(Welcome to Createquity’s summer rerun programming! Over the next few months, we’re reaching into the archives to pull out some of the best articles and most underrated gems we’ve published since 2007. This week, we’re starting with the “Thoughts on Effective Philanthropy” series. “Thoughts on Effective Philanthropy” was really the reason why I started Createquity. I wanted to have an excuse to write down some of the ideas that had been bubbling around in my head after five years or so of working in the arts, and I ended up publishing six essays in the series over the fall and spring of my first year in business school, in 2007-08. Reading over these posts, I’m struck by how much of my thinking in those early days still reflects my thinking today, even though my perspective was far less informed back then than it is now. -IDM)

Measuring impact is a hot topic in the nonprofit world right now, if the title of the 3rd Annual SOM Philanthropy Conference, “Achieving Effectiveness In Philanthropy,” is any indication. Understandably, foundations want to have confidence that their money is being used effectively by the organizations they entrust it to. Furthermore, many staffers and donors in the field come from corporate backgrounds where a premium is placed on deliverables and results, and hope to apply the discipline contained within that culture to the nonprofit sector. In many ways this is a good thing: nonprofits are notorious for inefficiency and amateurish management, and by developing extensive evaluation techniques foundations hope to lead the way toward a more accountable, professional future.

Here’s the rub, though: measuring effectiveness in the arts is a different animal altogether than measuring effectiveness in other program areas, like healthcare or social justice. To illustrate why, let’s take a step back for a moment and think about the differences between the for-profit and non-profit sectors in general. In most cases, the primary goal of a for-profit company is to maximize value for its shareholders by selling a product to consumers. From the outsider’s perspective, then, the focus of the company is on the product. In other words, when we think about Microsoft, we think about Windows. When we think about Starbucks, we think about coffee. Now, what about nonprofit organizations? I would argue that the focus there is not on the product so much as the customer—broadly defined as the recipient of the organization’s services. Take a support group for people with AIDS, for example. Again, from a total outsider’s perspective, the most important thing is not what they’re doing (i.e., the specific programs or services they offer) but who they’re doing it for. When I think about Greenpeace, the first thing that comes to mind is not the specific programs or initiatives they operate—it’s the environment.

In most nonprofit disciplines, funding agencies primarily work with mission-driven service organizations. These are nonprofits that exist in order to improve infrastructure, advocate for interest groups—in short, to correct or alleviate a perceived problem in society. With such organizations, measuring effectiveness can be defined fairly concretely, say in the number of meals served at a soup kitchen or in the passage (or not) of particular legislation that a group was pushing in the local government. Of course there’s more complexity to it than that, but the point is that mission-driven organizations in non-arts fields can generally be evaluated relatively easily and accurately using quantitative and/or results-focused methods.

The arts, on the other hand, are a field primarily comprised of organizations that produce a product for consumption, much like for-profit companies. In fact, they are basically for-profit companies without the profit. Their value to society (and selling pitch to funders) presumably lies in their ability to bring products to market that would not have otherwise seen the light of day; otherwise, why fund them at all? However, this definition of value doesn’t match up so well with our traditional notions of social responsibility and moral imperative. Think about it this way: if a mission-driven nonprofit were to be wildly successful, so successful that it had entirely solved the problem it was created to address, it would have no choice but to shut down. For presenters, museums, galleries, ensembles, and the like, there is no such consideration: wild success is merely an invitation and an opportunity for more activity. And why shouldn’t it be? Arts organizations, much as they might like to believe otherwise, don’t really exist to solve some urgent problem in society. At some level, like for-profit companies, they are self-serving: they promote the art itself (the product) rather than who experiences the art (the customer). As a result, making an argument to donors for support of the arts can be exceedingly difficult, and the arts sometimes take a back seat to other priorities in the philanthropic arena.

That doesn’t mean that there is no argument to be made, however. For me, the role of the arts in a creative society is to define a space in our lives in which the impossible becomes possible. The arts are about celebrating and honoring creativity and innovation for their own sake, not as a means to an end such as financial gain. They need support precisely because a constraint of income inevitably constrains imagination, and the whole point of the arts is to see what happens when imagination runs wild.

Beyond that, however, the arts can be extremely useful to society. This can be seen perhaps most dramatically in the network effects that artists help create when they congregate in undervalued urban neighborhoods (Williamsburg in Brooklyn being a prime example). As an educational tool, the arts have applications in everything from grade-school math to graduate-level management. Not to mention that there are increasing synergies all the time between traditional arts fields and highly creative commercial enterprises such as graphic design, video games, motion pictures, and so on. The arts, in no small way, serve as R&D for society—they provide a leading edge from which other sectors draw inspiration. Their influence “trickles down” into popular culture through numerous intermediaries, providing jobs and creative fulfillment for many in the process. The true impact of the arts is thus difficult to measure properly. For example, my experimental rock band Capital M was made possible in no small part by the money the American Music Center received from the likes of the Hewlett and Mellon Foundations to pay my salary every year. Yet those organizations have no way of accounting for those kinds of residual second- and third-generation ripples created by their investments.

So how can we go about measuring—or even defining—the impact that we want the arts to have? I’ll explore that question in my next installment, Philanthropy and Experimentation.

(Enjoyed this post? We’re raising funds to make the next generation of Createquity possible. We are 30% of the way there, but need your help to cross the finish line. Please consider a tax-deductible donation today!)