If Your House is on Fire, Don’t Throw on More Wood!

I’ve worked in the nonprofit sector for a long time. I landed my first professional fundraising job 31 years ago at Temple University. Given how long I’ve been around the nonprofit sector, you might think that I’ve seen and heard it all before. But, I recently received a reminder that that’s simply not true. One of my Twitter friends Tweeted a news item about the Vancouver Symphony Orchestra, the one in southwest Washington near Portland, Oregon. The link took me to a sad news article: “Vancouver Symphony’s Future in Doubt” in The Columbian.

While I certainly have not made a thorough study of the Orchestra’s dire situation, I’ve learned enough to be somewhat surprised and very concerned about some horrible mistakes that the organization’s board of directors appears to be making. Here are some of the mistakes that the Orchestra seems to be making that others should avoid:

Mistake 1–Misidentifying the Problem: You can’t solve problems if you can’t identify the problems. This might explain some of the difficultly at the Vancouver Symphony Orchestra. The Columbian quotes Scott Milam, the Orchestra’s board chairman, as saying, “Like most small nonprofits, the economy has caught up to us. We’re struggling very hard.” While I’m reasonably confident that the recession has indeed contributed to the Orchestra’s troubles, an examination of the Orchestra’s 990s at Guidestar reveals that the organization’s problems are more complex. In 2006-07, public support totaled $385,600. In 2007, with the recession officially beginning in December (in mid-fiscal year), public support dropped to $352,236. So, the Orchestra did see a philanthropic decline. However, the $352,236 is still well above the $249,969 that was raised in 2005-06. And, the $299,050 that was raised in 2009-10 was also above the 2005-06 level. So, while public support is down, this by itself does not explain the Orchestra’s trip to the edge of the abyss. Furthermore, the decline in contributions cannot be blamed solely on the economy. Consider that in 2008, 39 percent of arts and cultural organizations reported actually raising more money than they had in 2007 with another 20 percent saying they had raised the same amount, according to a Guidestar survey reported in Giving USA 2009. Looking at ticket sales reveals more. While The Columbian reports that the number of tickets sold has gone up over the past five years, the 990s reveal that ticket revenue has actually declined since 2006-07. In 2006-07, ticket revenue totaled $146,345. By 2009-10, ticket revenue had fallen to $115,574. What’s even more telling is that ticket revenue only covers about 20 percent of the Orchestra’s operating budget. Virtually no performing arts group can sustain itself at that level. As a general rule of thumb, earned revenue must total at least 50 percent of the operating budget. The Orchestra has seen a decline in both philanthropic support and earned revenue. And, its expenses have remained at an unsustainable level relative to earned income over this period. Until the board gets a handle on all of the complex issues, the future of the Orchestra will remain in doubt. Simply attributing the troubles to the economy is insufficient.

Photo by Helena Price via Flickr

Mistake 2–Wrong Actions: About one year ago, the Orchestra’s director of development left. Perhaps in response to its fiscal woes, the Orchestra chose not to fill that position. Surprise, surprise. Without a solid director of development, contributions continued their downward slide. Now, looking ahead to 2011-12, the Orchestra is planning to eliminate the executive director and the director of marketing positions! It’s unclear how the Orchestra expects to effectively manage itself during this crisis without a strong executive director. It’s equally unclear how the Orchestra expects to increase desperately needed ticket revenue without an effective marketing director.

Mistake 3–Too little, too late: The 990s reveal that the Orchestra has been on a downward decline for several years. While the organization has taken some steps to try to avoid a crisis, it seems its efforts have been too little, too late. Last year, the Orchestra canceled two concerts and conducted an emergency fund drive. This year, the Orchestra announced an even larger emergency fund drive to raise $100,000 by June 30. Even if the fundraising effort is successful, the future of the Orchestra remains unclear. And, if the board has a strategic plan for addressing the current crisis and achieving sustainability, neither through word nor action, have they revealed it to the general public. I’m reminded of a quote from Sun Tzu: “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before the defeat.”

These mistakes are in stark contrast to two performing arts groups I worked with in the 1980s. With the economic challenges of the early part of that decade, the Pennsylvania Ballet faced disaster. The board hired a turn-around expert who took decisive action and canceled the remainder of the season. While patrons were offered a ticket refund, the Ballet requested they instead donate the money. Many did. The Ballet hired strong marketing and development staff. It invested in a revitalized marketing campaign and innovative, assertive fundraising efforts. The Ballet came back with a full season and achieved a high artistic standard. Today, the Pennsylvania Ballet continues to be ranked among the top dance companies in the nation.

Another Philadelphia arts organization struggled in the 1980s. The Philadelphia Theatre Company was in a fiscal crisis. Like the Ballet, the Theatre Company hired a strong, new managing director. It also hired a creative artistic director. The Company slashed costs, reinvigorated its marketing efforts, and invested in innovative fundraising. Today, the Company resides in its own new, state-of-the-art theater.

The Pennsylvania Ballet and the Philadelphia Theatre Company are superb examples of how to handle fiscal challenges. Decisive action. Hiring bold leadership. Crafting a strong plan. Implementing robust, creative marketing and development efforts. This is the path not only to solvency but also to a higher degree of artistic excellence.

Unfortunately, the Vancouver Symphony Orchestra appears to be moving in a different direction. However, there’s still time. I wish the Orchestra well. But, back to back emergency appeals in the absence of a sound strategic plan is not especially wise. Failing to replace the director of development was also not wise and has led to a further philanthropic decline. Eliminating the director of marketing will likely have a similar impact on earned revenue. Eliminating these two positions will not just have short-term negative consequences, it will have an impact felt for years to come. And, eliminating the executive director position at a time when a bold chief is needed most boggles the mind. Blaming the economy is not enough. Sadly, the Orchestra’s actions seem a bit like the man who sees his house is on fire and tosses on some logs instead of water.

My wife has occasionally said, “If you can’t serve as a good example, at least serve as a horrible warning.” Time will tell if the Vancouver Symphony Orchestra will join the Pennsylvania Ballet and the Philadelphia Theatre Company as a good example for the nonprofit sector or whether it will end up as a horrible warning.

(For any organization in the midst of dramatic change or facing the need for change, I highly recommend the book Breakthrough Thinking for Nonprofit Organizations by Bernard Ross and Clare Segal.)

That’s what Michael Rosen Says… What do you say?

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UPDATE:

For those interested in getting a local perspective on the Vancouver Symphony Orchestra troubles, visit Almost Phameous, a blog by Stephen Marc Beaudoin. 

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UPDATE, June 25, 2011:

I’m delighted to report that the Vancouver Symphony Orchestra has surpassed its emergency June fundraising goal of $100,000. The Orchestra has raised about $135,000 and has done so several days ahead of its June 30 deadline. The Orchestra is now working on a new business plan and hopes to launch its 33rd season later this year. For more information, you can read the article that appeared in the June 24 edition of The Columbian.

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12 Responses to “If Your House is on Fire, Don’t Throw on More Wood!”

  1. Well said, Michael. I think that while many non-profits understand the value of a mission statement, many do not put the same effort into formulating a vision statement. One measures current projects against your purpose, and the other allows you to project your plan (and thereby your financial needs) into the future. The two go hand in hand if you are to plan effectively and engage your donors.

  2. Thanks for the write-up! I have personal ties to musicians in the orchestra & hope the Board can get some insight from neighbors across the Columbia River.

    * A couple years ago between seasons the Oregon Ballet Theater dug itself out of $750k hole to keep the lights on.
    * After paying off their long-term debt the Oregon Symphony is on-track for a balanced budget for the second straight year (fingers crossed).

    Some difficult decisions & engaged management/Board/musicians/donors aligned with a objective vision can go a long way!

    • Dan, thanks for taking the time to share the local perspective. Please let your muscian friends know they’re in my thoughts during this difficult time. The situation with the Oregon Ballet Theater and the Oregon Symphony prove that there is hope. It will be interesting to see what happens.

  3. These are helpful perspectives and a good analysis of the situation – a useful fable about non-profit management for sure!

    To use a cliche, “If you build it, they will come” – usually this works in non-profit management. Invest what you can in creating a great offering and program and then get others excited and involved and over time things will blossom.

    This sounds more like, “if you fumble the ball, take apart the stadium, fire the coach and half the team and try to double your ticket sales” – will be interesting to see if the logic works here!

    Christina
    http://www.christinaattard.com/blog.html

    • Christina, I appreciate your comments. While I don’t think I’m free to say much, I can tell you that an advisory group has been formed to help guide the VSO through this crisis. I think the chair of the advisory group “gets-it.” I’m keeping my fingers crossed that it’s not too late.

  4. Emergency fund drives need to be just that, for emergencies. Someone should have seen what was coming, and I guess that should have been the Executive Director.

    I wish them well too, and I agree they need leadership, but might it be that the staff/management can formulate and implement a vision and business plan that “creates a great offering and program”? If a new ED is appointed now she/he will need a different skill set to rescue the organisation than is needed to drive forward a successful programme once it is turned around, and crucially much less time to do so.

    And, while a new appointment is being made the board will have taken their eye off the ball of getting a focus on mission and vision and figuring out how to implement this. Never under-estimate the potential of someone in-house acting up to lead the organisation through the crises!

    • David, you’re correct. Emergency fund drives need to be for emergencies. If you need to do one every year, that’s an enormous red flag. At this point, the Executive Director has left and the organization doesn’t have much money. So, it is up to the volunteer leadership to get the VSO out of its mess, at least to the point where they can hire a crisis manager. Then, if that person is successful, the VSO should probably consider hiring another ED to manage the organization beyond the crisis. This is the pattern that the Pennsylvania Ballet followed successfully back in the 1980s when they were in trouble.

  5. Looks like they’ve gotten past the immediate hurdle (http://www.columbian.com/news/2011/jun/24/symphony-update/).

    We’ll see what the board, donors & community come up with regards to a sustainable business plan.

    • Dan, thanks for the update. I heard the good news and posted an update for my subscribers and folks who follow me on Twitter (@mlinnovations). I was pleased to learn that the VSO got past the immediate hurdle, over goal and ahead of schedule. As you’ve said, now we’ll see if folks can put together a sustainable, long-term plan. I certainly hope so.

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