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The Stakeholders Are Watching

In Non Profit Quarterly, Ruth McCambridge wrote a pretty involved comparison between the stakeholder revolts which reversed board decisions to close San Diego Opera and Sweet Briar College.

There is a lot to be gleaned about how popular support has apparently turned things around for the two organizations. It is worth reading on that basis alone.

There were a few things that popped out at me as general lessons, not necessarily dependent on these scenarios, about the environment in which arts organizations are operating.

First was an observation by current San Diego board chair, Carol Lazier, that:

“…the community was absolutely furious. We had a great opera company, a cultural jewel, and no one wanted to lose it. We had people who didn’t even go to the opera who were fighting closure, saying, ‘This is not right—this is owned by the public; this is not owned by the small group of people on the inside.’”

It is easy to have mixed feelings about this response because indignation by people who never attended doesn’t pay your bills. Yet we clearly know that arts organizations are viewed as a community asset by both individuals and businesses. People may not actually participate in your activities, but they like the idea of living in a community that has an opera, symphony and art museum. Businesses and individuals will relocate to places with these amenities.

While the presence of your arts organization is definitely an intangible asset, the value of which is difficult to quantify to politicians and others who want to cut arts funding, this type of reaction does allow you to answer the question about how your community would be impacted if your organization didn’t exist.

Another observation made about San Diego Opera board governance provided some insight into a downside of a “Get, Give or Get Off” policy of board membership.

The San Diego Opera was one of those organizations where having a large number of people on the board was a function of fundraising. You pay x amount of money and you’re on the board, and no one wants to alienate any of those folk with contentious conversations that cause discomfort. But that is certainly not a good modus operandi for an organization facing the whitewater of the twenty-first-century cultural organization. And, it was not only the business model that had to change but the governance model, too.

The implication that a non profit needs to have a governance structure that allows it to be nimble is something to seriously consider. Scrutiny of non-profits is shifting focus about the role of a board away from fund raising and toward effective governance.

The San Diego Opera board went from 53 to 24 in the course of a few days due to resignations. A quick look at the opera website shows it continues to maintain those numbers two years later.

Not only is there no correlation between the ability to make large donations and the ability to effectively govern an organization, some people may have no interest in doing so. This made me recall a story told by an executive director about a large donor who showed relief when presented the option of NOT serving on the board because they didn’t see it as a reward at all.

Finally, in relation to the Sweet Briar closure, I was quite intrigued to learn that generally those who most supported the closure were from among the earliest graduates. When they attended, a women’s college was the only option for higher education. Now that a woman could attend anywhere they wished, they didn’t feel single gender higher education was relevant any longer.

It is the younger generations that intentionally chose to attend Sweet Briar when hundreds of other options existed that have been the most invested in keeping the institution open.

This information brought to mind the question that arts organizations have increasingly been challenged to ask themselves over the last few decades: Given that so many other options exist for people, are you providing those who intentionally choose to engage with the arts a reason to continue to do so?

The example of Sweet Briar seems to illustrate that answering in the affirmative is what turns people into invested stakeholders.

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Positive Signs For Reimbursement Of Overhead Costs

You may remember back in January that I wrote about the new rules promulgated by Office of Management and Budget (OMB) requiring that any entity receiving federal funds much cover at least 10% of a non-profit’s overhead costs.

Don’t worry, its okay if you don’t remember. But this is relatively important and bears repeating.

One of the concerns at the time was that state and local governments and other funders might pressure non-profits with whom they contract or provide grants to waive a their right to receive overhead costs. The OMB rules prohibit this, but if a non-profit isn’t aware of the rules or are afraid to advocate for themselves, the problem may continue.

Given this context, it was a positive sign when the L.A. County Board of Supervisors voted to adopt the OMB guidelines and to write a letter to the state government to do the same.

It may not seem significant for a governing body to agree to adhere to the conditions under which federal funding was allocated, but as Non-Profit Quarterly notes there are “rob Peter to pay Paul” concerns about how funding may be manipulated.

Rules do not implement themselves without strong nonprofit monitoring and oversight—hopefully, as in this case, in partnership with government authorities. In this case, not only are the supervisors talking to state officials, but they will also be developing an implementation strategy in consultation with Los Angeles nonprofits, which we presume, based on what we have seen as policy statements from CalNonprofits, ought to address how to ensure that higher indirect cost reimbursements do not occur at the cost of lessening service delivery.

As I had noted in my earlier post, the National Council of Non Profits created a guide to educate organizations about the rules and provide responses to assertions from funding entities that the rules don’t apply.

One thing I had mentioned was that arts organizations should note that these rules likely apply to the funding you receive through your state or regional arts organization:

One- it doesn’t matter whether it is called a contract or grant or any other term, the rules are based on the substance of the transaction.

Two – Sub-recipient non-profits who are required to acknowledge part of the funding is received from the federal government are covered under these rules.

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Info You Can Use: Holding A Mirror Up To Fundraising

Simone Joyaux wrote a must-read, “physician heal thyself” post for development teams in a recent Non-Profit Quarterly post.

In her column, Fundraisers: the Good, the Bad and the Ugly, she enjoins development teams to look in the mirror before blaming others for failures. (If you have a hankering to listen to the theme music for The Good, the Bad and the Ugly movie while reading, there is an interesting guitar rendition here.)

Joyaux addresses many common complaints development departments have about board members not providing assistance with fundraising, board members not donating, issues with opinionated executive directors and weak economic conditions inhibiting efforts.

She provides some advice about dealing with each situation, mentioning a different approaches to use. In nearly every case though, she challenges fundraising staff to examine their assumptions and understanding of the situation to see if they are at least partially contributing to the difficulties.

Often she asks if the development team has sat down and spoken with someone to understand their limitations and concerns and whether the development staff has been providing sufficient support to a board member’s efforts on their behalf.

There are some things Joyaux writes about that I have rarely, if ever, heard mentioned in relation to fund raising efforts.

(By the way: How do you define fundraising? I hope you aren’t thinking about asking for money only. There’s so much more to fundraising than the asking point. Do you know all the steps and the neuroscience and the psychology and communications and all the rest? Can you help board members apply that, in partnership with each other and in partnership with you?)

When she mentions them, neuroscience and psychology make sense as factors to consider, but I can’t remember ever hearing them mentioned in connection with development before. (Actually, I have to admit I only have guesses on how neuroscience relates.)

As Joyaux notes, becoming effective at development is a process and there isn’t anyone who hasn’t committed some sort of poor practice.

In my early years, I know I must have behaved this way. I saw glimpses in the mirror. How about you?

Bad fundraising performance #1: The fundraiser didn’t handle well leads suggested by several board members.

Bad fundraising performance #2: The fundraising staff didn’t ask for specific support from a specific board member, and explain why, and provide support.

Bad fundraising performance #3: The fundraising staff doesn’t spend much time learning about the program. The fundraising staff doesn’t collect stories from program staff. The fundraisers rarely observe a program or talk with client beneficiaries. This produces weak solicitations, bad links with our heroes, the donors.

Oops, actually that last point reminds me I need to follow up with some participants of an education service we hosted last week.

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Info You Can Use: Non-Profits and Loans

If you didn’t catch it, in June Non-Profit Quarterly had a good 101 guide on when it is appropriate for non-profits to take out loans.  Most times you hear about non-profits and loans it is once the non-profit is in financial trouble and deep in debt.  The discussion of constructive use of loans by non-profit arts organizations is relatively rare.

In my own experience, conversations among arts administrators usually touches on earned revenue, fund raising/sponsorships and grants.  I have never heard anyone talk about using loans to fund an initiative. This might be, as the NPQ article suggests, there is a stigma of failure associated with taking out a loan. Or it might be simply that we are so used to worrying about falling attendance, lack luster fundraising and onerous grant writing that no one really thinks to mention loans.

In addition to discussing the times it is and is not appropriate to seek a loan, the article notes that there are no “one-size-fits-all” loans so organizations can negotiate terms that suit their needs.  They also provide a general sense of what answers and materials you might expect to be asked to provide as part of the loan process.



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