Thursday, July 25th, 2013
Guidestar, Charity Navigator and Better Business Bureau’s Wise Giving Alliance recently “denounced” the value of the “overhead ratio” as a primary indicator of nonprofit performance. Who cares?
To address the matter, there was a nice discussion with Steve Zabilski (St. Vincent de Paul) and Ellen Solowey (Piper Trust) on last night’s Horizon ~ worth viewing.
Methinks, however, that this is a bit of a tempest in a nonprofit teapot and a rather disingenuous and unproductive snit by nonprofit monitors whose perspectives frankly have little relevance. Is their perspective, as some have suggested, a paradigm shift? I hardly think so. Sure, administrative overhead is not and should not be the only criterion for assessing performance; nor is it a fully accurate reflection of an organization’s allocation of resources. But, is this really news?
Indeed, nonprofits have become rather adept in allocating administrative and fundraising costs into programs, thereby decreasing the admin ratio ~ or obfuscating the true costs of administration.
Nevertheless, the ratio has been a long-standing standard ~ and a useful, albeit limited, measure ~ that, in the last several years, has been joined by an equally if not more rigorous demand by donors and stakeholders for metrics regarding effectiveness/results/impact/ROI.
The problem here is that nonprofits have been hard put to develop anything close to the industry standards used by corporations to measure organizational financial performance ~ and to develop metrics that delineate cost and impact. It is therefore an imperfect profile on which grantmakers and donors must make their decisions and which, therefore requires on their part more careful scrutiny.
Finally, the notion that nonprofits starve themselves and hesitate to invest in their infrastructure (fundraising, marketing, technology, etc.) because of their concern about administrative overhead is laughable. The problem is that these are the needs for which philanthropic funds are the hardest to raise. It’s the Catch-22 of nonprofit life!
Wednesday, July 24th, 2013
(Published in Nonprofit News, ASU Lodestar Center for Philanthropy & Nonprofit Innovation, July 17, 2013)
What’s a nonprofit executive to do when all the forces of nature, politics, and the economy conspire to thwart organizational (program and resource) development?
The answer lies in leveraging the crisis strategically for the opportunity that lies within the eye of the storm, in daring to lead beyond expectations and risking professional comfort.
Yes, a unique and seismic convergence of economic (the Great Recession and its aftermath), political (Congressional stalemate on the national budget and sequestration), social (demographic shifts and changes in attitudes and values regarding social responsibility), and technological (the democratization of social media and alternative forms of charitable expression) have taken a financial and programmatic toll on nonprofits. Today’s storm is unlike those of past economic downturns in both scale and duration.
In other words, times are rough for nonprofits, and every indication is that they are going to get even rougher and more challenging. These dramatic changes in the marketplace have broad implications for organizational governance and for the viability of the conventional nonprofit business model.
A number of long-standing organizations have fallen by the wayside. Some are gone because of failures of governance, others because of funding cutbacks they could not withstand, others for their inability to adapt to a highly competitive marketplace. Still others remain at risk, with zero margin for error and limited internal capacity, drawing on their reserves (if they have any), making last-minute appeals to live another day, or doing far more with far less.
But, the forward-looking executive will recognize that the successful and sustainable organizations of the future will be those that are organized and positioned for adaptability and innovation in a marketplace of changing needs, attitudes, preferences, and points of access and that are willing to make structural adaptations to meet new realities. And there is no better time to trim the sails and toss impediments to progress overboard!
Think about the following developments and trends:
- With the full implementation of the Patient Protection and Affordable Care Act looming in 2014, a shakeout among behavioral health and social service organizations is likely coming. I expect that many single program-focused agencies no longer will be viable; some will dissolve; others will merge into larger integrated organizations.
- The concomitant trend in behavioral health, primary care, and social services may well be the consolidation of entities into vertically and horizontally integrated enterprises that have the capacity for greater economies of scale and the technological capabilities to measure outcomes and manage new performance-based reimbursement strategies.
- The methods, channels, and venues for service delivery will change. Caretakers no longer will be office-based, but will be mobile with remote connections to servers.
- The methods of cost reimbursement are changing and are performance-based. Organizations that are equipped with the technology to establish and track metrics and monitor and control costs will have competitive advantage.
- Arts and cultural, environmental and educational organizations are similarly challenged by the impact of new technologies on audience or constituent behavior and more accessible and affordable alternative forms of entertainment or expression, let alone evolving and changing tastes and values.
In today’s marketplace, where the speed and substance of change is more volatile than ever before, the fundamental challenge is to rethink operating premises and structural arrangements and develop strategies that are best suited to achieve or recalibrate the terms of organizational effectiveness, which I define as the ability to realize corporate objectives in terms of relevance, efficiency, effectiveness, and impact.
Periods of retrenchment, then, if wisely leveraged, are opportunities for strategic reflection, restructuring, and mapping pathways to recovery or transformation.
It means reevaluating the skill sets, competencies and perspectives required at all levels of the organization (from line staff to management to board members) to fit a culture of adaptability and innovation. It means removing deadwood from boards of directors and ensuring that those who remain have accountability for both their fiduciary responsibilities and their obligations regarding institutional support. It means creating a new balance of power between boards and executives and limiting the ability of boards to go rogue or dysfunctional. It means openness to strategic alliances or consolidations that add value to the customer and the community, even if it entails absorption. It means curtailing strategic planning processes that are neither strategic nor planful but operating with active opportunism and entrepreneurialism.
If there is an overarching principle, therefore, that should frame executive policy and action, particularly in hard times, it is not solely to preserve operational and programmatic continuity and quality but also to reposition, redesign, and reallocate resources in ways that serve the common good.
It’s a stunning and provocative challenge for executive leadership, and, if met, will inure to the betterment of the nonprofit sector and society.
Wednesday, July 24th, 2013
Headlines in the Arizona Republic tell a story of crisis in the performing arts: “Cash-strapped Arizona Jewish Theatre to close after 24 years,” June 7, 2012; “Actors Theatre leaves Herberger in Phoenix, Valley troupe cancels season, will re-examine business model,” February 12, 2013; “Plight of theater group (Theatre Works) tests Peoria’s generosity,” June 18, 2013; “Arizona Theatre Co. $1 million in the red,” June 22, 2013.
The narrative is not that, however, of theatres alone.
All performing arts are challenged by the impact of new technologies on audience behavior; more accessible and affordable alternative forms of entertainment; changing tastes, values, and patterns of giving; and the extraordinary pressure to demonstrate value and relevance.
The balance sheets and cash flow reports of local groups tell the story of organizations at risk, with zero margin for error, coping with the pressures of this dynamic and competitive marketplace and questioning the efficacy of their business models.
It should by now be very clear that the standard solutions to organizational crises aren’t sticking and that the self-celebratory rhetoric about the extrinsic and intrinsic value of the arts is having only marginal impact.
So, let’s get real:
Turnaround, recovery, and even renaissance, are possible if the will and determination exist to reinvent the business of the arts and to forgo organizational ego.
Fundamental change in the governance, organization, delivery, and financing of the performing arts is essential. The cultivation and well-being of current and future generations of artists needs to be at the heart of change. Otherwise, the cycle of dysfunction will continue, and more headlines like those above are in store.
Movement in this direction has already begun in other parts of the country, experimentation with new business models is under way, and the conversations and initiatives are encouraging.
Check out Seattle’s Intiman Theater and, in the wake of crisis, its reinvention of itself by downsizing to a summer festival:
“In its new incarnation, Intiman has become that rare thing in the ego-driven, reputation-obsessed world of theater — a humble endeavor, as reflected in the scale of its shows; the decision by its trustees to accept responsibility for poor past management; and the contrite overtures by the theater’s leaders to donors and grant-making foundations.
“While there are some people who question why Intiman continues to exist, who don’t trust us and who won’t give us money, we’re trying to make clear to our audiences and funders that we’ve learned from our mistakes and can be trusted again,” said Cynthia Huffman, the board’s new president.”
Consider initiatives such as that of Julliard to “teach the art of business to artists trying to make it in a changing economy.” Note the words of Diane Wittry, the Music Director and Conductor of the Allentown (PA) Symphony Orchestra and the Norwalk (CT) Symphony:
“… the challenge is how do you balance…doing marketing for yourself and all these other things and still keeping up your art form. How do you make a website? How do you make a demo tape for an audition? I think that schools are now beginning to expand the training and realize that entrepreneurialism is the answer for the future.”
Or check out Scott Walters’ July 2nd article on the education of theatre artists, A New Education for a New Theatre.
A robust and healthy conversation is emerging that challenges past practices and aims to redesign the business of the arts and the art of business. The new ways may indeed be unconventional, but they may be the key to sustaining the artists and their art forms while at the same establishing their relevance and value to the community.
If we dare to experiment and innovate, thePhoenixmetro area just might become a national model for a renaissance of the performing arts.
Friday, April 19th, 2013
On March 23rd, 2010, President Obama signed the Affordable Care Act (ACA) into law.
Thanks to friends in the financial services community, we’ve assembled the following reminder of the elements of health care reform that are included in the law.
Several major provisions of the Act will not take effect until 2014, and these are summarized below. However, many of the Act’s requirements already have been implemented, including:
- Insurance policies must allow young adults up to age 26 to remain covered on their parent’s health insurance.
- Insurers cannot deny coverage to children due to their health status, nor can companies exclude children’s coverage for pre-existing conditions.
- Lifetime coverage limits have been eliminated from private insurance policies.
- State-based health insurance exchanges, intended to provide a marketplace for individuals and small businesses to compare and shop for affordable health insurance, are scheduled to be implemented by October 1st, 2013.
- Insurance policies must provide an easy-to-read description of plan benefits, including what is covered, policy limits, coverage exclusions, and cost-sharing provisions.
- Medical loss ratio and rate review requirements mandate that insurers spend 80% to 85% of premiums on direct medical care instead of on profits, marketing, or administrative costs. Insurers failing to meet the loss ratio requirements must pay a rebate to consumers.
- The ACA provides federal funds for states to implement plans that expand Medicaid long-term care services to include home and community-based settings, instead of just institutions.
- The ACA provides funding to the National Health Service Corps, which provides loan repayments to medical students and others in exchange for service in low-income underserved communities.
- Medicare and private insurance plans that haven’t been grandfathered must provide certain preventive benefits with no patient cost-sharing, including immunizations and preventive tests.
- Through rebates, subsidies, and mandated manufacturers’ discounts, the ACA reduces the amount that Part D Medicare drug benefit enrollees are required to pay for prescriptions that fall in the donut hole.
Provisions of the ACA that are due to take effect in 2014, include:
- U.S.citizens and legal residents must have qualifying health coverage, subject to certain exemptions, or face a penalty.
- Employers with more than 50 full-time equivalent employees are required to offer affordable coverage or pay a fee.
- Premium and cost-sharing subsidies that reduce the cost of insurance are available to individuals and families based on income.
- Policies (other than grandfathered individual plans) are prohibited from imposing pre-existing condition exclusions, and must guarantee issue of coverage to anyone who applies regardless of their health status. Also, health insurance can’t be rescinded due to a change in health status, but only for fraud or intentional misrepresentation.
- Policies (except grandfathered individual plans) cannot impose annual dollar limits on the value of coverage.
- Individual and small group plans (except grandfathered individual plans), including those offered inside and outside of insurance exchanges, must offer a comprehensive package of items and services known as essential health benefits. Also, non-grandfathered plans in the individual and small business market must be categorized based on the percentage of the total average cost of benefits the insurance plan covers, so consumers can determine how much the plan covers and how much of the medical expense is the consumer’s responsibility. Bronze plans cover 60% of the covered expenses; Silver plans cover 70%; Gold plans cover 80; and Platinum plans cover 90% of covered expenses.
Monday, December 17th, 2012
(Published in HR InSights, December 17, 2012)
The cold truth of turnaround management is that jobs are either being lost or reconfigured. There is no getting around this reality. The challenge then, is to execute staff restructuring. Whether one refers to it as reduction in force (RIF), downsizing or rightsizing, the process needs to be handled in a prudent and practical way, with minimal disruptions to the operations of the organisation.
In this transitional period, management, perhaps understandably, is often inclined to soft-pedal the possibility of staff restructuring lest morale plunges, employees take flight or productivity decreases. Furthermore, the possibility that a merger may be the restructuring option of choice can further heighten paranoia regarding staff pushback.
Whether the turnaround process comes as a result of a business’s employees, systems or processes, it’s important to remember that the process is only underway due to a failure in organisational effectiveness. The business may be on the verge of insolvency, losing its competitive edge or encountering a serious downturn in revenue generation. Therefore, the turnaround, by definition, must mean an end to business as usual.
The duty of a turnaround manager is to ensure the organisation remains solvent and effective during transitional periods, as well as making sure it is populated with the skill sets, competencies and perspectives to help enable the organisation to fulfill its goals and meet the needs and expectations of its customers. The challenge is to expedite and negotiate this process of change so that any decisions made, weather the tests of dissension or charges of wrongful termination.
The first order of business is to make the workforce aware of the challenges facing the organisation, along with the intended processes and the messages of the intervention. In every intervention I’ve conducted, I’ve found that employees respect candor and transparency. They may not like what they hear, but they respect it. My approach has been to acknowledge the anxiety that accompanies my presence as a turnaround manager and recognise that, although I can’t eliminate it, I will do all I can to mitigate it by means of open and constant communication.
With the knowledge of the possibilities that lie before them and the understanding that there are no guarantees of continued employment, they have choices – to stick with it through the process of change, to demonstrate that they are indispensable, to resist and face the consequences, or to abandon ship. The one choice that is unacceptable and subject to immediate termination is subversion; there can be zero tolerance for the toxic personality. Any personnel actions during this period require a credible and reasoned rationale.
Below are three essential steps which demonstrate the painful necessity of restructuring:
- Organisational assessment – During this process of discovery, intelligence is gathered to help inform future decision making. This period focuses on interviews with staff and surveys of employees to offer insights into the organisation’s culture, the efficiency of current structural arrangements and the quality of staff relationships and internal collaboration. This is a key opportunity to assess the organisation’s human capital.
- Strategy – The immediate focus of a turnaround is stabilisation – restoring financial stability, focusing on core lines of business and shedding those lines and associated personnel that are not core to organisational mission. With stabilisation, a conversation can ensue regarding future strategic direction and priorities. It is in this context that the transition team will define the skill sets, competencies and perspectives required to advance the organisation and determine to what extent the current staff complement and configuration is compatible with future strategic goals.
- Implementation – All the theory in the world will not conceal that as well organised as the restructuring process is intended to be, it is ultimately a messy and painful process. Leading up to the final staffing decisions, the turnaround manager will likely contend with a good share of minefields – not the least of which are the organisation’s ‘sacred cows’ and the subversives. In the end, having navigated these stormy seas, the turnaround manager’s challenge is to communicate the necessity of the restructuring decisions in an objective and dispassionate way, while demonstrating authentic empathy.
Turnaround and stabilisation require solvency, continuity and effectiveness to have primacy over the interests of the work force. If the mission is to be achieved and the expectations of the customer met, the right people in the right positions with the right standards of performance need to be involved. Were that the case in the first place, the necessity of the turnaround may have been obviated.
Wednesday, December 12th, 2012
(Published in Nonprofit News, ASU Lodestar Center for Philanthropy & Nonprofit Innovation, December 12th, 2012)
Twenty years ago, I was privileged to serve as a senior consultant and trainer with the newly created Center for Corporate Community Relations at Boston College (now the Center for Corporate Citizenship).
In the two decades that have elapsed, the scope and texture of corporate social responsibility (CSR) have evolved dramatically. Then, the focus of my consultation was on community needs assessments, priority-setting, and allocations processes; today, the focus is on impact and return on investment. In the coming years, given dramatic changes in the marketplace, the context and scope of CSR may need to take a giant paradigmatic leap.
What was once a matter of checkbook philanthropy is now decidedly strategic, and the driving forces of CSR revolve around the convergence or fit between the company’s business interests (its customers, product line, and brand) and the offerings of potential nonprofit beneficiaries.
Corporate support is today an indispensable component of the nonprofit organization’s diversified fundraising strategy. Corporate presence and visibility in the community have been most effectively accomplished through relatively low cost/high yield investments, including short-term project grants, event sponsorships, cause-related marketing, voluntarism and hands-on projects, in-kind giving (e.g., printing, marketing, human resources, information technology services), and board membership.
This is all good and deeply appreciated. However, it may not be enough.
The nonprofit business model is increasingly vulnerable to the volatility of the nonprofit marketplace and broad social, political, economic, and technological trends.
For example, health, behavioral health, and social service organizations, already limited in capacity and infrastructure, will have a devil of a time adjusting to new models for care delivery, requirements for electronic documentation of metrics and outcomes, and changes in the financing of services.
Likewise, for nonprofit arts and cultural organizations, similar challenges exist because of the impact of new technologies and alternative forms of entertainment on audience tastes and behavior.
Among the most severe impediments to nonprofit sustainability are fundamental deficiencies in funding, capacity and infrastructure. Notwithstanding countless initiatives and grants to address this dilemma, the business model problem remains.
It is because of this altering landscape and the inherent threats to nonprofit viability that I believe that there is an urgent need to rethink the nonprofit business model and our structural arrangements for philanthropy and governance. In this context, I believe that corporations have a unique and vital role to play in the reinvention of the nonprofit sector – because nonprofits can’t do it alone and because corporations have the infrastructure and intellectual capital to help nonprofits transform their business models.
So, the time is ripe, I believe, for the next shift in CSR: from strategic branding-driven philanthropy to pragmatic collaborative philanthropy, whereby corporate leadership is actively invested as partners with government and nonprofits in business redesign, technology transfer, community problem-solving, and capacity-building.
The challenge for progressive CSR leaders is to delineate their company’s role in these endeavors and accessible processes for deploying their resources. Because corporations are deep reservoirs of human and intellectual capital that extend beyond their corporate contributions and foundation programs, they have much to offer in cultivating environments where individuals and families can thrive – where they want to work, live, play, and stay. After all, if corporations wish to be defined as people, then they need to act like people and share more proactively in building the common wealth.
Likewise, leaders in the nonprofit sector, individually and collectively, should develop a unified strategy for leveraging corporate resources for broad-based and integrated organizational development, capacity-building, and community development. The advocacy strategies of nonprofits may need now to shift from a focus on government to a focus on the private sector, encouraging if not urging active public/private partnership for community development.
Friday, November 9th, 2012
(Published in HR Insights - November 9th, 2012)
Human resources development: More honoured in the breach than the observance. The commitment to invest in one’s human capital too often takes a back seat to other organisational priorities, particularly and ironically during hard times when it is needed the most.
Regardless of one’s primary book of business, the core reality of contemporary organisational life is that all enterprises are in the people and the information business and that these two intrinsic lines of business connect and lubricate corporate performance. Inattention to human and information detail ultimately diminishes performance and productivity. Organisational effectiveness derives from having the right intelligence about your market and deploying people – your human capital – in ways that address and exploit market realities and leverage great talent.
If this is so, what impedes a high-level and sustained commitment to human resources development?
The answer lies in part in the need for a model that:
a.) Establishes clearly the link between investment in human capital, resource allocations, and corporate financial performance, i.e., profitability
b.) Compellingly reinforces the principle that management has a vested interest in employee loyalty and productivity, to the extent that the evaluation and remuneration of the manager will be largely a function of the performance of his/her employees.
To address this need, I propose such a model (Figure 1), comprised of the following elements:
- Organisational culture at the core of the model, defining the values and principles that guide the conduct of the organisation’s business and behaviours – values and principles which ideally will emphasise and encourage empowerment, innovation, and flexibility.
- The four quadrants that reflect the logic and flow of management’s investment in human capital development are:
1. Metrics – Whereby the manager clearly defines the results against which
the individual’s performance will be evaluated and relates performance to
intended outcomes for the team and the corporation.
2. Controls – Whereby the manager balances the commitment to empowerment
with a delineation of those practices that are unacceptable in achieving the
3. Verification – Whereby, in the spirit of trust but verify,
the manager defines the process, format and frequency for tracking performance
against the metrics and uses the verification process as a platform for
coaching, interventions and/or corrections.
4. Professional development – Whereby, based on the employee’s
performance, the manager identifies not only areas of strength but also
opportunities for investing in building the employees’ skill sets.
- The cycle of review, improvement and resource allocations feeds continuous improvement in organisational performance. The premise of the cycle is that a conscious investment in human capital will breed higher levels of performance that ultimately will inure to the benefit of the corporation and its stakeholders and that will in turn determine future investments for continuous improvement.
The bottom line is that this model will work when the CEO is fully and unequivocally committed to a sustained investment in human capital. The engagement of an HR manager does not relieve the CEO of responsibility for personnel management and development. Indeed, the CEO must ever and always be the chief HR officer, even if the title is conferred on a subordinate. The HR manager exists to help the CEO achieve corporate objectives by ensuring that all employees have an environment in which they can do their jobs and excel.
Monday, October 29th, 2012
(Phoenix Business Journal – October 26, 2012)
As the season of appeals for charitable contributions commences, it’s worth noting what a rough year it’s been for nonprofits. It’s going to get rougher still. And that has broad implications for the business community.
A number of long-standing organizations have fallen by the wayside — organizations that have sustained, healed, educated and inspired us. For example, the WellCare Foundation, Arizona Jewish Theatre, The Arts & Business Council of Greater Phoenix, and Community Food Connections.
Some are gone because of failures of governance, others because of funding cutbacks they could not withstand, others for their inability to adapt to a highly competitive marketplace.
Still others remain at risk, with zero margin for error and limited internal capacity, drawing on their reserves (if they have any), making last-minute appeals to live another day, or doing far more with far less.
With the full implementation of the Patient Protection and Affordable Care Act looming in 2014, a shakeout among behavioral health and social service organizations is coming. Single program-focused agencies no longer will be viable; some will dissolve, while others will merge into larger
Caretakers no longer will be office-based, but will be mobile with remote connections to servers. The emphasis will be on innovation and service integration. Organizations that are equipped with strong infrastructure, metrics and technology, along with the will to integrate services, will be the survivors.
Arts and culture are similarly challenged by the impact of new technologies on audience behavior and alternative forms of entertainment.
The bottom line is that the nonprofit landscape is altering as we speak, and the implications for the business community are profound. For it is businesses and their employees whose lives are enriched by these groups; whose presence makes for a hospitable place to live, work, and stay; whose absence impoverishes us.
It is an alteration that demands a long-term strategy to rethink our structural arrangements not only for philanthropy, but for governance and the configuration and delivery of services. And I contend that, to be successful and impactful, the strategy will require the substantive involvement and investment of this Valley’s business leadership.
Corporate social responsibility is an accepted value and is certainly alive and well in the Valley of the Sun. But it can do better. How it gets exercised, and to what ends, is crucial to the future well-being of our region. As always, business will need to deal with the painful necessity of
choice, responding to requests that far exceed their available funds.
But it behooves us to acknowledge that technological and political trends compel us to seek smarter more economical ways to allocate and leverage our limited reservoir of philanthropic resources.
In a region that excels in innovation, we ought to be able to reframe philanthropy. Let’s begin that process now. The question is, who will take the lead?
Tuesday, October 2nd, 2012
It has been a rough year for Valley nonprofits and ultimately for the communities and individuals they serve. Mary Reinhart’s coverage of the crisis in health care (“Amid state cuts, non-profits strain to treat uninsured,” September 22, 2012) leaves no doubt about the long-term price we’ll pay for short-sighted public policy and severe funding cutbacks. The narrative about health care, however, is one part of a larger story regarding not just the continuous erosion of our social safety net but also the increasing vulnerability of the nonprofit sector and the need for bold community responses.
Consider the parallel crises in child protection services and in education, each of which have received in-depth analysis by the Republic.
Consider the demise this year of several long-standing community-based organizations (e.g., the WellCare Foundation, Arizona Jewish Theatre, the Arts & Business Council of GreaterPhoenix, Community Food Connections) that have sustained, healed, educated and inspired our community.
Some are gone because of failures of governance, some because of funding cutbacks they could not withstand, or others because of their inability to adapt to a highly competitive marketplace.
They signify another looming reality – that numerous nonprofits remain at risk for the same reasons, with zero margin for error and limited internal capacity, drawing on their reserves (if they have any), making last minute appeals to live another day, or doing far more with far less.
Consider the additional likelihood of a major shakeout among behavioral health and social service organizations, in large part because of the reforms envisioned in the Affordable Care Act. Many single program-focused agencies will no longer be viable; some will dissolve, and others will consolidate into larger more competitive multi-service organizations.
With at least 12,000 nonprofits already operating in Maricopa County and, given the nearly 40% increase in the number of nonprofits over the last fifteen years, the likelihood of more entries in the marketplace, the competition for financial support will intensify and an already limited reservoir of philanthropy will be strained to meet the demands.
These developments certainly amount to a compelling case for charitable largesse, particularly as the season of appeals for charitable contributions commences. However, the fact is that that a convergence of social, economic, technological, and political trends are transforming the terrain on which the business of caring is conducted. The community can ill-afford redundancy of effort, deficiencies in governance, and adherence to outdated business models. The nonprofit sector is ill-equipped to handle the challenges of these changes on its own. As is the case in other industries, business-as-usual in the world of philanthropy just won’t cut it anymore, and an each-agency-for-itself attitude does not serve the common good.
Therefore, let me suggest that the scenario I’ve painted calls for a fundamental rethinking of the way we organize, govern, prioritize, and deliver philanthropy in the Valley of the Sun and that, if ever there was a time for a public-private partnership of corporate, philanthropic, governmental, and academic leadership to address this opportunity, that time is now.
Monday, August 27th, 2012
(Opinion piece published in the Arizona Republic, August 25, 2012)
Nonprofit theaters, indeed the performing arts in general, are waging an uphill battle for survival. What are these organizations doing to stay afloat, and what should we as a community do to ensure their vitality?
Kerry Lengel describes a marketplace where the rules of the game have changed and nonprofits must learn new plays to stay afloat. (“Non-profit theaters face ‘new normal’,” August 19, 2012). He’s half right.
The “new normal” that Lengel describes is not so new. It is more of the “same old same old” – echoes of the habits of past recessions where the “tried and true tricks” of austerity that are prevalent today end up as short-term fixes. Nor does the assertion that the “business model is broken” hold water. The problem lies not in the “model” but rather in failures of governance and implementation.
Too many boards of directors – all too often unclear about their responsibilities and accountability, and all too often guided by artistic visionaries who are not necessarily adept managers – are unprepared to adjust to the realities of recession. In flush economic times, they tolerate inefficiencies, ignore the financial red flags in their balance sheets, and succumb to the temptation to overextend beyond their capabilities. When downturns occur, these acts are debilitating if not fatal. The prescribed remedies, as Lengel notes, generally turn to urgent appeals for financial help, demands to do more with less, and calls for collaboration. They play well, but only for the time being, until things ease up and bad habits return.
The reversal of these recurrent misfortunes lies in honoring the “business model” and rigorously monitoring the organization’s progress in achieving its key elements: generating a balanced base of contributed and earned income; developing adequate financial reserves to address special needs or potential disruptions in cash flow; delivering quality productions; and building new audiences.
However, even when the model is purring, the basic economics of nonprofit theater, indeed of the arts in general, require long-term philanthropic and governmental subsidy. The question for patrons, public policy makers, corporations, and nonprofit leaders centers on what strategies are appropriate and feasible to create an environment that encourages preservation of theater as an art form; that invests in infrastructure, incubators, and affordable venues for rehearsals, recitals, and productions. The problem is that when efforts have been made to address these questions – whether the ill-fated Maricopa Partnership for Arts and Culture or the well-intentionedArizonaTown Hallof 2011 – they have failed to gain traction, saying something about the depth and durability of the region’s commitment to its own cultural health.
Yet, like Mr. Lengel, I am optimistic because there are good examples of theater companies (and other performing arts) that belie the nonsense of the “new normal” – Theater Works, Childsplay, Valley Youth Theatre, Desert Stages Theatre. They govern well, live within their means, perform to scale, cultivate their constituencies, and stay true to their artistic vision. They practice the business model the way it needs to be done – despite the odds.