Questions that Deserve Answers

Yesterday, the audience advocacy group Save our Symphony (SOS) Minnesota gave a public presentation that’s attracting considerable attention—and focusing new attention on the Minnesota Orchestra’s murky finances.  The group’s stated goal was to do a deep dive into the Orchestra’s financial records, as well as its overall financial strategy, over the past decade.  And more specifically, the presenters conducted a hard-hitting analysis of the Orchestra’s financial statements from the last few years as a way to better understand the context of the ongoing labor dispute.  Powerful stuff, delivered in a clear-headed manner.  (Coverage of the event can be found at the online newspaper, MNPost.)

The short version of the presentation:  the Orchestra’s management has been either incompetent, deceitful, or both.

Using publicly available tax records, board meeting minutes, financial statements, and other published documents, SOS Minnesota demonstrated how the Orchestra manipulated its’ financial numbers, showing good news or bad news depending on the audience.  Co-Chair Jonathan Eisenberg and Treasurer Mariellen Jacobson also made a convincing case that the Orchestra was engaging in all kinds of questionable activities that should have raised more than one red flag by the auditor, by the board, or by government officials.

I think the presentation speaks for itself, and I hardly want to steal their thunder… I urge you to examine the presentation and the supporting materials on their website (I believe there are plans to post a video of the event shortly).

But once again, I was stunned by the Orchestra’s response, as quoted in MNPost and the Star Tribune.

Again and again, I’ve been baffled at the Orchestra’s public relations strategy.  Here was a presentation that asked a series of probing, important questions that get to the very heart of dispute, particularly the Orchestra’s rationale for locking out the musicians.  These questions were very clear and straight forward… and yet the Orchestra lazily batted them aside and tossed off the same bland talking points they have been saying since the lockout began.

Instead of answers, we get statements like these:

“In recent years, the Orchestra has deliberately and strategically reduced its number of classical concerts to better match supply with demand,’’ the MOA said in a statement. “Our aim is to find the right balance of concerts to increase our total capacity sold and overall net returns and we’ve been successful in doing this.’’

I think a deconstruction of this one statement could fill an entire blog.

First of all, let me say that this highlights a danger of applying for-profit thinking too literally onto a non-profit organization.  The overall philosophy underlining the Orchestra’s statement is akin to a company with too much of a product on hand, and the company has to move through this excess inventory by slashing prices, halting additional orders, or some other drastic method.

But an orchestra concert is nothing like an overstocked case of Windex.

Cutting down the number of concerts might appear to make the remaining ones more scarce and valuable on paper. But scarcity isn’t enough—it is still the content and quality of the concert that drives sales.  Each concert is inherently unique, given the many different options for conductors, music selection, style, timing and guest soloists.  Eliminating those superfluous concerts featuring Tchaikovsky doesn’t mean people will automatically flock to hear Schoenberg instead.  Your idea is like having movie theaters close Monday through Thursday, so they can really pack in audiences over the weekend.  Maybe that will work, but what if no one likes what’s playing that weekend?  Or, think about shortening the baseball season.  There might be all sorts of reasons for starting play later in the year, but it would be ridiculous to suggest that that step alone will improve ticket sales for the remaining Twins’ games—the ticket buyer’s personal schedule, the opponent on the field and the Twins’ win-loss record are far, far more important factors.

Plus, I point out—as have many musicians over the last year and a half—that you are still paying the musicians’ salaries, even when they are not performing.  For example, you have moved the season opening later and later until it now takes place in mid-October.  So what are the musicians doing in August and September?  If you were really interested in shortening the season, why didn’t you create a new model for when the Orchestra is considered “in session” and adapt the salary accordingly?  You’re still paying salaries and benefits, the biggest components of the overall budget, but missing chances to earn revenue—a point that was vividly made clear in the SOS Minnesota presentation.

Something else that was made clear in the presentation is how shortening the season puts increased (one might even say disproportionate) importance on selling out the remaining concerts in order to reach your overall ticket revenue goals.  You’ve reduced the seating capacity of Orchestra Hall and reduced the number of concerts.  That means you have to wring out every drop of revenue from every remaining seat—there is no longer any cushion or margin of error.  So what else have you done, apart from making seats more “scarce,” to ensure that every seat is filled, and every ticket payer paid top price for that seat?  You mention a “glow effect” of renewed interest once Orchestra Hall opened, but how would that be sustainable for the future?  What happens now that this “glow effect” won’t occur?  I have seen no marketing strategy sufficient to meet your ambitious goals.

Another thing that troubles me about your above statement is that it suggests you’ve forgotten something incredibly important:  you are a not-for-profit arts organization.  You are a mission-based group that is designed around the idea of performing great classical music.  Simply put, cutting concerts means you are not fulfilling your mission.  This is important.  Certainly there are reasons and rationales for reducing the number of concerts, but doing so is a major step that should be given great thought…  and have wide-spread institutional buy-in.  In other places you’ve argued that cutting classical concerts would provide extra room on the calendar for other, more profitable activities.  Perhaps, but that’s debatable at best (Orchestra Hall is simply too large and expensive for many groups to rent casually).  Plus, renting the Hall to outside groups like the Center for the American Experiment might bring in extra revenue, but that isn’t the purpose of the Minnesota Orchestra.  Sure, one-off events and rentals are fine on dark nights, but again—the Orchestra and Orchestra Hall exist not to make a profit, but to present the best in orchestral music.  That is your core mission, and symphonic music is your core product.  Everything else is a distraction.

One of the most worrying things about this statement, however, is the horribly uninspiring philosophy behind it.  In effect, you’re making an assumption of the perceived value of the concert ticket, and cutting down—and dumbing down—the Orchestra to match that assumed value.  What evidence do you have for this assumption?  How did you arrive at this conclusion?  Something this big—concluding that apparently classical music has no following in the Twin Cities—needs a lot of documentation to support it.  Particularly because there is all kinds of other information to suggest it is not true… doesn’t the fact that during a recession you were still able to secure $100 million for the rebuilding of Orchestra Hall, the Orchestra’s artistic initiatives, and its endowment, show that there is a great deal of support for classical music in the Twin Cities?  If demand is low and declining, why go to the bother of building an expensive facility for it?  One obvious answer is that you wanted a top-end performance venue to rent out for non-classical uses… but I can’t believe that’s what you told donors during the capital campaign.

Why don’t you flip your thinking instead?  How can you increase the perceived value of the performances?  How can you increase interest, and in doing so increase demand?  How do you make yourself relevant again?  Other orchestras around the country have successfully done this—Cleveland, Chicago, San Diego, Kansas City  and others have having record-breaking years in terms of attendance and ticket sales, so please don’t toss up your hand and say it can’t be done.  Los Angeles was in far worse shape a decade ago, but is right now in a golden age.

Take a lesson from the larger world of business.  A basic rule of business is you hit a rough patch, that’s the time to make long-term re-investments in your product.  Re-group, re-think and re-tool your product… don’t just abandon it.  For example, what happens when sales of Apple’s iPhone 5 start to lose steam?  Apple surveys the industry, makes improvements and releases the iPhone 6.  It doesn’t simply cut production of the iPhone 5, saying it has to “match supply with demand.”  Why are you giving up so easily?

One final point here.  You say you’ve been successful in balancing costs and capacity.  I don’t know how you can possibly claim this strategy is a success.  Ticket revenue dropped, leading to lower revenue and financial woes.  You ended up with deficits.  Worse, you made yourself less relevant to the community, thus made it harder to build audiences and your donor base in the future. And, you created a point of friction with your musicians.  How could this be called a success?

“Henson is actually in the process of rebuilding the donor pool.”

I am fascinated to learn more about his techniques, his goals, and his progress to date.  Is the recent fundraising letter an indication of how he’s approaching this crucial task?  I note that your statement uses language that is so… flaccid that I’m not sure how strongly you stand behind it.  “In the process of rebuilding?”  How long and incremental is this process? “Donor pool?”  Do you mean increasing the size of the pool?  Diversifying it?  Will fewer donors give more?  What do you mean? Do you know? Do you care?

“The Board remains the party that is willing to talk and is clearly open to compromise, having already significantly altered its original negotiating position.’’

This statement is a triumph of self-justification over reality.  The MOA leadership has rejected every attempt by every group or individual to engage in negotiations.  It famously rejected the proposal of its hand-chosen mediator, Senator George Mitchell, because doing so would cause it to “lose leverage.”  The leadership’s “negotiation tactics” have been hammered by politicians, elder statesmen, business leaders, and arts administrators from around the county.

But beyond that, in your own fundraising letter—the one you sent to all your donors—you swear you “will never compromise.”

“Not surprisingly, the MOA disputes that theory. Its view: The $50 million capital drive was only part of a $110 million drive: $50 million for the renovation, $30 million for the endowment, another $30 million for “artistic initiatives,’’ money to be used for such reputation-building things as European tours.

I’m sure I’m not the only one bewildered at this statement.  You state that you raised $30 million for artistic initiatives to be used on things that build the artistic reputation of the group.  Fine… but you cancelled the Carnegie Hall tour.  Wasn’t that among the principal reasons for raising the money in the first place? Plus, your actions led to the cancellation of the recording contract with BIS and the residency with the BBC Proms.  And in fact, you cancelled each and every concert since October 2012.

So if all those artistic initiatives have been cancelled, what is that money being used for?

Are the donors who gave that $30 million to you upset that you’ve cancelled anything that could be considered an artistic initiative?

Another thought. Is there no way any of that $30 million could be used to replace the $5 million you’re insisting come out of the musicians’ salaries, rather than have it sit quietly in a bank account?  Especially since there are no other artistic initiatives on the horizon for another year at least?

And from the Star Tribune story covering the event: “ In response to the some of the questions raised in the presentation, the Orchestra said that the state auditor examined many of these allegations last spring and ‘cleared the orchestra on all counts.’ ”

Well, I don’t know if I’d go that far.  Remember, the auditor was specifically tasked to look at a very, very narrow set of issues… particularly in how the state bonding money was used.  The auditor, Jim Nobles, was careful to state that he was not authorized to look at larger issues of strategy, the endowment draws, assumptions, or any of the other financial questions the Orchestra was facing.  And he was clear that Michael Henson was not forthcoming in his testimony, even if he did not demonstratably lie.  This report was hardly the ringing, universal endorsement the Orchestra now claims.

* * *

The interesting thing about SOS Minnesota’s presentation is that the organization clearly admits that it doesn’t have all the answers—it has done due diligence with the information available, but still has a series of important questions for the Orchestra’s leadership.

In listening to those questions, my own opinion is that they are relevant, important, and timely—and that they most certainly deserve actual answers.  What is the real financial situation of the Orchestra?  What are its real problems?  Will the solutions the Orchestra’s management is proposing actually help anything, or have they been making things worse?  Has the Orchestra been honest in the past?  Is it being honest now?  How long has the lockout been planned?  Is this whole ordeal simply an ideological crusade against unions?

The Orchestra, unfortunately, seems to believe it doesn’t need to answer the questions.  Worse, it doesn’t respect the people posing the questions enough to give them a thoughtful reply.

I disagree.  These questions—and the questioners—deserve comprehensive answers that are far more substantial than we’ve anything gotten up to this point.  There may be perfectly legitimate answers to these questions… so why doesn’t the Orchestra articulate them?  If the answers are so obvious and self-evident, it should have no problem providing them.

I call on the Orchestra to sit down and actually respond to the questions put forward by SOS Minnesota.  Not in some media event where each side gets equal time in front of a camera to list its talking points, but in a format where we can ask follow ups and cut off grandstanding.

I want answers.

 

Xochipilli

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8 thoughts on “Questions that Deserve Answers

  1. To quote the MOA’s envelope from their recent mailing seeking donations–
    “We’re Listening.” The audience has been locked out of the Hall as well as the musicians. We deserve to hear straight answers and real strategies. I want answers too.

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  2. I understand and work in this environment of .. Greedy People. It’s that fucking simple.

    The ? is simply, where is the care for a great Orch. in a town and for the few other Orch’s in the U.S. ? Furthermore; should management ‘SHARE’ in the sad story and take a reasonable Salary? … or Are they willing to CLOSE THE DOORS .. and nobody works?
    while they make major $$$ , have benefits, health insurance .. and many things the Product (in this case.. Musicians on Stage) have little to nothing….. as for me, Many Years (13).

    Selfish pigs who make Major $$ and have benefits…. when Your Product People (peons/musicians) have little to nothing.

    Remember when you are Dying… none of your Employees will give a shit and in the Meantime; remember, without a product, there is Nothing to Sell.

    With Love,
    Steve Burke

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  3. I grew up in rural Minnesota. All of my aunts and uncles were farmers. Perhaps the MOA will respond to the questions and concerns raised by SOS and you, Scoot. And I have great confidence that their response will be vaguely familiar to me, harkening back to my 1950s visits to my aunt’s and uncle’s farms, when, even to a city boy, it was clear that it was time to clean the barn.

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  4. One more biggie I haven’t heard addressed:

    If you’re using interest income, you want to tie your drawdowns so they come when the market is high. During a large market dip, it may even be smarter to accrue debt and pay it off with a larger draw later when the market has bounced back.

    The MOA’s PR strategy of showing a balanced budget during the recession and showing big deficits in 2010-2011 is the exact _opposite_ of that best practice — and it certainly cost the orchestra money. Possibly a lot of money.

    How much?

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  5. Pingback: So, About That New Business Plan… | Mask of the Flower Prince

  6. Pingback: Thinking about the Orchestra Dispute from a Business Management Perspective | Mask of the Flower Prince

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