• The Los Angeles Times, via music critic Mark Swed, revives the Secretary of Culture talk, this time nominating Peter Sellars and Leon Botstein for the job. It’s an earnest appeal for an idea worthy of consideration, but if it was a political nonstarter four years ago, it’s hard to see how it has more legs now.
• Video game makers are finding themselves in the regulatory crosshairs after the Newtown shooting massacre, despite limited evidence that games played a role in motivating recent shootings. (Certainly a lesser role than…guns.)
• Margy Waller continues the charitable deduction discussion in a guest post over at New Beans.
• The NEA has relaunched the “Your Town” program as the Citizens’ Institute on Rural Design, which invites proposals for community-led workshops to improve quality of life in rural areas with the help of creative placemaking experts.

MUSICAL CHAIRS

• Well, that didn’t take long: Richard Dare, who just left the Brooklyn Philharmonic to take the top job at the New Jersey Symphony Orchestra, abruptly stepped down after a New York Times investigation into his past.
• Clayton Lord is leaving Theatre Bay Area, where he pioneered a number of research initiatives, to take the position of Vice President of Local Arts Advancement at Americans for the Arts. Lord replaces Mitch Menchaca, who left to become COO of Chorus America.

IN THE FIELD

• Joe Patti makes some astute observations about convergences between the arts and religion, including ways in which churches are getting into the placemaking game and the tidbit that newly minted pastors are more interested in starting their own flock than in joining established institutions. Fascinating stuff!

ALL ABOUT THE BENJAMINS

• The Kickstarter juggernaut continues on, raising an astonishing $274 million for projects in 2012. Yancey Strickler’s prediction that the company would outpace the budget of the NEA proved more than prescient. The Economist has more.
• Artspace, the nonprofit artist housing developer, is the recipient of a new $2.7 million grant from the Ford Foundation. Createquity previously reported on a $3 million program-related investment Artspace received from Ford in 2011.
• “Household incomes in Manhattan are about as evenly distributed as they are in Bolivia or Sierra Leone” – the New York Times on what it means to be “middle class” on the country’s most expensive island.
• Rob Dietz and Dan O’Neill wonder why we haven’t yet given up on GDP.
• Need lots of money for a wacky, wildly ambitious and possibly ill-advised art project? Britain’s Artangel might just be your ticket.

BIG IDEAS

• I think Diane Ragsdale has become the arts sector’s “questioner-in-chief.” She’s back after a monthlong hiatus with a doozy of a question.
• Michael Hickey ruminates on scale, efficiency, and what size grants would encourage the most art created per dollar. (But is it about the most, or the best?)
• A year in the life of Collective Impact.
• Phil Buchanan, writing at the Center for Effective Philanthropy blog: “I think this whole aversion to dependency may be yet another example of where analogies to the for-profit world have created confusion in our sector. We’re so enamored with market analogies that we can’t get our heads around the fact that certain work simply requires ongoing philanthropic support. Other than large-scale government support, there is no ‘exit’ event on the horizon for nonprofits, no analog to the IPOs that allow early private sector investors to cash in and get rich.”
• I wholeheartedly endorse this pledge on Andrew Taylor’s part not to discuss “generic topics” in 2013. Taylor identifies three in particular that provoke discussions with “lots of heat, but not much light”: business models, advocacy, and value.

RESEARCH CORNER

• A new research study from Germany appears to show a causal relationship between music training and “verbal memory” (and by extension, speech and language processing). The study seems well-designed although the sample is on the small side.
• The New York Public Library system appears to be more vital and in demand than ever despite budget  cuts over the past decade, according to a new report from the Center for an Urban Future.
• A woman named Amy Webb found her life partner online…data scientist style. She conducted a detailed study of popular women’s behavior on JDate by creating 10 fake male profiles and interacting with 96 women over the course of a month, taking notes all along. It’s all ever so slightly unethical, but it does make for some, ah, engaging reading.
• This is a great example of how a theory of change can illuminate assumptions needing testing. Do more entrepreneurs and more companies = more innovation?

ETC.

• In 2011, Createquity shared the story of Aaron Swartz, who had been indicted by federal authorities for “liberating” some 4.8 million academic journal articles from the online database JSTOR in an act of protest against restrictive copyright policies. In a sad coda, the 26-year-old Swartz, who suffered from depression, committed suicide this month in the face of a potential 35-year prison sentence (although the prosecutor in the case claims that she was only seeking six months). Among the other tributes making their way around the web, it turns out that GiveWell’s Holden Karnofsky (of course) had developed a personal friendship with the kid supergenius.

“Rhythm & Rest” by the Animus Collective, 2009″ at FIGMENT NYC
Photo Credit: Suzie Sims-Fletcher courtesy of FIGMENT

For the past two and a half years I’ve been involved with FIGMENT, a non-profit organization that produces participatory art events in a growing list of cities, including New York, Boston, DC, Detroit, Jackson and Pittsburgh. When I first joined FIGMENT in 2010, it had already grown from a one-day event on New York City’s Governors Island attended by about two thousand people in July of 2007 to an annual weekend-long participatory arts festival attended by tens of thousands. FIGMENT had begun to expand geographically, producing a weekend event in Boston, and temporally, with a dedicated summer-long FIGMENT area on the Governors Island featuring an artist-designed minigolf course and an interactive sculpture garden. Since then, the organization has continued to grow, with events and members in cities across the United States, and even internationally—there are plans for FIGMENT events in Canada and Australia. Last year, FIGMENT received its first grant from the National Endowment for the Arts (NEA), and this year it hired its first paid employee (the organization had previously been run entirely by volunteers). Also for the first time this year, FIGMENT will be providing some artists a small stipend beyond the cost of materials. Past Createquity Writing Fellow Katherine Gressel also works with FIGMENT, and recently profiled the organization’s growth in a piece for Americans for the Arts.

Because of my own personal investment in FIGMENT, I’ve become increasingly interested in the effects of institutional support on alternative arts organizations and projects. This grassroots/alternative arts group is hiring paid staff, providing artist compensation, creating guidelines and consistent branding for events, and receiving more mainstream institutional support and recognition. How will its ability to carry out of its principles, which include participation, decommodification, inclusion and access, be affected?

To understand what FIGMENT might encounter in the future, I thought I’d investigate how more established non-profit arts organizations have fared during similar transitions. Perhaps the organization can benefit by looking at the successes and pitfalls of other groups.

In 1974, a trio of actors founded the Steppenwolf Theatre Company in a Deerfield, Illinois Unitarian church with a commitment to ensemble collaboration and artistic risk. The company’s stated mission was to “advance the vitality and diversity of American theater by nurturing artists, encouraging repeatable creative relationships and contributing new works to the national canon.” In the past nearly 40 years, the organization has had numerous expansions—first to the basement of a Catholic school, then to a 134-seat theater at the Jane Hull House Center in Chicago, again to a 211-seat space at 2851 North Halsted Street in Chicago, and finally to its present home, a theater complex at 1650 North Halsted. Today, Steppenwolf is an ensemble of 43 artists, including actors, directors, playwrights and filmmakers, with an annual audience of over 200,000 and an operating budget of $13.5 million. The company has won numerous awards, including a National Medal of Arts and a Tony Award for regional excellence.

As Steppenwolf has evolved, it has remained financially solvent while strengthening its community engagement, even as many performing arts organizations are struggling with a decline in subscription rates, or tickets for an entire season of programming can be renewed annually. In fact, Steppenwolf has also suffered from attrition in subscriptions, which means a decline in a steady, predictable stream of revenue. However, the organization used this funding issue as an opportunity to re-examine its core values. A 2011 study by the Wallace Foundation on building arts audiences profiled Steppenwolf’s strategy for building deeper relationships with both subscribers and non-subscribers. The paper outlined the company’s “Public Square” initiative, which included post-show discussions after every performance led by facilitators who are specifically trained to progress a dialogue within the audience; additional online content, with access to interviews, articles, podcasts and videos for each production on its website; and a series of social events that are free and open to the public and offer the opportunity to explore thematic elements of current productions. The strategy led to a 61% increase in multi-performance ticket sales, as well a deeper level of audience engagement. In short, Steppenwolf’s institutionalization has not resulted in the compromise of its values, but instead has actually furthered them.

Intersection for the Arts in San Francisco is another organization that has maintained and expanded its mission since its inception forty years ago. Founded in a former bar in San Francisco’s Tenderloin district, it began as an interdenominational space that sought to bridge artistic and spiritual ideas. The organization produced alternative musical performances, theater pieces, screenings, readings and workshops. Four expansions and relocations later, Intersection continues to provide such programming in addition to maintaining a gallery space, sponsoring artist residencies with individuals and collectives, and promoting community engagement via collaborative and educational opportunities. In fact, it is such an established cultural institution that in a 2005 San Francisco Chronicle article, Visual Arts, Literary and Jazz Program Director Kevin Chen acknowledged that “Intersection is no longer alternative.” But far from losing its way, Intersection has become an institution that smaller, alternative organizations now look to for support.

The success stories of Steppenwolf and Intersection for the Arts have achieved an almost mythic quality in Chicago and San Francisco—it’s the dream that that many non-profit arts organizations aspire to. But for every Steppenwolf or Intersection, there are multiple failures like The Franklin Street Arts Center, Collective for Living Cinema, Minor Injury and Matzo Files. It’s more difficult to find information on these defunct spaces and groups, which can seem to disappear in a day. Some began expanding, and then folded due to lack of funding, or were absorbed by a larger, more mainstream entity, resulting in a compromise of artistic vision and mission.

P.S.1 is one such example of an alternative arts organization that expanded beyond its means. Founded in 1971 by Alanna Heiss through the Institute for Art and Urban Resources, an organization that developed exhibitions in abandoned spaces across New York City, the center’s original mission was to showcase young artists and offer an exhibition space for risk-taking works that weren’t necessarily saleable or commercially viable. From 1994-7 P.S.1 underwent an $8.5 million gut renovation and expansion, adding an elevator and sculpture garden and redesigning their galleries. Although its subsequent 2000 merger with the Museum of Modern Art (MoMA) was billed as a win for both organizations, enhancing MoMA’s contemporary art initiatives and giving P.S.1 access to MoMA’s collection and marketing resources, in reality, P.S.1 needed a larger institution to rescue it after the expansion had depleted its financial resources. Now renamed MoMA PS1, the Museum of Modern Art controls the center’s finances and has the right to appoint its board members. In 2008, after a planned 7-year transition period for the center and MoMA, Heiss was forced into retirement. In his 2008 New York Magazine article, Andrew M. Goldstein recounts his lunchtime conversation with Heiss and Glenn Lowry, MoMA’s director:

“I told him I didn’t want to retire,” Heiss explains. “And he said, ‘Why not?’ I said, ‘Well, I want to work another couple of years.’ And he said, ‘I think I’m going to go ahead on the retirement plan.’ And now we’re talking about what I might do.” Lowry says the discussions are ongoing—“These are not easy conversations”—but he made clear that he and MoMA’s board considered Heiss’s retirement necessary for P.S. 1’s evolving future within MoMA. “From my perspective, the seven-year period was a transition period; the goal was to get to know each other and make things work, and then at the end of that transition period to move on,” he says.

P.S.1’s institutional expansion—the addition of space and staff, as well as the support it received from the established MoMA–transformed it from an alternative arts space to a branch of a commercial contemporary art museum. It now throws parties sponsored by Volkswagen, and launches exhibitions anchored by established artists who can draw crowds. Recent and current exhibitions at MoMA PS1 include a Kraftwerk installation that coincided with the electronic-music pioneers’ MoMA retrospective; “September 11,” which showed work by heavyweight artists like Diane Arbus, John Chamberlain, William Eggleston, Felix Gonzalez-Torres, Alex Katz, Barbara Kruger and Yoko Ono; and a solo show of work by Huma Bhaba, who has work in the collections of The Whitney, The Saatchi Gallery, MoMA, and the Met. The final Warm Up of this year was DJed by Thom Yorke’s new project Atoms for Peace. This programming may be worthy in its own right, but it’s not the risky programming meant to give emerging artists a platform that the original P.S.1 was founded on. Administrative practices that enable sustained revenue should allow for more risk-taking and challenging work, but unfortunately, as with P.S.1, this is often not the result.

Building—creating a space or expanding a space– is arguably the purest form of institutionalization. It’s a concrete statement that an organization intends to be around for the long-term. “Set in Stone,” a recent study by the Cultural Policy Center at the University of Chicago, examined the results of the physical expansions of cultural organizations between 1994 and 2008, drawing on data from more than 700 construction projects. The authors looked at how new facilities related to organizations’ missions; the additional staff, technical support and marketing expertise needed to effectively operate new spaces; how new facilities helped or did not help organizations to engage the surrounding communities; and the relationship of funding streams to new spaces. The final report explains:

In many cases, the actual need for a new facility had not been demonstrated (even though there was often great enthusiasm about getting underway with construction); the connection between a new facility and delivering more effectively on mission was in many instances quite murky; realism about how a new facility could be sustained once built was frequently missing – both in terms of the financial resources and staff needed to successfully run a new facility. The list goes on. New facilities would open, organizations would then run into financial problems because of insufficient revenue, or an inadequate endowment, or because they couldn’t service the debt they incurred to build, or because the building was too costly to operate, or it turned out to be beyond the organization’s capacity to administer and sustain.

Although most of the organizations, projects and budgets in this study are much larger than FIGMENT or other young alternative arts organizations, the takeaway is still relevant: The most successful projects were motivated by both artistic mission and organizational need. Project leadership was clear, consistent and sustained throughout the process, leaders provided efficient timelines and effect feedback, and expenses were controlled during construction. While this study was specifically about physical expansions, I also believe that these points hold true for other types of expansions, such as in staff or geography.

With all of this in mind, then, the question remains: how can FIGMENT remain “alternative” even as it receives more mainstream support?

FIGMENT strives to provide opportunities for emerging artists to showcase interactive works that wouldn’t necessarily be commercially successful. The group quite literally takes art out of the museum or gallery, primarily using outdoor spaces such as public parks for its events. According to FIGMENT co-founder and executive producer Dave Koren, this strategy has helped FIGMENT remain inclusive and accessible by showcasing a broad array of work from many artists in large, free spaces that are easily reached by the public. FIGMENT’s open call for project proposals also facilitates a transparent and wide-ranging curatorial process. FIGMENT once decided not to go forward with an event in Mexico City because there wasn’t enough time to do an open call for art there. The organizers there had proposed to approach specific artists and collectives, but FIGMENT decided that handpicking people and projects for the event would privilege particular groups and run counter to the organization’s principles.

Koren says that this open call process is especially important when there is a limited amount of space, as there is in FIGMENT’s season-long area on Governors Island, which includes an architectural pavilion, an interactive sculpture garden, and an artist-designed minigolf course. Works are chosen for this exhibition via an open call for proposals with specific, intensive guidelines and a rigorous jury evaluation.

As FIGMENT expands to new cities, ensuring that the new organizers, teams and artists understand FIGMENT’s mission is not always easy. “They get the big picture, but not always the specifics that it involves,” Koren says. He recounted one group that planned to have a bar tent with beer for sale, similar to what one usually finds at an outdoor concert. He had to clarify to them that this would violate FIGMENT’s decommodification principle. “FIGMENT seeks to create social environments that are unmediated by commercial sponsorships, transactions, or advertising. We will not substitute consumption for experience.” FIGMENT events aren’t places to sell things, whether that be art or food or beer. For that reason, FIGMENT doesn’t want to endorse a vendor, or rely on commercial vendors as a source of revenue.

FIGMENT has recently been the recipient of some substantial grants, including one from the NEA, and the group continues to apply for funding in the form of grants from foundations. However, the group is wary of relying on these grants as a main source of revenue. Many grants have very specific criteria; it’s important that the group doesn’t lose sight of its own mission while trying to fit a grant’s standards. Ultimately, as FIGMENT builds its community, it hopes to build its donor base along with it. According to Koren, “what we’re seeing is that someone first comes to FIGMENT as an artist, then takes a greater role as a team member, and then also becomes a donor.” It’s this community of donors, it is hoped, who will sustain FIGMENT.

Institutionalization in the form of paid staff, money for artists, and physical or geographical expansion results in budget increases. Therefore, financial support from other institutions as well as from a group’s community also need to grow. The challenge for alternative arts organizations is in both growing that revenue and not compromising on artistic mission and principles. Will FIGMENT remain FIGMENT—retaining its essence and principles as it expands to Texas and California and Australia and beyond? Will its institutionalization further its mission, or weaken it? Will support from major funders lead to a realignment of values? Only time will tell, but the best predictors may be those outlined in the “Set in Stone” study: motivation, leadership and implementation. If these are the criteria, FIGMENT seems to be positioning itself well for the challenges ahead.

How does scale influence impact in the arts? In 2007, back when I was a fresh-faced grad student, I actually addressed this question head on in the eighth post ever published on Createquity. I argued pretty strongly that scale in the arts was a myth, or at least not salient to the same extent as in other fields:

It’s not that I don’t think large arts organizations do good work, or that they don’t deserve to be supported. What I’m going to argue instead is that there is a tendency among many institutional givers to direct their resources toward organizations that have well-developed support infrastructure, long histories, and vast budgets, and in a lot of ways it’s a tendency that doesn’t make much sense (or at the very least, could use some balance).

For one thing, those well-developed support infrastructures don’t come cheap. Consider the case of Carnegie Hall… [snip]

In contrast, small arts organizations are extraordinarily frugal with their resources, precisely because they have no resources to speak of. It’s frankly amazing to me what largely unheralded art galleries, musical ensembles, theater companies, dance troupes, and performance art collectives are able accomplish with essentially nothing but passion on their side. A $5,000 contribution that would barely get you into the sixth-highest donor category at Carnegie might radically transform the livelihood of an organization like this. Suddenly, they might be able to buy some time in the recording studio, or hire an accompanist for rehearsals, or redo that floor in the lobby, or even (gasp) PAY their artists! All of which previously had seemed inconceivable because of the poverty that these organizations grapple with.

The literature on scaling impact in the social sector tends to take for granted that scale is a good thing—that services are provided more effectively when centralized under a strong leader and when efficiencies can be exploited across functions and sites. This logic makes sense when the goal is to solve a systemic problem that is evident in many different  contexts, such as physical places. If you’ve come up with a solution that works in Chicago, why wouldn’t you want to bring it to New York and DC? Arts service organizations, in fact, can likely benefit from economies of scale. Fractured Atlas has certainly been able to accomplish a lot more because its focus is national and cross-disciplinary than would have been the case otherwise, and scale has no doubt been a motivating factor behind Americans for the Arts’s many mergers.

But when you get to talking about arts producers and presenters, which I think is what most people mean when they say “the arts,” the conversation about scale becomes very different. What problem, exactly, is being solved here? It seems like the whole point of the nonprofit arts is to add to the aesthetic diversity that would otherwise exist in the marketplace for creative expression. If the point is diversity, how is that goal served by attempting to scale up institutions? The very commercial marketplace to which the nonprofit arts strive to provide an alternative loves scale – it thrives on it, because scale begets market power, which begets revenue, which begets profit. (Profits worth talking about, anyway.)

Leaving our cultural lives in the hands of commercial entities, many theorists have worried, will result in a boring sameness, an attempt to feed the world’s aesthetic appetite with the equivalent of TV dinners every day.* Our sector takes it on faith that there are forms of artistic expression that have clear cultural value and relevance even if replicating them widely is not practical. I suppose if you believe that these forms are specific and identifiable in nature (e.g., classical music, plays by Henrik Ibsen), then scaling them to help them compete with commercial cultural products would make sense. But if you believe, as I do, that their value comes in large part from the diversity they add to our collective palate, it’s much better to spread the subsidy around.

On a purely theoretical level, my view hasn’t changed that much in the five years since I wrote that thought piece. However, having become more closely involved with several grantmakers (including serving on a couple of grant panels) since then, I’ve developed a newfound appreciation for what large organizations can accomplish with scale. The scale that institutions traffic in does not have to do with the creation or presentation of work, but rather the audiences reached by that work. There are arts consumers – plenty of them, in fact – who simply will never frequent a show or exhibition by a smaller, experimental group or venue unless they personally know someone in it. But give that experimental group an institution’s stamp of approval, and those audience members are all over it. That’s got to count for something, and speaks volumes of the curatorial role that large institutions have in the broader ecosystem.

That said, one thing I still don’t see much of on the part of arts funders is a willingness to consider the transformative potential (or lack thereof) of grants. Some years ago, the Hewlett Foundation developed a simple yet very clever rubric for grant selection called Expected Return. One of the ways in which Expected Return is clever is that it accounts for the proportion of a project’s success in an ideal world that can be attributed to the grant you made. The less of the budget you’re responsible for, the less of a difference you’re really making. As I wrote then and still believe now, “Foundations concerned with ‘impact’ should remember that it’s far easier to have a measurable effect on an organization’s effectiveness when the amount of money provided is not dwarfed by the organization’s budget.”

*Defenders of pop culture will no doubt cite the many creative achievements of the entertainment industry as evidence against this point – and they are certainly right to celebrate The Wire, Radiohead, and The Lord of the Rings. But for every groundbreaking artist who succeeds in the market economy, there are dozens more who don’t, and plenty of mediocre talents gumming up our headphones and screens instead.

Microphilanthropy is not a new idea, though its application has been spotty up until now, with programs such as NYFA’s Strategic Opportunity Stipend, ASCAP’s Leonard Bernstein Fund, or Fractured Atlas’s microgrants generally limited in scope. One of the programs I like the best is Subito, from the American Composers Forum. The guidelines differ a bit in different cities, but perhaps the most generous version is in Philadelphia (where, incidentally, I worked as Chapter Assistant way back in 2002-03). Clicking on the “Subito Philadelphia” link on that page will download a Word document with three exceptionally varied scenarios for funding on the third page – there is functionally almost no restriction on what the funds can be spent on, as long as they are somehow in service of the proposed project. Now, platforms for aggregating small-dollar donations from individuals are starting to pop up as well, drawing inspiration from the likes of DonorsChoose and Kiva. Kickstarter is a model that looks promising—Jay Corless is using it for his Cities x Design tour with Sali Sasaki—and another Createquity reader, Kristine Maltrud, has written in to alert me to an in-development microfunding + social networking project called ArtSpark. It’s likely that such platforms will make it easier for small-scale art projects to reach new audiences and lower the costs of their fundraising, helping to equalize the playing field.

Nevertheless, I still think there’s some value to be found in setting up a microphilanthropy program at an institutional level. Online donation aggregation platforms are well and good, but by their nature will tend towards popularity contests that do little to help artists whose talents do not lend themselves to self-promotion. A diligently run, centralized microphilanthropy program, on the other hand, can potentially identify artists and projects with promising features but that lack the kind of social or technological capital necessary to mount an effective online fundraising campaign.

While a detailed exploration of what an ideal microphilanthropy program might look like will have to wait for another post, if it were up to me, such a program would take into account the following principles and assumptions:

Small amounts make a big difference.
This value meshes not only with my own experience but with those of countless other artists I know. It never ceases to amaze me what artists are able to accomplish on absolute shoestring budgets, sometimes even losing money on the work they present to the public. But just because they make it happen on such lean terms this time doesn’t mean that they will be able to next year, or that they couldn’t benefit enormously from an influx of capital. To an artist trying to scrape together a living from dozens of sources, a few extra hundred or a thousand here or there means a lot. Sometimes it’s the difference between art happening or not.

Fewer restrictions promote innovation.
Startup, temporary, and very small-scale projects are already at a disadvantage in that they are ineligible for most mainstream grant programs that require a minimum operating history, paid performers, or a minimum budget. Even grant programs that ostensibly serve “community groups” will often have eligibility requirements that prevent organizations with budgets of less than $100,000 from applying. In that kind of environment, then, it’s counterproductive to set excessive limits on who can apply or what kinds of things the money can be spent on. The whole point of supporting small, under-the-radar groups is to support innovation, and no one sitting in an office writing up guidelines can adequately anticipate the kinds of uses a burgeoning community of experimental artists will want to put money to. Moreover, the widespread adoption of eligibility criteria (especially if it’s the same eligibility criteria) can often lead to massive gaps in the institutional funding framework—like, for example, the horrible dearth of opportunities available to independent jazz musicians.

Better to help lots of people when possible.
We haven’t yet talked about the fact that many of the artists applying to a program like this (and even some who will be funded) simply won’t be very good. That’s okay. In my view, a microphilanthropy model should adopt a venture-capital-like approach – spreading the risk across a number and variety of investments, in the hopes that a few will break out and be so successful that they cover the failures or mediocre performance of the others. In this case we’re talking about artistic success rather than financial success, but the principle is the same. That argues not only for spreading grants across a fairly wide proportion of applicants, but also for selecting applicants in part on how much their project helps other artists besides the people applying for the grant. So a musical ensemble that selects scores via an open-call process and performs an eclectic mix of repertoire, for example, provides more value to the artistic community than one that exclusively performs the music of the founder. I’m not saying the latter kind of project should never be funded, but in my mind the bar for evidence of artistic potential has to be raised considerably in order to justify it.

There’s a difference between growth and institutionalization.
Helping a project to happen in the first place or increase stipends to performers is one thing. That’s growth of an artistic variety. Helping to fund the hiring of full-time administrative staff or rent office space is something else entirely. That points to a more institutionalized, professional—and potentially less nimble—future. While certainly appropriate in some instances, a lot of small-budget organizations don’t really need to get drastically bigger. Many artists just want to be able to make enough to live on and do their thing (or, failing that, at least pay their colleagues), and have the flexibility to shut it all down later if they want to. I believe in microphilanthropy that is as supportive of organizational death as it is of organizational growth.

Quick to give a chance, slow to give second chances.
In keeping with the “risk pooling” concept, I support keeping eligibility requirements as open as possible and applications as simple as possible. But once that money is granted and a commitment is made, the gloves need to come off. Flakiness, dishonesty, and sloppy reporting should not be tolerated. Since this may well be one of the artist’s first grants, it might have to be a learning experience for them. Teach them how to keep accurate books and manage a budget. Teach them responsiveness and task management tools if they don’t already have them. Reporting requirements should be as strict (not burdensome, just strict) as eligibility requirements are loose. And hey, if people don’t want to put the few hours it takes into telling you how they spent your money, you don’t have to give them any more of it in the future.

Overnight success doesn’t happen in a year.
On the other hand, if grantees are respectful and wise with the handling of the funds, the default approach probably shouldn’t be one-and-out. Sourcing stable, renewable sources of capital is one of the biggest challenges for fledgling arts organizations, which is yet another reason why people with access to independent wealth have a leg up. Now, presumably after three or four years the organization will either be on the rocks or will have found other (bigger) supporters, so there should definitely be some turnover around then, but a one-time injection risks leaving the beneficiaries on no more stable footing than before.

When we left off last time, I was advocating for funding agencies to adopt a spirit of experimentation in their philanthropic strategies for the arts. However, I haven’t yet talked explicitly about an idea that goes hand-in-hand with that strategy: diversifying grants across many different (and often smaller) organizations, instead of concentrating them in a few very large ones.

It’s not that I don’t think large arts organizations do good work, or that they don’t deserve to be supported. What I’m going to argue instead is that there is a tendency among many institutional givers to direct their resources toward organizations that have well-developed support infrastructure, long histories, and vast budgets, and in a lot of ways it’s a tendency that doesn’t make much sense (or at the very least, could use some balance).

For one thing, those well-developed support infrastructures don’t come cheap. Consider the case of Carnegie Hall, which due to union constraints (the subject of a current strike over on Broadway) routinely pays its top stagehands north of $300,000 a year. The astronomical salaries that symphony orchestra conductors make (up to $2.5 million annually; and that’s not counting guest conducting gigs with other ensembles) are being paid for by someone, after all. If those kinds of numbers seem a little insane to you, well, you’re not the only one. This is one of the dirty little secrets of the arts—very few people seem to be aware that their local orchestra conductor might be making bank on par with their favorite NFL players. And yet this information is all publicly available on government forms thanks to the incomparable Guidestar. (pdfs; registration required)

An important thing to note is that the forces driving these compensation figures into the stratosphere cannot be described as “nonprofit” in any meaningful way. The labor unions, for example, are not particularly interested in giving Carnegie Hall some sort of break because of their IRS status. From their perspective, this is the top gig in town and they should be remunerated accordingly. Similarly, the conductors and soloists extracting huge appearance fees from the major orchestras are being represented by for-profit management agencies such as IMG and Columbia Artists. Another large expense for many arts organizations is the rent for their office buildings that ultimately winds up in the hands of property-owning for-profit corporations. Foundations that are truly interested in “effectiveness” should ensure they are aware of the extent to which their charitable dollars may ultimately be making rich people richer.

Those are only perhaps the most egregious examples of money ending up where it may not be doing the most public good. The administrative overhead costs of maintaining such a budget can get quite high as well. The more money that needs to be raised for the organization to maintain a certain level of operation, the more fundraising staff need to be hired to support that activity. And, of course, since fundraising professionals know damn well that their services are in demand, they know to ask for a substantial salary from an organization that clearly has the resources to give them what they want. Which they then have to figure out how to pay for by raising yet more money. Do you see how this can become an upward spiraling process?

In contrast, small arts organizations are extraordinarily frugal with their resources, precisely because they have no resources to speak of. It’s frankly amazing to me what largely unheralded art galleries, musical ensembles, theater companies, dance troupes, and performance art collectives are able accomplish with essentially nothing but passion on their side. A $5,000 contribution that would barely get you into the sixth-highest donor category at Carnegie might radically transform the livelihood of an organization like this. Suddenly, they might be able to buy some time in the recording studio, or hire an accompanist for rehearsals, or redo that floor in the lobby, or even (gasp) PAY their artists! All of which previously had seemed inconceivable because of the poverty that these organizations grapple with. Foundations concerned with “impact” should remember that it’s far easier to have a measurable effect on an organization’s effectiveness when the amount of money provided is not dwarfed by the organization’s budget.

The best part of giving more money to smaller organizations is that it actually reduces the risk for the funding agency by diversifying its portfolio. Think about it like this: if you were investing stock in each of these companies instead of grant dollars, your broker would call you crazy to divide a million dollars among four of them rather than forty, or better yet four hundred. Sure, some of them will fail, but think about the missed opportunities with the ones that succeed. To only fund the largest organizations would be akin to confining one’s endowment investments to the blue chips on the NYSE while completely ignoring emerging markets.

It seems that, as MBAs, our primary challenge will be to convince potential employers that we really do care about the mission (something that Alex Chu, the excellent MBA admissions guru, warns about as well). While respecting their acumen in operations and management and knowledge of best practices, nonprofits tend to view MBAs with some suspicion, fearing unrealistic salary demands and elitism. I suppose I don’t blame them, although it appears that this factor is greatly reduced if the applicant has previous experience working for nonprofits.

I asked James about the arts getting short shrift in umbrella nonprofit services because of their unique position in between the nonprofit and for-profit sectors. He agreed that the arts often take a back seat in donors’ hearts to priorities like education (strong #1) and the environment. Another factor he mentioned that I hadn’t really thought about is that arts organizations often have difficulty achieving a certain scale. His company, and indeed many institutions across the nonprofit sector, primarily deals with mid-size to large organizations (i.e., budgets of $1 million and above). Obviously, major symphony orchestras and art museums clear this hurdle easily, but the great majority of the arts organizations out there slip under the radar.

Apparently, though, there are some risks being taken by venture philanthropy firms. Venture philanthropy has redefined expectations around management and social return on investment, making it “okay” to invest in infrastructure, for example. I know very little about this field, but what I’ve read so far has me very intrigued. I’ll be exploring some of these ideas as they relate to the arts in future posts.