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Leading For the Future: An Interview with Steppenwolf Theatre Company
Thu, 06/02/2011 - 1:24pm
Andrew Schwalm

Last week, we published a series of documents stemming from the early results of our Leading For the Future initiative, funded by Doris Duke Charitable Foundation.  You can download the Case for Change Capital in the Arts here and the companion document, Financial Reporting Done Right, right here.  Together they showcase the lessons of the work done so far and provide a road map for foundations and their grantees who might like to put some of the lessons into practice themselves.  The Case for Change Capital in the Arts made Nell Edgington's 10 Great Social Innovation Reads for May and got a thorough airing on Andrew Taylor's Artful Manager blog as well.   

In late April, we gathered the participants in the initiative together in New York City to talk about how their capitalization experiments are going.  We had a chance to interview two of the organizations in greater depth.  Earlier this week, we posted Rebecca Thomas' interview with Charles Dillingham of Center Theatre Group.   Below, you'll find Rodney Christopher's interview with Polly Carl and Martha Lavey of Steppenwolf Theatre Company who share how they've invested their change capital over the last two years.  

 

Arts, capitalization, change capital, Doris Duke Charitable Foundation, Leading for the Future
Leading For the Future: An Interview with Center Theatre Group
Tue, 05/31/2011 - 10:55am
Andrew Schwalm

Last week, we announced a new series of publications laying out an approach to providing and accounting for influxes of capital in nonprofit organizations, with a particular focus on arts organizations.  The publications stem from early results we're seeing from a five-year initiative called Leading For the Future, which we've undertaken with support from the Doris Duke Charitable Foundation. (Read more about it and download those publications here!)  In April, we held a gathering of the arts organizations participating in the initiative, and we had a chance to talk to two of the groups, Steppenwolf Theatre Company and Center Theatre Group.  Below is the interview our Rebecca Thomas did with Charles Dillingham of Center Theatre Group:  

Arts, capitalization, change capital, Doris Duke Charitable Foundation, Leading for the Future
The Case for Change Capital in the Arts: New Publication Series
Wed, 05/25/2011 - 1:40pm
Rebecca Thomas

Nonprofits need capital to plan for and invest in strategies that will help them prepare for future growth and make changes to the way they operate. They also need reliable and recurring revenue to sustain themselves year in and year out after the change has happened.

Through our Leading for the Future Initiative, Nonprofit Finance Fund is directing more than $10 million of a specific kind of capital -- change capital -- to ten performing arts organizations* that are adapting their programming, operations and finances to ensure long-term health and vibrancy.

With funding from the Doris Duke Charitable Foundation, these ten nonprofits are working with NFF over five years to develop and implement plans for achieving this transformation. The goal is to provide these organizations with the flexibility to test new ideas, explore new business approaches, resist distraction, and even risk failure. While each participant is investing its capital differently, all seek to reaffirm the value of their art, while increasing reliable net revenue and building more liquid and adaptable capital structures.

NFF is excited to share with our readers and clients a series of new publications on the need for and uses of capital in the arts. The written and video materials convey stories and lessons learned from the Initiative thus far. Nearly three years into the program, we now have much to share with the field, both funders and nonprofits alike.

Please check out our new publications:

1. The Case for Change Capital in the Arts shares the philosophy governing the Leading for the Future Initiative and discusses the need for and application of change capital in the arts. It also outlines core principles and practices that can improve capitalization in the sector but that will require changes in behavior by both nonprofits and funders alike. The piece tells how each of the participating organizations is applying change capital to undertake meaningful artistic, organizational and financial change.

2. Financial Reporting Done Right introduces a new way of financial reporting that improves transparency around how organizations manage their capital resources. While conventional accounting and reporting treat capital and revenue in the same way, NFF recommends that nonprofits make straightforward adjustments for capital that better reveal their true operating performance and progress.

3. Change Capital in Action: Hear how three organizations are applying change capital to realize their artistic and organizational ambitions! Center Theatre Group, National Black Arts Festival and Steppenwolf Theatre Company share their stories in these short videos.

NFF has long advocated for greater access to capital for nonprofits, particularly as they invest in growth or change. We’re excited to share these real-life examples of change capital in action in the arts. To learn more about the Initiative, please check out our other recent writings:

Envisioning Success: How Funders and Nonprofits Can Lead for the Future

Chronicle of Philanthropy: Four-part Interview Series with Ben Cameron, Program Director for the Arts at Doris Duke Charitable Foundation

* Participants in the LFF Initiative include :

Alvin Ailey Dance Foundation, New York, NY
Center Theatre Group, Los Angeles, CA
Cunningham Dance Foundation, New York, NY 
Jacob's Pillow Dance, Becket, MA 
Misnomer Dance Theater, New York, NY 
National Black Arts Festival, Atlanta, GA
Ping Chong & Company, New York, NY
SITI Company, New York, NY 
Steppenwolf Theatre Company, Chicago, IL 
The Wooster Group, New York, NY

Arts, arts capitalization, Case for Capital, change capital, Doris Duke Charitable Foundation, Leading for the Future
Envisioning Success: How Funders and Nonprofits Can Lead for the Future
Mon, 05/09/2011 - 11:18am
Rebecca Thomas

Ten artistically excellent performing arts organizations* gathered in New York at the end of April to discuss how each is applying $1 million of change capital to adapt their art, operations and finances in ways that contribute to long-term viability and vibrancy.  The event was the second annual convening of the Leading for the Future Initiative, a five-year investment program managed by NFF and supported by the Doris Duke Charitable Foundation.  Over two days, the organizations participating in the Initiative shared the lessons they’ve learned and the obstacles they’ve overcome as each seeks to refresh or reconfigure its business models to advance artistic goals.

During the convening, we engaged in candid discussions about what “success” in the arts sector might look like, exploring the roles both funders and organizations can play.  The takeaways from these conversations have application for funders and nonprofits alike, regardless of nonprofit sector.  Here are some of the ways the groups envision success: 

  1. More organizations would budget and manage to surplus, strengthening their business models and balance sheets. Strong finances would be recognized by funders and nonprofits alike as critical to long-term artistic success. As one participant in the convening noted, almost all nonprofit organizations subsist on “a starvation diet” and need encouragement to establish reality-based annual operating budgets.  
  2. Nonprofits would have greater access to a) multi-year, more flexible revenue at the enterprise level, and b) periodic capital to make artistic and organizational change. Organizations most value and need general operating support, which provides management with the ultimate discretion while contributing to the coverage of full annual operating costs.  Nonprofits also require sizeable and episodic infusions of change capital –which is distinct from revenue– to cover the temporary deficits and/or exceptional expenditures they may incur as they invest in new infrastructure, adjust or improve programming, realize efficiencies, and recover from inevitable setbacks along the way.
Read More
Arts, Case for Capital, Doris Duke Charitable Foundation, Leading for the Future
Reliable Revenue: Waiting for Godot?
Tue, 01/25/2011 - 12:15pm
Rebecca Thomas

In her new blog for Arts Journal, Diane Ragsdale (formerly of the Andrew W. Mellon Foundation) comments about the predictability of revenue in the cultural sector. She points to a comment by our own Clara Miller who once provocatively spoke about the singular sound business model as being the one characterized by reliable revenue that meets or exceeds expenses.

Diane asks in her post whether, in this environment, any revenue sources are reliable for nonprofit arts organizations –and if not, whether and how the business model (and our assumptions about it) may be broken. We’ve been asking ourselves some of the same questions here at NFF as we invest $10 million of “change capital,” provided by the Doris Duke Charitable Foundation, into ten leading arts organizations. These groups are using our funds to change their business models in ways that are more responsive to what audiences want and the economy can support. One of the goals of the program is to help our cultural partners invest this capital strategically.

For some, that means improving their revenue-generating infrastructure and capabilities so that the combination of earned and contributed income is indeed more dependable year to year. For others, it means restructuring their activities to bring costs better into line with market realities. After all, waiting for reliable revenue in this environment can often seem like waiting for Godot!

NFF’s “working definition” of reliable revenue follows. We’d welcome your feedback!

reliable revenue: an estimate of the amounts of earned and contributed revenue with a track record of recurrence.
For example, the amounts of ticket sales, memberships or tuition income that have been raised consistently over three to five years. In the case of contributed support, securing reliable revenue typically requires having development staff who have a history of bringing in institutional and individual support year after year. In estimating future reliable revenue, it may be advisable to apply a discount or take an average of historical performance while making a realistic assessment of the environment going forward. For example, if your organization has brought in $100-$125K of earned revenue from ticket sales in each of the past three years and anticipates a tough economic year ahead, a “reliable” amount may be $80K.

NFF’s experience suggests that more cultural organizations need access to change capital. These periodic, sizeable infusions of funds (not to be confused with regular revenue) can be deployed to make organizational adjustments that are more likely to lead to dependable revenue streams. Some examples of how change capital can be used include: hiring additional and more effective development staff, investing in relevant and robust marketing efforts, and/or retooling programming in ways that are more culturally relevant.

Further, arts organizations need capital not just to build their revenue “engines” for the future but also to better align their costs with demand and to build sufficient liquidity for those times when revenue will indeed be less reliable. Of course, there are always risks involved in selecting effective and viable strategies for change.

Finding sources of change capital won’t be easy, but the business models of the future may depend on it.

Arts, change capital, culture, Doris Duke Charitable Foundation, Leading for the Future, LFF, reliable revenue

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