The Pacific Symphony is “Unsustainable?” Really?

I hate buzzwords. I hate it when people casually throw around jargon as a substitute for real-world knowledge. I hate it when people paper over complicated, nuanced issues by tossing out an oversimplified term or phrase.

And I really hate when those tossed-off buzzwords aren’t even true.

“Sustainable” is just such a buzzword that sets my teeth on edge.

I freely admit that like all popular buzzwords being bandied about right now, there is value to it. I applaud the notion that we have to look at both the long-range prospects and the long-range effects of the things we do.  And I applaud the notion that we have to be planful, and think of the future… not just the fleeting needs of the moment.

But as often happens, the term has been misused by people who fundamentally misunderstand its meaning.

And far too often, the people misusing this term seem to run arts organizations… organizations like the Pacific Symphony.

For those unfamiliar with the group, it finds itself in a similar situation to other orchestras around the country.  Contentious labor negotiations between the unionized musicians and the Pacific Symphony’s management have stalled since the existing contract expired back in August.

Violist Adam Neeley, who serves as bargaining committee chairman for the musicians union, notes that the issues are fairly straightforward; he notes the musicians’ desire to have a predictable schedule, a contract that gives them more employment and a guaranteed annual wage.  As it stands now, among 11 peer orchestras of similar size, the Pacific Symphony ranks at the bottom in the percentage of its budget allotted to musicians’ pay and benefits.   As the musicians explained in a recent press release:

The proposed policy for scheduling services is a major point of contention for the musicians. Since its inception, Pacific Symphony’s musicians have been forced to find outside work to supplement their income. Under the terms proposed by management, those musicians hoping to play the number of services guaranteed to be offered to them, must keep dates open throughout the year for services they were not initially offered; and wait to be called. If these musicians accept other work and are subsequently unavailable, the employer proposes to punish them by reducing their guarantee. Thus, musicians who expect to earn $34,807 in the 2016-17 season could only do so by sacrificing other work in order to keep their schedules clear, and would have no way of predicting when they would be called to work.

[Violist Adam] Neeley, goes on to add, ‘We believe the organization should be able to agree to the musicians’ proposed service guarantees without requiring substantial new dollars to the annual budget. Pacific Symphony allocates just 29% of its annual budget to the employees who carry out its very mission; the musicians of the orchestra. This is problematic and we believe the business model must begin to change in order to sustain the Symphony’s high artistic level.’

When pressed for a response, President John Forsyte wrote:

Our offers have been designed to address union concerns about predictability of work and annual wages. The board maintains its commitment to a contract that provides stable and meaningful work for musicians while ensuring the long-term sustainability of the organization.

And there we have it… sustainability.  Concessions can’t be given, because they won’t be “sustainable.”

With respect, Mr. Forsyte, I think you’re misusing the term.  Especially if you’re only devoting 29% of the annual budget to supporting the art form… which is the entire reason the Pacific Symphony exists.

What does sustainable really mean?  Here are my thoughts on the topic—an updated version of an article I wrote last year that appeared in Nonprofit Quarterly.

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A Misunderstood Concept

Over the past few years, labor disputes have rocked a number of performing arts institutions, including the Minnesota Orchestra, the Detroit Symphony, Atlanta Symphony Orchestra, Saint Paul Chamber Orchestra, and the Metropolitan Opera. And new labor disputes have continued to pop up like dandelions, in places like Philadelphia, Pittsburgh and Fort Worth.  Regional orchestra have also been dragged into the fray.  In each of these cases, management explicitly argued that the organizations’ operations, programming, and labor contracts were no longer “sustainable.” In their words, these things represented a huge financial drain on the organizations and were killing the organizations from the inside. Similarly, leaders of the San Diego Opera used this same rationale in an attempt to liquidate the company altogether (an attempt that mercifully failed).

Some examples:

• Management of the Atlanta Symphony Orchestra argued that ticket revenues only covered 20% of the costs of producing a classical concert, and this model “simply wasn’t sustainable.”
• Peter Gelb, General Manager of the Metropolitan Opera complained that “the percentage of operating costs covered by donations is 48 percent. That’s unsustainable. It’s not a business model.”
• Leaders of the San Diego Opera proclaimed that opera was no longer a sustainable art form in San Diego—labor costs had become prohibitive, former levels of fundraising were no longer feasible, and audiences were shrinking.
• Just this month, Twin Cities Business ran an article about the Minnesota Orchestra with the blaring title, “Does The Minnesota Orchestra Have Sustainable Labor Contracts?”
• The board of the Binghamton Philharmonic in New York cancelled the orchestra’s season opener in 2015, with Executive Director Brittany Hall saying, “Unfortunately, this orchestra needs to look toward the future and remain sustainable and viable.”

Unfortunately, leadership in each of these cases was completely wrong about “sustainability” and how to achieve it.

How so? Three reasons come to mind.

First, their understanding of “sustainable” was far too narrow, focusing exclusively on a particular, financial criterion. Second, they were inappropriately using an understanding of the term derived from the for-profit arena, and trying to graft it onto their nonprofit organizations. And finally, in each and every case, they tried to make their organizations “sustainable” by imposing a simplistic set of solutions to the problem: sharp cuts in the compensation packages of their union musicians and workers, plus an equally sharp reduction in programming.

With respect, this is no way to build sustainability. On the contrary, this is a recipe for disaster.

I propose a different way of looking at sustainability—using more holistic criteria that can better ensure that arts organizations can, in fact, thrive into the future.

 

The Arts as Nonprofit Businesses

First, a couple of points. Many people seem to think that nonprofits, and nonprofit arts organizations in particular, are not businesses. They are. Absolutely. An ensemble like the Minnesota Orchestra employs around 90 musicians, a similar number of full-time staff, and a comparable number of part-time staff. These are real people working at real jobs, who pay taxes, have mortgages, buy cars and other durable goods, go to school, and in all sorts of ways contribute to the economy.  Plus, the Orchestra not only generates revenue itself, but serves as a catalyst for other economic activities such as restaurants and parking.  The City of Minneapolis estimates it lost $2.9 million in parking, dining and other business as a direct result of the Minnesota Orchestra lockout.

And it’s not just the Minnesota Orchestra that has an impact. Each year, the City of Minneapolis produces the Creative Index report that analyzes the economic impact of the creative sector, including music, theater, and the arts as a whole. As detailed in the 2015 report, creative industry sales pumped $4.5 billion into the city’s economy, with $285 million coming specifically from nonprofit arts organizations. This is more than eight times the revenue brought in by the city’s sports sector. Also, approximately 5% of the entire workforce of Minneapolis worked in the creative sector, primarily as photographers, musicians, and writers.

These are real numbers, and it is clear that arts organizations—and nonprofits generally—play a critical role in the economy and in the community.

But at the same time, a point that I’ve hammered home again and again here on my blog is that nonprofits have to be recognized as nonprofit businesses. They are fundamentally different from for-profit enterprises, and thrive by following a very different business model. Based on my own experience as President of the Board at an arts nonprofit (the Minnesota Chorale), I’ve found that leading a nonprofit requires a whole different type of skills and strategies than are needed in for-profit business.

Nonprofits stand apart in that they are designed to meet a critical social need, or provide an important service to the community. They are driven by a stated mission, and their success or failure is ultimately determined by how effectively they live up to that mission. Yes, there absolutely is a business and financial aspect to doing this, but the business and financial strategies and decisions are always in service of the outcomes, not the profits.

In recognition of this special status, the IRS grants nonprofits 501 (c) (3) status, which creates a special tax status and allows them to fundraise to support their operations. This is key—a nonprofit that engages in fundraising has a very different set of income streams than a for-profit business, and has to act accordingly.

Fundraising is not a sign that the organization’s business model has failed, and it is not a last-minute, shameful attempt to balance the books. On the contrary, it is an integral part of the organization’s business model and overall financial strategy.

So again—to be clear, an arts organization like the Minnesota Orchestra or the Minnesota Chorale is a business. But we cannot lose sight that it is a nonprofit business. And that changes the equation as to what makes it “sustainable.”

 

Sustainability in the Nonprofit World

For too many people, “sustainability” simply means financial sustainability, as if we were thinking in terms of a for-profit enterprise.

This is false.

Sustainability is, and must be, comprehensive… especially for a nonprofit, which isn’t solely about turning a profit. The Nonprofits Assistance Fund has a wonderful working definition of the word, arguing that a sustainable nonprofit is one with the ability to carry out activities that will achieve its mission while also developing and maintaining capacity for mission relevance in the future.

In other words, while it is important for a nonprofit’s finances to be sustainable, it is more important for the nonprofit’s mission to be sustainable.

As Kate Barr from the Nonprofit Assistance Fund explains:

Why else stay in business? Ask yourself this: what’s the worse case scenario? I’d hate to have to call my board chair and say, “I just found out that we are out of cash and I don’t know if we’ll make payroll next month.” That’s a nightmare for executive directors but it’s a technical problem. The worse case scenario is this call: “We just finished a complete review and discovered that our programs don’t work. We are making no progress at all to improve or help our community.” That’s fatal. The number one component for sustainability is to do great work that will result in progress for your mission, which means you have to define what it is and how you’ll know.

For a nonprofit, mission trumps all else.

Once the mission is secure, an arts organization can look at three additional layers of sustainability: financial, organizational, and programmatic.

Financial sustainability is marked by the ability to generate resources to meet the needs of the present without compromising the future.

The hallmark of organizational sustainability is the ability to build, adapt and refresh an organization’s capacity to fulfill its mission within an ever-changing environment. This includes things like having the right number of staff members with the right skills, or the proper equipment.

And finally, programmatic sustainability is the ability to develop, mature, and sunset programs that meet the changing needs constituencies over time.

If an organization does not successfully balance all three of these elements, it won’t be successful—sustainable—in the long run. The recurring theme throughout them is flexibility… the ability to respond to events and conditions on the fly.

A key aspect of being flexible is knowing when to let something go; the wise organization knows when to retire programs that have outlived their usefulness, have become too expensive, or have grown beyond the organization’s ability to execute them effectively. Similarly, an organization does not have to be expanding in order to thrive over the long-term. This point was brought home in the study “Bright Spots Leadership in the Pacific Northwest,” created by On the Boards, a Seattle-based performing arts organization. In this report, the director says: “We have grown up with the idea that if you’re not growing, you’re dying. That mentality is ever-present and it’s lethal. The expectation that we will always be able to do more needs to change. We need to replace it with an expectation that we remain fresh, vital, relevant, and healthy.”

In other words, sometimes you have to say “no” in order to remain sustainable.

And finally, organizations need to have a realistic assessment of the time frame they’re envisioning when they talk about “sustainability.”  Given how fast technology, economic developments, and world events are changing, most arts groups have abandoned 5- or 10-year strategic plans, and are planning in of 3-year increments.  This trend makes it particularly odd to hear dire warnings that something won’t be sustainable over the next twenty years or so.  Could anyone in 1995 have imagined the world of today, and adequately planned for every variable?  No.  And if an arts group had locked themselves into an inflexible 20-year plan that didn’t allow for changes brought by, say, social media… it would have collapsed by now.  Again, flexibility is a key aspect of sustainability.

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For too long, too many arts groups have focused on financial sustainability as the sole criterion by which they evaluated their organization’s health. They used a for-profit business model as their guide, and erroneously argued that since organizations had to supplement their earned income with fundraising, the organizations’ business models were fatally flawed.

This thinking has been at the core of the labor disputes that rocked the world of classical music over the last few years.

Mercifully, in most of these cases these moves toward a flawed idea of “sustainability” were turned back or otherwise softened. But this masks a real problem—if these plans had been successfully implemented, they would not have led to sustainability, but to deep and lasting damage for the organizations involved. Specifically, these plans would have crippled the art in a fool’s quest for short-term financial gain.

To truly be sustainable, arts organizations need to ensure that their mission is sustainable. People don’t buy tickets or donate money to an orchestra so that it will be financially strong… they do so because they are inspired by the music and see the impact it has in their community. Think about this on a broader scale—do people buy movie tickets to support the studio’s bottom line? Do they eat at restaurant because of its business plan? Of course not.

It is only after the mission is made strong that the organization can work on financial, organizational, and programmatic sustainability. These three areas are critical, but they must be put in service of making the mission strong. Otherwise, there is no reason to do any of it.

So Mr. Forsyte… may I suggest using a more appropriate definition of “sustainability?”

Or for that matter, adopting a more accurate, comprehensive definition of “sustainability” so that you don’t destroy you organization?

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