(Really) Long Term Planning

Undergoing long term planning sessions are all the rage today with orchestra managers.  Attempts to go beyond creating three to six year plans are becoming more common.  The Saint Paul Chamber Orchestra even decided to create a 10-30 year plan complete with their own unique “Big, Hairy, Audacious Goals” (go to page 10 of the document).

But what about really long term planning, say 50-100 years form now, is it worthwhile to think that far into the future?  Most of the discussions I’m familiar with along these lines approach the realm of being esoteric; “Will there even be orchestras playing classical music that far into the future?”

I do think it’s a worthwhile topic of discussion and one that should be taken seriously from a structural standpoint for all symphony orchestras.

To help understand the topic, it helps to look at where we are now and where we’ve come from.  Currently, there are two major challenges that threaten the status quo of orchestral classical music: money and audience development.

The industry is coming up short on cash and is desperately fighting to slow down and reverse the decline in attendance numbers.  Some of the solutions are working, others aren’t but what I don’t see happening is anyone sitting down to think about what could have been done to prevent the current problems. 

Playing “what if” scenarios are not always a waste of time.  Quite often, they’ll allow an organization to find solutions to their problems that have, in fact, been in front of their face the entire time.

Yes, managers across the board, including former Chicago Symphony president Henry Fogel, have all admitted that they shouldn’t have been spending so much money during the fat years of the late 90’s up through 2001, but that’s just a common sense evaluation. It would be more productive to use 20/20 hindsight to see if there was a better way which could have insulated the industry from the current round of economic trouble.

For example, the industry can owe many of its financial woes to the earned income gap, or the amount of money they need to pay for all of their bills above and beyond what they earn from selling their product and services (giving concerts and making recordings).

The average percent of budget covered by earned income for all ICSOM orchestras is 46% and for ROPA’s it’s slightly lower at 40%.  So that means most orchestras out there don’t earn enough money from creating a product to cover even half of their obligated debts.

That earned income gap is filled by annual funding from corporate, government, and private philanthropic sources as well as investment income from endowments.

If we look back into the industry’s past we can find the point in time where this gap started to become a major issue. 

In the early 1960’s when musicians won the legal right to represent themselves in their own contract negotiations, orchestra budgets began to grow at a much faster rate then previously experienced.  As a result the earned income gap began to grow beyond a point where conventional wisdom was able to effectively deal with it. 

By the 1970’s many large foundations, such as the Ford Foundation, stepped up to help stabilize American orchestras by assisting them with creating endowments and offering operational support to begin filling that gap.

Although this was a wonderful occurrence, it was always a reaction to a need, so much as an anticipatory notion.  Orchestras needed a lot more money and the new large endowments allowed them to create a new revenue stream to match the rise in expenses.

What if managers 30-40 yeas ago were forward thinking enough to realize they might need to create a revenue stream outside of earned income large enough to subsidize all but 10% of the earned income gap and perpetuate an orchestra almost indefinitely?

I invite you to return for tomorrow’s article which will examine an imaginary historical scenario called “The BIG Endowment”.  We’ll then examine whether or not this scenario might supply a possible answer to the long term problems facing the industry today.

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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