George Thorn, theater guru – interview in THE OREGONIAN

I had the great honor of being a student of George Thorn at Virginia Tech (I actually think I was his last graduating student).  George and his partner in Arts Actor Research, Nello McDaniel, continue to be among the wisest counselors for theater and dance in the country – we used to call them gurus and I think it still fits.  The books that were published by Arts Action Research still grace my bookshelves—and many of my friends. 

 

Interview: George Thorn on the ecology of the arts community

May 02, 2009 09:00AM. OregonLive.com

 

If you're a struggling arts organization, who would you call for 9-1-1 advice?

Probably George Thorn, the Portland-based independent arts consultant who's likely in the Rolodex of every arts organization in town.

Off and on for more than four decades, Thorn has advised arts nonprofits around the country to plan and strategize finances, programming, board development and administrative infrastructure. Never, it seems, has this expertise been in greater demand than now, during a recession that has forced most arts institutions to cut budgets in response to, and in anticipation of, a difficult year.

Born in Indiana, Thorn, 72, studied theater at Butler University in Indianapolis and also at Yale University. In 1959, Thorn moved to New York, where he began a career as a stage manager and then general manager of Broadway productions. After three years in Connecticut as the executive vice president of the Eugene O'Neill Theater Center, Thorn began to shift to consulting, eventually starting Arts Action Research with Nello McDaniel.

Thorn and his wife, Nancy, a former theater and television dancer, moved in 1996 to Portland, attracted to the city's modest scale and scrappy arts scene. Because of his partnership with McDaniel, Thorn spent much of his first 12 years in Portland traveling to New York for work. These days, Thorn spends most of his time in town, though he and McDaniel continue to work together.

Since 1996, Thorn has advised more than 75 Oregon arts and culture institutions of all sizes, disciplines and levels of success, including the Portland Art Museum, Portland Center Stage, Chamber Music Northwest, Northwest Children's Theater and the now closed Portland Art Center.

Last month, he was honored by The College of Fellows of the American Theatre, an organization based in Washington, D.C., that promotes professional theater.

Recently, Thorn talked with The Oregonian about the financial health of Portland's arts institutions, the state of fundraising here and other arts issues. The interview was edited for clarity and space.

Q: You were so immersed in New York's arts world. Why did you leave?
A: Nancy and I left New York in 1974 for a couple reasons. It was the time of New York City's first economic crisis. This great city was disintegrating. It was also the time of a great transition within professional theater. In the theater, professional producers used to be the ones who put the shows together. But at the time, there was this transition from professionals to people who weren't professionals but could raise money. I had another business partner back then and together we managed five different shows for one producer. That producer could raise money. But he had no sense of aesthetics. It was just time to move on.

Q: You've been an arts consultant during a time that spans the emergence and maturity of nonprofits. What's been the biggest development?
A: One difference is that there used to be this belief in an institutional model. Whether you were an orchestra, a small gallery or museum, you were supposed to fit into that model. People are now organizing in terms of the way they need to as opposed to the way they are supposed to.

Q: Is that good or bad?
A: It's a great thing because the idea that one model can serve a collective that is so wide-ranging is not healthy. Many small and midsized organizations tried to fit into a model when they shouldn't have.

Q: Having witnessed New York's economic collapse during the '70s, how bad is this current recession?
A: This is the most serious recession I've ever seen. It's not cyclical. When we come out of this, we will be different. I don't know how, but we'll be changed. There's little in our past experience to help with this.

Q: We've seen many arts organizations scale back costs because of the recession. But shouldn't we expect some to shutter entirely?
A: I would think so. The way I would describe it is this: If a nonprofit was relatively balanced before the crash and endowed with good leadership, then they'll find their way through this. But if a nonprofit was out of balance financially, then the stress will be a hundredfold.

Q: Nonprofits have made budget cuts. But given the cycle of budgets, isn't the worst ahead of us?
A: I think everyone is making cuts because income and endowments are down. So in December and January people began to rethink budgets and how to break even. But I think balancing budgets for 2009-10 will be much harder. When the crash happened in October, performance organizations, for example, already had subscriptions, and year-end giving was coming in.

But only now and into next year will we truly see the ramifications on ticket sales, fundraising and memberships. I suggest nonprofits conceptualize not only for the several months left in this year but also for the time carrying forward into next year and beyond. People need to be working on an 18-month cycle now.

Q: What other advice are you giving nonprofits?
A: Be income-driven as opposed to expense-driven. If you are expense-driven, you build an expense budget based on what you want or need to do. Then you create income budgets to balance that. But if you are income-driven, you will develop your expenses responsibly and in line with the money you have.

Q: What's the single biggest mistake nonprofits make?
A: Growing to a size and scale beyond the mission. That's when it loses its center, its mission, and tries to become something more than its resources indicate. Of course, it's easy to understand why this happens: Our society is based on growth. That's the primary criteria for success: Are we getting bigger, doing more programs? Groups thus feel this pressure to grow bigger. That's how nonprofits get a mile wide and an inch deep.

Q: Nonprofits talk a great deal about the shallow funding base. Do you think they're right?
A: Yes. Portland is the most difficult city to raise money that I've ever worked in. Portlanders surely appreciate what they have culturally. But what's missing, to a degree, is an understanding by them that an investment is necessary in order to keep what they have. They have to give money. Another reason is that there is a thin layer of support overall. What the city and the Regional Arts & Culture Council (the nonprofit devoted to arts funding for the Portland area) have done is important in terms of funding, but it can't compare to other cities. We also have a thin base of corporate funding because so many businesses are moving out. The foundations have been generous but that, too, is a small base.

Q: So it's difficult to raise money here, but do you think there is actually money to raise?
A: Overall, no. From individuals, yes. The corporations have been doing what they can. But again, that's a small base compared to other communities in other cities.

Q: You've talked in the past about a system of individual donors.
A: There is a window closing on the old system of donors here. The old system is composed of the families who long ago took responsibility for patronizing arts and culture and other sectors of the community -- Arlene and Harold Schnitzer, for example. As that generation passes, wealth is spread out across the next generation. But sometimes that next generation doesn't have the same interests and passions of their parents, though Jordan Schnitzer clearly does. Our large budget organizations, like the Portland Art Museum, will likely get through that closing window. But not others. What will replace that new system? We have some elements already -- RACC's Work for Art program, the Oregon Cultural Trust, maybe a dedicated funding stream down the road. In other words, there are a lot of individuals out there with money, but they aren't in the arts and culture system.

Q: In the visual arts word, there's been a dream to create a contemporary art center. There have been various attempts, but each has failed. Can it happen here?
A: I'm not sure there is a level of support for a center of the quality and size we desire. I think the first thing that would have to happen is that people would have to be prepared to commit a significant level of funding. Because if we are talking about a center with national, maybe international, reach and ongoing education programs, then that's a big price tag -- at least a $3 million or $4 million budget.

Q: Why isn't the support there?
A: I did a presentation about 18 months ago in Seattle. At the time, Seattle had just expanded its museum with a new outdoor sculpture garden. There was also a new great symphony hall and a new library designed by Rem Koolhaas. We just don't dream like that in Portland. It doesn't mean we don't dream. We just dream differently. We dream about light rail, sustainability, bicycles, green culture.

Q: Mayor Sam Adams recently introduced an idea to create a ballot measure for arts funding. What are the chances of such a measure passing?
A: It would happen only with a real educational effort to articulate why arts funding would add value to all of our lives. And we are a long way from that kind of understanding. On the other hand, if the arts community can rally all of its audiences, donors, members, workers and volunteers over one or two issues, then they won't be stopped.

Q: Don't you think the recession will affect people's willingness to give money?
A: Yes, but on the other hand, this is the best time to plan, to strategize, so that when we come out of this recession, we'll be prepared and ready.

Q: The ballot measure is really the mayor's idea. But he's been compromised politically because of the Beau Breedlove scandal. How will that affect any possible measure's chances?
A: I don't think the mayor will be that key. What's more important is whether a grass-roots movement develops. It will be a collective effort that won't be dependent on any one person.

Q: You and your wife, Nancy, could just enjoy a simple life in Portland after many years on the road and having accomplished so much professionally. Why bother with struggling organizations now?
A: It's simple. I get to work with terrific people and I love the work that I do.

Interesting articles/blog posts from last week – in case you missed them!

Here is a round-up of what caught my eye over the last week.  Let me know if there is something interesting I should be reading!

Interesting argument - Text Me Later (Or: How Theater Isn't Baseball) http://u.nu/5zz3

Cultural Groups ask what to mount next. The Answer - losses? Washington Post http://u.nu/3zz3

To gala or not gala - Iu2019m Honored. No, Actually, I Canu2019t Afford It. NY TIMES. http://u.nu/6xz3

How Much Does Mayor Bloomberg Want to Cut from the Department of Cultural Affairs? Clyde Fitch Report - http://tinyurl.com/dhcugv

Anonymous Giving Gains in Popularity as the Recession Deepens - Philanthropy.com - http://tinyurl.com/d45sky

More Valuable - The Ticket Buyer Or The Donor? - diacritical - http://tinyurl.com/d8sbrg

Bad Behavior at the Theater: Reviving an Old Tradition « Clyde Fitch Report - http://tinyurl.com/d4vjw4

Celebrities Are Taking All the Jobs - http://tinyurl.com/cm3ur9

Equal Time For Planned Giving http://viigo.im/rFc

Fundraising suffered big drop in 2008 http://viigo.im/rii

99seats: Priorities, Part 1 - http://tinyurl.com/d4sn4v

Let's Get Practical! - Artistic Manager and Resident Companies http://tinyurl.com/cpbdse

Broadway, Off-Broadway, Theater : How to invest in a Broadway show. Part I - http://tinyurl.com/d5cgur

How to invest in a Broadway show. Part 2 http://tinyurl.com/dnzg4t

Reasons to be Pretty to Encourage Texting at the Theater - http://tinyurl.com/c5o864

Union Calls City Opera Strike ‘Likely’ Given Demands - Bloomberg.com - http://tinyurl.com/tra5t

Why Twitter Quitters don't Get It http://tinyurl.com/c4neyh

HarvardBusiness.org: The 24/7 Employee http://tinyurl.com/dcz8mu

The World of Celebrity Giving: http://www.looktothestars.org/

IRS provides a mini-course on the new 990 form for charities - http://tinyurl.com/cuo8wh

There are BO users and AO [Twitter] users: Before Opera/After Oprah' ( http://tinyurl.com/cojbdc )

Parabasis: No One Edits Poets. Pondering new play development and collaboration - read the comments too. http://u.nu/4463

ArtsBeat: Barlow-Hartman, Broadway Publicity Agency, to Close http://viigo.im/q2W

Is Your Social Network Cool Enough To Be A Tree House? http://viigo.im/pS6

Social Net Fundraising - All Hype? The Agitator. (Pretty sound advice) http://viigo.im/pQW

A Nonprofit New York Times? http://tinyurl.com/cskgs3

Theatre vs. Theatre Companies (The Playgoer) http://viigo.im/pln

Wall Street Journal Only Top 25 Newspaper To Report Circulation Increase http://viigo.im/pfw

Diacritical: Do we need institutions to create art? http://u.nu/5dp

Why don’t we treat ourselves better?

The other night I ran into a great friend who I hadn’t seen in a while.  We caught up briefly.  I was delighted to hear that she had reached out beyond theater to radio.  But what struck a chord was when she mentioned how working outside of theatre, made her realize how tired she was from a life lived constantly in tech rehearsals.  This made me think about how unhealthy our business can be.

Let’s start with the concept of tech.  AEA standards and what producers can afford comes in packages of 10/12 hour days.   Now let’s be honest on any given tech day very few people involved in the production work 10 out of 12 hours.  Crew, designers, stage managers, etc. are always called before the actors and stay after for production meetings.  Even the actors working under union rules usually work longer than the 10 hours, whether they are running lines, reviewing their blocking, etc, most actors during the tech period through opening are focused on the show they are doing more or less from the time they wake up until they go to bed.  The theory is that the higher the contract tier, the more ten out of twelve days you can do.  For example a Broadway show often does 10/12s from tech to press nights.  Off-Broadway shows may do a week of 10/12s and then rehearse up to 5 hours more each day.  It is exhausting.  And in most cases, designers live in this process the majority of their lives.  Even when a show is up and running there are understudy rehearsals, publicity events, put-ins, etc.  The point is there is a heck of a lot of work outside of rehearsals and performances that most people don’t really think of they just live it. 

The staffs of nonprofits, don’t escape the rigorous schedules.  In addition to regular office hours, many leaders and staff members attend tech, have early morning committee meetings and evening board meetings, must participate in a variety of social events, should see shows at other theatres, and must be at the curtain of a show most nights. 

In addition to the exhausting schedule, theatre folks spend the majority of their lives in building that are either so cold in the summer that you need a sweater or so hot in the winter that you can feel your throat dry the minute you walk in the door.  Many theatres are in older building that don’t have the best air circulation.  In tech or in nonprofit offices you can spend hours sitting in the same place, in the same position.  Or you can spend all day running from meeting to meeting, rehearsal hall to audition space, etc. always in transition in and out of the elements back indoors.

An exhausting schedule, cabin fever, lack of fresh oxygen are just the beginning.  For some reason, theater greenrooms, rehearsal halls and offices are usually filled junk food, snacks, endless supplies of caffeine, and tons of fast food or takeout.  Between short meal breaks, long rehearsal hours and too many cocktail parties and events, keeping a healthy eating schedule is more or less out of the question.

As a group we are not eating well, can barely keep our eyes open and our minds focused, and spend less time outdoors than vampires.  Then many theater folks are smokers.  Musicals can wreck havoc on the body without proper training.  Raked stages tear bodies apart (let’s just admit it – you try walking on a rake in high heels, I have had to do it too many times and I’m just short not an actor).  Haze fills their lungs – sorry it aggravates allergies and asthma.    And after a day filled with all of the above, who doesn’t want a drink.

Of course I have described the worst of it all.  There are plenty of folks who make frequent appearances at their gyms or yoga classes.  Many even train for advanced body conditioning.  There a lots who have unbelievable discipline in what they eat and treat their bodies like temples (at least reformed temples if not orthodox ones).  But as with many careers this takes a lot of hard work.  Yet when theatres are built (and goodness knows we have built or renovated a whole lot of them recently for good or for bad), staff and artist amenities are the first things cut.  What would happen if every theatre created a small gym and mediation room on site?  What would happen if changed the rules and schedules so people could get a little more sleep and a bit more fresh air?  What if we planned the entire tech process for each production rather than by industry standards?  I challenge that rather than making the process take longer it may actually make us work more efficiently and with much greater focus.  Who says you have to do 10/12s?  What if we said that production meetings couldn’t go into the wee hours of the night and finance committees weren’t allowed to demand 9am or worse 8am meetings?   What if we made all of our nonprofit staffs stop eating lunch at their desks?  Sure it would be a big change, but actually it would be pretty easy to test.  Of course there would still be people who don’t take of themselves, but maybe if we found a better balance more folks would take care of themselves, just a bit better and not have to take a break from working in theater to do so.

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Bring it to scale

Bridgespan has released a new report about bringing organizations to scale.   Organization replication and scale is something we tend to forget about when it comes to the arts.   But isn’t the first question we should ask - what is the “right-size” for an organization to accomplish its mission?

The Bridgespan report notes some key challenges for nonprofits in determining and fulfilling scale:

1. Distinguishing promising programs from proven ones is complicated, costly and essential.  Many social service organizations have little if any evidence of their programs’ efficacy. This doesn’t mean that they aren’t producing results. But it does mean we cannot say for certain that they do.
2. Scaling requires rethinking traditional patterns of funding. If we want to make a pervasive impact on our nation’s most difficult problems, we are talking about supporting fewer organizations with larger sums of money. Concentrating resources on a few organizations is rarely how money flows today.
3. Scaling a nonprofit’s programs without investing in its capacity is a recipe for failure. Building organizational and human capacity – putting in place the strategy, systems and, above all else, the right people in the right jobs to convert money into results – is as important a factor in bringing a program successfully to scale as the money itself.
4. Ongoing research, evaluation and performance measurement are imperative as an organization scales. Put simply, there is no other way to ensure that even a well-funded program with proven outcomes will be expanded and sustained. A good idea absent its execution is in fact not a good idea at all.

Last summer at Harvard Business School’s Strategic Perspectives for Nonprofit Managers, we spent a lot of time talking about scale.  This was the first time I really fully explored the concept in terms of the arts and in particular theatre.  In the post, I pointed out four strategies in terms of scale.

1. Get support for fixed costs (and maybe semi-variable costs), and have variable (and maybe or semi-variable) costs covered by earned income.
2. Franchise.
3. Engage in partnerships (or even possibly mergers).
4. Create a subsidiary of a commercial business.

Shouldn’t successful organizations and programs be replicated? What would bringing it to scale mean for theatre? Can we "franchise?" Aren’t co-productions, touring, or moving a show be a type of franchising in the theatre?  Certainly education programs are replicated – it happens naturally more often than not without a strategic plan, but why not plan to replicate and take certain ideas for programming to scale.  In a way the NEA Big Read program is doing exactly that. 

When talking about funding models and whether theatre’s should be saved, if we can talk replication, we have to take mergers under consideration.  For some reason in the arts, mergers are often interpreted as failures.  But consolidation, restructuring, and resource-sharing can be VERY effective for theatre organizations and individual productions, so why not out-right mergers?  Certainly in terms of scale it may make sense for organizations and the community.

We certainly are seeing a form of mergers in co-productions and new play development.   Adrian Ellis wrote in the Art Newspaper that this would be one of the three ways to compensate for the losses in philanthropic, endowment and visitor incomes for museums, “what museums accept they cannot do alone, they will explore doing together more thoroughly and earnestly than in the past: collection sharing, joint acquisitions, pooling conservation resources, and pooling curatorial appointments.”

Without question determining scale is difficult and requires significant examination, but it seems to be an essential step which we don’t take enough time to address and plan.

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Key Issues facing the nonprofit theatre industry (a top ten list)

Issue One: The business model is broken (if it ever worked).   We need a new definition of fiscal health and sustainability based on individual organizations needs.

Theaters across the US are acknowledging that the traditional nonprofit theatre model is broken (60% earned/40% contributed). For many structural deficits have become the norm rather than the exception.

Other Earned Income resources can be explored but must not pull the theatre off mission.  Enhancement income can be raised from aggressive new play development and active exploration within the industry. Although this is a somewhat unpredictable source of income when done under the right circumstances it can be very helpful in offsetting expenses.  When done for the wrong reasons (read – for the money) it can be devastating.  Co-Productions are another performance related income stream. Similar to enhancement income, the partnership is as important as the income source. Many Education Programs generate significant revenue through participant fees, vendor agreements with academic institutions, or corporate training programs. Real estate acquisition and utilization can be a revenue source for many organizations.

Rising Production costs must be reasonably contained, however, eventually many theatres might have to go through a certain amount of correction on their production expenses if they are “living beyond their means.”  Programming, fund-raising and administrative needs of companies need to be assessed regularly.

Theatres need to address contributed revenue across the board – annual campaigns, specialized campaigns, and reserves/endowment.  Alternatives to traditional endowments will need to be explored.  Working capital must be addressed. 

We must assess our governance structures and make sure there is balance between board, artistic and managing leadership.  Too often healthy discussions become tyrannical demands by one or two of the partners. 

Issue Two: Many of our mission statements have become interchangeable.

Writing missions by committee has watered down many theatres’ missions.  Consensus has become a compromise to mediocrity.  Organizational values are sometimes difficult to identify and in a few cases have been lost to the whim of leadership changes and egos.  We must return to missions that address a need.  Why do we have mission statements in the first place? We need a purpose.  We have to have an identity right? A uniqueness? A reason our community needs us? We have to use our resources and capabilities to fill some social need.  We need goals to measure our impact against!

Issue Three:  We have lost our relevancy within our communities.

The first two issues have created the most challenging and threatening issue of all.  Several organizations have veered away from their original mission and become increasingly irrelevant.  Theatre has become about making the safe choice.  We shy away from artistic risks over concerns for finances – just when we should be taking the greatest risks with our work.  We aren’t spending enough time getting to know our constituencies so aren’t picking work that matters to them. We must live up to the responsibilities we have to our community.

Issue Four: We aren’t investing enough in new kinds of theatre – the evolution of the form.

Theatre has a bad tendency of being behind the times, we must explore how we use new technologies, environmental theatre and challenge the definition of the theatre or new forms will evolve without us.

Issue Five: We should partner more often with other arts organizations or social service organizations.

We must identify mutually beneficial partnerships and eliminate those that drain resources.  Natural partnerships have formed with other theatres and some arts organizations, but we must actively pursue new bonds and relationships that allow us to share resources and fund our expenses.

Issue Six: We don’t do enough for families.

As members of a community, we must do more for families.  In a world where group experiences are becoming more and more virtual we must provide programming that  brings families together under our roof to experience live storytelling.  We must make theatre-goers.  If you haven’t experienced something you will never miss it.  We need to provide flexible services and scheduling to parents as well as provide the tools with which to explore theatre together with their children.  We need to have programming that reaches audiences of all ages focusing on the major transition periods.

Issue Seven: We need to make theater more accessible.

Programs that lower ticket prices must be created so that more people can see shows.  We have marginalized much of the theatre-going experience to the affluent.  Of course not all programming will be accessible to everyone (that is unfortunately inherent in the arts structure).  But we have reached a point of imbalance.  A correction is essential to remain relevant, to serve most missions, and to keep theatre alive.

Issue Eight: We need to build theater’s Audience Base.

We must create participatory experiences beyond productions.  Education programs, outreach programs, audience development programs – whatever you want to call them, must be at the center of the organization along with productions.  We cannot afford for them to remain or become satellites to production.  When all of the information in the world is available in a few keystrokes in a google search, we must feed the desire for deeper, more qualitative, more educational experiences. We have to listen to our audiences, create a dialogue, and create forums for ideas to be expressed.  We have to work as diligently on the relationship with the audience as we work on producing the work.  We must speak their language and use their communication tools.

Issue Nine: We need to build theater’s Donor Base.

We must work with the entire nonprofit community to stop complete marginalization of the arts.  We must finally create a multi-layer argument regarding the value of the arts.  We must stop the competition and aggression towards other arts organizations.  Again, we must listen to our donors and create loyalty and generosity that is based on something more than a rewards system for patrons.

Issues Ten: We must empower and invest in our staffs.

Without committed and seasoned staffs we will not achieve any of our goals. We need the staffs of organizations to drive programming and ALL activities of the of the organization in partnership with the board to achieve appropriate growth, long-term strategic goals and the necessary fund-raising to sustain the organization.  We need to invest in continuing education for our staffs.  We must break the cycle of short-term employment and increase staff retention.

As with any list about an entire industry, of course there are folks working on these issues.   Please share what you are doing!  Learning from one another and working together is the only way to address these issues industry-wide!

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Harvard Business Publishing Management Tip of the Day, April 15, 2009

Great tips and article link below. In times like these we forget how impactful our words can be to our staffs, boards, and other constituencies. These are some good rules to live by!

Harvard Business Publishing Management Tip of the Day:

APRIL 15, 2009

4 Ways to Talk Tough Without Creating Panic

While you may be tempted to use words like "Armageddon" and "disastrous" when talking about your business these days, now is not the time to tell people the sky is falling. In times of crisis, leaders need to choose their words wisely and convey calm and confidence. Think about these four things when addressing your team:

1. Pause before you speak. A well-used pause conveys calm, thoughtfulness, and seriousness. It also gives you time to think before responding.

2. Don't blame. While certain senior managers may be more culpable than others, singling out individuals does not instill faith. Instead of pointing fingers, honestly address the situation and describe a plan of action.

3. Avoid exaggerations. Using words like "catastrophe" and "meltdown" can cause unnecessary panic. To de-escalate tensions, use words like "serious," and "tough" to make your point.

4. Tell it like it is. Tough times demand tough talk and you owe it to your people to be honest and truthful. Don't gloss over serious concerns, but do focus on facts.

Today's Management Tip was adapted from "Cut out the Gloom and Doom talk" by John Baldoni.

5 things to do for your staff today!

Without a staff an organization is nothing. So take a moment and do something for the wonderful people who work with you today (notice I said with not for).

1. Celebrate a success. It doesn't matter how big or little but take a moment and celebrate an achievement from the past week

2. Eat something together. Order pizza or cupcakes or whatever without reason, but bring everyone together in one room. Eating or snacking together breaks down walls. It creates an environment for casual conversations and bonding.

3. Ban email for the day. Remind people to talk to one another instead of holing up behind cubicle walls.

4. Create a staff "fun" committee. Put a small group of people in charge of creating staff activities that are silly yet fun, and allow for breaks in the 12 hour days we all work at nonprofits.

5. Say "thank you." In an office these two simple words cannot be said enough, and sadly in the mad rush of thing we tend to forget to say them.

Remember, as in life, the little things count as much as the big things - perhaps even more.

Charity Navigators 10 predictions for the future and what affect they might have on the arts - most importantly opening your books to the world

Ken Berger (President & CEO of Charity Navigator) posted his 10 predictions about the non-profit sector on his blog. He provides detailed thoughts behind his predictions but here they are in short:

1. Increased Funding by the Federal Government
2. Decreased Funding from Other Sources
3. Rising Demand for Charities to Provide Information on Their Impact
4. Mergers, Program Closures and Layoffs
5. Scandals As Always, Only More So
6. Charities Having Problems Filing the New IRS Form 990
7. A Greater Divide in Opinion Over the Role of Government in the Charitable Sector
8. Arts, Humanities and Cultural Charities Take A Beating
9. Health Care Charities Remain King of the Hill
10. Religious Charities Remain Strong

With the exception of number one, I pretty much agree with his predictions (I think the government will pressure social sector but not necessarily fund it).

I think there are several the arts should be paying attention to:

Number eight: Obviously. Berger points out the admissions, reliance on affluent donors, and competition from social services sector are major factors. I addressed this competition aspect late last month. I could spend all day linking to my thoughts and others that I have tied into regarding ticket prices and donor dependence, I think we are all pretty clear that we have priced ourselves into smaller audience sizes and have not found the correct balance for the majority individual organizations. This will of course lead to several more organizations joining those who have already closed.

However I think number four, five and six are very pertinent to the arts as well.

I have written a bit about resource sharing, but not enough about mergers (which my next post will examine along with the idea that is becoming more and more annoying to me "putting the regional back into regional theatre" let me post before the angry comments pour in).

But let's focus for a minute on 990s and scandals. More and more I am seeing articles of executive compensation in nonprofits being torn apart. I would actual argue that the clarity on salaries and major donor relationships will be a source for scandals - real and made up. The 990 is something many executives and board pay no attention to, I think this is a MAJOR mistake. The 990 is the most public document regarding an organization. Most are posted on the Internet in many different forms - any one can look at them, peers, donors, government officials, etc. As the form is getting easier to read and understand, more and more people will have more and more information on your organization. I urge all executives and boards to take a serious look at what their 990 says about them. In fact, I would ask someone from a "competitive" organization to tear through them with a vengeance. After all there may be some IRS agent out there who will or worse a major donor or press person who will.


990 resources -

Want to read almost any organizations 990 - www.guidestar.org you have to register but is free.

Philanthropy Journal article Get Ready for the new 990.

Book time to think!

For theatre people crisis management is easy. It is technically what we do for a living. Production is one series of crisis management after another – even on the best of shows. We are often doing more than one show at once so we are constantly juggling crisis and topics. This makes strategic thinking and long term vision very difficult to manage. So in addition to breaking down department barriers – here is a radical thought – book time to think each week or every other week. I can hear many people saying - we are all so busy and the strategic planning process is for those useless board retreats. Well actually, we are so busy because we don't take the time to think and so we create more crisis to deal with and the board retreats are useless because strategic planning should be a constant in our process not something we think about once a year. Now I am not talking about strategic plans being those long documents that no one reads. I am talking about thinking strategically and having long term vision. Your key team (Board leadership, MD, AD, department head – whatever this means to your organizations) need to meet regularly to address this!

This means know the values of your organization and occasionally reviewing your programming to make sure it is aligned with the values.

It means mission assessment – note that values were before mission.

This means measuring the impact your organization is making.

This means thinking about the scale of your organization and if what is to scale and what needs to be expanded.

This means thinking about new models – for funding and programming - and addressing core issues that need to be resolved.

And, as a leader, I recommend you take one hour a day (start with a half-hour if you have to) – this is the most difficult of them all – to read, think, write or whatever you need to do to get away from the day to day, to get away from the crisis and THINK. Since every theatre person I know is working from the minute they wake up and check their blackberry in the morning until the read the performance report late at night, it really isnt' much to ask that you take a full hour. It may mean while you eat your lunch at your desk you look at www.playbill.com, www.broadwaystar.com, read an article at www.hbr.com or read someone's blog! It may mean you go walk a few blocks or around the parking lot. Your work, leadership, and organization will be the better for it.

 

12 things to learn about each donor or audience member

As a follow-up to my post about box office and front of house staff, I got several emails about what kind of information should staff try to learn about their customers beyond how they heard about the show they are seeing. Any information is good information, but below are the top 12 things I try to learn about donors, audience members, and anyone I work with (agents, artists, etc). The information is only useful if it recorded somewhere, don't forget that! For example, I copy the answers to these questions from our donor/ticketing software into the notes field of my outlook contacts. For agents I add their client list to the notes, and for artists I add every show I have worked with them on and all of their representation. Some of the information comes from phone calls, some from a little research, and some from conversations, but I track it all and ask that my staff does too.

1. What is their spouse's name (and track whether they stay married)? The reason is pretty obvious – whether it is for ticket pick-ups, events or phone calls – best to know who is married to whom

2. Do they have children? Names? Ages? Again, obvious reasons for tracking this – programming options, the occasional question about how they are doing. It is good to get what schools they go to (for educational program discussions) and speaking of schools…

3. Where do they work and what do they do? Another obvious one – you can learn a lot about what people might like by what they do for a living.

4. What colleges did they go to? Often they are active in alumni groups (hello group sales), they may be on the board (hello connections), or they may just follow that sports team (always an safe conversation topic).

5. Do they have pets? I have five dogs and a cat – no kids, enough said.

6. Where were they born? This is a great one to figure out through research and toss into a conversation – always impresses and makes a very personal connection.

7. Who are their friends? Or as I like to think of it – who are they going to bring to me as potential audience and donors! It is about networks and always has been, we are just more aware of this in the era of social networking (plug for fun site – muckety.com - It is a great way to find out a lot of info it actually tracks their former business associations and boards that they serve on and creates a cool graphic of it, in addition to Google and Wikipedia searches of course.)

8. What are their other causes? This is a great way to find future partner for programming or to identify programming that folks may be interested in. Perhaps you offer another organization they support free tickets for their employees or constituencies, it can really strengthen relationships and make you feel good about helping another organization.

9. What is their religion? Touchy subject, but it is more embarrassing to invite someone to an event scheduled on – say – Yom Kippur and completely insult them. Also religious organizations can be good programming partners (as in number 8).

10. What are their special needs or even just likes? Do they really prefer an aisle is as important as if they require it. Are they injured and need special assistance? Do they love the mezzanine (or hate it). Do they like to arrive early to socialize or get in and get out quickly. You can't also meet their desires, but acknowledging you couldn't sometimes is just as good as not meeting them.

11. What are their other interests? Knowing they are a baseball fan is not enough – Mets, Yankees or Sox? Guess the wrong one and you could be in trouble. Do they love gardening? Play tennis every morning? Write a blog? If you know you are going to see them – use a personal hobby as a conversation piece.

12. Are they talkers? This is a tough one, but you have to be careful. Some people don't want to chat or make small talk with you – it isn't anything about you, perhaps your organization is really their spouses passion and they are really just supporting their spouse, so they really don't want to hear about the great new programs you have. Some people are just very uncomfortable with small talk especially in a crowded lobby or group, but one on one are happier. Believe it or not I often learn this from a box office person. I will be curious about someone who never really wanted to talk before a show and the box office will tell me how odd it is because they are Chatty Cathy on the phone when getting their tickets, so I follow up with a one on one call, and make stronger connection to that person in the manner in which he or she prefers.

Lose the department borders and territorialism! Assign tasks by expertise!

There are way too many walls in a nonprofit theatre office, and it is creating problems. It is time to break down some walls and blur the lines between what each department does. If you have a great staff they will work better together if we follow the way we handle shows for every major task we have.

Switching completely to project management mode might save your staff. And I mean save in the truest sense of the word. Theatre staffs are overworked, underpaid, and over-stressed. Changing a few simple things may save folks.

Internal collaboration is the correct business term – but I think the production process is exactly that. On a show everyone knows what they are responsible for but they also know that they must collaborate with everyone's department and help out when help is needed. The process is at its best when there is no territorialism – boundaries of course are respected, but it is a solid team effort.

If you have ever produced a gala, this is the only healthy way to do it – treat it like another production, give assignments out to people based on their expertise and you will have a successful process. When the development department tries to do it all on their own, it is a recipe for disaster. If there is a performance component or artists involved, why would you not have company management, production and the experts at your organization in charge of it? The communications and graphics should be coordinated through marketing. It is just another show.

Since many already know that about events let talk about something most people wouldn't think of first. Your annual audit is another production. What? That is the finance department's job right? No it is not. If everyone is aware of what goes into testing, every department can be working on the audit throughout the year. Usually every donation over $5,000 is subject to testing, can't the development department just make an auditors copy when a donation is processed and put it all in a notebook for auditors. All contracts over a certain amount are tested, can't each department create an auditors copy at the time it is done. Sample contracts, marketing materials, and many other testing materials don't change and won't change, so why not have each department tracking it throughout the year. Wouldn't this also foster a better understanding (and relationship) with the finances and finance department?

Marketing and Development department who work together will generate customers for each other. Let's extend that say to production vendors. What if each production vendor was treated as a potential donor? We did this with rental inquiries at one organization and converted many rentals into corporate sponsors who among other benefits received building usage – but for a much higher amount than the rental would have generated.

There are so many projects we do each year that if we forgot about whose department it belonged in and instead focused on who the best people were for the project and assigned them the responsibility we would be a lot more efficient and might just save our staffs especially when they keep getting smaller and smaller.

 

 

Better box office and front of house service keeps your customers coming back – almost as much as your programming

Several months ago, I wrote a post on market research for theatre – who to talk to, where audiences might come from, and initial methodology that I have been meaning to revisit for ages. My Harvard Business Publishing update reminded me of it but brought up some really important ideas that I wanted to address as well. Of course, since many don't have access to HBR website I pasted the post below.

Peter Merholz makes some really important points about staff right up front. I have had many conversations with other leaders about our box office staffs. They are usually the youngest and worst paid staff members. We work diligently to keep them up-to-date on programming, updated information, and institutional information, but many if not most are part-time and more often than not our work to keep them informed is subpar. And let's not face it customers are not always nice, so when you are young, underpaid, and unprepared, it is pretty easy to be short or even rude to customers. And for a large part of our constituencies this is not on the first contact that they have with our organizations but the majority of our audiences probably only meet or talk to the front of house staff. Many of our subscribers only ever interact with the front of house staff. This is more than our "front line." So how do we improve customer care?

Perhaps we should do some analysis on what we pay for part-time employees, telemarketing and other interactions and really explore the idea that the box office staff and house management staff should be experienced, middle managers who are capable of handling difficult decisions.

Also, by nature, most box offices are separate from administrative offices. I really recommend to any one building a theatre, think of connecting the two. Satellite offices naturally receive information at a different rate and are by placement alone separate from the day to day conversations and camaraderie of the general office staff. The box office should be closed for full staff meetings and all box office staff should be in attendance at these meetings.

Of course staff structure is different at each theatre, but there must be a strong connection between marketing and development functions, as well as a system for staff education that makes sure that these front of house staff members are in the loop as decisions are made. These key intermediaries between the audience and the organization MUST have interaction with the artistic department and artists – and not just booking their tickets, showing them to their seats or letting them know about house sizes. It must be healthy, quality interaction about the work happening on stage.

As for the information that these staff members collect about customers from conversations and sales interactions, it has to be recorded somewhere. I don't care how busy the phone lines are – we have to learn more about our customers and what better way than through the person talking to them.

If we are going to connect with people, the connection should be as intimate as theatre itself with as many of our patrons as possible and at all levels of the organization. People can get cold, canned, impersonal experience from the majority of businesses they interact with throughout the day. If they don't want a human experience they will buy on-line. But most people who come to the theatre are coming for the human connection whether social, emotional or intellectual, they want a connection. We have to give them a positive, well-informed one.

From Harvard Business Publishing Blogs:

It's Not Who Your Customers Are, It's How They Behave by Peter Merholz

9:28 AM Wednesday February 11, 2009

Businesses cannot exist without customers, so it's sadly ironic that many, if not most, businesses, actually understand so little about them. As a company grows, a smaller and smaller percentage of the staff interacts with the customers. In fact, those folks on the "front line" (think call centers, service counters, retail stores) are typically among the lowest-paid and have the least authority.

Meanwhile, back at headquarters fundamental decisions are made with extremely limited information about customers. There, understanding the customer is often considered someone else's responsibility, because, "we have a department for that." No department has a complete view of the customer, however, and so in place of true understanding are models and frameworks that attempt to describe the customer. Many companies don't go beyond demographics and market segmentation. While it's helpful to know how they break down by age, sex, income, region, and other easily measurable characteristics, there's actually very little you can actually do with that information. In order to become customer experience-driven, you need to go beyond who your customers are, and understand what they do.

When companies think of how their customers behave, it's typically in one of these four ways. See if any of these resonate with you:

1. "A gullet whose only purpose in life is to gulp products and crap cash"

That quote comes from The Cluetrain Manifesto, still one of the best books on how companies should embrace a new way of communicating with their customers. Very few companies would admit it, but you know that some still see their audience this way (I'm looking at you, broadcast media.)

2. Sheep

This view holds that with the right "messaging", you can guide people to behave in certain ways, because they're docile and gullible and respond only to emotional tugs. And while this might be fine in the world of packaged consumer goods, where there's not a lot of complexity in using (i.e., literally consuming) the product, it breaks down when your offering is more complex. During the first Web boom, I remember companies spending tens of millions of dollars on advertising, and a tenth (or even a hundredth) of that on the site experience. You can no longer simply hound people into buying your product.

3. Homo Economicus

If Sheep are one side of the behavioral coin, this is the other. This view argues that customers are highly rational beings who want to maximize the utility of their purchases. This leads to an assumption that what matters most is "bang for the buck," which in turn gives us products with bloated feature lists, because who wouldn't want to buy the item with 14 bullet points on the packaging over the item with just 10? Sadly, there's research that suggests that many customers do make just this purchase decision; however, there's also research that up to 50% of product returns are for items in perfectly good working order -- they're just too confounding to use.

4. Type A Personality

Perhaps the most sophisticated common view of customer behavior is the one that understands customers are completing tasks in the process of accomplishing a larger goal. This view comes out of the world of software and Web design, where the functionality can get quite complex. This perspective becomes problematic when taken to the extreme -- that people are some kind of flesh robot seeking to maximize productivity. This leads to offerings that work, but can be joyless and dull. Perhaps you've used some of Microsoft's products?

Now, these perspectives aren't wholly wrong (well, maybe the gullet), but clearly they're not quite right. In order for a company to deliver truly outstanding products and services, it must embrace the messy complexity of human life, and endeavor to understand its customers as people. In other words, understand your customer as you understand yourself.

This means going deeper than tasks and goals to appreciate behaviors and motivations. A few years ago, I worked with a large national bank to help them better understand how customers decide to purchase the bank's products and services. The bank had a sophisticated demographic model, but didn't understand what cinched the deal.

Our initial efforts focused on the "goal" of buying a product, and we were able to outline the steps that people took to achieve that goal. They researched banks online, then compared products within banks as well as across banks. They visited nearby branches, and spoke with representatives in person or on the phone. And once they amassed enough information, they committed.

In our analysis, we realized this was only part of the story. We asked the research participants to retrace their steps, focusing on the Web site, to walk us through their experience. And in doing so, we saw that while there was a set of discrete tasks that lead to achieving a larger goal. More importantly there was an underlying motivational layer of emotion that actually guided their decisions. Buying financial products is challenging, because unlike physical goods, it's hard to define what you want ahead of time. At Best Buy, you can point to a 52″ television and say, "something like that." You can't do that with a loan or a line of credit.

So what happened was that while people appeared to engage in the appropriate steps to make a purchase decision, because they couldn't articulate an end state, they were simply going through the motions and would never commit. We realized that customers must satisfy three sets of requirements -- functional (does the product meet my basic needs); intellectual (through comparison, am I confident I'm getting the best deal); and, crucially, emotional (could I have a relationship with this bank?). The bank wanted to drive all applications for new products online, but the customer research analysis made clear the importance of maintaining a quality cross-channel experience. Potential customers often wanted to meet representatives, either in person or on the phone, before committing to an application, even if they've done all their research online.

Peter Merholz is a founding partner and president of Adaptive Path, an experience strategy and design firm. He has worked with a wide variety of clients from large multi-national companies to smaller, avant-garde firms and start-ups. Past clients include Hallmark, Socialtext, Intuit, United Airlines, and The Vanguard Group. Peter is an internationally recognized thought leader on user experience. He co-authored Subject To Change: Creating Great Products and Services for an Uncertain World, published by O'Reilly. Peter's thought leadership is perhaps most dubiously demonstrated in his coining of the term "blog" in 1999 when it was a nascent genre.

Cris-i-tunity

The post below is something I wrote for a new blog or perhaps even a book that I plan to start writing soon. It has been on the sidebar of Off-Stage-Right for a while, but some readers suggested I bring attention to it by making it a post. I will still leave it on the sidebar, it is a guide for me in a deeply personal way. As I was thinking today about why I am writing this blog, I realized the friends who suggested it be a post here were right:

I can't help but feel that we (and unquestionably I) have entered a new era and that we must shed the past, taking with us what we learned but facing the fact that none of it may be useful in the future.

Everyone is more than aware of the global economic turmoil we are experiencing. It is impossible to escape TV reports, newspapers and magazines, internet alerts, etc. that let us know how horrible the situation really is. Even the President of the United States has to be honest that these are trying times, and they are going to get worse. And, no one can really say how long recovery will take or what recovery looks like. We find it difficult to even discuss or if it is recovery or is it more truthfully outright change.

The world of theater - especially nonprofit theater - is not experiencing a bump in the road, a correction, or simple challenges. We must acknowledge that we are entering a new reality and must adapt our organizations and, yes, our art to thrive in this new reality.

Personally, I am also going through circumstances beyond my control that are creating a new reality for me. I have lived my professional life in the world of theater - although I had a global perspective in learning, I rarely journeyed outside of the theater world, and today I am faced with a great unknown as to whether I can or will continue to do so, or whether I am supposed to be traveling another path.

Without question this personal, national, and global crisis has manifested for myself and I am sure many others a response similar to Elizabeth Kubler-Ross's five stages of grief -denial, anger, bargaining, depression, acceptance. I am sure that dissertations have been written relating grief to life changes or periods of crisis.

However, I posit that for life changes or crises there is a sixth stage. A stage in which we take action. That stage is opportunity.

Therefore, even though my professional and personal life may be in crisis and the world is facing tremendous social, economic and cultural crises, it is time I emerge from denial, anger, bargaining, depression and acceptance into opportunity. I expect there to be minor/major shifts and bumps in the road, so I will just call this period - Cris-i-tunity.

Nonprofit Compensation

With the A.I.G. scandal so widespread, it is not surprising to find the Wall Street Journal article below:







MARCH 27, 2009

Pay at Nonprofits Gets a Closer Look

The furor over big bonuses at American International Group Inc. and other Wall Street firms is prompting nonprofit organizations to brace for more scrutiny of their executive pay practices.

Though they haven't received taxpayer bailouts, charities benefit from billions of dollars in subsidies through their tax-exempt status, which could expose nonprofit leaders to the same level of scrutiny that executives at subsidized financial firms are facing.

Nonprofits of all stripes were feeling greater heat over pay even before the AIG bonus furor. At the University of New Mexico, faculty are in an uproar over pay for the school's president and other top executives. For the first time in 20 years, the Internal Revenue Service recently imposed stricter disclosure requirements on executive pay. The IRS also has scrutinized pay for nonprofit hospital executives, while the Chronicle of Higher Education has put the spotlight on big payouts for professors, administrators and athletic coaches.

"The train of greater focus on nonprofit executive compensation has left the station, and charity boards better get on, or they're going to suffer greatly for noncompliance," says Michael Peregrine, a partner at McDermott Will & Emery LLP, who advises nonprofits. Nonprofits should start reviewing their pay policies in light of the current political environment, he says. "It just cannot be business as usual."

In higher education, the University of New Mexico's faculty delivered a no confidence vote last month against its president, David Schmidly, amid consternation over executive pay and other issues. Mr. Schmidly took home $587,000 in total compensation in fiscal 2008. A recent university report showed budgeted salaries -- excluding other perks -- for senior executives increased 71% to more than $9.8 million between 2002 and 2008. (Mr. Schmidly took the reins in 2007.)

The increased pay for these university leaders has created "a similar sense of disparity" that others have voiced about paydays for Wall Street executives, says Douglas Fields, the university's incoming faculty senate president.

Mr. Schmidly, who recently instituted indefinite pay freezes for himself and other top executives, expressed disappointment in the faculty decision, but in a statement after the vote vowed to "reach out and gain the support" of the university community. He declined to comment further through a spokeswoman.

In a survey by the Chronicle of Higher Education examining large compensation packages at universities, David N. Silvers, a Columbia University dermatology professor, was the top-earning academic, bringing in $4.3 million. In a statement, Columbia declined to discuss Dr. Silvers' pay but said he is "renowned in the field and has significant responsibilities in directing a highly specialized lab" at the university's medical center.

Universities point out that their officials help generate millions of dollars in revenue. And even the best-paid nonprofit leaders don't come close to making the tens of millions of dollars reaped by some on Wall Street. At the largest nonprofits, or those with budgets exceeding $50 million, top executives earned $476,383 on average in 2006, according to the most recent figures compiled by GuideStar, an electronic database that gathers information on nonprofits. Some argue that nonprofit leaders are underpaid, which may lead to the same "brain-drain" phenomenon that Wall Street executives have warned about in light of new pay restrictions.

"I've run into a lot of people who are great leaders of great nonprofit organizations who end up having to leave to go into business to make some money, because they have kids they're going to need to send to college," says Steve Case, the America Online co-founder who now chairs his own foundation.

Still, the IRS has signaled more aggressive oversight of charities as various compensation scandals crop up among nonprofits. The agency overhauled the annual tax form nonprofits must file. Now, nonprofits are required to disclose compensation perks under certain circumstances, such as when an employee makes more than $150,000. Among the compulsory disclosures are benefits that have featured prominently in recent compensation scandals. They include first-class air travel, expense accounts, housing allowances and the use of bodyguards, chauffeurs and lawyers.

The IRS also has homed in on hospital pay. In a report, which surveyed 489 institutions, the agency found pay for the top official averaged $490,000 a year. Among a select 20 hospitals that paid relatively higher amounts, the compensation figure averaged $1.4 million. The IRS declined to name the hospitals.

The IRS can currently impose penalty taxes, called "intermediate sanctions," on an executive receiving excessive compensation from a charity. But the agency also has established a procedure, called the "rebuttable presumption of reasonableness," that allows charities to avoid the penalty. To do so, the nonprofit must demonstrate its board approved the pay and used comparable compensation data from similar organizations to determine it, among other things.

Critics say the standard is loose and puts the burden on the IRS to show compensation is excessive. Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee who has pushed for stricter regulation of nonprofits, is considering legislation that would put more pressure on charities to prove their compensation is reasonable, an aide said.

Others say the policy has already spurred charities to more prudent governance. "We have encouraged our clients to use it religiously" to ensure compliance with IRS rules, says Victoria Bjorklund, a partner at Simpson Thacher & Bartlett LLP who represents charities.

Still, squabbles over nonprofit executive pay continue to emerge. In the fall, a controversy swirled around a $1.2 million pay package for the United Way of Central Carolinas Inc.'s chief executive, Gloria Pace King. Board members resigned and Ms. King was ousted as a result.

Ms. King couldn't be reached for comment. She recently told the Charlotte Post that she thought her performance justified her compensation.

Board retention in good and bad times

One thing I have been thinking about a lot in the recent weeks and keep meaning to write about is board member retention during these difficult economic times.  The Wall Street Journal article below was a kick in the stomach reminder that we need to be focusing some significant attention on our boards.  In times this dire, it is essential to keep key stakeholders engaged.  With the pressing economic concerns for both the organizations and the individual board members, a delicate balance must be maintained between being honest about situations and being overly negative or pessimistic. 

It is a necessity to remember to celebrate successes no matter how small.  Even in good times this is something many nonprofits forget to do.  By nature we are problem solvers and excellent at crisis management, once something has been achieved we often make the mistake of moving onto the next task before congratulating ourselves on our accomplishments. 

Our boards need to know that they are important to us in every way possible - as a workforce, as information resources, as access to networks and as funding sources.   There are plenty of reasons for board members to be concerned - if we are conscious of this during our interactions we will find a proper balance.  But the MOST important thing is to keep them engaged!

Believe it or not most board members join a board for some reason other than to write a check - a deep connection to the mission/cause, a desire to make a difference in his or her community, social-standing/prestige, or a slew of others reasons.  Hopefully during the recruitment process and the individual's time on the board the reasons that drew the person to the board are clear.  Our job as staff leadership is to make sure that we take time to address these reasons with positive reinforcement during these times (and all others). 

In times like these we have to fight the impulse to hunker down and have a small group make the tough decisions.  A healthy process must be maintained.  We need to work with our board leadership to ensure that each board member has a chance to be heard and be part of key decisions -- especially organizations that are truly at risk or on the brink.  After all very few people join a board if they don't want to take responsibility for the organization's well-being. 

Healthy board management is going to be very important the in the months ahead.

From the WALL STREET JOURNAL

GETTING PERSONAL: Charity Board Members Insure Against Risk

NEW YORK (Dow Jones)--Even at charities, boards of directors are watching their backs.

In an environment ripe for investment- and employment-related lawsuits, a number of nonprofits are increasing their directors and officers coverage - or D&O - while insurance companies say they have seen an uptick in the number and severity of claims.

"Individual directors are now more concerned about making sure insurance is in place to protect them and their organization," says Michael Schraer, a vice president and not-for-profit product manager at Chubb Group of Insurance Cos.

Several prominent charities have been caught up in recent investment frauds, including the alleged $50 billion Ponzi scheme run by Bernard Madoff, and most are struggling with shrinking endowments because of the market decline.

Charity board members can be held personally liable for mismanagement of investments or employment mishaps, among other things. An individual's umbrella insurance policy won't necessarily cover these claims.

"If a board member is sued, it means their house, their retirement savings, their investments that could ultimately come into play," says Scott Simmonds, an independent insurance consultant who advises nonprofits on D&O insurance.

This kind of insurance "pays for poor decisions," he adds.

Coverage, which can start at around $1,200 a year for organizations with fewer than 25 employees, varies by plan and carrier but D&O policies typically cover claims over misused funds or mismanaged assets.

Policies also address employment issues such as wrongful termination, discrimination and harassment - important at a time when many hard-pressed charities are being forced to trim jobs and other costs. More than 90% of claims against boards of directors involve some type of employment dispute, according to the Alliance of Nonprofits for Insurance Risk Retention Group.

Know the Rules

Most states have volunteer immunity laws that protect board members from personal liability when acting in good faith. However, coverage is limited and these laws may not protect against federal civil rights and anti-discrimination laws. What's more, volunteers will likely have to pay fees to defend themselves.

Nonprofits usually say they will indemnify board members, or pay for legal costs. However, nonprofits may not be permitted to indemnify board members against all types of actions and may require the board member to pay legal fees first and then get a reimbursement.

And if the nonprofit doesn't have enough money to cover the claims or has gone out of business, the individual could be held accountable.

"Foundations that go out of business because they had all their assets invested in Madoff will not likely be able to pay for defense costs," says A.Q "Skip" Orza, a vice president at RLI Corp., an insurance company in Peoria, Ill.

D&O insurance policies can serve as additional coverage - typically at least $1 million of coverage per year - or pay claims on behalf of the nonprofit so the organization doesn't have to dip into its funds.

Sizing up your policy

D&O insurance can differ from other types of liability insurance and policies should be reviewed annually.

It typically covers lawsuits filed while the policy is in force, regardless of when the wrongful act occurred. And limits are aggregate, not per occurrence: Unlike an automobile policy that pays up to a certain amount each time you get into an accident, D&O insurance will only pay up to a set limit for all of your claims that year.

Since contracts can span 30-60 pages, board members should carefully read the terms and conditions to determine what is deemed a wrongful act and what is excluded from coverage - such as bodily injury or sexual abuse.

Board members should also keep tabs on the financial strength of insurance providers using ratings issued by companies such as A.M. Best Co.; Moody's Investors Service, a unit of Moody's Corp.; and Standard & Poors, a unit of McGraw-Hill Cos.

MARCH 10, 2009, 3:31 P.M. ET

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Hartford's Cultural Institutions Take Steps To Weather Economic Storm -- Courant.com

Hartford's Cultural Institutions Take Steps To Weather Economic Storm -- Courant.com

This article gives a great overview of one city's cultural institutions.  Nice to see some smart thinking happening here in Connecticut.

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Other bloggers thoughts on the business model issue

Read these!

Beth's Blog: how nonprofits can use social media: The Crumbling of Nonprofit Arts Organizations (includes great map)

A. Fine Blog: Greatest loss of 2009: Social Capital

diacritical

Douglas McLennan of Arts Journal has started blogging - I know I thought all along surely he was, but alas... His first full post is a nice companion to many of my posts last week.

Is the NEA bad for the Arts?

Recent Articles

Some recent articles that I missed until today - maybe you did too.


Seattle Post Intellegencer goes digital only - no more print. March 16

Bloomberg Musical has cure for Broadway Blahs - in seat drinks service? on Broadway? March 17.

Guardian Arts World braces for a hurricane - a look at UK arts organizations' issues during the global financial crisis. March 14

Chronicle of Philanthropy 52% of donors plan no decrease - new survey results by Cygnus Applied Research

Nonprofit Fundraising Trends - Retriever Development Counsel survey results

Crains Experts give nonprofits tips in weather tough economic times

NY Times The Problem with Nonprofits - mini review of the book UNCHARITABLE. March 9

NY Times Charities say Government is ignoring them in Crisis - deals with implications from Obama charitable tax deduction changes. March 4

Time to Restructure?

I have been thinking a lot about restructuring. Not surprising since it seems to be happening everywhere.

On the personal side, Brian and I, like almost everyone I know, are restructuring our finances. Things we once thought essential - are just not important anymore. We have been talking a lot with our families about consolidating. For example, my mother and sister have homes about a mile apart. My mother more or less lives with my sister, seems logical to completely consolidate resources. Perhaps we go so far as to consolidate three households into one and a half. We are searching for other ways to consolidate with both of our families. Distance makes this somewhat difficult. It is also difficult to fight the feeling that we somehow failed, did something wrong, or are being punished. I think many of us feel s certain amount of guilt or shame about the effect the current economy has had on our personal lives.

However it made me think about something that has always been nagging at the back of my mind. Why can't nonprofits "consolidate" more often especially when it comes to infrastructure?

In 2001, my friend Roy Gabay (one of the great commercial theatre general managers) and I discussed me joining his team. The idea was that I would create a new branch of business - outside general management services for nonprofits. At the time we focused only on general management and could not find a solution to what we perceived was a tremendous competition between small off-broadway companies (for donors, ticket-buyers, human resources, and scripts). We felt the competitive nature would prevent the organizations from sharing a key position such as a general manager.

I have rehashing that idea in my mind for a while now. I don't think the real issue was the competition, but that pride and ego were a large part of the equation, as were perceptions of what defined success and on the practical side - the fact that we were narrowing the services to General Management. And even though a general manager oversees budgets, marketing etc - each theatre still would need a significant number of staff members.

What if several theatres share one institutional infrastructure and only the only position that varies (if indeed it did and most likely wouldn't have to) was that of Artistic Director? Or if theatres regularly shared spaces? Or came together for more than co-productions, advocacy or the occasional marketing project - but for fundraising, true artist development and outright survival.

Let's take a few examples of how it might work before we rip it apart with reasons why it wouldn't.

Take Arizona Theatre Company. They have two spaces one in Phoenix and one in Tucson. But they have one core infrastructure. Would this consolidation work with other theater in other states? If they were about the same size and were diverse enough geographically or in mission - it could create some amazing opportunities.

First and foremost, it would allow for better staff compensation and perhaps raise the bar on staff qualifications. Rather than having two or three understaffed Marketing and Development departments - the combined resources would allow for the creation of a unified, complete workforce. And frankly would attract a more talented staff. In the last week three theatres have trended in the opposite direction - cutting leadership staff and just spreading the work around. Isn't a shared qualified staff at least worth exploring?

It would be significantly better for the environment. In general, theatre is a tremendously wasteful art form. Although we have made great strides in recent years, we still throw thousands of dollars of lumber, steel, and goodness knows what else into landfills nationwide.

It certainly could strengthen the bonds between geographic or cultural communities. And the networks and impact of the organizations involved.

And perhaps most importantly (saved the best for last), it could mean a lot more money for productions and education programs.

Sure there are a lot of thing that would have to be sorted out - but isn't is a possible solution for some that is better than closing the doors forever.

And frankly, we are already half way there with all of the "co-pros" currently on the boards.

I am not suggesting this as something everyone could make work, but I can think of a lot of combinations that might make sense and create a tremendous amount of new opportunities.