Alan Harrison | Voice of Reason Enterprises

314 pages.  That’s a lot of information and a lot of impact for an agency that is responsible for less than 1 percent of all the arts funding in the US.  It’s a ton of information for an agency whose budget comprises less than four thousandths of a percent of the national budget.  To be precise, the current budget is 0.00369 of one percent of this year’s US budget.  That means that for every thousand dollars of taxes paid, less than 4 cents goes to the NEA.

According to a report, military marching bands, which are necessary, are estimated to receive more than $50,000,000 more this year in the current budget than all the arts groups funded by the NEA. Nice recruitment tool.  It shows every high school clarinetist, trombonist, and sousaphone player that they have the capacity to be all they can be.

The NEA, according to itself -- http://www.nea.gov/pub/nea-history-1965-2008.pdf -- is unique among federal agencies. “Created by the Congress of the United States and President Lyndon B. Johnson in 1965, the NEA was not intended to solve a problem, but rather to embody a hope. The NEA was established to nurture American creativity, to elevate the nation’s culture, and to sustain and preserve the country’s many artistic traditions. The Arts Endowment’s mission was clear—to spread this artistic prosperity throughout the land, from the dense neighborhoods of our largest cities to the vast rural spaces, so that every citizen might enjoy America’s great cultural legacy.”

Willard Mitt Romney has said he will eliminate funding for the NEA, among other agencies.  “Some of these things, like those endowment efforts and PBS I very much appreciate and like what they do in many cases, but I just think they have to stand on their own rather than receiving money borrowed from other countries, as our government does on their behalf," Romney said, according to The Hill.

Um, okay.  So Willard, you don’t want to borrow money from China to pay for, you know, unnecessary US things.  I guess I would understand that, except the amount of money you’re talking about is, as we described earlier, pennies per thousand dollars.

In a Huffington Post article, Travis Korte opines that “even if it's no longer possible to have a bipartisan conversation about arts money, maybe that's for the best….And, as any manufacturing tycoon will tell you, it's more efficient in the long run to invest in means than in ends. Arts advocates sometimes forget that we ought to agree with this: when we talk about culture and heritage, we're talking about future generations and long-term benefits, not immediate profits.…On top of the federal arts budget's inefficiencies and lack of influence, there's the intrinsic trouble of centralizing something people are expected and even encouraged to disagree about.”

It’s an interesting point, and something I’ve heard over the years, even from artists.  As someone who ran organizations that received NEA grants, I’m not sure if they served as an advantage or a detriment to the organization.  I felt that at the time of funding and still feel it now. 

If the arts endowment were eliminated, what would happen?  Would the arts in America die?  Would the anti-freedom crowd in the GOP claim a victory?  If so, then what?  Would that embolden them to eliminate funding for military marching bands?  And what good would that do?

At some level, I think this is a discussion that happened in Las Vegas when larger casinos decided to eliminate the $2 blackjack tables.  They’re a lot of work for not a lot of yield.  But they’re also a point of entry for those that have never gambled.  And the pennies spent toward the arts in the United States might be determined not to be a central policy position, but as an incentive, to create a point of entry for participation in all the arts.

But why?  Why must we have a point of entry?  Are we “nurturing American creativity,” as the NEA publication stated, even in the light of the recent “Shakespeare in America” initiative which rewarded exactly zero American playwrights from 2004-2009?  What is the purpose of investing America with the arts if America is ambiguous –- if not downright hostile – to the idea?

As we continue our mean-spirited carousel of polarized thought and aversion to compromise, we in the arts community must also remember that we have a job to do that is not complete merely by the creation of art. 

We in the arts community often point to other countries and their national support of the arts, and that support is real.  For each $0.01 a US taxpayer spends on all the arts in the US, a German taxpayer pays $2.00 for all the arts in Germany.  Most of Europe and Asia is similar – the US taxpayer bears the lowest burden toward the arts of any non-third-world country in the world.

But we Americans have had a problem valuing the power of the arts, and it doesn’t take an endowment to quantify value in a capitalistic society.  It takes discipline, differentiation, and determination – not to create excellence or relevance, as most arts organizations’ leaders believe.  Neither of those attributes is germane to the discussion – they are expected by your community; they are a baseline, not a goal. 

No:  discipline, differentiation, and determination are needed to create organizations which provide external greater good.  The arts in America do not succeed by producing arts in America; they succeed by producing better Americans.  And if the NEA were eliminated and the discussion made moot, would we in the arts community be in a better position to freely produce better people?  Just asking.

Funny thing.  Recently I shared an article about dreaming and great leadership.  It was one of the most popular articles I’ve ever shared, at least in the response to it.  Dozens of people from all walks of the nonprofit world replied, either with a bon mot or an actual dream or a misquote of Shakespeare’s The Tempest, in which Prospero says at the end of the play that “We are such stuff/As dreams are made on, and our little life/Is rounded with a sleep.” This has been construed to be a reverie about the meaning of life, that all that is constructed in our lifetimes disappears when we’re gone.

But dreaming in the nonprofit arts world is something quite different.  I’m actually fairly staggered – in a negative way – by the responses to this article.  I asked the question:  “What would we do if revenue were not a consideration?”

The question, which dumbfounded the literalists and the shallow thinkers, who lack the capacity to dream and should therefore probably not be in the nonprofit business, speaks to the mission of the organization.  None of the respondents got that, which I find fascinating.

As we’ve discussed in previous posts, focus and mission are everything. Further, solid nonprofit missions are not self-reflective or narcissistic.  Nor do they merely describe the programs and activities – merely backing into the mission statement by revealing what you’re already doing is nonsense.

But the state of dreaming is necessary to identify (and therefore seek a way to fill) a need.  I’ll never forget a lunch with a group of employees and interns from a Shakespeare festival in which I asked the group was asked the very same question I posed in the blog:  “What would you do if revenue were not a consideration?” (I have paraphrased the answers below.)

The answers were amazingly varied.  “We’d do more interesting plays,” said one.  “If we didn’t have to care about income? More avant-garde work,” said another.  “Plays about gay people – our audiences hate them, but they’re so important,” said another.  “Big musicals – our audiences love them and they provide so much entertainment,” said yet another, who was nearly scowled away from the table.

Only one person at the table – a just-out-of-high-school costume shop intern, incidentally – answered the question correctly.

Yes, there is a correct answer. 

“Um, you guys don’t get it,” said the intern.  “We do Shakespeare.  We do it because just about all of life’s lessons can be found in his words, and the only way to get those lessons in the hands of the public is to perform the work well.  We do Shakespeare because he’s the greatest English poet of all time, but beyond that, his poetry is great because his words have the power to change the future.  I think if we didn’t have to worry about money, all we might change is spending as much as we need to spend to get everyone all over the world to see and hear this stuff so that their lives might change for the better, so that they might become more tolerant and patient, so that war and hatred end.”

Not to be overly harsh (which means that I probably am being overly harsh) if the answer to “What would you do if revenue were not a consideration?” is spending all the money on your organizations’ needs (or worse, your own needs) first and the mission doesn’t even get a mention, then it follows that your mission is not only unconvincing to the world at large, but not even remotely important to you. And if that’s the case… well, maybe it’s time to move on and let a costume shop intern run things for awhile.

Talent is immaterial to a successful mission.  The right dream is.  Talent too often cloaks the requirement for nonprofit arts organizations to fill a societal need.  Dozens of years of experience are meaningless to the organization unless people are making the world around them better by virtue of your company's work.

The right dream is forever.  Don't waste your time wanting more assistants or a new building.

PS:  The day I posted this blog, two different responses from two completely different communities came in about the original article.  They were the first two right answers that were received. 

"If you are already operating to your mission, you will do nothing different other than move up the excellence curve in delivery. If you aren't operating to your mission, no amount of money will get you there."

"Expand And Extend"

Thank you, Paula Lucas and Elisa McFarlane.  There's hope after all!

How often have we seen this happen?

Jack – an artistic, managing, or executive director – announces that he is leaving the company.  Jack is a founding director, or at least a director who has held the position for many years and the organization has been built around his tastes, his passion, and his contacts.  The Board chair pales at first, but is made to feel better when Jack gives so much notice as to be able to recruit a successor.  Jack is central to the recruitment, offering selflessly to winnow the field.  Jack has always thought that Jill might be a good choice, and the board goes along with his recommendation.  Jill arrives.  Jill is happy.  Jack is happy.

There is much celebration as the new director takes the predecessor’s job, chair, desk, office, and responsibilities.  Jill’s background and contacts are similar to Jack’s.  Jill is respected highly by Jack and, by extension, the search committee.  The search committee is happy.  The search firm in Connecticut that was paid $15K to conduct the search is happy, because they asked Jack who they should call and when Jack suggested Jill and the board agreed, they did so.  The arts organization, for which this has been a harrowing period filled with uncertainty, rumor, and something of a death march, is saved.  The employees are happy.  And the merry-go-round continues blissfully.

Except for the tiny, niggling problem of Jill’s own talents and personality.  Jill is not Jack, no matter how much influence Jack had in hiring her, and no matter how available Jack has made himself to Jill.  Jill, for no other reason than she is a different person than Jack, has her own agenda.  It is not an evil agenda – in fact, it’s pretty exciting – but it is unfamiliar and untested.  Even though Jill has done a good job at her previous position, it was not at this organization in this city at this time.  Jill starts to get frustrated when she ultimately discovers that, regardless of the rhetoric thrown her way by the board chair, supporters, staff, and artists – and by her partner in the organization, if there is a two-headed directorship – she is expected to continue Jack’s work and have Jack’s results.

The work suffers an identity crisis as Jill discovers that not only has she been enlisted to follow Jack’s path, but that there’s a mission to the organization that is so open to interpretation as to mean nothing at all.  It is some version of “we do good work, so you should support us,” but more eloquently written with much obfuscation involved.  Mentions of “lifelong learning” or “the celebration of the spoken word” or “education and engagement” are simply ornamental filigree to a mission that, when broken down to its most undividable form, holds no opinion or power.

But Jill soldiers on.  After a year, during which time the organization has taken a financial bath because it had been branded not by its own successful mission but by Jack’s success, Jill is unhappy.  Board members resign.  Others are tossed off.  The Board is unhappy.  The employees, half of which have taken other jobs, are unhappy.  The work is unexpected, ambitious, and only liked by new audiences unfamiliar with Jack’s work.  However, the longtime season ticket holders are unhappy and drop their subscriptions. 

After a second year, Jill is more unhappy.  She realizes now that she’s moved across the country to take a position that was not hers, but Jack’s.  Jack offers little advice because he’s entrenched in his own career.  Jill keeps an apartment in New York, where she lived before she took the new position.  She is so confused and embittered that she starts to absent herself from all but the most critical company functions.  She distances herself from the staff except for the ones that came on after her arrival.  The board chair changes.  The new chair is looking for more responsibility toward the finances after two bad years.

Jill announces her resignation.  It’s a toss-up as to the reality – maybe she resigned, maybe she was asked to resign.  In any case, she is not given the lengthy period of time to recruit a successor.  She’s given the minimum.  She is deemed a failure and scurries back to New York where her base of personal support exists and she recovers.

The company, now reeling, makes another search and hires Fred – who is neither Jack nor Jill – and now collectively comes to the public with hat in hand, attempting to repair relationships with all stakeholders – audiences, board members, volunteers, staff, government funders, foundations, individual donors, corporations, and the media – while not admitting that the fundamental issue is not the leader but the organization itself and its lack of identity.  And a larger problem is that the leaders of the organization have not learned anything from the process, which means that Fred’s fate may well end up just like Jill’s, which means that the vicious cycle continues until someone turns it around. 

Or until the place shuts down.

Whichever comes first.

What are the broken issues here?  Whose fault is it?  And why didn’t the board, the staff, Jack, and Jill know that this was a desperately poor succession strategy?

Jack, after all, had done his homework on succession strategies and Jill was always in the back of his mind for this particular purpose.  Did he tell anyone?  Did he tell Jill?  Was there a documentation of this?  And finally, is it at all important for an outgoing director to be involved at all in the choice of his successor?

First of all, succession planning is not necessarily a permanent option.  In fact, it works best if there are several people brought into the process and the absence of the director is either temporary (for example, a sabbatical), emergency, or when bad behavior requires that the director be removed immediately.  The plans should be documented in the company’s strategic plan, allowing for duplication of responsibilities in order to bring some talent to the organization’s depth chart.  Ideally, the depth chart should be in-house and temporary.

In this case, however, there was no emergency and Jack gave plenty of notice.  And all the bad things happened rather predictably.  Certainly, this is a worst-case scenario, but a scenario that within the last ten years played out at a once-prominent arts organization in the United States.

Knowing all these issues, the board could have searched for an interim director.  Why?  Because an interim solution is one that provides for the present while the governing body retreats to seek a long-term solution. 

Yes, I can hear you through the internet.  “Why do an executive search twice?” you’re asking.  Isn’t it twice the work to hire an interim leader and then hire a permanent one?  Won’t it take forever?

Doing a search for an interim director does not preclude a search for a permanent director.  Interims do not necessarily want to be a permanent director of that organization.  Boards and staffs often look at an interim director fish-eyed when that information arises; there is an acceptable amount of mistrust when someone says that they simply don’t want to work there full time.  Still, if the goal is to provide for the now while the company prepares for the future, intentional interim leadership is a good plan.

Bringing in an Interim leader after a quick shakeup, however, is not a good idea.  It is an easy idea – often a board member believes that he or she can handle the day-to-day leadership responsibilities, and a board chair is almost always looking for an easy solution – but it is not a good idea.  In those cases, if leadership has not already been documented by a succession plan, or if the succession plan has gone awry because the successor moved on to another organization, then a better path would be to take the time to do an active search for an interim leader from outside the organization while the difficult job of picking up the pieces takes place.

In the scenario, what if, after Jack’s revelation to the board that he was resigning, the board had decided to perform a search for an interim director.  Let’s say that they decided that Jill would be an excellent choice.  If Jill wanted more, she could certainly throw her hat into the ring for the permanent job, but there would be no expectation of that.  Jill could keep her apartment in New York without the idea that she was compelled to move her family to the new city.  There would be no expectation from the board, staff, community, and other stakeholders that Jill would be leading the company for an undetermined period.  If things went as sour as they did in the scenario, she would simply finish out her year and return, having completed the job she was asked to do.  The company would have gone through a serious review of mission and policies.  The board would have hired a new permanent director, Fred, by then, with the knowledge that Fred’s company would be Fred’s legacy.  And there would be another series of strategic planning sessions immediately after Fred’s arrival, with his unique vision, strategy, and description of success folded into the company.

Every leader’s legacy ends the day the leader leaves the company.  The new leader must not simply be given the reins; instead, the new leader must provide a new method of transportation, a new way of leading an organization’s success story.  In the interim version of the scenario, where the board has made the good decision to intentionally not hire the first best person that came along, the company is given the best chance to succeed.

Another important point, too often ignored (which is why it's in bold and underlined):  It is never a good idea to have the outgoing director have a say on his or her permanent successor.  No matter who the outgoing director is or how amicable the separation is.  Never.  Never.  Never.

For the most part, unfortunately, most companies still seek permanent replacements immediately.  If your company is undergoing a leadership change, you should probably call in a consultant immediately (yes, I do that -- call me at 206.533.0242, or you can click here to send me an email) who can walk you through a successful succession process.

Oh, and one last thing.  I’ve often thought it might be an interesting idea to take potential permanent leaders into a strategic planning process.  Not all candidates simultaneously, of course, just in sections.  Their actions and reactions during the process may help, in real time, to determine their fit in the organization.  Just a thought.  What do you think?

And yes, I did just compare communism and women’s choice.  They’re both legal in this country, last I checked.

Missions, missions, missions.  So many organizations have adopted mission statements with the idea that they should reflect their own happy business practices that they missed the boat on why missions should be documented.

The Drucker Foundation, named after Peter Drucker, the man generally anointed as the most important designer of business strategy in the latter half of the last century, describes criteria for a successful mission statement as a step-by-step process with a mission-writing team (click here for the paper):

“The suggested criteria for an effective mission statement are that it:
•    Is short and sharply focused
•    Is clear and easily understood
•    Defines why we do what we do; why the organization exists
•    Does not prescribe means
•    Is sufficiently broad
•    Provides direction for doing the right things
•    Addresses our opportunities
•    Matches our competence
•    Inspires our commitment
•    Says what, in the end, we want to be remembered for”

I’ve always thought of a mission statement as that which expresses the mission; the mission is an unspeakable truth, developed in the limbic portion of the brain where there is no language but there is emotion and decision-making.

So what shouldn’t the mission tell you?  Sound business practices do not a mission make, and if there are still those out there who believe that “fiscal responsibility” belongs in a mission statement for a nonprofit arts organization, then your arts organization is suffering under the undue weight of that.  Because “fiscal responsibility,” like marketing, development, and other sound business practices, is not “what, in the end, we want to be remembered for.” 

Don’t get me wrong: fiscal responsibility, without the quotation marks, is extremely important.  Just as it is for Bank of America, McDonald’s, Starbucks, JP Morgan Chase, and Fatburger.  None of these places would be succeeding without it.  But in the nonprofit arts organization, the mission statement should reveal, as best as it can, the simple, elegant thing that drives a collective of people to create art.

The art itself cannot be the mission either.  The impact of the art – why it is done and for what effect on whatever is defined as the participants or community – is the thing, not the art itself.  “Art for Art’s Sake,” a 19th century idea, described a kind of art that had no need to be presented or shown.  If arts organizations have as their commitment a kind of art that has no need to be presented, then the organization is at best moot.

That said, some of the worst mission statements out there can be attributed to arts organizations nationwide.  If yours is in here, give me a call, because your worth to the community is being denied by your statement:

• “It is our responsibility to assertively administrate timely deliverables in order to solve business problems.”
• "To satisfy our customers' desires for personal entertainment and information through total customer satisfaction"
• “To produce a season of innovative work with a series of productions as broad and diverse as [our city] itself”
• “To preserve and produce musical theatre of the highest quality”
• “[Name of organization] exists to develop, produce and present live musical theater for the cultural enrichment of the [local community], and to preserve, maintain, and operate the historic and irreplaceable [building in which the artistic activities take place].”
• “to be a regionally recognized and nationally influential center of excellence in family theatre”
• “[Name of organization and then acronym] is an award-winning, nonprofit theater company that seeks to bring vibrant musical theatre to the [local] community. The mission of [acronym] is to impact audiences by producing a range of classic and contemporary musical productions that engage and enhance the overall experience.”
• “To serve the diverse audiences of [our city] by producing and presenting theatre of the highest caliber, by nurturing new artists, by attracting new audiences, and by developing youth outreach and arts education programs.”
• “[Name of organization], [our city]’s oldest and largest not-for-profit theater, has won international renown for the quality of productions, the depth and diversity of artistic leadership, and the excellence of its many community and educational programs. Under the guidance of Artistic Director [that person's name] and Executive Director [that person's name], [name of organization] is committed to producing both classic and contemporary works, giving full voice to a wide range of artists and visions. Central to that mission is the [group of artists associated with the organization], a diverse group of outstanding theater artists whose distinctive visions have given the [organization] an artistic identity of uncommon richness and variety. By dedicating itself to three guiding principles—quality, diversity, and community—[name of organization] seeks to be the premier cultural organization in [our city}, providing productions and programs that make an essential contribution to the quality of life in our city.”
• "[Name of organization]’s mission is to scout profitable growth opportunities in relationships, both internally and externally, in emerging, mission inclusive markets, and explore new paradigms and then filter and communicate and evangelize the findings."
• “To satisfy our customers’ desires for personal entertainment and information through total customer satisfaction”
• “[Name of organization] presents engaging dramatic work that celebrates the intimate relationship among artist, audience and language and, through the exploration of enduring themes, illuminates the shared human experience of our diverse community.”

That said, there are some really valuable mission statements out there as well.  If these are yours, let me digitally shake your hand and praise your organization on wanting to do more to help society using art as a powerful tool to do so:

• “to engage audiences in an exchange of ideas that makes us think harder, laugh longer, feel more”
• “[The organization’s} mission is to create theatre so strikingly original in form, content or both, that it instills in young people an enduring awe, love and respect for the medium, thus preserving imagination and wonder, those hallmarks of childhood which are the keys to the future."

It was never meant to apply except as a fun title to this blog, but here is the chorus to Elton John’s “Burn Down the Mission.”  I think you’ll see a parallel here, and if not, it’s still a great song.

I was talking to a good friend in the nonprofit arts business.  At one point in the conversation, she starts speaking in low tones as if someone at the next table were a spy. 

“We’re in the run-up to our next gala,” she whispered. “There’s no way we can raise the amount of money we have budgeted, not in this climate.  There are just too many auctions going on.”

(She even whispered the words “too many auctions” in such hidden tones that it reminded me of how my own family whispered the word when they said that someone was suffering from some form of “cancer.”)

What’s odd is that just about every development professional I’ve met in the last ten years has told me what a nightmare auctions can be.  Let me rephrase: those who depend on more than 5% of their annual revenue budgets on one night of a gala are in sheer terror all year long.  Those that do it just to have a party and thank donors have a different tack – it’s great if it makes money, but as long as it doesn’t lose money, it’s all right.

But they’re all in the same boat when in comes to putting these fancy parties together.  They all get the same things on the high end – a week in a board member’s timeshare; baseball luxury box tickets; and many trips. 

A large portion of the trips come from companies who take a heavy slice from the nonprofit’s selling price, reducing the income to nearly zero once all is said and done, but still costing the customer an amount of money perhaps spent elsewhere in the evening.  For instance, there was a run on safari trips to South Africa over the last several years.  The company who provided them required on average about 80% of the final sold price.  So that would mean that a $3000 high bid on a luxury safari (no airfare included) would net the nonprofit $600.

$600 is $600, of course.  However, the customer paid $3000.  Which means that the customer likely did not spend another $2000 of a nightly budget on items that would have netted 100% of the sale to the nonprofit.  Which drives the price down on other items.

Loss leader, you might say, and that is a good point.  But what’s really a good point now is that auctions and galas have mostly become old news – development directors across the country have come to dislike the pressure on one night’s earnings, the pressure to provide a great party (and the further reputation-dissing of the development department as “party central”), and the way that their companies are dependent on auctions the way the US is on oil. 

In fact, that last part’s a great analogy.  The people of the US probably don’t want to continue buying oil from unstable, nutty countries in the Middle East, don’t want to pollute by digging in the Tar Sands in Alberta, and don’t want to risk another explosion in the Gulf or oil tanker accident in Alaska.  Only the oil companies and those that serve them really want to keep the world dependent on oil because they make money off it.  Similarly, development departments across the US probably don’t want to continue spending thousands of hours of procuring; paying the hyper-inflated prices of venues, caterers, liquor, and entertainment; or risking the budget on a single night that might be a victim of weather, scheduling, a bigger auction elsewhere, or the health and caprice of the auctioneer, biggest donor, or venue operator.  Only the companies that benefit from benefits, as it were, have a no-risk win in the scenario of the nonprofit auction.

In Alabama several years ago, following a lead from Baltimore’s Center Stage, my company held its auction in a peculiar venue…the air.  It was done over seven hours on the radio and television.  In fact, I was the auctioneer for the entire 6 radio hours – no guests, no breaks, one 60 second station break per hour, talking a mile a minute, having a ball.  I remember getting a message from one bidder who bid so that I wouldn’t have a coronary right there, live on the radio.  We raised about $100,000 on the radio that day.  No venue rental, no catering (except pizzas and salads and such for the people on the phone), no tuxedos, no bid cards, no liquor, no gold-embossed invitations.  The radio network (with stations all over the state and online) donated the time.   The items were almost totally donated, including a new Toyota.  It was inventive, and the development director was in heaven.

Of course, that development effort was excellent year round – working with major donors and board members to make contacts, develop relationships, take time, and get influential people to become part of the company’s fabric before asking for a donation, and following up, talking to them about things that had nothing to do with fundraising, asking their ideas (and taking some), and doing all the real work that a good development effort does. 

See, that’s the ticket to greatness, not the one-night auction.  You can’t swing for the fences as a strategy.  You’ll likely end up being the Dave Kingman of the Nonprofit Industry.  By the way, Kingman hit 442 home runs, struck out 1,816 times and hit only .236. Not all that productive.

I was reading the Wall Street Journal recently and their special philanthropy section.  I came across this article which asked “Should Philanthropies Operate Like Businesses?”  There were two accompanying articles: one yes, and one no.  And the comments about the piece were also split: yes or no.

I challenge the premise.  It assumes two things not in evidence: 1) that the term “philanthropies” covers every kind of “charity,” when the common usage now indicates that “philanthropies” refers to those organizations that give, while “charities” refers to those that receive; and 2) that whatever the term is, these entities do not currently operate like businesses.  The first point is pedantic and needs no further discussion.  The second speaks more to the friction that currently exists between the for-profit and the nonprofit universes, and by extension, between the for-profit and government universes. 

This is not to say that all for-profit ventures are run beautifully or terribly.  Nor is it true that all nonprofit ventures are, either.  It is disingenuous to believe that all anything is true or false. 

Business guru Jim Collins, bestselling author of Good to Great, wrote a follow-up to that discussion of the traits that enable companies, even longstanding ones, to outperform the market.  His monograph, Good to Great and the Social Sectors, starts with the following: 

 

We must reject the idea—well-intentioned, but dead wrong—that the primary path to greatness in the social sectors is to become "more like a business." Most businesses—like most of anything else in life—fall somewhere between mediocre and good. Few are great. When you compare great companies with good ones, many widely practiced business norms turn out to correlate with mediocrity, not greatness. So, then, why would we want to import the practices of mediocrity into the social sectors?

 

I shared this perspective with a gathering of business CEOs, and offended nearly everyone in the room. A hand shot up from David Weekley, one of the more thoughtful CEOs—a man who built a very successful company and who now spends nearly half his time working with the social sectors. "Do you have evidence to support your point?" he demanded. "In my work with nonprofits, I find that they're in desperate need of greater discipline—disciplined planning, disciplined people, disciplined governance, disciplined allocation of resources."

 

"What makes you think that's a business concept?" I replied. "Most businesses also have a desperate need for greater discipline. Mediocre companies rarely display the relentless culture of discipline—disciplined people who engage in disciplined thought and who take disciplined action—that we find in truly great companies. A culture of discipline is not a principle of business; it is a principle of greatness."

 

Later, at dinner, we continued our debate, and I asked Weekley: "If you had taken a different path in life and become, say, a church leader, a university president, a nonprofit leader, a hospital CEO, or a school superintendent, would you have been any less disciplined in your approach? Would you have been less likely to practice enlightened leadership, or put less energy into getting the right people on the bus, or been less demanding of results?" Weekley considered the question for a long moment. "No, I suspect not."

 

Some for-profit businesses seek only profit; some seek a greater good, often at the expense of profit. Great for-profit businesses engage in solid business practices, others do not.  All charities seek a greater good at the expense of profit.  Great charities engage in solid business practices, others do not.

It has always been my contention that businesses of both types have been asked to adopt a “survive model” rather than a “thrive model.” The former model requires revenue to continue to exist. The latter model, which great for-profits and charities adopt, requires more courage and resolve and requires revenue to continue to serve.

Revenue is the total income produced by a given source.  In nonprofit arts organizations, the revenue comes from split sources, earned and unearned, and those headings are split further – tickets, rentals, royalties, etc.; and government, individual, corporate, and foundation contributions and grants.  Grants are the same as contributions; although often there is a specific activity supported that the organization may or may not already be doing.  Too often, that activity is not what the organization does, so the expense to do said activity is added to the budget so the contribution is revenue-neutral to the organization.

I know that sounds elementary, but there is kinking in the thinking. If a for-profit company, say a Thai restaurant, were just enough venture capital to start producing frozen lasagna, the Thai restaurant would have to think about the repercussions:

1) If the restaurant were to start serving lasagna, what would the additional cost be?  After all, the restaurant would have to stock up on sfoglia, make a nice marinara, Bolognese, béchamel, or other set of sauces, buy meats and vegetables that are not used in Thai cooking, set up an oven instead of perhaps only a stir fry setup to bake the lasagna, and train the current cooks – or maybe even hire a new cook – to make the darn thing.  Then, the restaurant would have to make a deal to set up a mass-production of the lasagna, brand it, package it, freeze it, and find some distribution channels that get the product into the stores.  Then there’s advertising, payola, and other expenses that the restaurant had never encountered before. 

That’s some serious cost.  And let’s say that the venture capital is only covering the cost of the lasagna itself (the food portion) and nothing else.

2) If the Thai restaurant were still thinking about this capital (and that’s doubtful), they’d have to worry about current customers suddenly avoiding them.  Why?  Because they’re suddenly pushing lasagna, something that, while still food, has nothing to do with their core values as a restaurant.  Thai foodies would never order the lasagna, and would likely cease going there for Thai food because there are so many other places that serve Thai food when they want it.

3) Lasagna lovers have come to look for good Italian restaurants to find their favorite fare.  Would they venture into a Thai restaurant for lasagna?  Probably not.  Would they buy it off the shelves of their favorite grocery store? Doubtful – it’s hard to envision a customer choosing to purchase a standard Italian lasagna from a Thai company.  Maybe as a change-of-pace or because they’re intrigued by the fusion, but not as a general rule.  Plus, with the additional expense that it took to make, package, freeze, brand, distribute, and advertise the product, the cost is likely to be quite high, even if the ingredients are paid for by the capital.

So you see, this is a lose-lose situation. And yet, performing arts organizations are asked to take this bargain all the time.

Which takes me back to the Congressional Budget Office’s nonpartisan report, “Reducing the Deficit: Spending and Revenue Options,” and the revenue side of the equations.  About 42% of the $2,200,000,000,000 in revenues in 2010 came from income taxes.  About 40% came from what is called social insurance taxes – these are primarily payroll taxes to support Social Security and Medicare.  Another 9% comes from corporate income taxes.  The remaining 10% or so (I know, it adds up to 101%, but that’s because of rounding) comes from various sources:  excise taxes, estate and gift taxes, earnings of the Federal Reserve System, customs duties, and miscellaneous fees and fines. 

$2.2 trillion is a lot of money, to be sure, but when that is seen relative to the size of the economy, it’s at the lowest level in 60 years.  Revenues are under 15% of GDP; from 1971-2010, they averaged 18%.  In the last year of the Clinton presidency, 2000, revenues were 20% of GDP.  Obviously, that’s why we were in surplus during the late 1990s.

But when taxes were cut during the Bush administration, the revenue level dropped.  Now this might be looked at as a dog-bites-man epiphany except for one thing: when the taxes were cut, a significant reason was so that the job-makers in the US would have more resources to hire more people, lifting the American economy through a market-based approach.  That this approached has never been successful in the history of the United States is irrelevant to the argument, or so we were told.  So when taxes were cut, revenues were cut.  This and so many other acts of greed led to an economy that crashed, burned, and skidded down the embankment of deep recession/depression.

Concurrent to the cuts in taxes were cuts in expenses. Almost every government program on the federal, state, county, and city level were chopped.  Except the federal military budget, of course.  That grew by thousands of percentage points, not nearly coverable by other government cuts.

But the key to a good economy is revenue.  Cuts are not the answer.  I’m sure you can find silliness in many corners of the federal budget.  $600 ash trays for the Pentagon comes to mind.  But we were able to handle all those silly expenses and still report a surplus through 2000.  Not so after the tax cuts.

In the nonprofit world, the tax cuts and the cruddy economy gave birth to a new attitude among organizations.  Cutting expenses would have to be the answer because new revenues were not a viable answer. 
To that I say this: when you give up on the idea of keeping the revenues strong, you give up on the idea that your nonprofit has something of value to offer.  And when the cuts happen and 50% of your workforce is suddenly doing 100% of the work, two bad things happen: turnover increases and there is an attitude among funders – including deficit hawks on your board - that your organization didn’t need all those other people.  So they ask for more cuts.

And at the same time they’re asking for more cuts, foundations are losing organizations that serve specific purposes in the region and ask you to do those activities.  As an incentive, they offer to pay for the new activity, not imagining that the extra workload would create an atmosphere where now 40% of the workforce is doing 120% of the work, irrespective of the mission of the nonprofit and its own activities.  It’s a recipe for closure. And it has closed many nonprofit arts organizations.

So the CBO has projected that because of some of the programs being enacted (healthcare for one, and those points of the president’s newest jobs bill that do get passed), revenue will climb again in relation to the GDP past that magic 20% mark.  In 2021.  10 years from now.  Assuming nothing else happens.

We nonprofits have an advantage, if we can choose to exploit it.  We can collude, legally.  It’s called “collaboration” and is strongly encouraged.  We can choose to be flexible and plastic in the way we attack the mission.  We can see the writing on the wall and simply not accept that revenues are shrinking.

It takes courage to do so, but the results are amazing.  I’ve interviewed over a dozen executive directors of arts organizations across the US and those that raised revenues – even during a recession – were the ones who were thriving. Those that chose to make cuts were desperate and failing and looking to make more cuts.

Is it a pipe dream to grow revenues these days?  Nope.  Others are doing it.  What are the characteristics of those organizations and how do they differ from yours?

© 1998, 2011 Alan Harrison

Congratulations.
You are now the marketing director for a theatre.
You are in deep trouble.

You will need, on a regular basis,
every now and then,
to come up with “an idea.”

And the ability to make the sun shine
from the butt of a monkey.

Good luck.


1. Never assume anyone knows what you’re talking about. Ever.
2. No one really cares if it’s t-h-e-a-t-e-r or t-h-e-a-t-r-e. Beware the minutiae.
3. If it has been done, it can be done. So stop kvetching and do it.
4. Sorry...the customer is, in fact, always right. Even when they’re wrong.
5. Just take care of it; it is better to apologize than to ask permission.
6. Never let logistics get in the way of a good idea.
7. Fail fabulously, many times, with gusto. If you fail once and only once, you’re just not trying hard enough. If you never fail, you’re coasting.
8. Simplicity...you can’t really do more than one thing at a time, no matter how hard you try. Corollary: only ask for one thing at a time from the customer.
9. Have a response to “If the play is a hit, it’s the art. If it’s a bomb, it’s the marketing.” It will help keep you off death row.
10. Subscription is a methodology, nothing more.
10. Marketing = advertising + research + instinct.
10. Maintain the mission. Of the theatre, of course.
10. Track, code, and research. Know why something works or doesn’t work.
10. Interpret what is vanity and what is marketing.
10. You are not marketing the marketing department. It doesn’t matter how much revenue comes in, as long as it’s enough. Collaborate.
Corollary: fundraisers are not raising funds for the development department; educators are not educating the education department; finance is not tracking the finance department, etc., ad nauseum. Stop kvetching and collaborate already.
10. Rules are for Scrabble, messages are for Western Union, and art is an on-stage product.
10. When in charge, ponder. When in trouble, delegate. When in doubt, mumble.
10. And always remember: 50% of marketing is absolutely, positively guaranteed to work. Exactly which 50% is anyone’s guess.