Making Sense of “Sustainability”

From the blog: Mask of the Flower Prince.  

The nonsensical ravings of a singing archaeologist. Really.

by Scott Chamberlain

Ah, “sustainable.” It is a buzzword of the moment, showing up in discussions ranging from the environment, manufacturing, agriculture… even the arts. Of course, everyone wants to be sustainable, thinking that they, their product, or their service will stand the test of time and last forever.

Like all popular buzzwords there is value to it, and I applaud the notion that we have to look at both the long-range prospects and the long-range effects of the things we do.

But as often happens, the term has been misused by people who fundamentally misunderstand its meaning.

I’d like this willful misuse of the term to stop—particularly among arts organizations.

                                                 A Misunderstood Concept

Over the past few years, labor disputes have rocked a number of performing arts institutions, including the Minnesota Orchestra, the Detroit Symphony, Atlanta Symphony Orchestra, Saint Paul Chamber Orchestra, and the Metropolitan Opera. And new labor disputes have continued to pop up like dandelions, in places like Hartford, Connecticut and Binghamton, New York. In each of these cases, management explicitly argued that the organizations’ operations, programming, and labor contracts were no longer “sustainable.” In their words, these things represented a huge financial drain on the organizations and were killing the organizations from the inside. Similarly, leaders of the San Diego Opera used this same rationale to liquidate the company altogether.

Some examples:

• Management of the Atlanta Symphony Orchestra argued that ticket revenues only covered 20% of the costs of producing a classical concert, and this model “simply wasn’t sustainable.”
• Peter Gelb, General Manager of the Metropolitan Opera complained that “the percentage of operating costs covered by donations is 48 percent. That’s unsustainable. It’s not a business model.”
• Leaders of the San Diego Opera proclaimed that opera was no longer a sustainable art form in San Diego—labor costs had become prohibitive, former levels of fundraising were no longer feasible, and audiences were shrinking.
• Just this month, Twin Cities Business ran an article about the Minnesota Orchestra with the blaring title, “Does The Minnesota Orchestra Have Sustainable Labor Contracts?”
• And yesterday, the board of the Binghamton Philharmonic in New York cancelled the orchestra’s season opener, with Executive Director Brittany Hall saying, “Unfortunately, this orchestra needs to look toward the future and remain sustainable and viable.”

Unfortunately, leadership in each of these cases was completely wrong about “sustainability” and how to achieve it.

How so? Three reasons come to mind.

First, their understanding of “sustainable” was far too narrow, focusing exclusively on a particular, financial criterion. Second, they were inappropriately using an understanding of the term derived from the for-profit arena, and trying to graft it onto their non-profitorganizations. And finally, in each and every case, they tried to make their organizations “sustainable” by imposing a simplistic set of solutions to the problem: sharp cuts in the compensation packages of their union musicians and workers, plus an equally sharp reduction in programming.

With respect, this is no way to build sustainability. On the contrary, this a recipe for disaster.

I propose a different way of looking at sustainability—using more holistic criteria that can better ensure that arts organizations can, in fact, thrive into the future.

                                                  The Arts as Non-Profit Businesses

First, a couple of points. Many people seem to think that non-profits, and non-profit arts organizations in particular, are not businesses. They are. Absolutely. An ensemble like the Minnesota Orchestra employs around 90 musicians, a similar number of full-time staff, and a comparable number of part-time staff. These are real people working at real jobs, who pay taxes, have mortgages, buy cars and other durable goods, go to school, and in all sorts of ways contribute to the economy.  Plus, the Orchestra not only generates revenue itself, but serves as a catalyst for other economic activities such as restaurants and parking.  The City of Minneapolis estimates it lost $2.9 million in parking, dining and other business as a direct result of the Minnesota Orchestra lockout.

And it’s not just the Minnesota Orchestra that has an impact. Each year, the City of Minneapolis produces the Creative Index report that analyzes the economic impact of the creative sector, including music, theater, and the arts as a whole. In 2013, the arts contributed $830 million into the city’s economy, with $311 million coming specifically from non-profit arts organizations. Also, approximately 5% of the entire workforce of Minneapolis worked in the creative sector, primarily as photographers, musicians, and writers.

These are real numbers, and it is clear that arts organizations—and non-profits generally—play a critical role in the economy and in the community.

But at the same time, a point that I’ve hammered home again and again here on my blog is that non-profits have to be recognized as non-profit businesses. They are fundamentally different from for-profit enterprises, and thrive by following a very different business model. Based on my own experience as President of the Board at an arts non-profit (the Minnesota Chorale), I’ve found that leading a nonprofit requires a whole different type of skills and strategies than are needed in for-profit business.

Non-profits stand apart in that they are designed to meet a critical social need, or provide an important service to the community. They are driven by a stated mission, and their success or failure is ultimately determined by how effectively they live up to that mission. Yes, there absolutely is a business and financial aspect to doing this, but the business and financial strategies and decisions are always in service of the outcomes, not the profits.

In recognition of this special status, the IRS grants non-profits 501 (c) (3) status, which creates a special tax status and allows them to fundraise to support their operations. This is key—a non-profit that engages in fundraising has very different set of income streams than a for-profit business, and has to act accordingly.

Fundraising is not a sign that the organization’s business model has failed, and it is not a last-minute, shameful attempt to balance the books. On the contrary, it is an integral part of the organization’s business model and overall financial strategy.

So again—to be clear, an arts organization like the Minnesota Orchestra or the Minnesota Chorale is a business. But we cannot lose sight that it is a non-profit business. And that changes the equation as to what makes it “sustainable.”

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