SOUNDING BOARD
PER SPEC T IVES ON NONPROFIT STRATEGIES FROM WOLFB RO W N
Is Sustainability Sustainable?
By the principal consultants of WolfBrown,
v. 30 with Joanna Woronkowicz
CONTRIBUTORS:
Historically, sustaining an arts organization meant generating enough
earned and contributed revenue to fund current operations. With so
Alan Brown
Principal
much continued change and turmoil in the arts industry, WolfBrown
WOLFBROWN
set out to reconsider what sustainability means in 2011.
Why are some arts groups able to persevere – and even
Joseph Kluger
Principal
thrive – when they are chronically “under-capitalized” Is it possible that
and perpetually on the brink of extinction? On the
WOLFBROWN other hand, why are well-established, large institutions financial security
with sizable endowments filing for bankruptcy?
What, besides strong finances, does sustainability
actually deters
Dr. Dennie Palmer Wolf
Principal
require? Is it possible that financial security sustainability?
actually deters sustainability?
WOLFBROWN
Reflecting back on several decades of work with funders
and arts organizations, we propose a more nuanced and
Dr. Thomas Wolf
multi-dimensional view of sustainability – one that encompasses and transcends the current
Principal
dialogue on capitalization, adaptive capacity and other elements of good management. In
WOLFBROWN
our view, sustainability requires a balancing act with three interdependent but sometimes
competing priorities:
Laura Mandeles
Principal • COMM U NIT Y RELEVANC E
WOLFBROWN • ARTI STIC VIBR ANCY
• C APITALIZ ATION
Joanna Woronkowicz, PhD
UNIVERSITY OF CHICAGO
Together, these elements give organizations the ability to excel in a permanent state of flux,
uncertainty and creative tension.
1
E NG A
Is Sustainability an Illusion?
On December 16th, 2002, the San Jose Symphony – having stable and expenses have been carefully controlled, producing
played to audiences for over 120 years – declared bankruptcy. consistent operating results. In response to a major donation
Its assets were sold and an institution that had once been the to the Center from Jim Henson’s family of puppets and other
pride of a growing city suddenly ceased to exist. Many were objects from their personal collection, a capital campaign
shocked; how could an arts organization with such a long is underway to renovate and expand the Center’s facilities,
history and sizeable endowment fail? Throughout the late including a commitment to raise additional endowment to
1990s, the orchestra’s ticket sales had increased by fifty percent cover increased operating expenses. While other organizations
and government support remained stable. In the first fiscal year in Atlanta have struggled to raise sufficient capital for new
of the new millennium, however, ticket sales declined twelve facilities, the Center for Puppetry Arts sees great community
percent. More significantly, private support for the orchestra demand for its expansion, which will enable it to double the
decreased by half over a span of four years. While revenues number of unique visitors and increase operating revenues
decreased, expenses increased. At the opening of its 2002 by seventy-five percent.
season, the orchestra found itself in dire straits. Reluctantly,
Seemingly sustainable in a financial sense, the San Jose
a weary board of directors, unable to reorganize and remain
Symphony was not able to rebound after a few difficult
solvent, declared Chapter 7 bankruptcy.
years. With its structural deficit exposed, the orchestra’s value
Contrast this story to that of another nonprofit arts proposition to San Jose’s diverse community was not sufficient
organization, the Center for Puppetry Arts in Atlanta, which to generate the level of support required to reorganize, nor
opened 30 years ago when Kermit the Frog and his creator, was it able to rescale its operations to align with demand. In
the late Jim Henson, cut the ceremonial ribbon. Now a $3.5 contrast, the Center for Puppetry Arts – consistently operating
million organization, the Center’s live performances, exhibits on shoestring budgets – continues to grow in relevance to its
and distance learning programs generate roughly half a million community and to be recognized for its managerial and artistic
visits annually. Demand for the Center’s programs has remained excellence by national as well as local funders.
Towards a New Understanding
of Sustainability The ability of
Side-by-side, these two short case studies illustrate why a new an arts organization
model of sustainability is required. Accumulation of capital
alone is not sufficient to achieve sustainability and may in to focus simultaneously
fact lead to a false sense of security. Nor is artistic excellence
sufficient. Rather, three elements must work together to achieve
on all three will
a level of stability or “equilibrium” known as sustainability: largely determine
• COMM U NIT Y RELEVANC E its success.
• ARTI STIC VIBR ANC Y
• C APITALIZ ATION
AG E 2
The First Element
COMMUNITY RELEVANCE
Community relevance should be the first and foremost element reached an impressive scale of impact. While its programs and
of sustainability. It draws on a generosity of spirit and an partners are not immune to shifting economic and political
authentic desire to serve one’s community, allowing for a range conditions, Big Thought is deeply embedded in the community.
of partnerships both inside and outside of the arts. Achieving It provides an instructive example of the power of community
relevance in the eyes of the community enables an arts relevance as a source of strength during challenging times.
organization to demonstrate its public value regularly. This
Often, there is a natural tension between the needs of the
goes far beyond conventional notions of education and
community, which can be endless, and an organization’s artistic
outreach work or convenient strategies such as reduced-price
vision and capacity. Balancing these two value systems is a
tickets. In order to be relevant, an arts organization must
constant give and take. Community relevance takes the form of:
first develop a diagnostic capacity to understand what its
E
community needs and then refract that knowledge through • philosophy of community engagement that transcends
A
its artistic vision and core capacities. This is not to ask the departments and programs;
community what it wants, but to inform programming
• diagnostic capacity through which information about
A
decisions with a sense of community need.
the community is gathered and considered;
An indicator of community relevance is an organization’s ability
• board-level accountability process that balances
A
to achieve “collateral impact” through partnerships. In doing
community outcomes with artistic aspirations;
so, it demonstrates the essential role it plays in community
development and civic dialogue. When times get tough, an arts • rogramming collaborations and partnerships that extend
P
group with high community relevance is seen as a community impact and position the organization as a player in the
asset rather than an isolated, self-interested nonprofit with a larger community dialogue;
EN
financial problem.
• arketing partnerships that build awareness and extend
M
Take for example, Big Thought, the Dallas-based nonprofit the reach of programs to a range of audiences; and
devoted to creative learning for children and youth. Since its
• rograms that take place in venues and settings that engage
P
founding in 1987, Big Thought’s investments in financial,
the community.
human and cultural capital have slowly paid off, garnering the
attention of community leaders. Now, through its partnerships Arts organizations that embed themselves in a larger dialogue
with numerous cultural programs and community service about the challenges, hopes and aspirations of their community
providers such as the Dallas County Juvenile Department, the will be seen as indispensable. Those who do not will grow
Dallas Public Library, the city’s Department of Cultural Affairs increasingly irrelevant and unsustainable.
and the Dallas Independent School District, Big Thought has
The Second Element
ARTISTIC VIBRANCY
Artistic vibrancy is the fuel of sustainability. A steady Pam Tatge, director of the Center for the Arts at Wesleyan
flow of creative programming is the lifeblood of an arts University, ensures the artistic vibrancy of her program
organization and the inspiration that motivates donors and through an inclusive process that integrates the needs of
engages the community. Yet, the creativity and robustness students, faculty and community members into every aspect
of an arts organization’s programming process is often a of the Center’s programs. Tatge collaborates with students
taboo subject. Artistic vibrancy should not be conflated with and faculty on artist selection, invites non-arts faculty to
“artistic excellence,” which refers more narrowly to quality collaborate with artists on new curricula, and positions art as a
of artistry. Rather, artistic vibrancy stands for the whole of springboard for campus-wide discussion of current issues such
an organization’s artistic health, including the quality of its as climate change. A participatory artistic event planned by an
programming processes.
3
interdisciplinary team has become the focal point of each year’s
Common Experience orientation for freshmen. By surrendering
partial control of the programming process to key stakeholders,
Tatge succeeds in attaining a high level of community relevance
without compromising artistic standards. In fact, she is curating
•
•
An inclusive and consultative program planning process;
A full pipeline of new programming ideas;
willingness to experiment with programming and the
A
financial policies and capital for managing artistic risk;
EN
to a higher standard of accountability.
• Quality of artistry;
Artistic vibrancy is attainable regardless of budget size or the
• A commitment to artist development at all skill levels; and
adventurousness of programs. Some of the most artistically
vibrant arts groups we know are community theatres and music • S mart use of technologies in engaging audiences and
schools. Like Wesleyan, they choose to apply their artistic communities in the artistic work
talents to engage a specific community in a two-way process of
At the core of every arts organization is a creative process.
self-discovery. Artistic vibrancy is indicated by:
Some of these processes are healthier than others. Artistically
• larity on the desired outcomes of artistic work and open
C vibrant organizations are sustainable because they continually
debate as to the right balance between artistic ideals and reimagine their programs and refresh their constituency. They
community needs; open new doorways before old ones slam shut.
The Third Element
CAPITALIZATION
The third element of sustainability – and servant of the other An example of an organization that has embraced the
two – is that of capitalization and sound fiscal policy. The principles of capitalization is the Opera Company of
need for nonprofit arts groups to gain a more secure financial Philadelphia (OCP). In 2008, OCP had an operating deficit
footing has been a recurring theme since the 1960s. The of $1.5 million, an $850,000 working capital deficit and
current industry dialogue on capitalization, led by The Kresge no reserves or endowment. Just three years later, OCP has
Foundation, Nonprofit Finance Fund (NFF) and others, $1 million in positive working capital and a $750,000 working
once again brings into focus a helpful set of principles first capital reserve. Special funding commitments will enable
advanced several decades ago. NFF identifies three purposes the company to create a $500,000 operating reserve and a
for capital: 1) liquidity (i.e., enough cash to meet operating $1 million risk capital fund by the end of its 2012 fiscal year.
needs); 2) adaptability (i.e., funds that offer flexibility in Through careful attention to managing its finances while
adjusting to changing circumstances); and 3) durability (i.e., simultaneously articulating its capital needs, OCP transformed
funds to address the range of needs in future years). Like their its financial position and laid the groundwork for raising
counterparts in the commercial sector, nonprofit businesses additional capital.
require periodic infusions of capital to remain healthy. For
Based on our work with a wide range of arts organizations, and
some reason, however, the basic principle of capitalization –
learning from the work of others in this area, we distinguish
that return requires investment – has not yet taken root in
between five categories of sustainable fiscal policy:
the nonprofit arts sector.
• A strong base of reliable, recurring revenue, and a cost
Without good fiscal policy, capital disappears quickly. The
structure that adapts to it;
A-B-C’s of good financial management are as necessary today
as they have ever been: containing costs, isolating financial risk, • Sufficient funds, including unrestricted working capital to
planning for surpluses, building reserves and depleting them cover unanticipated shortfalls and other capital that allows
strategically, and tracking against key metrics. For example, one for periodic investments in artistic opportunities and
prominent arts organization we know is re-stating its financial business model improvements;
activity on a consolidated three-year basis, to shift focus away
• A compelling articulation of capital needs, and a long-
from short-term operating results.
term, board-activated plan for raising them;
4
• A culture of fundraising that permeates the board and the problems arts groups face in becoming sustainable.
every staff department within the organization and Organizations that focus solely on finances in trying to
focuses everyone on renewing achieve sustainability can lose their
a broad base of support; and sense of vitality and purpose. This leads us to question
the presumption of durability as a goal, when adaptability
• A disciplined, multi-year financial planning process
provides a sufficient platform for renewal.
driven by key performance measures, which can be
adjusted regularly as conditions warrant.
Smart capitalization and good fiscal policy are tools of
sustainability. But they are hammers, not nails. In most
cases, financial distress is a symptom, not a cause, of
Embracing the Paradox of Sustainability
Other models of sustainability from years past include elements In looking across the arts ecosystem in a community,
of “strong leadership,” “clarity of mission,” “adaptive capacity,” sustainability in the institutional sense becomes more
“willingness to innovate” and being “brand-driven.” These compelling – and more problematic. The health of the
are baseline indicators of effective management. The road to ecology requires constant regeneration and renewal, which
sustainability, though, involves higher order constructs that go sometimes conflicts with institutional designs on permanence.
beyond the A-B-C’s of competent oversight. Cultural leaders, therefore, have a paramount responsibility
to the ecosystem, which necessarily means consolidating,
Sustainability still matters in 2011, but not in the simplistic
re-imagining, or phasing out arts programs that are not
sense of financial security. It is not a business strategy.
delivering sufficient public value. The dissolution of the San
Nor should it be the focus of strategic planning. Rather,
Jose Symphony, for example, made way for Symphony Silicon
sustainability is a byproduct of high levels of community
Valley, a small and more nimble ensemble.
relevance, artistic vibrancy and proper capitalization.
Permanence, stability and durability are illusory and perhaps
even counterproductive ideals in today’s speed-of-light
marketplace. In a sense, the pursuit of sustainability, as
…with a more nuanced historically defined, is quixotic. But with a more nuanced
understanding of what it takes understanding of what it takes to flourish in a permanently
volatile business environment, arts groups may build a legacy
to flourish in a permanently of creative invention and gain the enduring support of
volatile business environment, their communities.
arts groups may build a legacy
of creative invention and
gain the enduring support
of their communities.
5
Resources on Sustainability HOW WILL YOU ENGAGE
We are indebted to the excellent work of other consultants, researchers, THE FUTURE?
funders and cultural leaders, which we drew upon in our research for this WolfBrown guides foundations,
article. They include the following: government agencies, and nonprofit
organizations in fulfilling their
Bailey, Jackie (Australia Council for the Arts), “Defining Artistic
Vibrancy.” missions. Services include program
Culbert, Jane, William Keens, Laura Lewis Mandales and Thomas Wolf design and evaluation, strategy
(Wolf, Keens & Company), “Rethinking Stabilization: Strengthening Arts development and sustainability
Organizations in Times of Change,” Strategic Grantmaker Services, 1996. planning, resource development,
(To obtain a copy, contact the WolfBrown office at 617-494-9300)
impact assessment, audience and
Evans, Richard (EmcArts Inc.), “Entering Upon Novelty: Policy and
Funding Issues for a New Era in the Arts,” published in GIA Reader cultural participation research.
Vol. 21, No. 3, 2010. We invite you to visit our
Foster, Kenneth J., “Thriving in an Uncertain World: Arts Presenting website at wolfbrown.com.
Change and the New Realities,” commissioned by the Association
of Performing Arts Presenters, 2010.
Hewison, Robert and John Holden, The Cultural Leadership Handbook:
How to Run a Creative Organization, 2011.
Masaki, Karen, David Plettner and Mark Anderson, “The Nimble
Nonprofit: The Central Role of Adaptive Capacity in Building
Organizational Capacity,” published in GIA Reader Vol. 13, No. 3, 2002.
Morris, Gerri and Andrew McIntyre (Morris Hargreaves McIntyre),
“Insight Required.”
Thomas, Rebecca, Rodney Christopher with Holly Sidford (Nonprofit
Finance Fund), “Case for Change Capital in the Arts,” 2010. CAMBRIDGE, MA OFFICE
Robinson, Mark (Arts Council England), “Making Adaptive 8A Francis Avenue
Resilience Real,” 2010. Cambridge, Ma 02138
Walker, Brian and David Salk, “Resilience Thinking: Sustaining Tel 617.494.9300
Ecosystems and People in a Changing World,” 2006.
Williams, Tandi and Bridget Jones (Australia Council for
the Arts), “Understanding Community Relvance,” 2011. SAN FRANCISCO, CA OFFICE
808A Oak Street
Wolf, Thomas and Nancy Glaze (Wolf, Keens & Company), And the
Band Stopped Playing: The Rise and Fall of the San Jose Symphony, 2005. San Francisco, CA 94117
Tel 415.796.3060
Wolf, Thomas (Wolf, Keens & Company), “The Search For Shining Eyes:
Audiences, Leadership and Change in the Symphony Orchestra Field,”
commissioned by the John S. and James L. Knight Foundation, 2006.
©2011, WolfBrown Design: Cahoots
CHICAGO
York, Peter (TCC Group), “The Sustainability Formula: How Nonprofit
Tel 847.728.0954
Organizations Can Thrive in the Emerging Economy.”
PHILADELPHIA
Tel 215.570.3195
WASHINGTON, DC
Tel 703.591.3661
