I Don’t Remember The Nest Being So Nice

There is potential that cities across the country can ultimately benefit from this economic downturn if they play their cards right and tap into those returning home to help contribute to raising the quality of life. This at least, according to a piece by Will Doig on Salon.com.

According to Doig, young people who have moved to the big cities around the country like NYC, LA and Chicago, find the cost of living to be too high and returning to the places they left, often to start their own businesses.

“Or as urban analyst Aaron Renn puts it: “New York City is like a giant refinery for human capital … Taking in people, adding value, then exporting them is one of New York’s core competencies.”

And it exports them in droves. People associate brain drain with the agricultural and industrial Midwest. But most years, when foreign immigration is excluded, it’s places like New York and Chicago that lose the most residents. Chicago loses nearly 81 people a day to out-migration, more than any other metro area in America. Between mid-2010 and mid-2011, nearly 100,000 people left the New York area. Los Angeles lost almost 50,000.”

Of course, this doesn’t diminish the fact that a whole lot of people are returning home to live a fairly depressing unemployed existence. But according to Doig, in returning home, these people bring expectations of products and services they experienced in the big cities, paving the way for these same products and creating demand for business and government services. They also tell their friends about the great environment in the “nests” to which they have returned attracting more people there.

The reason why I mention cities need to play their cards right is because they have a role in perpetuating an image of their cities as vibrant, interesting places to live. According to Doig’s piece, the reputation perpetuated about cities belie the actual conditions in those cities. (My emphasis)

“The mesofacts say that Charlotte [North Carolina] is a boom town and Portland [Oregon] is cool.” In reality, the economies of both Charlotte and Portland have been struggling for a while now. Yet new residents still flock to these places because the mesofacts tell them they’re hot, when it’s actually Pittsburgh they should be looking to, where per capita income has risen faster than any other major Midwestern city’s, and the unemployment rate has been lower than the national average since 2006.

“I’ve been saying to people in Pittsburgh for years, ‘What Seattle was in the ’90s, you’re going to be that big.’ And they’d laugh. But the data show it,” says Russell. “The editor of the Pittsburgh Post-Gazette keeps saying the biggest problem in Pittsburgh is brain drain. And I’m like, you’re 20 years too late. Why are you torpedoing your own in-migration? When you’re running around saying you have a brain drain problem, what you’re saying to the world is, ‘We’re a loser.’ But if you can convince people the data are true as opposed to the mesofacts, then you open the sluicegates.”

If Doig is correct about all this, it could be the time for arts organizations to step up and take advantage of their trend. As Scott Walters and many other have noted, artists flock to cities like NYC, Chicago and LA convinced they can make their careers there. This is due not only to the alluring glow of the lights of Broadway, but to the practices of many regional theatres that often do their casting in major cities forcing actors to move there if they want to work back home.

This isn’t just the case for theatre either, Trey McIntyre confounded everyone when he chose to base his dance company in Boise, ID rather than one of the major cities. Artists aren’t just seduced away from home by the mythology of these cities, there are very practical reasons to move there if you want an opportunity to practice.

But as I said, arts organizations have an opportunity to reverse this trend by focusing on hiring locally and then getting the local arts community to tell their friends in the big cities why they should move back. For many of those who left, artistic spaces that seemed provincial and under equipped when they left may suddenly seem luxurious after working and living in dingy, holes in the wall in the big city. Yet they have also probably seen and done some pretty artistically interesting things.

As people move back, the arts organizations can tap into the returnees’ experiences interacting with the current thought and aesthetics churning in the big cities and adapt them as their own. You are never going to overcome the allure of going off to the golden cities, but by providing a reason to return, many places across the country can embrace the situation and leverage it to their own advantage.

Info You Can Use: Be Careful of Social Couponing

If you have been considering using social coupons to increase attendance at your events and attract new customers, you may want to read a study covered last month in MIT Sloan Management Review (h/t Drucker Exchange) that noted the repercussions of a badly designed deal could last for months.

The authors, V. Kumar and Bharath Rajan tracked three businesses for a year after they started their social coupon campaigns. The three businesses did attract large numbers of new customers with the campaigns, but experienced significant losses during the month they offered their deal, in some cases two or three times their normal net monthly profits.

“Such losses would not have been so serious if the businesses were able to achieve higher revenues and increased profits in future months. However, this was not the case. Despite their best marketing efforts, the three businesses had difficulty retaining most of the new customers who were attracted to the coupon offers. Based on our analysis, it will take the car wash service and ethnic restaurant 15 and 18 months, respectively, to recover from the profit shortfall following the coupon launch; for the beauty salon and spa, the recovery period for the coupon campaign at current business levels was projected at more than 98 months, or eight years.”

Now granted, given that most non-profit arts organizations lose money on many of their events, these facts may hardly be a deterrent to using social coupons. However, arts organizations do seek new audiences. The authors state that basic design of social coupons aren’t really conducive to new customer acquisition, but steps can be take to mitigate the losses of a campaign.

One approach may be to upselling or cross-selling products and services. Many theatres have tiered pricing on their seating so being able to upgrade to center orchestra may seem like a good deal to some attendees. If theatres are trying to attract a younger audience, they may want to cross sell tickets to their edgier space whose ticket prices are comparable to the discount the person is paying.

In other words, a person comes in with a 50% coupon for a $30 ticket and the theatre asks if they would like a ticket for a later date at the other space where the top price is $20 for the same $15 price. This approach helps to retain the person for another performance for what is probably the average ticket revenue at the other space.

Another approach the article suggests is limiting the size of the discount and the conditions under which it may be redeemed. They mention that the restaurant in their study later offered 30% discount on two days a week and reduced their losses to close to zero.

They also suggest only offering the coupon to new customers, but I am personally ambivalent about that. I think that sours your relationship with existing customers. If you have ever seen those cable commercials that offer tons of great channels at a low price –but only to new customers–like me you may have been a little annoyed wondering what benefit you will ever derive for having paid your bill on time for 5 years. To my mind, even if it isn’t the same benefit, existing customers should feel like they are rewarded for loyalty if the new kids are getting some sort of incentive to participate.

Shorter Board Meetings? You Have My Consent!

Last week a very interesting article came down my Twitter feed, (I apologize for not noting the source), written by Les Wallace about the best board meeting he ever attended.

What made it the best meeting he ever attended was a very effective use of the time, revolving around the use of a consent agenda. I had not really heard of a consent agenda before, but fortunately the folks over at Board Source wrote up a handy guide explaining:

A consent agenda is a bundle of items that is voted on, without discussion, as a package. It differentiates between routine matters not needing explanation and more complex issues needing examination.

[…]

With a consent agenda, what might have taken an hour for the board to review, takes only five minutes. Because it promotes good time management, a consent agenda leaves room for the board to focus on issues of real importance to the organization and its future, such as the organization’s image and brand, changing demographics of its constituents, or program opportunities created by new technology.

According to Board Source the types of things typically found in a consent agenda are the minutes of the previous meeting, confirmation of decisions, the CEO and committee reports, informational materials and routine correspondence. You don’t want to have financial documents and anything potentially controversial or requiring substantive discussion and decision making as part of the consent agenda.

It takes a fair amount of work to compile all this information. The organization has to be disciplined all the way through. Wallace mentions the work the CEO, staff and other board members did in advance to prepare the materials and have it placed it in the board section of the website for review two weeks prior to the meeting.

Wallace also mentions the board meeting moved from important to trivial matters rather than following Robert’s Rules of Order. The financial statements provided were color coded dashboard summaries of the organization’s financial position provided by the finance committee. An executive summary of staff and committee reports were provided at the meeting with more detailed information available online.

According to Wallace, this cut about 40 minutes out of the meeting and the board used that time to address strategic issues for the organization, attend to some board development and other governance issues.

The Board Source article has more information about how to use a consent agenda and exercises to use to help transition boards to this practice. It’s worth a look if this sounds the least bit intriguing to you.

One of my initial concerns was that the consent agenda could be used to hide problems amid minutiae or circumvent board members, but according to the Board Source guidance (my emphasis):

“If a board member has a question, wants to discuss an item, or disagrees with a recommendation, he or she should request that the item be removed from the consent agenda. Without question or argument, the board chair should remove the item from the consent agenda and add it to the meeting agenda for discussion.”

Using a consent agenda requires a great deal of discipline on the board if it is going to be effective-

“Just a quick question” is not an option when using a consent agenda. Either an item is removed and discussed or it stays put. This places the burden of facilitation on the board chair to be disciplined about stopping discussion and removing items from the consent agenda.”

Embracing The (Cost) Disease

Hat tip to Thomas Cott for bringing Jon Silpayamanant’s intriguing refutation of the idea of Baumol’s Cost Disease being the doom of arts organizations.

Silpayamanant correctly notes that sports teams have the same challenges as arts organizations. Just as it still takes just as many people to perform Hamlet as it did 100 years ago, improvements in technology haven’t brought efficiencies to baseball allowing them to play the game with only 6 people on the field. I was flabbergasted to learn just how small a percentage ticket sales comprise sports’ teams total revenues.

“The NFL, the most profitable of the Leagues, takes in 20% of its total revenue through Gate revenue while the MLB, the next in line in profitability, took in 35% in 2006 (down from 40% in 2001). The NBA gets roughly 33% of its total revenue from the gate.

[…]

So we have a performance income gap in the Sports Industry which is practically no different than the “structural deficits” found in Classical Music. But the former is considered “profitable” while the latter is increasingly being referred to as being in crisis. What has made up the shortfall in performance revenue for sports then? The most obvious revenue sources are through corporate sponsorship, merchandizing, and most importantly for the purposes of this post–Broadcast licenses (i.e. Television).”

As Silpayamanant points out, only a few sports franchises are profitable but thanks to revenue sharing “(the highest earners will give a disproportionate amount of their gross to distribute amongst the lowest earners), the field as a whole remains profitable.”

Now given the whole “non profit” element, I am not sure a ticket revenue sharing arrangement among arts organizations is viable. Television as a medium looks to be on the wane, but content licensing through online and other media might be viable if anyone figures out a workable model.

Merchandising might hold promise if arts organizations in a community or across a discipline got together and created some interesting products or services to distribute/license and then had some revenue sharing related to it.

But will arts organizations have the discipline and will to bond together toward a common cause and then have the patience to let their plans come to fruition?

A commenter on Silpayamanant’s blog reminds us that professional athletes were not always well paid and often had to work in retail during the off-season. In one of my very first blog posts I linked to Chris Lavin’s 2002 speech, “Why Arts Coverage Should Be More Like Sports,” where Lavin recalls that Wellington Mara who owned the NY Giants football team would give Lavin’s father piles of tickets in the hope of getting people to actually attend the games.

Success didn’t happen in the course of a couple seasons for the sport leagues, nor would it come quickly for any cooperative effort between arts organizations. One of the first hurdles would be a change in operational culture. Lavin’s call for arts organizations to be more open and transparent to the media is echoed today by people calling for arts organizations to make themselves more open and accessible to audiences.

Given the frequent questioning of the validity of the non profit business model for arts organizations these days, perhaps a league of arts organizations focused on monetizing anything that isn’t nailed down can comprise a viable way forward. I mean, heck, many orchestras are already running parallel to sports leagues with the threats of lock outs and hiring non-union players.