Going Forward by Staying Together

The administrative to-do list Robert A. Kret faced when he became director of the Hunter Museum of American Art was lengthy. The Chattanooga, Tenn., museum didn’t have a computer network. Its accounting and personnel policies were weak. Department heads didn’t receive regular financial reports, and there were no procedures in place to assess employee performance.

But rather than build those administrative systems, the museum struck a deal to pay its larger neighbor three blocks away, the Tennessee Aquarium, to handle its finances, human resources, information technology, and some marketing functions.

“I think about it a little bit like a slingshot,” Mr. Kret says of the arrangement, which is now in its eighth year. “It gave us an opportunity to go forward a lot faster than we would have otherwise.”

The aquarium had already been providing the same services to another nearby museum, the Creative Discovery Museum, since 1996. The children’s museum opened in 1995 and quickly ran up significant operating deficits when its attendance projections turned out to be overly optimistic. The museum had to cut the size of its staff, and it managed to save additional money by hiring the aquarium to handle its administrative work.

The three institutions formalized their partnership in 2001, creating the Chattanooga Museums Collaborative. But what started out as a fee-for-service arrangement that allowed the two smaller organizations to improve their administrative operations and save money has, over time, expanded in scope.

The groups now work together on programs, like exhibits and summer camps, and together with the city of Chattanooga, they ran a joint capital campaign that raised more than $120-million in 2002.

In May, a new exhibit developed by the aquarium and the art museum, “Jellies: Living Art,” will bring together their seemingly disparate missions. The aquarium exhibit will feature rare species of jellyfish from around the world and glass sculptures by leading artists, including Dale Chihuly, that mirror the forms and colors of the marine animals. The other part of the exhibit at the Hunter art museum will feature glass pieces from the museum’s permanent collection as well as an installation by Mr. Chihuly.

“What started as an opportunity to just improve what we do in terms of our administration has now gone into the curatorial and the animal-husbandry ranks and exhibit-design staff,” says Mr. Kret. “It’s a true collaboration.”

Sharing Back-Office Duties

Officials at the Hunter Museum of American Art estimate that the organization has saved roughly $1.7-million over the last seven years by hiring the aquarium to handle its administrative work. The Creative Discovery Museum, which buys more marketing services from the aquarium than the Hunter museum does, puts its savings at $1.9-million.

From 2001 to 2008, the aquarium collected $1.1-million for the administrative services that it provides. The fees that the museums pay are based on the amount of time it takes aquarium employees to provide those services. Last year, the fees represented about 1 percent of the Tennessee Aquarium’s roughly $18-million budget.

“Some of these tough years,” says Charlie Arant, the aquarium’s chief executive, chuckling, “1 percent makes a difference.”

He says the arrangement has had other benefits, especially in helping the aquarium recruit and retain top administrative officials. The fees that the museums pay for the services they receive allow the aquarium to pay those employees more than it could otherwise, attracting more talented people to the positions.

Plus, says Mr. Arant, working with the other organizations gives his employees opportunities to improve their skills and greater variety in their work.

“It gives them a change of pace, and exposure to other executives and boards,” he says.

Careful scheduling has been important in helping aquarium employees balance the needs of the different organizations and try to avoid too many big projects coming due at the same time.

Both the Creative Discovery Museum and the Tennessee Aquarium use the calendar year as their fiscal years. The finance team works on the museum’s budget during the third quarter, saving the aquarium’s until the fourth quarter. The Hunter’s fiscal year doesn’t start until June 1, so the team tackles its budget during the first quarter of the calendar year.

“You don’t go to the CFO and say, ‘I’m doing a grant, and it’s due today. You have an hour to do something,’” says Henry Schulson, executive director of the Creative Discovery Museum.

He also says that sometimes organizations might receive their monthly financial statements a little late when the finance team is going through an audit of one of the groups.

“But they’re not critical things, and the benefits far outweigh a little inconvenience,” says Mr. Schulson.

The need for timeliness, however, and questions of institutional identity and mission were the primary reasons why an early attempt to collaborate failed.

Initially, the Creative Discovery Museum also hired the aquarium to handle its public relations. Mr. Schulson says that it didn’t take long for the museum to realize that that was a mistake.

“It became an identity issue,” he says. “If a reporter would call and they got an aquarium PR person representing the Creative Discovery Museum, they would get very confused. Are we part of the aquarium, or are we a separate entity?”

Both Mr. Schulson and Heather DeGaetano, director of development at the aquarium, agree that functions that require fast response times are unlikely to work well in a shared arrangement.

“In a PR crisis, you have to drop everything else and focus on the crisis,” says Ms. DeGaetano.

Joint Fund Raising

Several years after the organizations started working together on administrative tasks, they joined forces for a very different kind of collaboration: a joint capital campaign.

Individually, each of the organizations had been contemplating significant projects. The aquarium and the Hunter were both planning expansions, while the Creative Discovery Museum was getting ready to overhaul its exhibits.

At the same time, the city was mapping out a plan to revitalize the waterfront area where all three institutions are located.

Rather than run competing campaigns, the three institutions worked with the city to raise the money needed for the building projects as well as parks, a public-art program, and other improvements along the waterfront.

They decided not to let donors designate their gifts for any one particular project.

The chief executives — and sometimes the board chairmen — of all three organizations were involved in almost all of the presentations to prospective major donors, says Mr. Schulson, of the Creative Discovery Museum.

“Each organization would describe what their piece of the plan was,” he says. “The mayor would provide an overall context and show what this would mean for the downtown area, and then the ask was made.”

The leaders of the organizations say they were able to avoid much of the territorialism that nonprofit organizations often feel about their donors, in part because of the foundation that the administrative collaboration provided.

“We share the same CFO,” says Mr. Kret, of the Hunter Museum of American Art. “He knows who all the donors are to all the organizations, so it really wasn’t a secret. And in most communities, people know where the significant wealth is and who the likely suspects are for a major campaign.”

What’s more, says Mr. Schulson, the organizations had a sizable overlap in donors and in past and present board members, even before the campaign.

“The foundations and donors who were going to give to us were probably also going to be asked to do something for the aquarium and to do something for the Hunter,” Mr. Schulson says.

He believes that the organizations were able to raise more money together than they could have separately. Some donors, he notes, said they gave more than they had planned to because they were so impressed with the cooperative approach.

Like many nonprofit organizations across the country, giving to the Hunter Museum of American Art has dropped as a result of the recession.

But Mr. Kret thinks that the museum’s story of cooperation — and that of its partners — will continue to appeal to donors.

“Donors are going to be much more discerning about the money that they give, and who they give it to,” he says. “They’re going to want to make sure that organizations are really maximizing their resources.”