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For- & Non-Profit Difference Is In Relations, Not Good Intentions

July 18, 2017

by:

Joe Patti

Last month, Non-Profit Quarterly reprinted a piece by Paul Hogan that explored the basic differences between for- and non-profit organizations that are not clearly understood and often lead to the “should be run like a business” statements.

Hogan says that companies that focus on the well-being of their employees and are dedicated to stewardship of the environment and other causes still have more in common with other for-profits than non-profits, despite their worthy intentions.

Higher fixed costs lead to lower net profits. But consider that in this way, the profits aren’t lost at all: They are simply allocated differently, to the greater benefit of employees or the community in which the business operates. Regardless, the for-profit enterprise still is fundamentally extractive, transactional, and profit-driven.

In comparison,

Nonprofit enterprises, on the other hand, are relational and restorative, or generative. The basis of activity in the nonprofit enterprise is personal and interactive, and seeks to restore or help generate whatever people need to improve their lives, or the life of the community in which they live.

[…]

It could be argued that even this exchange is transactional, no different from a for-profit interaction. But there is a critical difference: The person to whom the service is being provided is not usually the source of the payment for the service. I don’t pay my doctor or my dentist or my phlebotomist. Someone else does, and generally, I have no idea what amount is actually paid. So, the nonprofit person-to-person interaction is not zero-sum or about money or profit at all; it’s about the relationship that is established. And it is this disconnect of the cost of service from the third-party reimbursement for that service that destabilizes the nonprofit sector in ways that the for-profit sector does not deal with or need to understand.

And specifically in relation to the arts:

This isn’t restricted to healthcare or human services, either. The amount you pay for a ticket to many of the arts organizations you attend is subsidized, sometimes heavily, by outside public or private funders. If most arts organizations had to charge the full amount they needed in order to operate, most of us wouldn’t be able to afford to attend. That’s important because the health of people and communities depends as much on arts and culture as it does on all other nonprofit work, and arts must be as accessible as healthcare and education.

I apologize for the long series of quotes from the article, but I wanted to highlight his logic in contrasting for- and non-profit businesses and how he related insurance payments with fundraising.

I was especially interested in the way he compared insurance payments by a third party with third party funding of the arts (or any non-profit org). The idea that you need insurance because you might not otherwise be able to pay a medical bill is widely understood. That context provides a smoother segue to discussing why most of those non-profits serve couldn’t afford access to the services provided without a third party subsidizing their operations.

Of course, health insurance and healthcare costs being a hot button issue, you have to quickly insert assurances that there pretty much aren’t any heavily inflated costs related to the work you are doing.

Advocacy, Business Models, Fundraising, State of the Arts

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Ever Think About How Many Staff You Need Per Attendee?

July 17, 2017

by:

Joe Patti

Last week the National Center for Arts Research (NCAR) released some interesting data about the ratio between the number of full time employees at arts organizations and the audiences/visitors they serve.

An average of 3,547 people attend for each full-time employee. That is the relationship between an overall average of 38,741 attendees and 11 full-time staff members annually.

Finding that attendance at many organizations has either decreased or is flat, but number of staff has grown NCAR says,

This means that organizational capacity expanded at a slightly faster rate than growth in the number of people served. This does not mean that staffs became bloated. Instead, modest staff expansion can mean that an organization realizes it has maxed out its current staff’s capacity to provide high quality offerings and services, and the ability to attract more future audience members depends on making initial investments in people.

They break down the data by sector, organization size and market size.

Every Answer Raised More Questions

The part that really interested me and left me wanting to know more detail was in the Ecosystem Highlights section where they talk about “What Drives In-person Attendance?” (their emphasis)

• In-person attendance varies by sector and increases with organizational age, square footage, budget size, the number of programmatic offerings, the amount spent directly on programs (emphasizing the importance of findings related to the Investment in Program Index), targeting kids or Asian-Americans, and having higher levels of local funding.
• Attendance tends to be lower when organizations receive higher levels of support from state or federal agencies, when their lowest ticket prices is not terribly low (representing the importance of an accessible price point), if they produce proportionally more world premieres, or if they target young adults, African-Americans or Hispanics/Latino

Bearing in mind that correlation doesn’t equal causation, I really wanted to know more about the relationship of attendance increasing when programming targeted Asian-Americans or when there was higher levels of local funding.

Does the fact that attendance is lower when there is higher levels of support from state and federal agencies have any significance? Does that say something about the value of NEA funding? Are there restrictions on federal and state support that don’t exist with local funding that leads organizations to program and promote in ways that don’t connect with the local community?

This could be the case since NCAR found,

The number of world and national premieres increased contributions from trustees and other individual donors but decreased government contributions and program and earned revenue.

and

Government Grant Activity has a positive effect on fulltime employees, program expenses and total expenses but a negative effect on the number of offerings and direct marketing expenses.

So maybe federal funders aren’t really supporting the new work, broader programming and marketing that is needed to engage larger audiences.

I started to assume local funding meant high giving from individual donors until I read (my emphasis),

Physical attendance is lower in communities where the total population is larger, there is a higher percentage of children in the community, and the community’s overall level of philanthropy is high.

So I guess higher levels of local funding associated with higher attendance must be either local foundations or government? Except, apparently federal funding is helpful except when it comes to securing money from foundations:

The receipt of an NEA or IMLS grants had a positive effect on nearly all outcomes except foundation funding, which was lower for federal grant recipients.

Some Surprises About Demographics Orgs Want

Why is attendance lower for young adults, African-Americans and Hispanics/Latinos? Is it something about those segments or are arts and cultural organizations as a general group doing things that don’t resonate well with those groups but do resonate with kids and Asian-Americans? (Keeping in mind we aren’t necessarily talking about the same organizations doing well with the latter groups but not the former.)

There seems to be an inverse relationship on these same factors when it comes to Full Time Employees.

• Organizations that target people under 25 years old or Hispanics/Latinos, and those awarded NEA or IMLS grants tend to have more full-time employees.
• The number of full-time employees tends to be lower for organizations that present higher levels of local and world premieres and for those who target Asian-Americans.

I wondered if organizations that targeted young adults and Hispanic/Latinos also got more federal grants. Since young adults and Hispanic/Latino audiences are often mentioned as groups arts organizations aspire to attract, this might mean these efforts are targeted to receive more federal funding. There is a suggestion this might be the case:

And Government Grant Activity has no effect on program or earned revenue and a negative effect on physical attendance and engagement; this negative effect may reflect government support for arts and culture organizations that are initiating outreach efforts targeting traditionally underserved populations.

Is there an implication of racism/classism in the suggestion that government grants have a negative effect on physical attendance because the grants support targeting underserved populations?

Knowing that organizations that target Asian-Americans have smaller staffs and that organizations that target Asian-Americans have higher attendance, does that mean Asian-Americans are easier to attract? Or are these statistics just a result of there being only a few small organizations specifically targeting Asian-Americans and they are doing a good job with that demographic segment?

Among the interesting pattern NCAR noted in regard to organizations focused on serving minority populations:

Organizations that target African-Americans attract higher levels of contributed funds but tend to have a smaller footprint, with fewer offerings and lower marketing and development expenses and lower program revenue, attendance, and engagement.

Organizations that target Hispanics/Latinos have higher contributed revenue, program salaries, development expenses, and total offerings but lower marketing expenses, and program and earned revenue.

Other Notes Of Interest

Some other interesting observations that don’t necessarily fit with the aforementioned topics:

Youth Orgs Have It Great Until The Kids Grow Up

And organizations targeting children have lower marketing expenses that yield higher attendance, engagement and program and earned revenue, and higher development expenses that yield lower unrestricted and total contributions. This puzzling finding seems to suggest that parent-contributors have a short-term focus on immediate benefits for their children without necessarily supporting the long-term financial health of the organization.

A Vibrant Arts Community Is Great, Except For Attendance

Total Arts Dollars in the community is positively related with nearly every performance outcome, with physical attendance being a prominent exception; this negative relationship likely reflects the presence of many small arts organizations in a thriving arts and culture community competing for audiences.

The Number of Arts Providers in the community positively impacts program and total expenses and contributions from every source except foundations; there is no effect on program and earned revenue and the impact on attendance and engagement is negative, again suggesting competition for audiences.

A Wealthy Community Is Great, Except For Attendance

Higher socio-economic level is negatively associated with physical attendance and engagement – likely reflecting increased access to other leisure opportunities like travel – and positively associated with program, development, and total expenses and program and earned revenue, reflecting the ability of arts organizations to invest more in the art and charge higher prices.

Just to repeat the old saw about correlation not equaling causation, while these findings are interesting individually one should be careful drawing assumptions and relationships between them. Even some of the things listed together as having positive outcomes may not necessarily lead to a positive outcome when all present together. (i.e. You won’t necessarily increase attendance by expanding your physical plant, offerings, budget, spending and programming to Asian-American kids in a place with high local funding.)

Audience Relations, Fundraising, Government Relations, State of the Arts, Terms and Ideas

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On The Hook With Arts and Culture

July 12, 2017

by:

Joe Patti

Back in 2008, I wrote how the voters of Minnesota passed an amendment to support both the arts and outdoor wildlife as a result of a political alliance between the arts community and outdoor sport enthusiasts. The amendment increased the sales tax by 3/8 of 1%.

According to the website created to report how the money was being used, this is how much of the collected revenue has been allocated between fiscal year 2010 and 2017.

Minnesota has been known for its outdoor activities and support of the arts so it isn’t necessarily surprising that the citizens supported this tax increase. The alliance between the groups was not a forgone conclusion though. As I quote from an article from that time by Jay Weiner:

“As it was, the pioneers of the amendment idea — the sportsmen with bullets and hooks — were wary enough of the arts being included … until they saw the political power of the statewide arts and cultural organizations.”

I went on to write:

Every state should be lucky enough to have an arts community with enough political clout to help get a constitutional amendment passed. Of course, that influence didn’t magically appear, the state arts community would have been working on cultivating it over the course of years and probably decades.

[…]

The other thing he [Weiner] mentions is that berating the arts and parks people perpetuates an environment which keeps sports fans from forming coalitions.

If this program appeals to you and you want to replicate it in your state, another article written at the time outlines the pros and cons of the amendment. I am sure that nine years later, those who advocated for the amendment and those who have dealt with the appropriation and administration of the money can give valuable feedback about best practices and mistakes to avoid.

Advocacy, Building Public Will For Arts And Culture, Government Relations, State of the Arts

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Not Apologizing For Raising Money

July 11, 2017

by:

Joe Patti

Looking back in the archives can be really rewarding when it comes to reminding yourself about things you long forgot.

Back in October 2008 Seth Godin reproduced Sasha Dichter’s Manifesto in Defense of Raising Money which begins “I’m sick of apologizing for being in charge of raising money.”

In the post I made, I quoted Dichter’s thoughts about the fear associated with asking for money,

“…wealth is associated with power, and not having wealth can feel like not having power. So going to someone who has money and saying, “You have the resources, please give some of them to me” doesn’t feel like a conversation between equals.

How about this instead: “You are incredibly good at making money. I’m incredibly good at making change. The change I want to make in the world, unfortunately, does not itself generate much money. But man oh man does it make change. It’s a hugely important change. And what I know about making this change is as good and as important as what you know about making money. So let’s divide and conquer – you keep on making money, I’ll keep on making change. And if you can lend some of your smarts to the change I’m trying to make, well that’s even better. But most of the time, we both keep on doing what we’re best at, and if we keep on working together the world will be a better place.”

Looking back at the original post, I had mentioned the importance of storytelling as a skill. At the time I didn’t pay as much attention to Dichter’s suggestion that the work non-profits do to improve the world is interrelated with the work others do.

Do you really believe that the “real work” is JUST the “programs” you operate? (the school you run; the meals you serve; the vaccines you develop; the patients you treat?) Do you really believe that it ends there? Do you really believe that in today’s world, where change can come from anyone and anywhere, that convincing people and building momentum and excitement and a movement really doesn’t matter?

That can be important to remember when you are thinking that some other group is more worthy of support than your own.

Fundraising, State of the Arts

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