Good Partners Start Planning For Christmas In August

by:

Joe Patti

Community engagement is a common topic in the arts and culture industry. We talk about how important it is. We talk about successful programs that have been executed.

However, there is rarely a discussion about all the time, effort, trial and error involved in executing these programs well. By the time you hear about a program after the fact, you are left to assume that an organization is staffed with brilliant people who effortlessly bask in the adoring gazes of fulfilled participants.

That is why I was pleased to read Rebecca Noon’s account on that Americans for the Arts blog of Trinity Rep’s efforts to involve different community groups in their production of A Christmas Carol.

While it sounds like the participants directed a lot of adoring gazes Trinity Rep’s way, there was a lot of work involved in getting those participants in the room.

The directors of A Christmas Carol had the idea of involving non-profits they admired in the production. They viewed Scrooge as a man who cut himself off from the community and then decides to reconnect with it again. Involving area non-profits was a great way of reinforcing this concept.

Even though they only planned to have two rehearsals with each group, there was a lot of effort involved in making it happen. And not only on the part of the Trinity Rep staff. Part of their planning recognized that the staff and volunteers of non-profit organizations aren’t just sitting around waiting to be asked to participate in something.

While many people were thrilled to perform in such an iconic show, some people couldn’t afford the time it would take to organize. Even for the 18 groups who decided to participate, there was sacrifice that we, as the larger institution, needed to acknowledge and address, and so we got to work addressing them. We allocated small travel and food stipends from the Community Engagement budget; our development department offered trade they have with the parking garage; the education director stepped in as Assistant Director to help rehearse the community groups; we negotiated a limited number of comp tickets with the marketing department; and throughout the run, actors in the show self-organized to provide snacks for the community group’s dressing room. All summer and fall, we worked on this one aspect of A Christmas Carol as a team of artists and administrators, ensuring that our institution could live up to our community’s needs 100% of the time.

Perhaps most importantly, the staff established a context for extending the invitations and addressing expectations before asking the first group to participate:

Invitations would be simple, honest, and transparent, clearly defining what we needed and what we had to offer. Angela would listen closely to what the community groups needed, in order to understand why they were saying yes or no. If we could offer what they needed, then we would. If we couldn’t, we’d tell them why, and end the partnership as friends. No false promises, no agreements that felt like compromises on either side.

This seems to me to be a good set of general guidelines to employ for similar projects. There is a sense of reciprocity. Each group is seen as providing something of value to the other in this opportunity. There isn’t a sense that one group is doing another a favor by providing them with exposure and they would be foolish to turn it down. There is an effort being made to understand barriers and work around them, but no umbrage taken if it doesn’t work out.

If They Can Be A Successful Non-Profit, Why Can’t You?

by:

Joe Patti

If you feel like you don’t have a clue how to run a successful non-profit and are just winging it, you probably know that you are in good company.

If you are wishing there was a book someone could give you for Christmas that explained the process to you, according to a recent piece on The Conversation, such a book doesn’t exist because no one really knows the answer.

The reason why it doesn’t exist is due to the way the successes of non-profits are studied. The author of the piece, Fredrik O. Andersson, basically blames human nature and biases for this.

When people want to know what works, they tend to focus on the successes which means they learn very little about what contributes to failures. This is known as selection bias, the most famous example being Abraham Wald’s counter intuitive suggestion to armor the parts of WWII bombers without bullet holes since presumably that is where the planes that did not return got hit.

Or as Andersson writes:

Imagine that researchers want to investigate and isolate the factors that make gamblers successful. If they study only the gamblers who win all the time, they would reach the obviously false conclusion that gambling is always profitable

Carter Gillies who frequently comments on the blog has often brought up selection bias as a problem in the mindset and approach to non-profit problems. Now here I am writing about it, validating the point he has long held. I hate it when he is right so often and identified these issues so far in advance.

Except, Carter would point out this is an example of selection bias and one of the other problems Andersson identifies- flawed memory. I am only focusing on those times Carter was right and only remembering those times because I have later come across someone else reinforcing his view.

Andersson notes that any research performed directly on non-profits only provides a snapshot view of what is making them successful (or not) at this moment of time and doesn’t really provide insight into the process leading to that success. The researchers are left to ask the non-profit board and staff  to relate what factors lead to their current state. The problem is, their memories of how things evolved is often very flawed.

This is a huge issue because everyone from founders to donors and other funders are likely to look at successful examples and determine that is the path to success that should be followed either by themselves or those they fund.

Andersson writes about working with non-profit entrepreneurs where he asked them a series of questions and then followed up 6-14 months later and asked them to recall their answers. (my emphasis)

I asked participants in the workshop about three things: why they wanted to start a new nonprofit, where they anticipated getting funding and how likely they believed it would be that they might actually launch a new organization.

[…]

Three out of 10 recalled having a different reason for wanting to start a new nonprofit than they asserted in the first survey. And both of those reasons, of course, could not be accurate.

Nearly half incorrectly recalled the source of funding they had anticipated. The expected chances of a successful launch also differed. The people who did launch a new nonprofit were somewhat more likely to say they had anticipated this success during their second interview. The people who failed to get a new nonprofit up and running were nearly 20 percent less likely to say they expected to succeed during their later interview.

[…]

Since stories are malleable, the best way to reduce the risk of hindsight bias is to observe startups from the very beginning and follow them over time.

Some people forget, others get the details mixed up and others ascribe a rationale they didn’t have in mind at the time when they’re asked about events that have already transpired.

While his sample size is admittedly small, I suspect that this general trend would be observable with larger numbers. I have written about this general issue before with artists mis-remembering the amount of work that went into their first success and attributing a big break to luck rather than effort.

Breaking Even But We’ll Be Broke If Something Breaks

by:

Joe Patti

The National Center for Arts Research (NCAR) released the results of a study last week that, while not the most cheery news to release during the holiday season, is not terribly surprising.

Looking at the data of 4800 arts organizations, they found that it is becoming increasingly difficult for arts groups to meet expenses. They based these assertions on an evaluation of three data measures: unrestricted surplus before depreciation, operating surplus before depreciation and operating surplus after depreciation

Looking at unrestricted surplus (before depreciation), the average organization saw an unrestricted surplus of 2.1% of expenses in 2016. In the same year, overall operating bottom line (before depreciation) was 0.4% of expenses—virtually break-even. However, surpluses fell to a negative 4.2% when factoring in depreciation, meaning that the average organization is not reserving sufficient funds to repair and replace their fixed assets, which can lead to future challenges, particularly for organizations with high levels of fixed assets.

Somewhat surprising, smaller organization were doing better than larger ones when the three measures were applied.

  • Smaller-budget organizations, with lower fixed assets and less fixed costs, demonstrate the highest surpluses by all measures, continuing a four-year upward trend. Conversely, larger organizations tend to end the year with deficits, continuing a four-year negative trend.
  • Across all sectors, small organizations buck the overall sector trend—i.e. even in sectors where bottom lines trended downward, the smaller-budget organizations within the sector actually grew, sometimes by over 50%.

However, it should be noted that these three criteria aren’t necessarily the only ones that matter in organizational financial health. NCAR’s next step is to:

…take a look at working capital and access to available cash. It may turn out that organizations with high fixed costs and fixed assets also have sufficiently high levels of cash reserves to cover annual shortfalls and future asset repair and replacement. If not, organizations might consider how they can become more nimble if a break-even budget is a goal.

It is worth looking closely at the study data and methodology to get a better sense of what this all means.

For example, when deciding what budget size constituted a large, medium or small organization, they used different numbers for each artistic discipline. A $2 million budget makes a large theater or dance company, but a small art museum and a very medium sized opera or performing arts center.

Their notes on trends in the Opera sector say that one organization heavily skewed the results for the whole sector and that if left out, there would be a more positive trend. There are similar notes in other sections, especially breakdown by geography where nearly every metro region had an outlier skewing the data.

The other area of the report that was interesting was their Driving Forces section which left me asking “Why Is That…?”

Total Unrestricted Revenue Drivers

  • Having more arts education organizations, music organizations, and opera companies in a community tends to raise the unrestricted revenue tide for all organizations in these sectors in a market, while having more performing arts centers tends to lower the unrestricted revenue for all organizations in this sector.
  • As the level of individual philanthropy in the market increases, unrestricted revenue goes down.  The fact that there is more giving in a market does not necessarily mean that it is being directed to arts and cultural organizations.  Unrestricted revenue also tends to be lower in more densely populated communities and those where with proportionally more Asian Americans.

Operating Revenue Drivers

  • Operating revenue tends to be higher for organizations that target young adults or African Americans, and with higher levels of local and state funding.
  • More public broadcast activity in a market tends to drive down arts and cultural organizations’ operating revenue.

I am making a broad assumption that the observation about public broadcast activity is a result of competition for donated revenue. What I wondered was if there was a benefit to underwriting sponsorship on public broadcasting that helps offset that effect by providing additional earned revenue. Or is there no sense that one should support the activities of cultural organizations that support public broadcasting?

What I wondered about the observation regarding unrestricted revenue tending to be lower in densely populated areas was if this meant people in densely populated areas placed greater restrictions on the way funds were used or if they simply gave less. In the context of the sentence that precedes it, the answer would seem to be that people give less, but that doesn’t necessarily need to be the case.

It would be interesting to know if people in less densely populated areas placed fewer restrictions on their donations, perhaps implying a higher level of trust in the organization or a confidence in their ability to evaluate the effectiveness of the organization.

Your Resolution To Create Connections With Arts And Culture Starts Today! (or maybe tomorrow depending on when you read this)

by:

Joe Patti

For over two years now I have been talking about Arts Midwest’s Creating Connection initiative to build public will for arts and culture.

While readers have had an opportunity to review the materials on the website, few have been able to attend the Arts Midwest presentations and ask questions in person.

Well you are in luck! Tomorrow, Tuesday, December 19 @ noon CST Creating Connection program manager Anne Romens will be hosting a webinar to discuss the project and findings. You can register by following that link.

Anne also hosted a webinar on the subject last week. The video of that webinar is available if you don’t have the opportunity to participate on Tuesday. You’ll want to pay attention around the 33 minute mark for the shout out to some work I have been doing.

Even if you don’t think you will become the full throated advocate for the project that I am, at the very least you can come away from the webinar with some tips on how to change your messaging and promotional materials to be more audience and experience focused.

The webinar comes at the right time to allow you to resolve to do a better job in the New Year so check it out.