“Ordinary businesses have clear-cut yardsticks to measure their performance: profits, return on investment, stock prices. But what does high performance mean for a non-profit arts group? A bigger budget? A larger audience? A shiny new building?”
You have probably read something along those lines about the difference between for profit businesses and non-profits before. But when I read this at the start of a report about data collection that the National Center for Arts Research was conducting, a thought struck me.
I was wondering if much of the construction of new buildings and expansion of programs that strained the means of non-profit groups was motivated by a desire to provide some physical manifestation of the organizations’ successes. Non-profit arts organizations are frequently urged to run themselves more like a business and are governed by board members who work for businesses who use profits, stock prices and return on investment as a measure of success.
That provides some possible context for the situation at the Minnesota Orchestra which recently underwent a major renovation of the physical plant and then turned around and has tried to cut labor costs. A publicly traded company that reported building new facilities and cutting labor costs would be viewed as a success. Not so much with the Minnesota Orchestra.
It may be that the non-profit model was doomed once the ideal of increasing shareholder value was embraced by for-profit businesses. Even though they may intellectually understand the mission of the non-profit on whose board they serve, business people may unconsciously seek to apply for-profit values to the organization in an attempt to validate its work.
Number of people served each year may provide some degree of satisfaction, but no one seriously evaluates McDonald’s success as a business by the billions served sign out front. (In fact, I can’t remember if they still have the count on the sign. That is how much I pay attention any more.) That may not be a really compelling measure for most people.
Overhead, as a measure of effective use of funds has been increasingly recognized as a flawed metric. The deeper analysis being performed by the National Center for Arts Research may provide a solution because the data is synthesized in a manner more closely resembling a stock and bond rating.
Still, this is all relative to money. Non-profits aren’t supposed to be profligate spenders, but their goal isn’t to make money and these ratings are all essentially a measure of return on investment. Experimentation and an attempt at a little R&D is going to reflect poorly on you.
I spent the weekend trying to think if there was any other metric of value that could be use instead of one relative to money and I couldn’t think of one. Unless you can conclusively prove that people have a better life, test scores, job prospects, (all of which are pretty much tied to earning potential), for having met you, there really isn’t any measure of success that can be used as an alternative to effective use of funds.
The truth is, even if chickens were medium of exchange, someone would be probably be reporting if you made good use of all the parts or threw away the beaks.
So non-profit arts organizations are stuck with money as a measure. As much as I hate to have to do it myself, completing data collection reports like the Cultural Data Project is probably going to help the arts furnish evidence of their value.
I don’t imagine that it will ever prevent some arts organizations from feeling the need to provide visible and public proof of their success, but the rigor and benchmarks that can be established may satisfy many that the organization is quite effective at what they do.