Money is tight for many Australian arts organisations right now, particularly those who recently lost their core funding. The current environment is encouraging boards to become more risk averse; the last thing they want is for it all to fall over on their watch.
If you’re looking around to see where spending can be cut, our advice is to pause before you act.
We’re yet to hear of any arts organisation in the world that has saved its way to financial health. Instead, when costs are cut, we find that another pattern tends to emerge.
The organisational death spiral
When arts organisations go into cost saving mode, it’s inevitable that some of the cuts start impacting on artistic quality and revenue generating activities. And, when that starts happening, there’s a very small margin of error before the death spiral sequence is triggered. It looks something like this:
- CEOs and boards look for immediate savings
- Cuts are made to artistic, marketing and communications budgets
- They then cut – or at least threaten to cut – jobs, undermining culture and morale
- The programming inevitably becomes less compelling and less well marketed
- Box office income declines, discounting becomes standard
- Donors become disengaged and distanced
- Revenue declines further and more cuts are made
This sequence continues until the money has gone and the company is forced to wind up.
Why emergency fundraising won’t secure your future either…
Another common approach is to turn to donors with a crisis message. That’s rarely a good move either. Your sustainability is not the donor’s problem – it’s like asking them to fund to you to be competent.
The tacit assumption in any serious conversation with a donor is that your business is a going concern, not one that needs to be bailed out.
If you’re asking people to donate, it’s because they’re engaged and excited about the change they will make in the world by supporting your vision and mission. Not because they’re the one thing standing between you and oblivion.
Correcting the real problem
Just as we’ve never seen an arts organisation save its way to financial health, we’ve also never seen one with a spending problem. Quite the opposite is true: arts organisations make magic, sometimes out of fresh air. In fact, their leanness, resourcefulness and the intrinsic motivation of their staff is a model for any industry.
Instead, the financial problems of arts organisations are generally revenue problems. That’s especially the case now with funding in short supply.
If sustainability is your major concern, revenue generation is the first-order problem to solve.
But to do so, you’ll need to focus on five things.
- Your vision. This needs to be stronger and shouted louder. Your artistic leaders also need to be more visible than ever before.
- Your programming. This should be at its best and boldest. Your audience needs to be engaged from inception and your customer intimacy enhanced.
- Your people. Work out how to retain and inspire your revenue generators – marketers and fundraisers. Start by treating them well. Give them job security, confidence and support them in leading the revenue charge.
- Your case for support. This should sing. It must demonstrate your excellence and impact and shows the donor the difference they will make in the world.
- Your reserves. If you have some money put away for a rainy day – that rainy day may well be now. If you need to dip into reserves to do the above, don’t hesitate.
Want to know more?
Get in touch for a free one-hour consultation if you are facing a revenue problem in your organisation.