arts organization closings

Will Not Let You Go. (Let Me Go!)

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I don’t know if you have been following the story about the planned shutdown of Sweet Briar College, an all-women’s school in Virginia. I have been keeping an eye on the situation for the last month, having initially seen it as a positive example for non-profit organizations. Since then, the situation has evolved to the point where I am not sure if it is a positive example any longer, but can still provide some lessons.

When Sweet Briar College first announced they were going to close down, the news was generally well received. A decision to close had been made before things had gotten particularly dire. The school planned on using its endowment to provide severance packages to employees and assist students in transitioning to other schools.

All in all, it seemed like a responsible move in terms of attempting to soften the blow for employees and students rather than making an abrupt announcement that left people panicking.

Since I have written on the benefits of starting an arts organization with a definite expiration date in mind, I appreciated that they were looking to cease operations in a relatively constructive way with an opportunity to liquidate or pass on assets while they retained some value.

Later, various constituencies came together to try to save the school and called for the resignation of the president and board of trustees for not living up to their responsibilities and not exploring other funding avenues. Non-Profit Quarterly drew comparisons to other recent examples of board action, including the planned closure of San Diego Opera, where the stakeholders said not so fast and changed the outcome.

I am not going to suggest that any of these popular actions were wrong or just delaying the inevitable. However, as I thought about this in the context of the earlier idea about organizations with expiration dates, I wondered the idea were possible in practice.

Essentially, can you quit while you are still on top? When you reach the planned point to wind things down, will there be push back from people suggesting it would be irresponsible to abandon a project that so successfully serves the community? Especially if there is not a similar entity present to transfer resources to which could potentially pick up the work.

Is it in human nature that we have an easier time accepting the need to buy a new car before the current one falls apart than we have deciding to dissolve an organization? Basically, does the organization have to be further along in its decline before we will give it up?

This was what was on my mind as something I might write a blog post about until the most recent twist in the Sweet Briar College situation. It seems that the college accepted a million dollar estate gift about two weeks before they decided to close the school. The letter accepting this gift is being used in a lawsuit against the school.

This struck a real chord with me because December 23, 2013, I received a letter soliciting a donation from the Trey McIntyre Project. Then in January 2014, there came the news that the dance company was being disbanded as of June 2014. At the time, I wondered at the timing of the solicitation since they surely knew they were moving toward this decision.

Yet the letter read,

“As we look towards the new year, we are driven to educate more minds and heal more bodies through the vehicle of Trey’s art and the talent of our dancers. We need your financial support to make it happen.”

While the organization technically hasn’t closed, but rather has shifted its focus in other directions that doesn’t include the dance company, that solicitation email implies the dancers will be part of the future.

I have frequently praised the company in my blog entries, including praising them for quitting while they were still on top. That solicitation email has obviously stuck in my mind as a false note. But I think it goes to illustrate that every organization is going to make its missteps.

As to how big Sweet Briar College’s missteps ultimately end up being, that remains to be seen. There are likely more lessons to come that one can derive lessons from so the situation will bear watching.

The title of this post is, of course, inspired by one of the greatest songs of all time. Which you now long to listen to–

https://www.youtube.com/watch?v=k-ARuoSFflc

To Close Or Not To Close, How Much Debt Is Too Much?

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A little over a week ago I received the news that one of our partner theatres decided to close its doors. That sent the rest of us scrambling to contact artists to see if we could salvage the tours with which the organization was involved.

The board has said they want to revise their business plan and perhaps reopen in 2013. In the meantime, come this Friday, the entire staff is out of a job. I am wondering if they will be able to resolve all their grants and settle other business in that time.

A conversation I had about their closing has had me thinking over the last week. When I read the news about their closing, I was somewhat relieved to learn the organization was $200,000 in debt. Given the debt amounts you usually see associated with failing arts organizations, this is relatively small. Though it is also more significant for their $1 million annual budget than for those with $10 million budgets.

Referencing this debt, a colleague asked if they couldn’t have simply gotten a line of credit from a bank to enable them to stay open. This got me thinking about how you determine when it is time to cease operations.

Given that they intend to revise their business plan and hope to restart operations, would it have been better to attempt a reorganization through the next season rather than lose momentum with their community and funders by closing?

Or given that their debt is about 20% of their operating budget, did they do the responsible thing by deciding to close in the face of what I assume to be dwindling attendance and fundraising prospects? Why saddle your new business plan with the burden of another year’s accumulated debt?

In the last couple weeks I read an article/blog post that criticizes a non profit board of a YMCA for being oblivious to the state of their failing organization. The article suggested the board should have seen the warning signs had they been paying attention to the financials.

Our partners were clearly paying attention and decided to do what they felt was the responsible course of action. There isn’t really any clear cut formula which dictates that you should close your business when your debt reaches a certain ratio of your budget because there are so many situational variables each organization faces. What one company can recover from may mark the start of a downward spiral for another.

I am curious to know at what point people think organizations need to close. Does seeing other non-profits rack up huge debts before closing or declaring bankruptcy inure us and make organizations more apt to keep operating under the assumption they haven’t reached that point of no return yet?