Back From the Brink

In his new book, The Art of the Turnaround, Michael M. Kaiser, president of the John F. Kennedy Center for the Performing Arts, writes about his experiences helping to revive troubled arts organizations. He says the specific approaches an organization should follow differ, but that 10 basic rules should be followed in every turnaround. Following are excerpts from the book, which has just been published by Brandeis University Press.

Someone must lead.

In most troubled arts organizations, the role of leader has become divided into two or more (usually warring) camps. Rather than the “strong volunteer chairperson supporting a dynamic and committed staff head” model that healthy arts organizations enjoy, troubled organizations typically suffer from a diffused leadership structure as numerous parties try to “help.” Often board members come to believe that the staff is not competent and begin to poach on the staff’s territory.

At the same time, the staff is often making decisions without board involvement because “the board has not been as helpful as it should be” and because the board, without the day-to-day knowledge of the staff, typically does not develop reasonable solutions. When several different people feel empowered to make crucial decisions, there can be no real progress as the various parties pursue their own priorities and waste scarce resources.

Someone must be selected to run the turnaround. This person must have a single unified vision for the organization, have the courage to make difficult decisions in the face of controversy, possess strong negotiating skills, respect all parties, including artists, work incredibly hard, and have an obsessive focus on solving the problem. This person must also understand marketing, fund raising, and financial management. It is a hard job description to meet, but the job cannot be divided among many people.

The leader must have a plan.

The leader cannot simply be strong, determined, and charming. The leader must have a tangible road map that suggests how the organization will become a functioning and stable organism once again. And this plan must be communicated early and often to all the various stakeholders: artists, staff, board, volunteers, press, government agencies, and audience.

The plan must set priorities: It need not focus on every shortcoming of the organization. While the result of a period of poor performance typically is that many areas are neglected, not every area is of equal strategic importance. Rarely have I seen a new computer system produce a turnaround, for example.

The plan must include:

• An explicit discussion of the mission of the organization. If the goals of the organization are not clearly delineated, and priorities clearly set, it will be impossible to develop a suitable plan.
• A cogent review of the environment in which the organization operates. Without an understanding of the constraints and opportunities presented by the outside world, it is difficult to create a strong game plan.
• An honest evaluation of the strengths and weaknesses of the organization.
• A coherent set of strategies that will help the organization achieve its mission given the environment in which it operates and its own assets and liabilities.
• A detailed implementation plan that assigns responsibility for every strategy to one or several stakeholders.
• A financial plan that reveals the fiscal implications of the plan.

You cannot save your way to health.

There is a widely held, but usually wrong, belief among board members that artistic leaders are spendthrifts who do not appreciate the difficulty in finding funding. This condescending line of reasoning results in a belief that if “a businesslike person” attacks the budget, the fat will be removed and the organization will be right-sized.

Nothing could be further from the truth. In fact, arts organizations have learned to do more with far less than other organizations or corporations. Budget cuts might be advisable, but where one cuts is crucial. Cutting into nonstrategic costs is beneficial; cutting those activities that lead to revenue is foolhardy.

But the amounts saved by cutting expenditures on nonstrategic areas rarely change the fortunes of a troubled organization. Revenue is the problem with most arts organizations, not costs. Organizations focused simply on reducing costs will continue to get smaller and smaller and will never create the economic engine that is required for long-term stability and growth.

Focus on today and tomorrow, not yesterday.

There are so many things to worry about when one attempts to change the fortunes of a troubled arts organization. First, one must attend to current cash concerns.

In fact, addressing short-term cash-flow problems can take hours out of every day — talking with vendors, negotiating payout deals, securing funding, estimating cash flows, and so on. I once had a ballet-shoe vendor sit at my desk at American Ballet Theatre and refuse to leave until I had written him a check. It is the irony of the turnaround that one wastes so much time on cash-flow issues exactly at the point one needs time to implement the programs that will create health.

It would be naïve to suggest that this time is not required, however. It is the cost to the troubled organization for making financial commitments it could not fulfill. A thoughtful, open, and fair approach to unpaid vendors can lead to payment plans that are affordable. In fact, I have found that a strategic plan is the best tool available to convince vendors that the organization has an approach to finding the resources required to pay them.

But the true turnaround artist possesses the discipline to carve out time each week to focus on artistic programming, board development, donor and press cultivation, and other activities that will make future years easier. Too many executives spend all of their time on short-term issues. What one must not do is waste time rehashing the past, pointing fingers, and looking for scapegoats. These activities stall all progress and deflate the hope and optimism that can emerge from the planning process. Historians do not make turnaround kings.

Extend your programming planning calendar.

Too many arts organizations plan their programming only one or two years in advance, and troubled organizations typically reduce this time frame. Many arts executives have suggested it would be foolhardy to plan further into the future since the future seems so uncertain. Yet, if one does not plan far into the future, it is virtually impossible to develop the large, exciting projects that will reinvigorate the audience and donors. Nothing helps raising money more than presenting a menu of programming ideas that gives important donors a choice. Too many arts administrators go to a prospect with one project to “sell.” I never go to a prospect meeting with fewer than 10 projects in mind.

Marketing is more than brochures and advertisements.

While it is crucial for arts organizations to develop important new artistic and educational programs, it is also vital that these programs be marketed in sophisticated and creative ways.

Too many arts organizations pay marketing attention to projects only when there is earned revenue at stake. This programmatic marketing is central to building earned income — the brochures, advertisements, posters, e-mails, and so forth that sell tickets must be designed and distributed intelligently and with a goal of reaching the potential buyer.

But too few organizations spend any time or effort performing institutional marketing, the marketing of the entire institutional image that gets people excited about supporting the company. While institutional marketing can help sell tickets, it has a bigger role in increasing contributed income.

There must be only one spokesman, and the message must be positive.

If institutional marketing is central to a turnaround, then controlling the message by controlling the messenger is also crucial.

It is not unusual for artists, board members, staff members, and others to talk with the press about the problems facing the organization. When so many people are communicating with the press, no one is controlling the message. News reports, therefore, become focused solely on the problems, when they occurred, and who caused them. This focus only exacerbates the problem. Those donors or audience members still loyal to the organization become embarrassed and are dissuaded from continuing their support, and attracting new donors becomes virtually impossible.

Fund raising must focus on the larger donor, but don’t aim too high.

Turnarounds rely far more heavily on increasing fund-raising revenue than they do on increasing ticket sales. Few organizations in need of turnarounds can earn enough extra to pay off debts and establish fiscal health.

But turnarounds must take place with energy and speed. It is difficult for any organization to maintain the necessary focus and energy that a turnaround demands for more than three years. The focus of the fund-raising efforts, therefore, must be on gifts that are large enough to make a difference.

On the other hand, aiming to fill a deficit with one extraordinary gift is usually just a pipe dream.

In other words, we need to focus on “right-sized gifts,” gifts that make sense given the budget and the profile of the organization. For the Alvin Ailey American Dance Theater, with a $6-million budget and a $1.5-million deficit, $50 was too low and $1-million was too high. At Ailey, while we did receive larger gifts, we focused our fund-raising on $1,000 gifts. Our board felt comfortable asking for this amount from friends and associates, and this was an amount that would make a difference to us. Within six weeks we had doubled the level of individual giving to the organization and had paid off a substantial portion of our deficit.

The board must allow itself to be restructured

If the fund-raising activity is key to the turnaround, then the board’s potency must be an issue as well. Boards provide a vital underpinning to the fund-raising success of most arts organizations, especially with individual and corporate donors. Frequently, an arts organization gets sick because it has not enjoyed the evolution of the board’s fund-raising power that is required as the organization and its budget grow. A board of a turnaround candidate must evaluate in a clear, mature, and honest fashion whether its membership can provide and raise the resources needed by the organization at that point in its history. A senior staff person should communicate with every productive board member at least six times a year. If this is not happening, it means that either the board is too large or the staff does not appreciate their role in creating a strong and involved board.

The organization must have the discipline to follow each of these rules

This puts the leaders of turnarounds in a difficult situation. They must be able to balance many competing needs at the same time. They must deal with the current, short-term cash needs while also addressing the future. They must deal with the great stress induced by these problems while also presenting a strong and upbeat face to the outside world. They must present solutions rather than problems to anyone who has the power to help: board members, staff members, donors, and the public. They must also work quickly and rather ruthlessly to make the changes necessary. Ideally, at the end of the turnaround, all will respect that something miraculous has transpired.

In fact, turnarounds are not miracles. They result from good planning and determined implementation. And from a severe lack of sleep.

This article was excerpted from The Art of the Turnaround: Creating and Maintaining Healthy Arts Organizations, by Michael M. Kaiser, with the permission of University Press of New England. Copyright © 2008 by Brandeis University Press.