Mixed Nuts: A Case Against Mergers

Andrew Taylor, Director of the Bolz Center for Arts Administration, an MBA degree program and research center in the University of Wisconsin-Madison School of Business, and long time arts blogging colleague posted a fascinating piece on May 7th that examines the potential for mergers in the nonprofit world. It focuses on mergers throughout the broader nonprofit world but when it comes to performing arts organizations, mergers are rarely a good idea…

dont do it!Back in March, 2005 we examined the results of one of the larger performing arts mergers in recent years between the Utah Symphony and Utah Opera. Ostensibly, that merger failed to produce the benefits of combined resources and seemingly similar missions to anticipated levels and instead produced larger economic and artistic challenges that ended up consuming even more capital.

In Andrew’s post, he quotes Kennedy Center commander-in-chief, Michael Kaiser espousing alternatives to mergers:

“The amount of time, energy, and focus it takes, it takes energy away from the kinds of activities that I think really help to create health for an organizations. I’m more interested in joint venturing and sharing certain costs than I am about merging corporate entities.”

Kaiser couldn’t offer better advice. In fact, I have a current set of clients that are considering similar issues and much of my initial work has been related to providing examples demonstrating that combined resources do not always produce maximized results. During a time when some communities are experiencing economic troubles, we all need to be on guard against the lure of false security that typically rests at the heart of most merger discussions. As an alternative, directing those same efforts toward refining internal efficiency and focusing on core mission goals.

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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6 thoughts on “Mixed Nuts: A Case Against Mergers

  1. An interesting article that hits home for me as a member of the Arizona Opera — in the same city as the Phoenix Symphony.

    This, in combination with an extensive commentary from Bruce Ridge posted on AFM Observer have raised valid concerns in my mind over what amounts to a zero-sum game.

    Aside from the financial issues noted here, these mergers pit musician against musician in order to save one institution. It amounts to, as Mr. Ridge calls it, wedge politics.

    From his post:

    “It is the willingness of musicians and their representatives to indulge in the toxic practice of wedge politics in pursuit of declining revenues and political power. By attempting to argue that the division is one between full-timers and part-timers, the advocates for this idea perpetuate the real problem and attempt to paper over their own destructive role in it.”

    These are desperate times for many arts institutions. Yet there can be a fine line between fighting to survive and being predatory towards other institutions in that pursuit.

    The complete article is here

  2. Well, now that I think about it, the beginning IS a very good place to start. The beginning wasn’t nearly as complex as what came later; and, examining some things from back then can shed some meaningful light in places that could use some light.

    I would agree that various forms of joint ventures may, in cases, be part of an effective new strategy for arts organizations in their attempts to hash out a new business model for the 21st century. The keyword here is ‘strategy.’

    In the case of the Utah Symphony and Opera merger, it is notable that, at its inception, this merger was not a ‘strategy’ (an overall campaign plan towards an objective), but rather a ‘tactic’ (the means used to gain an objective).

    In our case, the strategy to save the Symphony was, quite simply, to hire our former CEO, hand her the keys to the car and tell her to ‘work her magic.’ The merger was thus a tactic, a carrot if you will, to lure her by making the job BIG enough to attract her here. One of the Board members who originally crafted the merger idea even said as much, on the record, to the Deseret News.

    Which is why, when trying to sell the players on the idea of the merger, this same Board member was completely stumped when asked the question of whether there was an exit strategy if the merger went sour. Of-course they had no exit strategy from the merger as the merger was a never a strategy to begin with. Hiring the perspective CEO was THE STRATEGY.

    However, it certainly was spun to the players and to the community as a strategy. Much like the Government’s decision to go to war with Iraq, the decision to merge was made 1st and the spin to sell the idea came later — in the form of the usual yada yada of the potential savings and benefits of combined resources and elimination of overlap. We’ve heard it all before.

    So, before other arts organizations simply jump on the old “urge to merge” bandwagon, it behooves those Managers and Board members to first simply ask themselves precisely WHY they feel said urge, plus how such a venture fits into their longer range objectives. Had our Board at the time taken the time to consider this route, we might not be so entangled in our current situation.

    george brown
    utah symphony/ICSOM

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