Social Currency

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.
3. This capital would provide organizations with greater artistic freedom to take risks. The capacity to be nimble when creating new programming streams or responding to environmental shifts is essential. Capital provides organizations with the flexibility to take organizational risk. One of our participants noted that this kind of capital permits experimentation, while still protecting what’s core. Another shared how access to capital has allowed his organization to turn away funds that took management off mission or off course.
4. Individual donors and boards of directors would be increasingly a part of the capital conversation. While acknowledging the important role individuals can play in providing recurring, unrestricted revenue to support existing programs, participants in the Initiative also agree on the need for language and tools that contribute to instilling an investment mindset among major donors who represent a largely untapped source of change and risk capital.
5. Funders would lower the transaction and stewardship costs associated with fundraising (increasing the “net grant”), allowing grantees to spend more time creating and delivering their work. Funders would make the applying and reporting processes for their grants less onerous, thereby reducing the administrative burden on nonprofit grantees.  They would streamline the grant making application and make the reporting requirements commensurate to the size of the grant.
6. Organizations would explore new sizes, structures and approaches to delivering their mission, while simultaneously ensuring that expenses are brought into better alignment with recurring revenue. They would focus on mission-related activities and continuously evaluate and re-evaluate to determine “right-size.”  They would recognize that “one size does not fit all” and that adaptability done right takes time, can be expensive and ultimately, requires annual net revenue to be sustained. 
7. The field would have more refined ways of measuring and communicating effectiveness. Outcome metrics are critical to any assessment of a grant's effectiveness. But how do we embrace and quantify such un-tangibles as "knowledge capital," community relevance and—in the case of cultural organizations— “artistic surpluses”? 

These were only a few of the many highlights of our dynamic two-day conversation. To learn more about the Leading for the Future Initiative, please revisit the Social Currency blog later this month when we release our new publication: The Case for Change Capital in the Arts.

* 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