Sunday, February 27, 2011

Sounds Good, But Not So Easy

Good morning.
"And the beat goes on........................."

Economies of Scale:
Years ago there was talk about mergers and acquisitions in the nonprofit arts field, and some discussion about how that borrowed business approach might be replicated in our sector as a way to reform our business model.  Alas, it turned out that the unique nature of art and thus of each arts organization did not lend itself to combining forces so easily.

More recently, there has been renewed discussion of figuring out ways to share certain business costs thus saving money for cash strapped organizations - and, again, bringing an outdated business model closer to something more efficient and functional.  But so far, we haven't done much more the broach the subject - with virtually no talk about specifics.

Currently, we have separate arts organizations across all disciplines - of varying budget size, staffing and fundraising capacity.  Each of these organizations share a very similar  organizational hierarchy - including an Executive Director, Finance person, Development  Directors, Marketing people, Project Managers, and various support staff people (not counting artistic people).  Larger organizations have departments for the above, mid-sized organizations have single people doing each task, and in smaller organizations, people wear multiple hats.

On the expense side, personnel costs (including payroll taxes and health care (if any) account for the largest line item, followed by rent and utilities, marketing and advertising (including not insubstantial printing costs), development costs, and general operating expenses.  Income and revenue vary widely.

So exactly where might organizations form co-ops and share some of these costs, realizing that the unique nature of each arts discipline and organization very likely demands de-centralized authority and decision making?

Let's take them individually:
1. Personnel costs:
  • It is difficult to see how executive decision making across several organizations can be centralized.  And prior isolated experiments in outsourcing marketing, publicity and even fundraising tasks has been universally disappointing.  While organizations can share ideas, best practices and other ways to be more productive, sharing personnel seems fraught with complexities and hardly something many would even consider.
  • Health care costs (to the extent it is offered at all) can, on the other hand, very likely drop IF we use the power of numbers as the bargaining chip.  Some of that (though not nearly enough) is already going on and private sector companies have stepped into the breach to provide the middle man 'organizer' role.  Doubtless, concerted effort could yield an even better approach.
2.  Finance:
  • Certainly accounting and bookkeeping functions can be outsourced, and again, to the extent local or regional collaborative efforts could likely get off the ground, even better deals than might be had.
  • Conversion of unused municipal facilities that could provide low cost office space to nonprofit arts groups might lower rent costs, but getting from ground zero to occupancy would require concerted (and time consuming) political engagement locally and the spate of bureaucratic hurdles that would need to be gotten over would be daunting to say the least.  While the current real estate marketplace might be an ideal time to acquire property, ownership of dedicated private sector office space exclusively for (shared) nonprofit arts groups would take considerable capital outlay, the source of which remains problematic.  Collaborative efforts to negotiate more favorable rent terms for multiple tenants is seemingly a potentially fruitful area to explore, yet finding the right (and unencumbered and thus available organizations to participate in such a cooperative enterprise) would not be easy.   
  • For the most part, we already have access to discounts on basic supplies, equipment, and communications (IT) expenses and thus further meaningful savings in this area won't likely justify the effort to try for more.

3.  Marketing:
  • Advertising:  The differences (and even unpredictability) of performance schedules, the diversity of extent and potential audiences, the uniqueness of artistic offerings, as well as fundamental differences in philosophy, and much more, complicate even simplistic attempts at the most rudimentary cooperative / collaborative marketing efforts.  Still, this is one area where the economy of scale and the negotiating power of our numbers  makes much, much more possible - though any such efforts would require not only a lot of leg work, but (perhaps more importantly) considerably more trust in each other than we currently seem to have banked.  Whether the purchase of bloc online or print news space, billboards, radio or television time or otherwise, we could conceivably get a lot more bang for our buck if we were organized.
  • Print:  A long time ago, I suggested that just in California - if we (the arts) were to open our own state of the art (no pun intended) printing facility we could probably produce the highest quality work (posters, brochures, banners et. al.) for a fraction of what we pay now in the aggregate.  Online applications would make it easy to use, and shipping is off the shelf reliable and puts every organization virtually "next door" to a facility.  The problem of course is the upfront financial commitment to get it off the ground and the buy-in by enough of the community to move forward.  But this is clearly one ripe area to investigate.
  • Publicity:  I have personally been involved in two attempts to outsource publicity to private sector firms - one of medium size effort, one quite large, and both were unmitigated disasters.  The private sector public relations industry is ill-suited to our needs and frankly, in my opinion, incapable of providing the services we both want and need at an affordable fee.

4.  Fundraising:
  • At their heart, arts organizations are very territorial entities, not given to sharing with their brethren (whether that is because they are conceived of as "competition" or for other reasons). One of the areas arts organizations are least likely to cooperate is in development.  Donor lists are valued proprietary assets and joint fund raising projects are few and far between.  The techniques and tools we all use to raise funds - from membership perks, to events, to solicitations are already widely known to everyone.  

In the final analysis, there are two principal factors that keep us from using the sheer power of our numbers to reap the benefits of economy of scale:
  • First, such efforts require a level of cooperation and collaboration that does not yet exist.  To get to such a level would require both a rethinking of our "business culture" and enormous resources (time, then money) that simply isn't available.  
  • Second, is the issue of "trust" - working together to move forward for mutual gain and benefit is somewhat foreign to our thinking.  We simply aren't comfortable outside of our smaller frames of reference, and while we are willing to share some things, consider some kinds of collaboration, and even cooperate in some experiments, by and large we aren't ready yet to work together even in simple back office functions.  It just seems an insurmountable hill to climb. 

Yet that isn't enough reason not to continue to try to figure out how to take advantage of our numbers, and to experiment with cutting costs and improving efficiency by sharing certain functions and costs.

Have a great week.
Don't Quit.