Another Offer, Another Round of Questions

A few moments ago, the Star Tribune posted an article announcing that the Minnesota Orchestra management has made a new offer to the musicians.

When I first started my blog, I stated that I wanted to focus on writing longer analyses of the ongoing labor dispute between the Minnesota Orchestra’s management and its musicians.  I recognize, however, that some of these deeper analyses have been… well, a tad too deep, so I’ll offer a different kind of blog here.  Let me simply raise a few questions that come to mind.

1.  Again, why are you being so conservative in your financial projections?  I don’t ask this in a passive-aggressive way, but from real curiosity.  As I’ve mentioned several times, there is a great deal of good news out there for arts organizations, despite the lingering effects of the recession:  the market has come back, corporate giving has returned to pre-recession levels, donations to arts organizations have returned to pre-recession levels and is in fact the largest growth area in philanthropic giving, the arts scene is flourishing locally, and orchestras of all sizes from all geographical areas of the country are reporting exceptional growth.  Why do you see such dismal times ahead?  I’d like to see your research.

2.  Why are you negotiating in the press, especially at this critical moment?  The musicians’ rep quoted in the story remarked that he has not seen the proposal yet.  Isn’t that odd?  Senator George Mitchell is your chosen mediator.  Why are you working around him?

3.  Has the SOS Osmo campaign authorized you to use the money they raised in the manner you describe?  It was raised with specific criteria in mind—have you met them?  Or are you making an assumption that you can take the money?  From this article, it almost sounds like they are part of the negotiations.  Is that so?  Can other third-party groups participate?

4. Broadly, does this in any way undermine your assertions that there’s no more money to be had? Despite your warnings about donors and the community at large being tapped out, it appears that you were able to procure $20,000 per musician in less than two weeks (since the date of your last proposal).  Does this provide any hope that a larger campaign, over a longer period, could bring in additional revenue that could offset proposed cuts?  Does this suggest a campaign specifically focused on keeping salaries high could succeed?

5.  Does it seem odd that you have only offered to cut President Michal Henson’s salary now Given your own argument the organization was in a financial free-fall, and that he was paid four times the musicians’ base salary, and that he too had received raises comparable to the musicians over the same period, and there have already been staff layoffs, wouldn’t it have made far more sense to make this cut previously?  Why is it being offered as a concession at this point in the dispute… nearly 12 months in?

6.  The numbers… in year 3, aren’t the musicians still at a 25% loss?  Since this puts them in the same position in three years, is this contract really all that much better than previous ones?

I don’t suppose I’ll get specific answers to these queries, but here they are nonetheless.  I’m curious as to how the musicians will respond to this latest offer.

* * *

Edit:  On Minnesota Public Radio, President Henson indicates why the management went public with this proposal:  “We felt that it was important that as this offer was generated by the community that we actually make the community aware of this offer outside the mediation process.”

Well, this is an answer, yes.  But this is, to be blunt, terribly out of line.  The idea that the public should know because the money is coming from “the community” is embarrassing.  By definition, all money is coming from the community, whether it’s from individuals, companies, foundations or the government.  So why make this announcement? And why do so now, at such a delicate stage of negotiations? The only reason to make such a public announcement would be to expand its scope—to increase the number of people participating and the size of the donations.  Is that your intent? Because it doesn’t feel that way.  To be honest, it feels like a transparent PR ploy, which unfortunately violates several principles of fundraising.  And contract negotiation. 

Xochipilli

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Running Together

“If you want to run fast, run alone.  If you want to run far, run together.”

–African Proverb

My wife had mentioned the above proverb the other day—she had heard it as part of a strategic planning session she had been to at work.  There is a great deal of wisdom in these words, but I was particularly struck at how it related to the ongoing Minnesota Orchestra labor dispute.

From my opinion, one of the cardinal errors that the Orchestra’s leaders made was deciding to solve the Orchestra’s financial problems on their own, relying on their own opinions, expertise and values to the exclusion of other stakeholders in the organization.  The musicians, for example, have in my opinion been treated as the problem, and been systematically marginalized in the search for a solution.  Leadership has been running alone.

The notion of running alone is evident in another way, too.  The individuals who make up the board and upper management are for the most part drawn from a single economic group and represent a uniformity of experience and vision—they overwhelmingly come from the ranks of business executives.  Obviously they are not all single-minded automatons, and it seems there are some that have disagreed with the board’s strategy and might be working towards an independent solution.  But thus far their similarities have overwhelmed their individual differences, and the board and upper management have functioned as a single player in this struggle.

To the other part of the proverb, this single-minded board chose to move fast.  Seeing the financial difficulties of the Orchestra as a structural problem—deeply embedded, pervasive and fundamental to the organization—they chose to eliminate it quickly and thoroughly, all at once.  They would immediately implement a new business model that would radically reshape the financial structures and eliminate an ongoing deficit in a single season.  Call it a “rip the band-aid off” strategy.

But would this dramatic action provide a solid foundation for future growth?  Would the dramatic action cause more damage than was needed, or even be sustainable over the long-term?  Based on my observation of the situation, I fear that the harsh demands made by management, and the tactics used to implement them, have caused a backlash from other members of the Orchestra’s extended family, including donors, audience members, community members… and of course the musicians.  All labor disputes brings tension by their very nature, but the horrified reaction from observers all over the country (as well as internationally) has been on another level altogether.  The Minnesota Orchestra has become a cautionary tale around the world.

How different the situation might have been if the board and management had chosen to run together, involving all the constituents of the Orchestra.

I point out that I have severe reservations about many of their forecasts (detailed here, and elsewhere), but I fully recognize the Orchestra took a huge financial hit as a result of the Great Recession.  That said, I realize it doesn’t matter if corporate philanthropy has returned to its pre-2008 highs (shown here), or that arts funding has regained all its lost ground (shown here) or that the arts scene in the Twin Cities is flourishing (shown here) if your organization is still struggling.  Similarly, even if McDonald’s is having a banner year, individual franchises can still be in financial trouble.

But still, let us assume for a moment that the management’s statements about the Orchestra’s finances are essentially true.  Let us suppose that in 2009 the Orchestra leaders realized they were on a crash course to financial ruin, with donations plummeting, ticket sales in the doldrums, and the endowment falling below the threshold where they could legally withdraw money.  On top of that, the leaders were well along on their plans to refurbish Orchestra Hall—in fact they had passed the point of no return and would have to go forward or return the accumulated donations.  How could they have acted to allow the organization to run far, to sustain itself over the long-term instead of searching for a short term solution?

Similarly, since they are still at a crisis point today, what could they do now?

Here’s my suggestions to let them run farther… by running together.

1. Be inclusive.  This is the core of my idea, that you have to build consensus and involve all stakeholders in solving the problem.  This maximizes the resources you have on-hand to solve the crisis, and ultimately helps to ensure that there is widespread buy-in to a solution.  And it’s not just me saying this… are you aware of the works of Scott Page?  His landmark work, The Difference, has revolutionized how we think in groups–and shows how collective wisdom often exceeds the sum of its parts.  Page, a professor of complex systems at the University of Michigan at Ann Arbor, has shown that diverse groups tend to outperform homogeneous groups, even if the members of the latter group are more capable or quantifiably more intelligent.  Again and again, he was able to prove that groups displaying a range of perspectives outperformed groups of like-minded experts—diversity yields superior outcomes.

My fear is that the board lacks the diversity of perspective and experience to tackle the problem of truly creating a new, sustainable business model for the Orchestra.  This is not at all to take away from each member’s skill, resources, accomplishments and experiences.  Not at all, they clearly are at the top of their game and could never have risen to their current positions without these things.   But they all so closely mirror each other that they aren’t able to come up with creative solutions, make seemingly “crazy” connections, see unusual patterns, or to effectively think outside the box.  What is needed is not just business acumen (although that is crucial), but experience in the art form itself, experience with different kinds of solutions, and an overall different perspective.

2. Don’t be afraid to lose control of the conversation. Along with this, there is often too much fear that a diverse group made up of people with different viewpoints will be inefficient.  Or be uncontrollable.  I’ve written before that this is not the case—that all kinds of studies have shown that conflict can be healthy and helpful for groups.  This idea was powerfully explored in an article in the Harvard Business Review, “How to Pick a Good Fight,” and has been borne out in many subsequent works.  In short, managers who try too hard to control a discussion and trample dissent are doing themselves a disservice; innovation and creative solutions germinate and thrive in a give-and-take culture where ideas—even preposterous-sounding ones—are fully vetted, and fully debated.  No one is advocating a toxic environment of backstabbing and personal bickering.  But healthy conflict leads to better problem-solving; arguing over ideas ensures that options, potentialities and consequences are fully fleshed out.  As a result, an organization can move forward with its eyes wide open.

3.  Increase transparency.  To truly bring people into the discussion, you have to give them the information they need.  For this problem, this means being even more open about the Orchestra’s financial health.  I know, management claims they are the “most financially analyzed orchestra in the country’s history” (which might surprise those like Philadelphia that went through bankruptcy).  I know, management claims they have provided 1,500 pages of documents to the musicians.  But I point out that you haven’t provided 1,500 useful documents.   As the musicians have indicated, you need to provide a fuller financial analysis that looks holistically at revenue and expenses, but also projections, capacity, and future expenses with a high degree of specificity.  Without these, it is impossible to accurately respond or make helpful suggestions.  This is why nearly every outside observer has urged you to provide an independent financial analysis.  This information is vital to have before someone can actively participate in finding a solution.   Remember, if you want the musicians to be part of the solution, you have to give them the information they need.  If they don’t think they have enough information, then they don’t have enough information.  They are not stalling, they are trying to understand.  Increased transparency will help them understand.

4. Brutal honesty.  This is not a time for subterfuge, for niceties, or hidden agendas.  If you want a real solution to a problem, and to truly engage people in finding this solution, you have to be honest.  But this is important—you can’t just speak honestly, you also have to listen honestly.  Do not be afraid of hearing a painful truth, and don’t try to stop someone from speaking it.

If the financial situation was as dire as the board has said, there should have been a much clearer reach to bring everyone on along together.  Structure a meeting where everyone was invited—not just the board members but the musicians, audience members, donors, corporate partners and staff.  But there’s no reason to stop there—bring in key representatives from outside the Orchestra’s principal sphere, including representatives from other orchestras around the country, or other non-profits here in town.

To win this race, you need to run together.

* * *

Let me offer another, more concrete example of how all this could work in practice and will effectively allow you “run together” as the proverb says.  There is a fascinating technique used to pull large groups together and to explore broad-based, organization-wide solutions to pressing problems:  Open Spaces Technology.

Open Spaces

Open Spaces Technology is the brainchild of Harrison Owen, who hit upon the idea, as he says, “at the bottom of his second martini.”  It springs from two sources of inspiration, with the first being from attending large-scale conferences. Owen noted that most of the truly valuable conversations and discussions took place in the “free” spaces—the breaks, the lunches and after-hours social events in the evenings. These informal, open times, provided a space where issues that individuals really feel strongly about could be raised and dealt with amongst similarly interested, though not necessarily like-minded people, who naturally gather together and who want to be there and listen and contribute. This is usually the opposite of the formal presentations, which were carefully staged and formalized.  The lesson was that people are better at raising issues relevant to them than experts, in the time and place of their choosing.

The other source of inspiration came from time he spent working as a pastor and community organizer in West Africa.  A West African village has developed a social mechanism to deal with village issues, where anyone is free to place in the public forum issues that are urgent or burning for them. A social “market place” of a particular kind then operates which gathers people around those issues and deals with them.  This provides a mechanism to shape and direct Open Spaces towards a particular objective.

Based on these inspirations, Owen created a new meeting format that focuses on interactions where people self-segregate themselves into groups that take on specific tasks or questions.  Open Spaces’ heart is a marketplace of ideas where people “shop around” for the topics and discussions that are most interesting to them, within a framework of tackling a larger issue. Open Spaces has taken off as an technique for facilitating discussions—it has been embraced for its ability to develop innovative solutions, build buy-in from across an organization, and empower all stakeholders to become more deeply involved.  It is used by people in a variety of fields, from arts administrators to engineers at NASA.

Owen notes that there are a few key “indicators” of where an Open Spaces discussion will be particularly effective.  Essentially, there must be:

  1. complexity, in term of the tasks to be done or outcomes achieved;
  2. diversity, in terms of the people involved and/or needed to make any solution work;
  3. real or potential conflict, meaning people really care about the central issue or purpose; and
  4. urgency, meaning that the time to act was “yesterday”.

I think we can agree that the Orchestra dispute contains all of these.

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What are the guiding principles of an Open Spaces event?

First is its total rejection of pre-determined ends or solutions. The key idea of an Open Spaces discussion is that while there are some guiding rules, it has an overall free-form structure where all things develop organically in response to the conditions on the ground and the makeup of the group.  Self-organization is its defining feature.

Equally important is the lack of hierarchy.  All the stakeholders of an organization, business, team, or so forth are welcome to participate, and they do so as equals.  Position and rank mean nothing in Open Spaces—what is truly important is a person’s experience, perspective, knowledge, passion vision, and problem-solving skills.  In other words, the participant’s wisdom; it is assumed that the wisdom to solve the problem at hand is in the room.  It is also important to note that everyone within the organization or team is free to attend or to not attend—maximum participation is encouraged to ensure diversity of thought and background, but no one faces implicit or explicit pressure to attend if they don’t want to.  Forced participation either at the event as a whole, or individual parts of it would undermine the work and pull focus from those who do want to be involved.

How does it work?

The format for Open Spaces is that all gather a centralized meeting point in a circle where all participants have an equal position and can all see each other freely.  The theme of the event and is explained (i.e. how to balance artistic and financial stability).

Then, something extraordinary happens—the organic creation of the day’s agenda.  Participants who are so inclined are encouraged to move to the center of the meeting and publically pose a question that they want explored or have been thinking about, within the framework of the overall topic (i.e. how can we increase attendance at new music concerts, or what’s the future of social media-based marketing). These “askers” don’t need to supply the answer, but simply to bring the question forward for discussion.  The asker then announces a time and place where a breakout session will convene to discuss this topic; all people interested in this breakout are welcome to join.  Other people similarly move and propose questions and meeting locations until all group’s assorted questions have been asked and assigned a breakout locations.  Ideally, there will be a wide range of breakout sessions set up tacking the larger issue from many different angles.

At this point, the main group divides, with all participants self-selecting which discussion they want to attend, either as a person interested in the question or as someone who has particular insight into the topic.  These breakout sessions usually last an hour or so, but are not bound specifically by time and can end early or be extended based on the feedback of the people who are participating.  If no one attends a breakout session, the asker can simply move to another group or use the time to reflect alone on the topic—usually having an hour dedicated to deep thinking about a topic is valuable in and of itself.  A list of all breakout sessions with their times and locations is kept at the main meeting point, and sessions continue throughout the day, or longer depending on the length of the Open Spaces event.

At each breakout session there is a scribe who writes down the key ideas.  At the end of the day, the full group reconvenes to debrief about the various topics, give time for further discussion and allow for the formulation of next steps.  All the accumulated notes are transcribed and offered to all interested participants.

In his User’s Guide, Harrison Owen has articulated “the principles” and “one law” that are typically quoted and briefly explained during the opening briefing of an Open Spaces meeting. These explanations describe rather than control the process of the meeting. The principles and Owen’s explanations are:

  1. Whoever comes is the right group for the job.  The group doesn’t need the CEO and 100 people to get something done, but only people who care. And, absent the direction or control exerted in a traditional meeting, that’s who shows up in the various breakout sessions of an Open Spaces meeting.
  2. Whenever it starts is the right time.  Spirit and creativity do not run on the clock.
  3. Whatever happens is the only thing that could have.  Once something has happened, it’s done—and no amount of fretting, complaining or otherwise rehashing can change that. Move on.
  4. When it’s over, it’s over. We never know how long it will take to resolve an issue, once raised, but that whenever the issue or work or conversation is finished, move on to the next thing. Don’t keep rehashing just because there’s 30 minutes left in the session. Do the work, not the time.

The “law” in question is law of two feet: if at any time you find yourself in any situation where you are neither learning nor contributing, use your two feet, go someplace else. In this way, all participants are given both the right and the responsibility to maximize their own learning and contribution, which the law assumes only they themselves can ultimately judge and control. When participants lose interest and get bored in a breakout session, or accomplish and share all that they can, the charge is to move on. The “polite” thing to do is going off to do something else. Often, a person moving from one session to another can help cross-pollinate ideas and provide a different perspective that is of value for another group looking at a problem from a different angle.

 * * *

This is just an idea, obviously explained in the most basic, skeletal way (there are many, many web resources about Open Spaces, and of course many works by Harrison Owen for those who want to know more).  But I think it offers a useful way of bringing the Orchestra—or any organization, really—together to effectively solve the huge, outstanding problems it faces.  If nothing else, it’s a fresh idea in a dispute that seems to have run out of them.

You’ve been running alone for some time—perhaps you should consider a different approach that lets you run together.

Xochipilli

A Question of Trust

Trust.

It is a difficult thing to talk about trust in the midst of an increasingly bitter labor dispute.  Obviously, at this point both sides are feeling a lack of trust, which is only to be expected.  I have no doubt both sides could assemble a lengthy list of betrayals large and small, each one backed up with lengthy justifications which may or may not be… well, justified.

But one recent exchange has jumped out at me as speaking to a larger point.  In this on-air debate, President Michael Henson of the Minnesota Orchestra asked Kevin Watkins from the musicians’ negotiating committee in effect, “We trust you to play your instruments, so why don’t you trust us to run the organization with solid financial leadership?”

Well, I hardly speak for Kevin or the musicians as a whole, but I can certainly explain why I don’t uncritically trust management’s word on the Orchestra’s finances.

1.  You hired a PR firm to report your financial position.  At a glance it may seem unfair to criticize you for hiring a PR firm to manage bad news—that is, after all, exactly why you hire a PR firm.  For similar reasons, you hire a lawyer to help you with a legal concern or a doctor to help with a medical concern.  But this goes far beyond massaging bad press; you hired this PR firm to dictate financial policy.  To refresh our memories, your board minutes reveal you wanted to end the past fiscal year with a deficit that would “prove” your need for a new business model and that the old way of doing things was coming apart.  So you consulted your PR firm to find just such a total, and withdrew a sum of money from the endowment that would result in just such a deficit—a shortfall of $6 million.

This deficit is entirely artificial, even contrived.  You could certainly have drawn down more, as you had been doing that for several years to “prove” you had a balanced budget.  Back then, you needed to make your finances look good because you were a candidate for state bonds, but now to make a case for organizational poverty you post a deficit in a pre-determined amount.  I get that other organizations did excessive draws during the recession, but that’s not the point here.  Also, we can argue about whether it was wise to have done these excessive draws in the past, or to have excessive draws in the future—but the fact remains that you altered your  profit and loss sheets not from purely financial considerations but as part of a deliberate attempt to enhance your position at the negotiating table.  So you’ll forgive me if I don’t uncritically trust your financial statements now.  What other “facts” been dictated by a PR firm? To what degree?

2. The 990s.  Board spokesman Doug Kelley has said in interviews that the musicians have the 990s—the tax documents the Orchestra must file with the IRS and make public every year as a non-profit.  He has gone on to state, more than once, that these documents are the “gold standard” for reviewing an organization’s financial health.  This is not entirely true.  Nor is an audit much better.  These documents are a snapshot in time, and hardly give a scope of an organization’s overall financial situation, and they inherently look backwards.  In personal terms, would you give a person a new credit card based on his or her last year’s tax returns?  Or a home improvement loan?  Or a mortgage?  Of course not—you would look at the family’s credit score, current employment, expected income, debt load, number of credit cards, car payments and so forth.  You would analyze their financial capacity right now, not just their personal ledger sheet from a year ago.  And so it goes for an organization.  The musicians are perfectly justified in requesting to see your assumptions, your projections and your aspirations.  What is the holistic view of where you think, realistically, the organization will be in a year?  Five years?  What are your priorities?  Your insistence that they base their response on the woefully inadequate 990 makes it seem that you are hiding something.

A secondary point also comes from Doug Kelley made on a previous appearance on Almanac: the statement that the administration should be trusted because no one lies on their tax returns.  This is an astonishing statement, really.  It seems almost embarrassing to point out that income tax evasion is a serious problem as old as taxation itself… one that has led to the creation of the IRS to enforce compliance with tax law.

3.  Questionable public testimony. When you testified before the state legislature to secure $14 million in state bonds, you were not entirely forthright about your finances.  I get that your testimony was not an outright lie, but you clearly presented yourself as being financially sound, and pointed to years of balanced budgets to support your claims of financial strength.  Yes, the legislators didn’t press you hard enough on your finances, but you gave an incomplete account of yourselves—it’s clear that you had been pulling extraordinary draws from the endowment to balance your budget.  You yourself freely claim that these amounts were unsustainable, and done primarily to create good optics for your presentation.  Is this legal?  I concede it is.  Was this politically astute?  Sure.  Was it effective?  Obviously.  But that doesn’t mean that outsiders observing the situation wouldn’t wonder if all your other financial statements—and your statements about finances—were not similarly  made up of spin, half-truths and political posturing.   As State Representative Jim Davnie (DFL-Minneapolis) said, “I can assure Mr. Henson that it is not just the musicians who have lost trust in the Minnesota Orchestra management.”

4.  Questionable data.  Another serious problem is the questionable bases of the few financial projections you’ve made public.  In your strategic plan, you base your future financial goals on the two specific years:  2008-2009.  You go on to make projections based on financial outlooks made during this same time, citing Giving USA as your source.  But those years represented the heart of the Great Recession, which hit non-profits—and specifically arts organization—particularly hard.  But things have changed.  The market is at record highs.  Giving USA notes that arts funding has fully recovered to pre-recession levels and continues to experience rapid growth.  As I spelled out in detail, other orchestras have experienced huge surges in ticket revenue and fundraising in the last few years.  But by all appearances you continue to base your forecasts on the grim reality of 2008-2009.  This doesn’t help your credibility.

5. Unclear definitions.  One ongoing point of contention is that in your analyses and projections you generally refer to “average” salary as a key metric.  This is odd—does any company think of salary in terms of a single average that ranges from the CEO to the mail clerk? How helpful would it be to look at an average of the salaries of all the staff members of Orchestra Hall, from Michael Henson down?  Think about it in personal terms: when you apply for a job, are you provided with an average salary for the company or the actual rate of pay for the specific position? It is the musicians’ base salary that is the critical metric here… the real-world rate that forms the basis of musicians’ salaries and dictates the overall payroll.  What is that figure? Worse, even though you repeatedly use “average” salary as a talking point, you haven’t released the formula for how such a number is calculated.  Forgive me, but this seems like more PR positioning.

6. Unanswered questions.  There are still areas of your financial reporting that raise questions.  All orchestra endowments took a hit in the 2008 recession, but the Minnesota Orchestra’s seemed to take a particularly brutal, disproportionate beating.  Why?  Documents show that the Minnesota Orchestra sold many securities at a $14 million loss in 2009 and hasn’t revealed what those securities were or how much they’re worth now. No other American orchestra saw a loss like this. Why?  The “independent” financial analysis you commissioned revealed that two very big ticket items, underfunded pensions and bond debt repayments of $9.3 million, weren’t addressed in your financial plans.  Why?

Let me point out one clear reason why it is not enough to uncritically trust management’s position is the cautionary tale of Minneapolis’ Southern Theater.

The Southern was widely seen as one of the most brilliant arts organizations in the Twin Cities, providing innovative original programming and serving as a home for a variety of smaller arts groups.  It’s annual budget topped $1 million.  It was supported by a range of donors and large foundations, including the prestigious McKnight Foundation, which in addition to regular support provided a large sum of money to the Southern to re-grant to the various artists and choreographers who performed there.  As an artistic leader in the community, its future looked bright, despite the hard times brought on by the 2008 recession.

Unfortunately, this was all a house of cards.

In 2011 the cards collapsed, and it was revealed that the organization was overleveraged and underfunded.  The Southern’s debt spiraled out of control; the organization had, in fact, been funneling McKnight’s pass-through grants—originally designed  for its clients—to pay for its own operating expenses, leaving the intended recipients without their money.  This development was all the more shocking because it was so unexpected… the Southern had been making rosy projections up until the final crisis.  Furious at the misuse of its funds, the McKnight Foundation demanded an immediate return of the $370,000 it had provided the Southern—funds which have not yet been repaid.  The scandal outraged the community and all other sources of funding dried up.  Within a week, the organization collapsed, and today the Southern exists solely as a rental space with one paid staff person.

Like the Orchestra, the Southern had a board of directors with managerial skill and personal resources.  Like the Orchestra, it filed 990s and submitted to annual audits, as required of all non-profits.  None of this made a difference.

In light of this situation, I’m sure you can understand why I think it wise to double check the management’s assertions… and its math.

Again, I say that trust often breaks down in a labor dispute—particularly one as long and ugly as this one.  But the above points show that this is more than a he-said-she-said debate… there are legitimate reasons why an outsider would not trust your financial positions.  And it isn’t just me saying this; nearly everyone observing this dispute has urged you to submit to an impartial, independent financial analysis.

I can’t speak to all the points of contention in this dispute, but I say with conviction that if you were to engage in an independent analysis, and to back up your assertions with independently verifiable data, many more people would be willing to trust you.  This really is an easy fix.

As Ronald Regan once said, “Trust—but verify.”

Xochipilli

Interlude: Listening to Music on the Wine-Dark Sea

Earlier this summer I had a chance to do something extraordinary.  To celebrate a milestone birthday of a beloved family member, the family went on a trip sailing through the Greek islands, with Venice as our port of departure and return.  Beyond the family time, this trip had special treat for me—I was able for the first time to sail past the ancient island of Ithaca.

Ithaca is a small island that looms large in the Western mind.  It was made famous by Homer’s Odyssey as the home of Odysseus the wanderer, his wife Penelope who waited patiently for his return, and his son Telemachus who helped restore his father to his rightful throne.  I can’t say that the Odyssey is one of my favorite works of literature—I much prefer the Iliad—but there is no denying that Ithaca is one of the great primordial Places of Western culture, a site that still exerts a strong tidal pull on our collective memory.  Depicted in countess works of art, the island remains a powerful symbol of the importance of home, homeland and family.

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For a dreamer like me, with a deep and long-lasting love of Classical history, seeing this island was a rare treat.

As such, I had to carefully plan how I got to experience it.  I scouted out the perfect hiding spot on the ship where I could sequester myself from the other family members and onboard activities, and got myself comfortable to wait for the fabled island to drift by.

Naturally, such an experience needed a soundtrack.  Allow me to share a bit about my playlist, which for me caught the magic of that moment.

First, I settled on Danish composer Carl Nielsen’s Helios Overture.  Nielsen is a composer we should know more of, whose unique voice has been overshadowed by the music of his more nationalistic counterparts Edvard Grieg and Jean Sibelius.  Helios follows the path of the sun as it passes majestically over the Aegean Sea; Nielsen wrote on the score: “Silence and darkness, the sun rises with a joyous song of praise, it wanders its golden way and sinks quietly into the sea.” It was written during the composer’s lengthy sojourn to Athens and is a masterpiece of orchestral color.

But I could not leave off my favorite composer, Jean Sibelius (I’m Finnish. So sue me.)  Fortunately, Sibelius wrote a perfect piece to accompany this magical moment:  The Oceanides.  Sibelius was far more famous for his vivid depictions of Finnish mythology, but the Oceanides is a rare detour into the world of classical myth, depicting the sea nymphs as they play in the warm waters of the Aegean.  It is frequently described as impressionistic along the lines of the great French masters.  Regardless of whether or not it qualifies as such, it is a gorgeous work that rises to a stunning climax as the waves gather together in force.  Not to be missed.

And finally, a more unusual selection:  Einojuhani Rautavaara’s Anadyomene, The Adoration of Aphrodite.  The name means “born of sea foam;” the work vividly depicts Aphrodite rising from the sea in all her glory.  A relatively short work, it is swirls with rich, impressionistic harmonies and a mysterious, flowing mood.   The funny thing is, it began its life as a work of serialism as a homage to Finnegan’s Wake.  But as Rautavaara worked on it he found that the musical themes simply refused to allow themselves to be boxed into, as he described it, “the serial straitjacket and quasi-scientific thinking” and instead called out for lushness, fertility and melody.  The work became one of primordial forces coming together and giving birth to something of absolute beauty.  Like the birth of the goddess herself.  It is a gorgeous work of modern orchestral music.

IMGP4295Those were my choices, and they did not disappoint.  But I had other music to keep me company, as we continued along our way over those gorgeous waters.  In no particular order:

Il ritorno d’Ulisse in patria.  “The Return of Odysseus to his Homeland.” This opera by Claudio Monteverdi actually touches on all parts of the trip; not only does plot revolve around Odysseus’s return to Ithaca, it was written by a Venetian composer and premiered in Venice. One of the first operas in the modern sense of the word.

Juditha triumphans.  An oratorio by Antonio Vivaldi, also a Venetian composer, tells the biblical story of Judith who saved her people from an invasion of the Assyrians.  The work was commissioned to celebrate the Venetian’s successful defense of Corfu from a Turkish invasion.

Idomeneo.  Mozart’s opera of the King of Crete’s homecoming after the Trojan War.

Les Troyens.  Hector Berlioz’s opera about the fall of Troy and the wanderings of the surviving Trojans.

Return of Ulysses.  Greek composer Nikos Skalkottas’s take on Odysseus’s homecoming.  While we’re at it, add his Greek Dances for Orchestra and The Sea.  Great fun, even if they aren’t great masterpieces.

Serenade, after Plato’s “Symposium.”  Gorgeous violin concerto by Leonard Bernstein, written on the subject of love.

Calm Sea and Prosperous Voyage.  I’m thinking more of the version by Felix Mendelssohn, but Beethoven has similar composition.

Escales.  “Ports of Call.”  Jaques Ibert’s beloved piece is a travelogue about sailing in the Mediterranean.  Maybe the wrong part of the Mediterranean for this trip, but a great piece.

Pan and Syrinx.  Another work by Carl Nielsen on the subject of Greek mythology.

Othello Overture.  Antonín Dvořák’s overture on Shakespeare’s tragedy of the Moor of Venice is a fantastic miniature.  Verdi’s opera Otello would also be a worthy, and thematically appropriate addition.

And because I’ve had the distinct pleasure of performing them:

Daphnis et Chloé.  Ravel’s impressionistic masterpiece adapts a classical romance by Longus that tells the story of a Greek goatherd who loves the beautiful Chloe.

A Sea Symphony.  Ralph Vaughan William’s choral symphony has nothing to do with Greece or Venice, but is an unforgettable depiction of the ocean in its many moods, and in the end becomes a visionary work about the questing spirit of humankind.

IMGP4751

Obviously, there are many more choices I could include, but these works provide enough music for several sea voyages.  What else would you add, if you were to find yourself voyaging on the wine-dark sea to an ancient land?

 

Xochipilli

An Un-Strategic Plan Part 4: And Finally, You List your Artistic Goals

Previous:  An Un-Strategic Plan Part 3: Unclear Goals, Uncertain Paths to Success

My ongoing analysis of the Orchestra’s strategic plan concludes here with part 4.  My previous posts examined the Mission Statement and Executive Summary, Overview of the Current Situation, Achieving Financial Sustainability, and concludes with the “Vision for a Sound Future” section (does a “vision” make a sound?) on pages 24-33.  And I’m sure many readers will be thrilled to note that this section is a bit more concise than the last one!

Page 25

This section begins with a telling transition… once you make all the cuts promised (yet left unexplained) in the previous section, you will be able to do all the activities listed on the next few pages.

It is odd that you see these things so disconnected.  It is, after all, the artistry that brings in the money that makes your financial goals possible.  Cuts to the music—your product—will certainly have implications for your bottom line.

Let me put it another way.  Making music isn’t the reward you get for balancing your books, it is the reason for your existence.

Prioritizing profits over your product sounds attractive, but it has repeatedly led to a death spiral for companies that have tried it—in an earlier post I looked at the sad fate of once-mighty Howard Johnson’s that bought into this mind-set.  I think it provides an important cautionary tale for you.

Page 26

This section is particularly disconcerting.  Again, you are an arts organization, but as I pointed out, the art is relegated to pages 25 and 27 of a 33-page document.  And when it does appear, it’s in a weak format that suggests—even more than its obscure placement—that you don’t have any idea what to do about it.

Let’s start with the title, “Artistic Programming.” You have chosen these words deliberately, but I’m struck by what you’re implying—that the planning is what’s important, not the actual performance or the final artistic product.  The greatness of the Orchestra’s planning isn’t in question; the staff at Orchestra Hall designs thoughtful, creative seasons that do an admirable job of bringing in new works and beloved orchestral standards.  But I’m curious that you don’t frame this section as “Artistic Excellence.”  Right off the bat I’m struck that this choice of words allows you “succeed” simply by putting together a concert season that looks good on paper—and sells tickets—rather than performing great music…  greatly.

It also suggests that a world-class conductor and world-class musicians are not, strictly speaking, critical to your success.

A few comments about the “strategies” that constitute the rest of this page.  As with the other sections, you’ve scattered vague buzzwords around that allude to quality, but never make an effort to declare what you believe “quality” will look like.  Or the steps you plan to achieve it.  What does a “symphony orchestra of the highest artistic quality” mean?  Who decides?  How will you know when you have one?  What’s your starting point, benchmarks, and ultimate goal?

Or, “initiate national and international touring strategies.”  What does this mean?  Are you going to convene a focus group? Compare airline fares?  Brainstorm a way you could raise cash?  Do you simply initiate a strategy… or do you successfully complete an actual tour?

“New concert formats” could mean anything from hour-long programs, streaming online, or a return to those infamous “carpet concerts” of the 1970s.

Again I urge you to look at SMART goals (specific, measurable, achievable, relevant and time-based, as explained in my previous post) to help frame your strategies.

Page 27

Look at your “action items” on this page.  One key metric is (as it reads in its entirety) “touring.”   Okay, but to where and to what result?  How will you know if you’ve succeeded in touring, simply by arriving home safely?   And for a document that puts such emphasis on finances, how do you propose to pay for these tours and what kind of return on investment do you hope to achieve?

Broadcasting—fine, but to what end?  How many stations?  How many households will you reach?  How will this promote great artistry?

Let’s explore that last idea further.  Another key goal is that you will “mark your first full season back in a renovated Orchestra Hall.”   Great.  How does that have anything to do with artistic excellence?  You could put on a stinker of a concert that turns off audiences for the rest of the season.

Moreover, this activity does not, strictly speaking, have to have anything to do with artistic anything.  You could throw a gala ball and give guided tours of the new facility.  Such activities would mark the first full season back in the Hall, and fulfill your strategic goal without involving one note of music.

I think it is telling, and worrisome, that throughout this section, you don’t specifically refer to the Orchestra, your Music Director, or the musicians—the key components of your artistry who have to be engaged to put on a successful artistic product.  Wouldn’t putting on a concert by a junior high jazz band fulfill your artistic goal? There is grave concern that you’re trying to push for more non-classical music at Orchestra Hall, because you perceive it will be more profitable.  The fact that the Minnesota Orchestra is not, strictly speaking, necessary to complete your artistic goals only aggravates this concern.

And so it goes.

From years of working on strategic plans for arts organizations, I know how hard it is to create concrete goals around art.  And I’m certainly not advocating you put down something like “Our concerts will be 20% more inspirational.”  But there are ways to gauge this; qualitative analysis is nothing new.

But think deeper for a moment—what do you want the artistry to do?  Why is it important?  What will greater artistic quality lead to?  There are questions that should be at the heart of every arts organization that wants to engage the community.  Please put greater care into how you can measure it.

In summary, because you are so vague in this section, you miss a powerful opportunity to really explain your art here.  This is your strategic plan, isn’t it?  Great!  What kind of music do you want to perform, or which will receive your greatest emphasis?  Why have you chosen this particular form?  What is your competitive advantage in a crowded marketplace?  What are the roles in the process—who does what, when and how? What do you strive for in doing this kind of music…

…what is your artistic goal, and how will you know you’ve achieved it?

Page 28Page 29

Again, this section seems to suffer from the fact that that you don’t really know what the goal community service truly is.  Why are you doing these activities?  What do you hope to achieve?  How will the specific actions you list bring about your ultimate goal?

In honesty, looking at this spread leaves me with the distinct impression that community and educational outreach are about good publicity, rather than achieving a clearly-defined goal that will strengthen the organization.

I think it’s great to partner with local school districts… but why are you doing it?  Is it to build an awareness of the process of music making?  Develop good music listening habits? Demystify the concert experience?  Which students, where?  Will you work at the school district level, or individual schools? Or classrooms?  With limited time and resources, how will you focus your efforts?

These are not idle questions.  You have made it clear that a significant reason for changing the labor contract with your musicians is being done to make education and community outreach easier.  So here’s a chance to explain why you are pushing so hard for these changes.  How will the organization be stronger?  How are the benefits going to outweigh the added burdens to staff and musicians?  How many students will you reach, how many adults?  How does this align with finances—is it a net gain in that it increases the number of ticket buyers?  Is this a long-term investment, or do you hope to see immediate gains?

I applaud your efforts to emphasize community outreach—the fact that this is included in your multi-year strategic plan shows admirable foresight.  Unfortunately, this foresight is undermined by the fact that there are no tangible details, clear goals, or any kind of metrics.  There is great danger that you’ll just start doing a whole bunch of well-meaning projects that are fun, but don’t advance the organization in any meaningful way.

And I can’t help but notice that community service gets equal space to artistry in your strategic plan.  Does that mean that community and educational outreach are by definition going to be given equal time, attention and resources as your core artistic endeavors?

Page 30Page 31

I hate to keep repeating myself, but… well, it bears repeating.  This section again perfectly encapsulates the problem with this strategic plan.

First, let me point out that you rely on a bunch of “exciting” key words without giving an indication of what you mean.  What is an “interactive” interior?  How is an interior “dynamic?”  In honesty, this suggests futuristic building materials that somehow change shape and color, or otherwise respond to human stimulus.

But leaving wordsmithing aside, you’ve listed several laudable items as part of your “Vision for an Expanded Orchestra Hall.”  But once again, they are vague and unrelated to your ultimate vision, and the ultimate purpose for refurbishing the building.

Simply put, why did you renovate?  This is a strategic plan… so, what’s the strategy here?

For example, you list “iconic design” as a part of your vision.  Great, it will have an iconic design.  Why is that important?  What will that result in? How does it get you closer to where you want to be? What does an iconic design get you that a non-iconic design won’t?

How will the building design provide a better customer experience?  I don’t doubt that it can, but talk about these things in concrete terms, and how they help.  Specifically.  Will this enable personnel to move the audience members through in a more efficient manner, allowing for a smaller staff?  Will it allow more people to patronize the bars, leading to increased revenue?

Page 32

With this page, your strategic plan comes to a close.  I want to reiterate that all of these things are important, but I have grave concerns that you can achieve them.

* * *

A final word about your strategic plan.  I recognize that it might be unfair to subject strategic plans to this level of scrutiny—they are often for internal consumption only, and are meant to be the start of an ongoing conversation.  But I remind you that it is posted on the front page of your website, and you have invited the public to review it to learn about your hopes and aspirations for the future; you have also indicated it gives a rationale for why the lockout of the musicians is necessary.

Well, I have answered your invitation to look at your plan, and have found that beyond any problems I may have about incomplete data or unfounded assumptions, I am troubled by the thinking behind it.

I find that it raises more questions than it answers.

Xochipilli

An Un-Strategic Plan Part 3: Unclear Goals, Uncertain Paths to Success

Previous:  Assumptions that Assume Quite a Bit

My ongoing analysis of the Orchestra’s strategic plan continues.  My previous posts examined the Mission Statement and Executive Summary and Overview of the Current Situation.  Here we get into the “Achieving financial Sustainability” section (page 16-23) that provides nuts and bolts about what you hope to achieve, and how you will go about doing it.

Page 16

You start with a set of fairly straightforward goals, which hit most of the big points; you promise more ambitious efforts in the usual areas: contributed income and earned income.  You also express a goal to capitalize on the luster of the newly-refurbished Orchestra Hall.

Well and good.

But I do have some potential red flags.  On the one hand, you’re trying to hit all the key areas, but it feels to me like “more of the same, but with greater feeling.”  How will this be different?  Weren’t your previous efforts ambitious?  Where is the line between ambitious and realistic?  And since on earlier pages of this document you painted such a grim picture of the state of classical music, classical audiences and an outlook for orchestras specifically… I’m surprised you plan to be more ambitious.  I don’t follow your internal logic—or maybe you don’t believe your own dire scenario that you lay out on page 7 of your strategic plan?  I’m curious as to what you have in mind.

Another word about the refurbishing of Orchestra Hall.   Having worked there for many years, I fully—fully—understand its limitations as a venue and applaud the work you are doing.  But as I mentioned above, in this very document, you painted a picture of ever-declining audiences.  You argue that audiences at Orchestra Hall have mirrored this national trend, and ticket sales are down.  (As I mentioned in my previous post, I don’t necessarily agree with you, but that is your argument.)

I’m curious as to why, if you believe this to be true, your solution is to emphasize the building.  Isn’t that counterintuitive? Yes, there will be a burst of interest when it first opens (the so-called “glow effect” you mention), but will that be sustainable if, in your own words, the music’s audience is declining?  Following your own argument, isn’t the $50 million refurbishment of Orchestra Hall just a very expensive, temporary solution to a long-term structural problem?  Using your own word, is this sustainable?

While we’re on the subject of the renovation of Orchestra Hall, writer Tom Peters has written about the real-world results of the problems of prioritizing a building over the activity that takes place inside it.  In a column “Baseball and Beethoven: The Minnesota Orchestra, the Marlins and the Perils of Market Correction,” he explores the similarities between strategies of the Orchestra and baseball’s Florida Marlins.  Like the Orchestra, the Marlins built a shiny new stadium while implanting massive payroll cuts that gutted the team.  The result?  Attendance tanked.  It didn’t matter how nice the new facility was, because with a forgettable team on the field there was no reason to visit it.

He is not alone.  Michael Kaiser, head of the Kennedy Center in Washington, has also written an interesting article on this theme, and been forced to ask, “How many more arts institutions must face financial woes, labor unrest, reduced performing schedules and even closure because they commit to capital projects that are beyond their means?” Plus, does the recent news from Nashville at all give you pause?  Their attempt at a “build it and they will come” solution to declining audiences has been a well-publicized disaster.

I point these things out not because I think you shouldn’t have refurbished Orchestra Hall, but to point out that doing so at the expense of the activities that take place inside it is a recipe for disaster.  At least as much consideration should have been given to keeping the Orchestra playing at the top of its game.

Page 17

Earned revenue.  I was hoping that the after the various teasers and introductions, this part of the plan would move more specifically into the details of what you wanted to achieve and the concrete steps you were going to take to make them happen.

Unfortunately, it doesn’t appear to be the case.

Right from the get-to, there are problems.  On page 17 you list your strategies to increase earned revenue; but in looking over the list many of your strategies are, with respect, buzzwords without clear meaning, fairly obvious, and lacking any kind of detail.  For example, you plan to align supply and demand of concerts.  Align with what? How will this be determined?  Who will determine it?  What are the values that shape this alignment?  You could present nothing but way-out, avant-garde concerts every week to 200 people.  That would align your supply with demand.  Would it be good for the organization?  Would that help your revenue goals?

There are a few things listed that I find it hard to believe you’re not doing already, such as positioning Orchestra Hall as a comprehensive performing arts center or conducting market research into audience interests.  What will be different from what you do now?  What will these new efforts lead to?

You explain that you plan to increase corporate sponsorships.  With respect, how do you plan to do this?  I know several members of your development team and they are masters of their craft.  I have nothing but admiration for them and their abilities, and I know that most arts organization look at your list of corporate sponsors with raw envy.  So what do you propose to have them do differently?  Do you suggest that your staff hasn’t been working diligently trying to attract the attention of every good sized company in the state? Are there businesses they have overlooked?

But mostly, when I look at your strategies, I don’t see… well, an overarching strategy.

For example, this section deals mostly with marketing, which ultimately seeks to raise money from your audience members.  So let’s back up one second to talk about audiences and the strategies to engage them.

Are you trying to broaden your audience base?  Diversify it?  Deepen it?  These often get lumped together, but they are very different ideas and the strategies to achieve them do not overlap.

Broadening means attracting more audience members like those cur­rently attending (and usually, are already inclined to attend).  It is essentially an effort to cast the nets as widely as possible to get more people in the seats.  The whole focus is to continually and rapidly find new patrons, and tends to be somewhat of an indiscriminate strategy.  Mailing a flyer to all addresses in the city of Minneapolis, for example. Because the emphasis is on attracting new people, and not necessarily on keeping them, this strategy can have a relatively high rate of attrition as some people will casually give you a try and move on.  The hope is that with enough people coming through your doors, some are bound to stay around.

To deepen your audience base, however, you have to get fewer numbers of people who already support you somehow to engage with you at a higher level.  In short, you try to turn your existing friends into your best friends.   You may ask them to go from casual ticket buyers to season subscribers, or move them from casual contributors to major donors.  This strategy relies heavily on targeting people, segmenting them into discrete populations and applying very specific strategies to get them to take specific actions that move them in a specific direction.   In many ways, the ways you work to deepen your audience are directly at odds with the strategies need to broaden it.

Diversifying an audience means you are implementing strategies to specifically attract people who do not normally attend your performances… say, bringing in more youth aged 18 to 30.  It requires a comprehensive view of your audience base as it is now, as well as a clear idea of who you want to attract, for what reason.  You need an understanding of what barriers this new population faces, plus a clear sense of what methods would convince these folks to attend—in short you need a very, very specific pool of research and a clear strategy before you even begin.

Not only are the strategies different for each, but the revenue generated will be different, too.  What do you plan to do?

With that as a preamble, we can apply those the same questions for revenue: do you want to broaden, deepen, or diversify your revenue streams?

There isn’t a right answer; but you can’t do all three at the same time, at least in equal proportion.  How many resources are you going to allocate to these different approaches? What are your expected rates of return?

I don’t see any indication that you’ve given these questions much thought.  Instead, this feels like you’ve thrown a whole bunch of ideas together that will hopefully make money.

Page 18

Turning the page, I am initially struck by relief that the vague catchphrases tossed out previous have given way to more tangible objectives.

But initial hope gives way again to frustration.  Interestingly, the “key targets” page raises a completely different set of issues.  Others have already documented the problems on this page. Essentially, you throw a barrage of numbers (this is, I might add, one of the very few places in the document that has specific metrics) that makes it feel like you have a clear idea of what you want to achieve.

The problem is that the numbers don’t stand up to scrutiny.  For example, Emily Hogstad has examined your data and come up with some disturbing finds.  You state you are striving for 80 percent paid capacity at Orchestra Hall post-renovation, up from a previous capacity of 69 percent. Sounds good. But as part of the renovation, several hundred seats were removed from the Hall, dropping the overall seating capacity. Sixty-nine percent of a 2,450-seat hall is 1,691 tickets sold, while 80 percent of a 2,092-seat hall is 1,674 tickets sold.

So apparently your goal is to sell 17 fewer tickets per concert than you do now—even as you proudly point out you hit your capacity targets.

Another point.  You suggest that between FY2014 and FY2015 you plan to increase concert revenue from $8.7 million to $8.8 million and rental fees from $0.9 million to $1.0 million.  Okay, sounds good.  But how?  Your deliverable reads, in its entirety, “2% revenue increase.”  How so?  Inflation?  I concede that later you do include the words “continue to optimize revenue through dynamic pricing, ticket fees and other pricing strategies,” but that appears to be an ongoing task that occurs in all other seasons as well.  Is your plan, therefore, to achieve those revenue goals solely by making ticket prices more ever more sensitive to demand—even though you’ve been doing so, in your own words, since 2011?

And again, how does this fly with your earlier statements that audiences will continue to decline?  By your own reasoning, won’t you have to work significantly harder simply to hit existing benchmarks?

One thought.  I can’t shake the feeling that you have chosen the worst year of the recession as your baseline so that you can take credit for any growth that occurs naturally as the economy recovers.  Indeed, you’ve given no other indication of how you will achieve this projected growth.

* * *

While we’re in this section, let me take a moment to discuss something that would help your plan immensely, especially here:  SMART goals.

I know, I know… the last thing the world needs is another consultant forcing some industry buzzspeak on you, but I do think this concept will help.

SMART is an acronym for the five crucial qualities an effective goal should have:  they should be specific, measurable, achievable, relevant, and time-based. It’s a simple tool used by businesses, governments, and non-profits to go beyond the realm of fuzzy goal-setting into an actionable plan for results.

Specific: Great goals are well-defined and focused. “Sell 300,000 tickets to events at Orchestra Hall” focuses attention far more than “Increase ticket sales.”

Measurable: A goal without a measurable outcome is like a sports competition without a scoreboard or scorekeeper. Numbers are an essential part of any plan, so put concrete numbers in your goals to know if you’re on track.

Attainable: Far too often, organizations set goals beyond reach. Dream big and aim for the stars, but keep one foot firmly based in reality. Reviewing past history is a good start, but not enough—check with your peers or industry statistics insure you’re being realistic.

Relevant: Achievable goals are based on the current conditions and realities of the overall climate. You may desire to have your best year in ticket sales or increase revenue by 50%, but if a recession is looming or new competitors have arrived on the scene, then your goals aren’t relevant to the realities of the market.

Time-Based: Organizational goals and objectives just don’t get done when there’s no time frame tied to them. Make sure you give yourself a realistic deadline, and stick to it.

Bad example of a SMART goal: “I want to lose weight”.

Good example of a SMART goal:  “I want to lose 20 lbs by April 15th 2014. I will perform a half hour of cardio and half hour of strength training per day, 5 times a week and I will only eat starchy carbohydrates 3 times a week.”

One final note about SMART goals—one potential downside to them is that they focus attention on activities, not larger goals.  Make sure that you have firm, universally agreed upon organizational goals, and then use SMART goals to achieve them.

With all this in mind, look back on your strategic plan.  Not everything here is bad, but how does, say, “Maximize concert revenue” stack up as a goal?

Page 19

This analysis is already getting too long, and I don’t know if it helps to pile on here, but nearly all of my earlier comments hold true of this page as well.  To be brief—aren’t you already doing each and every one of these things?  More than that, isn’t every orchestra, arts organization and non-profit doing each and every one of these things?  Lacking any specifics, how will you know you’ve succeeded in “increasing board giving” or “considering new programs”?  You don’t necessarily have to use the SMART model I mentioned above, but please get some specifics here.

One of these strategies does require a more specific call-out—increasing board giving.  Isn’t one of the driving features of the new business model that the board members are tired of bailing out the organization with large gifts each and every year?  So why—and how—do you propose to induce them to give more?  Unless they are going to increase their giving permanently, instead of agreeing to short-term increases to get the new business model up and running, this strategy raises serious questions of long-term sustainability.

Page 20

Page 21

Again, much of what I can say about these pages has already been said.  You are free to set your own metrics of success, and unlike other sections of this plan you do assign numbers and specifics—I hope that from your experience they are realistic and attainable.

But that brings up a couple of questions.  The first one is to note that for the numbers here to be realistic and attainable, they must be based on data that reflects your organization’s history, your peer organizations locally and orchestras nationally.  As I said earlier, I don’t have confidence that you have such data—or at least that it is current.  Presumably you have done a recent capacity study (I believe such a document was mentioned in your “independent” financial analysis).  So what does it say?  How does it inform these figures and goals?

In short, how do you arrive at these numbers?

A second question is perhaps outside the scope of this plan, but it has to be asked.  It is clear through the minutes from your board meetings, your public statements, and the fact that you bought up all kinds of Internet domain names that you anticipated a rough labor negotiation as far back as 2009, if not possibly earlier.  Many have speculated, in fact, that you had planned to cancel the season well in advance.  How does that impact the goals you lay out here?  Clearly some donors have been put off by the dispute—as you no doubt expected.  Have you adjusted your numbers accordingly?

Page 22

And finally with this chart, you attempt to summarize all the previous data of the document and lay forth your argument for what has to happen next.  In brief, all the revenue you’ve discussed, including the new revenue mentioned in the last few pages, will lead to an “annual imbalance” of $6.3 million.

There is no way to sugar coat this—this statement is specious, speculative, incomplete… and just plain embarrassing.

First of all, you don’t use specific years on this chart, but your use of the word “annual” suggests that this year’s financial shortfall will be a constant every year going forward.  Apparently the weakness of the endowment, diminished contributions and reduced ticket sales of 2008 are hard-wired into the Orchestra’s programming, and will be with the Orchestra forever as a new normal.  In my earlier posts, I discussed how national trends from arts groups locally and orchestras around the country reveal your assumption to be inaccurate.  Maybe the Orchestra hasn’t specifically seen a recovery, but all indicators suggest that there is a recovery taking place out there that’s ready to be taken advantage of.  And, your peer organizations are doing so already.  Labeling your current fiscal problem as “annual” is sloppy and downright misleading.  Far better would be to add projections for two or three additional years; this would present more concrete evidence that the gap will persist as you claim, and show how it would shrink or grow over time.  Otherwise, this looks like a single-year problem.

Along those lines it is important to remember this is a projection, not an Absolute Truth.  As such, you should be much more thorough in explaining the assumptions that go into your numbers.  Is this a worst-case scenario?  Fine, state that.  Then give a best-case scenario.  What you have looks like a clear attempt to scare stakeholders into compliance.

And let’s talk about the annual operating expense number itself.  What greatly disturbs me is, again, this number doesn’t take into account the full scale of Orchestra’s expenditures.  Again, your “independent” financial analysis made note of underfunded pensions and debt financing that add millions to your bottom line–$9.3 million in bond repayments alone.  Comparing this total to the one given on page 11 (essentially the same total, but with greater detail), it is clear that that these big ticket items aren’t included in this number.  What else have you left off?

On the flip side, how are you accounting for revenue of the $100 capital campaign?  Is that on here?  Part of the stated purpose for your Building for the Future campaign was to support artistic initiatives, so shouldn’t some of that money be here?  On page 21 you specifically list a goal of bringing in $12 to $18 million in fulfilled pledges each year.  If nothing else, wouldn’t that exponentially increase the size of the endowment draw, even if the endowment weren’t to grow naturally with the market?  A 5% draw on $100 million is $5 million.  If you fulfill your goals and add $45 million to the endowment, a 5% draw would bring in $7.25 million, which would put a dent in that annual imbalance.

This is why the musicians, the state legislature, the state’s largest paper, and nearly every independent person observing this dispute has urged you to produce a real independent analysis—your “facts” simply raise too many questions to be accepted on face value.

Page 23

And here we hit the crux of your argument.  This one page says it all—new revenue is insufficient, all expenses must be restructured, and long-term obligations will be examined.

Let me say that I don’t inherently disagree with you on these points.

But.

First, as I mentioned, there is no indication that you cannot raise new revenue other than… well, that you asserted it to be true.  Finances are complicated and you undoubtedly have more information than I do, but I point out again that you’ve based all your assumptions and benchmarks on the realities of 2008.  As I’ve pointed out, many sources have mentioned that ticket sales, fundraising, and investments have come back to pre-recession levels.  All around the country.  You were, in fact, able to raise $100 million of the Building for the Future campaign over the last few years. Therefore I will need a much, much more detailed financial analysis and capacity study before I believe you cannot increase your revenue now.  I’m sorry, but your “independent financial analysis” that you recently produced was funded by you, was restricted to exploring those questions you wanted answered, and conducted using data you provided.

Second.  Sure, expenses can be cut—but not solely at your discretion.  You have to negotiate with the union for cuts to the musicians’ salary… the extent of which will, by definition, be determined as part of the negotiations.  Thus, it is foolhardy to presuppose specific cuts for this plan—at this point they’re all still hypothetical.

I would also assume that if the entire purpose of the new contract is to save money, that each of the 200 or so changes you propose to make to the contract have a specific savings attached to them, and that is the only reason they are being proposed, correct?  Therefore, I think it would be valuable to see a list of the specific dollar amounts saved on each proposed change, such as mandatory participation in outreach activities.  Plus, since it is clear that many of the activities covered by the contract still incur real-world expenses (i.e. a musician still has to get to a community outreach event, even if the Orchestra no longer picks up the tab), I’d like to see who does assume the costs the organization saves.

I also note that executive compensation is conspicuously absent from your list of expenses to be restructured.

Finally, you will address long-term expense obligations.  That makes it into your strategic plan? That you will “address” how you will pay your bills?   Why haven’t you addressed this before, in your daily operations?  Instead of addressing these expenses, why don’t you just pay them?

One point I will concede here—you may be implying that you will change the way you will pay them (I hope you don’t mean “start” to pay them).   I agree this has many implications—you could conceivably pay them off in full right now, but that would leave a gigantic hole in your budget.  Or you could restructure the debt and pay it off over 5 years, 10 years….  As the board leaders also run financial institutions, you know better than I what the options are; but I point out that each option has widely varied ramifications for the Orchestra’s finances, and would result in graphs and charts that look very different in your strategic plan.

And one final thought.  Let us suppose that I were to agree with you entirely and concede the need for each and every one of these items.  Do you not find it odd that there is no indication of how they will be implemented?  Do they go into effect immediately?  Over time?  Are any of these items contingent on the others? Which are the top priorities?  How will you communicate these things?  These are big changes—how will you build consensus around them, or manage dissent?

Next:  And Finally, You List your Artistic Goals

Xochipilli

An Un-Strategic Plan Part 2: Assumptions that Assume Quite a Bit

Previous: An Un-strategic Plan

[Disclosure.  As I mentioned in an earlier post, after I started posting this series, the Minnesota Orchestra management finally released the “independent financial review” they had commissioned several months ago.  I commented on some of the many problems with the analysis—particularly the absurd notion that a document paid for by the management, examining the specific questions pre-determined by management and specifically using data furnished by management could in any way be considered “independent”—but held off posting the subsequent installments of the series in case something relevant was released.

I think that was the right thing to do, and I continue to believe that was a good decision.

But in retrospect, I don’t think I should have worried.

Others have pounced on the document from a variety of angles, including Robert Levine who thoroughly shreds it here.  Of all the problems associated with it, the one most relevant for my deep dive into the Orchestra’s strategic plan is the fact that it exists in a closed loop of information.  Yes it paints a terrible view of the Orchestra’s finances—because it’s using the same information the Orchestra management has been using. 

It’s the equivalent of writing your own entry on Wikipedia, then asking reviewers to “independently verify” the information by having them fact check the article against  your own notes… the ones that you used to write it in the first place.

I may delve into this aspect of the dispute later, but in the meantime I want to continue my series on the Orchestra’s strategic plan.  Although I’ve made a few edits, the bulk of my analysis remains the same.]

 * * *

The labor dispute between the Minnesota Orchestra and its locked-out musicians continues.  I have mentioned that, from my perspective, this dispute is less about the nuts and bolts of the labor contract itself, and more a clash about competing visions of what the Orchestra should look like as an organization—what its priorities are, who it serves, the nature of its product and its role in the community.  The management has put forth its strategic plan on its website, helping to establish what it wants the organization to look like.  In honor of Labor Day, I began a deep dive into this plan, which for me raises some serious red flags.  I began with general thoughts and a look at the mission statement and executive summary; today I’m turning my attention to the section marked “Overview of the Current Situation” that runs from page 7 to page 14.

Management is clearly trying to make a strong statement of The Problem, the dire current situation that justifies and requires the solutions that follow on subsequent pages.  As such, this section provides, at least in theory, the intellectual underpinnings of the rest of the plan—everything that follows is somehow related to the information on the next few pages.

To my mind, this section has some serious deficiencies.  The main problem is that the assumptions that underlie nearly all the graphs, charts and statements assume way too much, and are both lazy and vague.  Platitudes and generalities are stated as fact with little evidence or concrete support.  Because of this, it is difficult to verify whether the assumptions are accurate, if the evidence proves anything, or if the solutions that make up the remainder of the plan will be in any way effective.

 * * *

Page 7

On this page, you begin to flesh out some of your ideas and explain the assumptions and the figures that support them.

But, to be frank, you do so in a peculiar way that ultimately feels self-serving.

To begin, let’s look at the figures showing a decline in both audience members and donations.  First, I am willing to believe that ticket sales are down from the orchestral heyday of the 1990s, but what about other trends during that long sweep of time?  Has ticket revenue declined when adjusted for inflation?  Are profit margins per ticket up since then?  Is the Orchestra less dependent on ticket revenue as a percentage of its overall income than it was 20 years ago?  Has the rest of the budget been adjusted to account for this trend?  Are some concert series doing well?  Is fundraising down uniformly in all areas evenly? Are there new and developing income streams that can help make up the difference?  What about overall users of your product, not just concert attendees?  Maybe these specific questions are irrelevant, maybe there are other questions that are more pressing—but I find it odd that a board filled with CEOs and financial leaders would peg everything on  one or two macro indicators without delving into some of the micro trends that would provide a fuller understanding of what’s happening with the Orchestra’s revenue streams.

It feels like there could be some points of good news to report, but you chose to bury them within a broader framework of gloom.  That’s too bad… these points of light might be good indicators of what specific steps you need to take to right the ship.  Not including them suggests that they don’t support your chosen narrative, and thus you’ve ignored them.

More troubling is timeline.  Interestingly, you chose as your end date to coincide with the Great Recession.  This seems so obvious to say out loud, but you’ve chosen for your benchmark the economically disastrous 24-month period in since the 1930s.

Really?

Do you feel that specific two-year cycle is a good indicator of future trends?   While economic times are still tough, the market has returned in full force.  National studies have shown that contributions are returning to pre-recession levels, and contributions to the arts have seen high rates of growth.  For example, Giving USA— the very source you cite to show a collapse in arts funding—has shown that by last year, giving had already returned to pre-recession numbers and has been the fastest-growing charitable cause over the last 12 months.  In their annual report released in June, they write:  “Previous Giving USA reports had noted that donations to arts and culture sank 8.2% during the two-year recession of 2008 and 2009. The $14.44 billion given in 2012 vaulted the sector back above the pre-recession peak of $13.7 billion in 2007.”

Arts funding at the local level is also on the rise. In the new budget for Minneapolis, there is extra funding available to arts projects.  Crowdfunding for specific projects has taken off, providing another avenue for supporting the arts.  Ticket sales have seen improvements, as well; one recent article in the Star Tribune demonstrated that many local theaters were experiencing a rise in audience size, with the Jungle Theater doing particularly well.

But it’s just not the arts in general that have thrived—orchestras specifically have thrived.  They have done so all over the country, in places that continue to feel the effects of the recession.

The Cleveland Orchestra has seen surges in attendance, driven in part by increased demand by young listeners.

The Houston Symphony is celebrating its centennial this year on the heels of two years of record-breaking fundraising.

The San Diego Symphony has been chalking up record ticket sales; its budget has doubled in the last decade and its leadership is celebrating 14 straight years of balanced budgets.

The Buffalo Philharmonic has sold more subscriptions this season than any time in its 75-year history.

The Kansas City Symphony appears to be entering a golden age of high attendance, strong fundraising and good governance.

There are, of course, still caveats and challenges ahead for funding the arts, but I believe a longer-term analysis, more carefully argued, would make your point better.

So why are we basing a business model or an economic forecast on the pain and fear of the Great Recession?  Aren’t massive cuts a permanent solution to a temporary problem—one that is on its way to being resolved, and has already been resolved elsewhere?

Interestingly, at this point you set out to prove your point by casually tossing off two examples of orchestras facing difficult times.  This is curious.  The orchestras you mention are, by and large, the worst-case scenarios that feel cherry-picked to show classical music as a whole is on the brink of collapse.  What about the other orchestra I mentioned above:  Kansas City, Pittsburgh, Cleveland or Houston, among others?   Even one of the cases you hold up as proving the need for a new model, Philadelphia, seems to undermine your claim—musicians took a 15% pay cut, and that was part of a bankruptcy proceeding.  You have demanded the Minnesota musicians take a 40% cut… just because.   Why the vast difference?

One other point on this section.  I recognize that the League of American Orchestras is an important trade group and a reliable source for facts and figures—I can see why you would quote them.  But this article by Philip Kennicott, the art and architecture Critic of The Washington Post, has shown in clear terms where as a group they often fail at seeing the forest through the trees, and may not be the best source of strategic thinking.  I think you would benefit from drawing on other sources that could provide a more holistic view of the situation.

* * *

In these pages, you move from industry trends to the specific trends of the Minnesota Orchestra.  All well and good—this is exactly the kind of thing your plan should do.

Page 8

This graph is good.  But it contains few specifics.  I’d like to see grand totals here to get a better sense of what we’re talking about.  Plus, I get that this is still a “background” section, but I hope at some point you indicate what your preferred percentages would be.  If you’re goal is to wean the Orchestra off the endowment completely, for example,  that will have tremendous implications for everything else in the plan.

Page 9

Page 10

The charts on these subsequent pages vividly demonstrate some of the financial challenges the organization has had, and I am willing to believe your data.  In fact, I doubt there are many that wouldn’t agree that some sort of changes must come to the Orchestra to give it greater financial stability.

That said, there are some problems right off the bat.  Despite your clear indication that this section of the strategic plan sets out to describe how things stand for the Orchestra, you give no indication of why things stand this way.  For example, why did the earned income fall?  Was it because ticket prices were too high?  People are losing interest in classical music?  Traveling downtown is a burden?  Osmo is passé?  These are not random questions—each would require a different strategy to overcome.  You’ve assumed classical music is unpopular, based on a decline of revenue… but what if the problem is in the presentation of classical music?  Same with contributed income… why are these trends happening?  How do you propose to enact a solution to this problem when you don’t know or can’t explain why the problem is occurring?

It’s no different from having a doctor say to you, “You have abdominal pain?  I must remove your gall bladder at once!”  End of discussion.

Similarly, you don’t give any indication of why the endowment has dropped.  Why not?  The assumed rationale seems to be “the stock market tanked as part of the Great Recession.” This statement may be true, but it is woefully inadequate.  Were all your investments in the stock market?  In the stock of one company?  I suspect not, which means that the reasons for the decline are many and varied—lack of diversity, bad investments, selling low and buying high, and so forth.  These are serious concerns that must be addressed before moving forward; before demanding $5 million in sacrificial cuts from the musicians, why don’t you spend $50,000 to re-evaluate your investment strategy?  Less charitable folks may also suggest that if you were going to downsize the staff, you should have started with the person managing your investment portfolio.  That may be extreme, but I would reiterate that if you are going to truly lay out the Orchestra’s situation, you have to give the specific reasons for the decline in investment revenue, or you will never be able to effectively address them.

Another point with this section is you seem content to talk about “The Endowment” as if it was a single monolithic entity.  This is not the case.  Sure, there is $150 million in “the endowment,” but how much of that can be accessed at any given time?  In other words, how large is the board-designated portion?  My recollection is that because of the way the endowment has been set up, there is only a relatively small amount that can be spent at the Orchestra’s discretion, with everything else being untouchable.  Is that still the case?  If so, what is the real-world maximum you can draw down to?  Isn’t that number equally important to note?

I have another point that may seem minor, but is quite significant—why haven’t you included industry averages in any of these charts for comparison?  You give industry-wide data on the first page, but after that we’re only left with your numbers on where the Minnesota Orchestra is.  This may not seem a huge issue, but essentially it means that the solutions you lay out in the final part of the document don’t take into account other data, or provide examples of what you might be able to achieve.  If you were to compare income streams at a range of orchestras, would you see that one or another of these steams was underperforming? Or realize the Orchestra is actually doing pretty well and ahead of the curve?  You aren’t looking to your peers in any meaningful way, either to see how they’re doing or to see how they achieved their results.

As a result, it is no wonder your ideas are the only possible solutions—you’ve given yourselves no other options to choose from.

Similar to the above point, if this really is an attempt to give the “lay of the land” and explain the need for an orchestra that the community can afford, why no general information about the community?  Why no comparison data for other Twin Cities arts groups, or non-profits in general?

The lack of this information only furthers the feelings of disdained detachment and close-mindedness that permeates this document.

Page 11I note that in this document, $7.4 million is spent on administration, building and financing, and general overhead. This summer, when he was forced to return a nearly $ 1 million grant back to the Minnesota State Arts Board, Henson implied that the Orchestra spent approximately $13 million this last year. That’s nearly double.  Why the discrepancy? What was the additional $5.6 million spent on?

More to the point, your own “independent” analysis brings up another uncomfortable truth…  that your financial situation may be worse than you report because of severely underfunded pensions and a $9.3 million bonding debt due in 2015.  (This may help answer the question I asked directly above.)

Why haven’t you listed those items?  Yes, in the strictest of senses, they don’t fit nicely into a chart depicting “operating expenses” and so could be left off.  But doing so wildly skews the numbers and gives a false report of the true extent of the Orchestra’s financial situation.

…in your organization’s strategic plan.

How on earth do you plan to get out of this financial morass if you don’t accurately identify the problems looking you in the face?

And how does this lead an outside observer to have any faith in the information you’re laying out?

Page 12

Your point here is straightforward, that musician costs have risen compared to all others.  Great—I believe you.  The graph vividly demonstrates the rise in musician costs.  But… well, as an isolated fact, it means nothing.  Did those other costs decline because they were inefficiencies or redundancies that you were able to pare down?  Did you eliminate costly expenditures?  More to the point, are you getting a good return on investment by allocating more resources to the musicians?  Does this improve your product, making it easier to attract interest, audience members and donors?

Page 13

This starts to get into your main argument, that the Orchestra’s finances have been in a precarious state for the past decade, and only stern medicine now can save it.

Really?

But as reported in 2010, the Orchestra had had four straight years of balanced budgets.   How do you publicly reconcile this fact with your present position?   Another point of fact.  You yourselves indicate that for most of the 2000s, you were averaging a healthy draw from the endowment of less than 7%.  The “dangerous” draws of 10% or more only happened after the 2008 recession.  So how does this match with your statements that the organization has been in financial crisis for more than a decade?

I can understand that in the wake of the 2008 bust that things went astray.  I can recognize that you pulled extraordinary draws from the endowment to balance the budget… as Alan Fletcher mentioned in his recent speech at the Orchestrate Excellence meeting, such tactics are sometimes necessary and many organizations did the same.  That’s one of the reasons you have an endowment, as a buffer in times of trouble.  But weren’t your finances in reasonably good shape prior to that?

In the report from you “independent” analysis, there is an indication that you have been underfunding pensions and leaving off debt financing from the books.  For a financial manager, these problems had to be easy to spot.  So why didn’t you resolve them?  Why is there no indication of these monstrous red flags in your strategic plan?  You certainly knew these problems were in existence–to my knowledge, all the men who served as chairman of the board during the 2000s are still on the board.

And as I look over this section, an uncomfortable question is developing in my mind:  you have been blaming vague trends for your financial predicament, generally using the passive voice (“the stock market fell” or “musicians’ salaries have outpaced revenue”).  Is the real problem one of financial mismanagement over the last five to seven years?  Isn’t the $9.3 million taxable bond due in April 2015 a much bigger problem than the musicians’ salaries… and isn’t it a problem of your own creation?

So, why are you demanding $5 million in salary cuts from the musicians to cover for your mistakes in other areas?  Why are you so fixated on the musicians’ salaries without publicly admitting the much larger problem?

Page 14

This chart does show, in vivid terms that there is a difference between your income and expenses.  But what is the basis for this? What are the assumptions? I recognize again that you are calling this a summary document, but you essentially put two disembodied bars on a graph and say, “See?  We have to make cuts to balance things out!” Obviously this page is a teaser, but it brings immediate questions to mind:

Based on the fact that debt servicing and pensions are not included elsewhere in this document… what confidence can we have that this chart is factually correct?

There’s no indication of a timeline here.  Is this a chart for the next forthcoming year? A five year goal?

Will the gap recede as the market improves (especially since the market has done so)?

Again, if this is a temporary situation, why suggest a permanent solution for it?

Perhaps most importantly, let us assume that all your projections are correct, and this is the start of an ongoing financial gap that will persist well into the future. This chart doesn’t tell you what kind of change is necessary.

It might indicate that a large-scale business reset is required, but there is no indication of what such a reset should look like, what the options are, who should come up with ideas or who should implement them.  Or, for that matter, the timeframe over which they should be implemented.  Is it better for the organization to have all the pain at once?  Or will that be too much of a shock, and the preferred method is to integrate painful transitions more slowly?

This gets to the heart of the dispute… are you justified in demanding $5 million in pay cuts unilaterally with the musicians, effective immediately?  Can’t there be a more organic solution?

I’m curious as to how subsequent pages address these questions.

* * *

Thus far, you’ve given some indications of why a new business model might be necessary, but you haven’t given a clear justification of your specific course of action.

One final thought.  You are an arts organization… where is your statement about the your art?  How can you lay out your current situation—in your strategic plan—and make no mention of current state of your music, and your music making capacity?  This is beyond baffling… do you suppose that music just spontaneously happens, completely divorced from what else is going on in the organization?

Next: Unclear Goals, Uncertain Paths to Success

Xochipilli