Editor’s Note: We found this blog post about the notion of sustainability in arts organizations while doing research for our feature on the Minnesota Orchestra and thought it had some great points presented knowledgeably and with great passion. For further background, you can refer to Monday’s still-trending feature. As always, we welcome your comments.
Ah, “sustainable.” It is a buzzword of the moment, showing up in discussions ranging from the environment to manufacturing, agriculture…even the arts. Of course, everyone wants to be sustainable, thinking that they, their product, or their service will stand the test of time and last forever.
Like all popular buzzwords, there is value to it, and I applaud the notion that we have to look at both the long-range prospects and the long-range effects of the things we do. But as often happens, the term has been misused by people who fundamentally misunderstand its meaning.
I’d like this willful misuse of the term to stop—particularly among arts organizations.
A Misunderstood Concept
Over the past few years, labor disputes have rocked a number of performing institutions, including the Minnesota Orchestra, the Detroit Symphony, Atlanta Symphony Orchestra, Saint Paul Chamber Orchestra, and the Metropolitan Opera. And new labor disputes have continued to pop up like dandelions in places like Hartford, Connecticut, and Binghamton, New York. In each of these cases, management explicitly argued that their organizations’ operations, programming, and labor contracts were no longer “sustainable.” In their words, these things represented a huge financial drain on the organizations and were killing the organizations from the inside. Similarly, leaders of the San Diego Opera used this same rationale to liquidate the company altogether.
- Management of the Atlanta Symphony Orchestra argued that ticket revenues only covered 20 percent of the costs of producing a classical concert, and this model “simply wasn’t sustainable.”
- Peter Gelb, general manager of the Metropolitan Opera, complained that “the percentage of operating costs covered by donations is 48 percent. That’s unsustainable. It’s not a business model.”
- Leaders of the San Diego Opera proclaimed that opera was no longer a sustainable art form in San Diego; labor costs had become prohibitive, former levels of fundraising were no longer feasible, and audiences were shrinking.
- Just this month, Twin Cities Business ran an article about the Minnesota Orchestra with the blaring title, “Does the Minnesota Orchestra Have Sustainable Labor Contracts?”
- And yesterday, the board of the Binghamton Philharmonic in New York cancelled the orchestra’s season opener, with Executive Director Brittany Hall saying, “Unfortunately, this orchestra needs to look toward the future and remain sustainable and viable.”
Unfortunately, leadership in each of these cases was completely wrong about “sustainability” and how to achieve it.
How so? Three reasons come to mind.
First, their understanding of “sustainable” was far too narrow, focusing exclusively on a particular financial criterion. Second, they were inappropriately using an understanding of the term derived from the for-profit arena and trying to graft it onto their nonprofit organizations. And finally, in each and every case, they tried to make their organizations “sustainable” by imposing a simplistic set of solutions to the problem: sharp cuts in the compensation packages of their union musicians and workers, plus an equally sharp reduction in programming.
With respect, this is no way to build sustainability. On the contrary, this is a recipe for disaster.
First, a couple of points. Many people seem to think that nonprofits, and nonprofit arts organizations in particular, are not businesses. They are. Absolutely. An ensemble like the Minnesota Orchestra employs around 90 musicians, a similar number of full-time staff, and a comparable number of part-time staff. These are real people working at real jobs, who pay taxes, have mortgages, buy cars and other durable goods, go to school, and in all sorts of ways contribute to the economy. Plus, the Orchestra not only generates revenue itself, but serves as a catalyst for other economic activities such as restaurants and parking. The City of Minneapolis estimates it lost $2.9 million in parking, dining, and other business as a direct result of the Minnesota Orchestra lockout.
And it’s not just the Minnesota Orchestra that has an impact. Each year, the City of Minneapolis produces the Creative Index report that analyzes the economic impact of the creative sector, including music, theater, and the arts as a whole. In 2013, the arts contributed $830 million into the city’s economy, with $311 million coming specifically from nonprofit arts organizations. Also, approximately five percent of the entire workforce of Minneapolis worked in the creative sector, primarily as photographers, musicians, and writers.
These are real numbers, and it is clear that arts organizations—and nonprofits generally—play a critical role in the economy and in the community.
But at the same time, a point that I’ve hammered home again and again on my blog is that nonprofits have to be recognized as nonprofit businesses. They are fundamentally different from for-profit enterprises, and thrive by following a very different business model. Based on my own experience as president of the board at an arts nonprofit (the Minnesota Chorale), I’ve found that leading a nonprofit requires a whole different type of skills and strategies than are needed in for-profit business.
Nonprofits stand apart in that they are designed to meet a critical social need or provide an important service to the community. They are driven by a stated mission, and their success or failure is ultimately determined by how effectively they live up to that mission. Yes, there absolutely is a business and financial aspect to doing this, but the business and financial strategies and decisions are always in service of the outcomes, not the profits.
In recognition of this special status, the IRS grants nonprofits 501(c)(3) status, which creates a special tax status and allows them to fundraise to support their operations. This is key: A nonprofit that engages in fundraising has very different set of income streams than a for-profit business, and has to act accordingly.
Fundraising is not a sign that the organization’s business model has failed, and it is not a last-minute, shameful attempt to balance the books. On the contrary, it is an integral part of the organization’s business model and overall financial strategy.
So again—to be clear, an arts organization like the Minnesota Orchestra or the Minnesota Chorale is a business. But we cannot lose sight that it is a nonprofit business. And that changes the equation as to what makes it “sustainable.”
Sustainability in the Nonprofit World
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For too many people, “sustainability” simply means financial sustainability, as if we were thinking in terms of a for-profit enterprise.
This is false.
Sustainability is, and must be, comprehensive…especially for a nonprofit, which isn’t solely about turning a profit. The Nonprofits Assistance Fund has a wonderful working definition of the word, arguing that a sustainable nonprofit is one with the ability to carry out activities that will achieve its mission while also developing and maintaining capacity for mission relevance in the future.
In other words, while it is important for a nonprofit’s finances to be sustainable, it is more important for the nonprofit’s mission to be sustainable.
As Kate Barr from the Nonprofit Assistance Fund explains:
Why else stay in business? Ask yourself this: What’s the worst-case scenario? I’d hate to have to call my board chair and say, “I just found out that we are out of cash and I don’t know if we’ll make payroll next month.” That’s a nightmare for executive directors, but it’s a technical problem. The worst-case scenario is this call: “We just finished a complete review and discovered that our programs don’t work. We are making no progress at all to improve or help our community.” That’s fatal. The number one component for sustainability is to do great work that will result in progress for your mission, which means you have to define what it is and how you’ll know.
For a nonprofit, mission trumps all else.
Once the mission is secure, an arts organization can look at three additional layers of sustainability: financial, organizational, and programmatic.
- Financial sustainability is marked by the ability to generate resources to meet the needs of the present without compromising the future.
- The hallmark of organizational sustainability is the ability to build, adapt, and refresh an organization’s capacity to fulfill its mission within an ever-changing environment. This includes things like having the right number of staff members with the right skills, or the proper equipment.
- Finally, programmatic sustainability is the ability to develop, mature, and sunset programs that meet the changing needs constituencies over time.
If an organization does not successfully balance all three of these elements, it won’t be successful—sustainable—in the long run. The recurring theme throughout them is flexibility…the ability to respond to events and conditions on the fly.
A key aspect of being flexible is knowing when to let something go; the wise organization knows when to retire programs that have outlived their usefulness, have become too expensive, or have grown beyond the organization’s ability to execute them effectively. Similarly, an organization does not have to be expanding in order to thrive over the long-term. This point was brought home in the study “Bright Spots Leadership in the Pacific Northwest,” created by the Helicon Collaborative on behalf of the Paul G. Allen Family Foundation. In this report, the director of On the Boards, a Seattle-based performing arts organization, says, “We have grown up with the idea that if you’re not growing, you’re dying. That mentality is ever-present and it’s lethal. The expectation that we will always be able to do more needs to change. We need to replace it with an expectation that we remain fresh, vital, relevant, and healthy.”
In other words, sometimes you have to say “no” in order to remain sustainable.
And finally, organizations need to have a realistic assessment of the time frame they’re envisioning when they talk about “sustainability.” Given how fast technology, economic developments, and world events are changing, most arts groups have abandoned five- or ten-year strategic plans and are planning in three-year increments. This trend makes it particularly odd to hear dire warnings that something won’t be sustainable over the next twenty years or so. Could anyone in 1995 have imagined the world of today, and adequately planned for every variable? No. And if an arts group had locked themselves into an inflexible 20-year plan that didn’t allow for changes brought by, say, social media…it would have collapsed by now. Again, flexibility is a key aspect of sustainability.
• • •
For too long, too many arts groups have focused on financial sustainability as the sole criterion by which they evaluated their organization’s health. They used a for-profit business model as their guide, and erroneously argued that since organizations had to supplement their earned income with fundraising, the organizations’ business models were fatally flawed.
This thinking has been at the core of the labor disputes that rocked the world of classical music over the last few years.
Mercifully, in most of these cases these moves toward a flawed idea of “sustainability” were turned back or otherwise softened. But this masks a real problem: If these plans had been successfully implemented, they would not have led to sustainability, but to deep and lasting damage for the organizations involved. Specifically, these plans would have crippled the art in a fool’s quest for short-term financial gain.
To truly be sustainable, arts organizations need to ensure that their mission is sustainable. People don’t buy tickets or donate money to an orchestra so that it will be financially strong…they do so because they are inspired by the music and see the impact it has in their community. Think about this on a broader scale—do people buy movie tickets to support the studio’s bottom line? Do they eat at a restaurant because of its business plan? Of course not.
It is only after the mission is made strong that the organization can work on financial, organizational, and programmatic sustainability. These three areas are critical, but they must be put in service of making the mission strong. Otherwise, there is no reason to do any of it.
So, as we look back on the labor struggles of the past few years, and brace ourselves for new ones, can we move toward a more appropriate definition of “sustainability?”