Eastman Students Negotiate Their Future Part 1

Last Monday, September 27th, 2004 I had the honor of serving as a guest speaker for the “Realities of Orchestral Life” course offered by Eastman School of Music’s Institute for Music Leadership.

I had a wonderful time working with the students and was an honor to open their minds to issues they may not have previously considered.  Collectively, they were sharp, engaging, and participated actively in the lecture and interactive portion of the class, titled “Negotiating Your Future”

Some Background

On Tuesday, September 21st, 2004 I published an article which outlined the financial history for the fictional “Sim Orchestra” the students were members of as well as detailing the issues we would be negotiating.  This information was distributed to the students in advance so their designated negotiation committee could survey their peer musicians (classmates) and determine their negotiation strategy.

The class enrollment was 24 and five students were selected to be on the negotiation committee by the course instructor, Professor Ray Ricker.  Of those five selected, three were designated to represent full time “A contract” players and two were designated to represent part time “B contract” players:

  • “A contract” representative: Sebastian Kroll, trumpet – chairman
  • “A contract” representative: Antonio Haynes, tuba
  • “A contract” representative: Chun Chim (David) Leeung, violin
  • “B contract” representative: Helen Bravenec, violin
  • “B contract” representative: Sarah McKittrick, bassoon

Before the class began the negotiation committee attempted to poll their fellow musicians personally since the majority of them had not bothered to fill out or return the  Player Surveys (not unlike real life).  By the time class started at 6:00PM, the negotiation committee compiled the following information:

eastman-respondents1

 

eastman-survey-question-11

eastman-survey-question-21

eastman-survey-question-31

eastman-survey-question-41

eastman-survey-question-51

eastman-survey-question-61

 

 


Based on those results, the players felt strongest about issues related to:

  • maintaining/increasing their benefits
  • retaining/increasing the number of “A contract players”
  • keeping the length of their season the same

The Surprise

Life just isn’t fair. And my intention was to establish that fact as much as possible during this class.  Among the seven year historical financial data distributed to the students, the final season contained projected financial results.

The interactive mock negotiation was scheduled to take place after the class break, but ten minutes before that I presented the\ students with the Sim Orchestra’s actual financial results.  Chart A details how the numbers came in well below the projected figures management initially supplied to the players.

Chart A: Sim Orchestra Season

03-04 Projected

03-04 Actual

Full Time Players (A contract)

50

50

Per Service Players (B contract)

25

25

FT Base Salary

$22,895

$22,895

PS Base Salary

$12,754

$12,754

Season Length – A Contract

35 weeks

35 weeks

Guaranteed Services Per Year

189

189

Medical Insurance Paid By Employer

80%

80%

Dental Insurance Paid By Employer

50%

50%

Pension Plan Employer Matching contributions

4%

4%

Annual Budget

$5,684,588

$5,684,588

Annual Revenue

$5,750,000

$4,766,834

% Of Budget Derived From Earned Income

48%

29%

Annual Surplus/Deficit

$65,412

($917,754)

Accumulated Surplus/Deficit

($39,645)

($957,399)

Endowment

$6,985,455

$6,988,232

% Of Budget Paid To Musicians

45%

45%

Artistic Expenses

$2,589,026

$2,589,026

Operational Expenses

$3,095,568

$3,095,568


Obviously, the Sim Orchestra is in some big trouble; they’ve run up a 16% season deficit.

The New Deal

But wait, the orchestra’s board and management (represented by yours truly) have created a three year plan for recovery which was presented to the musicians immediately after the news about the actual year end finances:

After a thorough audit and review of current and historical financial information, the board has determined that in order to prevent bankruptcy, significant changes will need to occur in the upcoming contract.  As a result, it is necessary to make corrections to the upcoming collective bargaining agreement so that we adjust annual expenses by $2,184,588. As a result:

  • Our expenditures will remain consistent with what our community can support.
  • Our artistic achievement remains at its current high level.
  • We maximize revenue by using a flexible business model which better manages our cash flow on a monthly basis.

The management then presented the musicians with three separate options designed to reduce the annual expenses by the necessary $2,184,588 as well as produce a yearly surplus that would allow the accumulated deficit to be paid off in three years.  Each option carried a different amount of risk:

eastman-pick-poison

 

All proposals:

  • Adjust expenditures to address structural deficit.
  • Provide for a flexible, automatically renewable 1 year contract.

Proposal #1 – Moderate Risk

  • Will require adjustments in artistic expenses by $1,189,026.
  • $777,310 in adjustment are from the musicians and $411,716 from other artistic expenses.
  • No change in Medical, Dental, and Pension contributions remain consistent.
  • No service guarantee for per service players and a reduction of full time positions.
  • Length of season reduced by 20%.

Proposal #2 – Low Risk

  • Will require adjustments in artistic expenses by $1,189,026.
  • $1,019,700 in adjustment are from the musicians and $169,326 from other artistic expenses.
  • No employer contributions to Medical, Dental, and pension plans.
  • Per service positions expanded to 50 with a minimum service guarantee of 75 and a reduction of full time positions.
  • Length of season reduced by 20%

Proposal #3 – High Risk

  • Will require adjustments in artistic expenses by $1,189,026.
  • $660,650 in adjustment are from the musicians and $528,376 from other artistic expenses.
  • Reduced employer contributions to Medical, Dental, plans, and pension plans contributions unchanged.
  • Per service positions expanded to 43 with a minimum service guarantee of 150 and a reduction of full time positions.
  • Length of season reduced by 15%

At this point the class came to a halt to take a scheduled break, as will this first installment.

I invite you to return tomorrow where the “Games Will Begin” as the students recover from the shell shock of the new information and prepare to begin the mock negotiation.

Postscript: The financial information for the fictional “Sim Orchestra” isn’t really all that fictional. It’s an amalgamation of information from several very real orchestras and the similar situations they have faced in the recent past.

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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