Wednesday, February 16, 2011

Cutting off Our Noses to Kill the Golden-Egg-Laying Goose

The President’s 2012 budget axe fell earlier this week and the results weren’t pretty. He recommended a nearly 13% cut to both the National Endowments for the Arts (NEA) and Humanities (NEH) and one would be hard-pressed to find a better way to describe this recommendation than the title of this post.

First, even here in Vermont, it is generally acknowledged that Vermont's investment in the Arts is so small that were it to be reduced to zero, there would be a negligible reduction in expense side of the State’s ledger. But, oh my, what such a step would mean on the income side!

At the Federal level, this impact is even more negligible.  Of the US's current $3.8 Trillion(!) budget, the NEA’s appropriation of $167.5 million represents just under 44/10,000ths of one percent.  That’s right: .0000438 of the total $3,819,000,000,000. The cut proposed by the President would reduce that figure to 39/10,000ths of a percent. As a manager, I consider a figure that much less than one percent to not even rise to the level of a rounding error.

To help people visualize what this means by comparison, I offer the following:

If the Federal Budget represented the total mileage between, say, Montpelier and Bennington (a distance of 121 miles), the distance one could travel on just the NEA’s portion of that “budget” would be slightly less than 25 feet.

If the Federal  Budget represented the 542 miles from my office at 136 State Street in Montpelier to the US Capitol Building on the National Mall (542 miles, according to Mapquest), the distance I could travel on the NEA’s portion of that “budget” would be 111.5 feet—or about halfway from our front door to the corner of State Street and Bailey Avenue.

For those of you who like temporal comparisons here are two that will make you sit up and take note:

If the Federal Budget represented the 18 hours, 20 minutes you might spend watching all the films directed by James Cameron in one sitting, including “Piranha II”, (and who among us wouldn't want that?), the amount of time you would have to suffer due to the “NEA’s Portion” of that experience would be 2.6 seconds.  That’s barely enough time to take a swig of your medium Sierra Mist, no ice!

If the Federal Budget represented an eight-hour school day, and the NEA’s portion was devoted to Art Class?  Hang on to your seats, people, you only have 1.1 seconds to paint, act, dance, or tickle (the ivories).

Saving 12.8% of nothing will result in saving...umm...nothing!

Doug Hoffer’s report (discussed at length in an earlier post), on the other hand reveals that, with very little marketing and promotional support from State agencies, the nonprofit arts sector (arts organizations and individual artists) provide nearly $19.5 million to State and local government coffers.  State and local investment in the arts here in Vermont is generously estimated to be $2.5 million.  That’s an “ROI” each year of 775%.

So, for the sake of argument, I asked: what if the expected ROI for the US was the equal to the ROI for Vermont? Or, phrased more clearly, what is 775% of $167.5 million? 

(Drum roll please) 

$1.298 billion...or about 6/10ths of one percent of total US receipts for 2011.  By my figuring, if the President reduces the NEA’s budget to $146.3 million, it will lower receipts to $1.133 billion (146.3 x 775%).  That’s a difference of $165 million dollars $1.298-$1.133).  So cutting about $23 million from the NEA’s budget will reduce US revenues by an amount equivalent to the total current cost of funding the NEA!

The concept that the President has not yet figured out is that the NEA and its sister agencies more than pay for themselves every year in tax receipts paid by people whose jobs depend on a healthy arts and humanities infrastructure.  No, I’m not just talking about artists, administrators, lecturers, teachers, and the like…I’m also talking about the restaurateurs, the owners of B&Bs and hotels, wedding industry professionals, and anyone else whose jobs depend on quality of life, integrity/authenticity of experience, quality of education and workforce preparation. 

It seems to me the President should increase these budgets, not decrease them.  More importantly, if the Republicans in the House who are insisting on even more draconian cuts are really serious about job growth and income generation, they might want to rethink their absurd strategy of cutting the NEA even more than the President.

You hear it here often…the arts exist on the income side of the public ledger, not the expense side.  A thriving arts sector will always generate a lot more money for governments than it will spend.  From our largest cities to our smallest villages this has proven true again and again and again.  So I would suggest that if your representative is only paying attention to the expense side of the Federal budget, (s)he's doing only half his/er job. And if he or she is one of the ones who wants to eliminate the NEA, an agency that has proven, year in and year out to lay golden egg after golden egg...well!..

...there's gotta be a face-spiting, bathwater-throwing, mixed metaphor in there somewhere.

Please, will someone tell the President and the House of Representatives?

Tuesday, February 1, 2011

Three (types of) Questions All Board-candidates Should Ask...

...and Trustees/Staff should know the answers to.

A colleague was recently about to interview for a board-candidate slot at a local arts organization and wondered what kinds of questions she should ask of other trustees and staff when she met with them.  I suggested a few basic questions and then realized this was a topic that probably a lot of people either never think to explore or, if they do, are a little embarrassed to bring up for fear of insulting the organization that’s considering them for Board service. 

Since good Board service is so integral to the health of any nonprofit, it is incumbent on trustees and candidates to seek answers to these questions and, more importantly, to insist that answers be full and forthcoming.  Only when you know what you’re dealing with is it possible to move an organization forward. 

So here is my list of some basic questions that all trustees should ask, and all organizations should be prepared to answer, broken out into three categories:

Questions Trustee Candidates Should Always Explore

Financial Questions:
·         Of the total revenue, what percentage is contributed every year?
·         What portion of contributed income is expected to be raised by the board directly?
·         What portion is expected to be contributed personally by each board member (on average)?
·         What portion is expected to be raised by the board in conjunction with staff?
·         How much contributed income is staff expected to generate (applying for grants, etc.)?
·         What are the most effective ways that the organization has found to raise money?
·         What is a “significant” gift to the organization; i.e. at what amount is the red carpet rolled out and a special party thrown? (If it’s less than $1000, ugh.)
·         And the corollary question: If a “significant” gift turns out to be less than $1,000 how is that gift recognized?
·         What, if any financial relationships are there between the organization and other collaborators? How are these managed?  Are the collaborative goals and expectations in writing?

Governance Questions:
·         What is the mission of the organization?  (You’d be surprised how often other trustees and staff hem and haw over this one!)
·         What is the committee structure of the board and who reports to whom and with what frequency?
·         To what degree are trustees allowed to be consulted in program planning?  Related to this, how much direct participation does the staff want/expect from the board? How much does the Board expect/want to have?
·         How often is the strategic plan revisited during the course of the implementation cycle?  (In other words, if it’s a 3-year plan, there should be three annual work plans developed by staff and endorsed by the board, each of which is closely reviewed twice a year during a board meeting: the first time to review last year’s progress and lay out the coming year’s expectations at the beginning of the fiscal year; the second time at mid-year to review ytd progress against the stated goals and to reflect changes in opportunities and circumstances.)
·         Does the Executive Director receive an annual review by the board?  If so, how?  If not, why?
·         What are the top five most critical issues facing the organization?  Or, put another way, has the organization engaged a third party to develop a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for itself going forward through the next few years?  What has it revealed?

Communications and Marketing Questions:
·         How and how often does staff report to the board on its activities?
·         Does the board have a means to communicate among its own members without staff present?
·         Are board meetings generally policy/planning discussions; or are they generally reports on progress from staff to board?
·         How effectively are listservs, website, and social marketing tools being used to communicate between the board and staff?
·         How often does the board meet and does it make (effective) use of its committees?

·         Who or what is your primary constituency?  Does the organization have more than one?
·         What is the relationship of the organization to the local print and broadcast media?  Who manages those relationships?
·         How much information is conveyed “traditionally” (print, broadcast, paid advertising, direct mail) and how much is conveyed electronically (email, listserv, web forms, social media like Facebook, Twitter, MySpace, etc.)?
·         Are your various e-communications linked to each other and do they drive people to your website?
·         What does your website’s home page ask someone who lands on it to consider doing?
·         What does your Executive Director WANT someone to do when he/she lands on the website’s home page?
·         How competent is staff at web “content management;” is it able to respond to the ever-changing appetites of your audience on your website or does it need training?  (If staff is not managing the website’s content, this might be an area worth spending money on immediately to lower the external costs of managing the site’s content).

Some of these questions are best asked of other trustees, but some really need to be asked of staff.  Remember, as a trustee, you will have a "fiduciary responsibility” for the organization.  Don’t be shy about asking these questions, don't forget to leave the interview with a copy of the organizations' most recent audit in your hands, and if the answers you are given are unsatisfactory, you should seriously consider not joining the board, or doing so conditionally.  Remember, no matter how heart-warming and stirring the mission of the organization is, if it is managed poorly or if the board lacks commitment to the mission, it's going to be very hard to serve on its board.

Please share questions YOU have found valuable to ask as a potential trustee!