Creating, Managing and Presenting the Arts

Abstract

This article will explore how creative arts organizations can effectively manage their businesses, especially in the nonprofit sector. There will be an examination of how marketing, management, labor relations and funding factors influence the operation of these organizations. In addition, the issue of risk management for the creative arts will be discussed as well as the complexities in arts funding which have placed increasing demands upon arts managers. To help tackle such risks and complexities and ensure a viable future for the arts, many institutions have created graduate arts management programs.

Overview

Art is a tricky commodity to promote. Although art plays a significant role in educating society on cultural issues, it is not a product that generates large amounts of revenue. “The production of art [became] an international multi-billion dollar industry during the twentieth century” (Kjorkegren, 1993, p. 1). Nonetheless, according to Kjorkegren (1993), most organizations do not make money from the arts, most art initiatives fail, and few yield a profit.

Given the dynamics, many view the art industry as unpredictable. It is difficult to determine which products will be successful because it is not easy to predict the market response. Demographics are other factors that should be considered in marketing campaigns for art. Times are changing and arts managers must make sure that they create programs that appeal to a diverse population. According to the US Census Bureau (2015), the US population is expected to become majority minority by 2044, meaning that ethnic and racial minority groups will comprise more than half of the nation’s population by midcentury. These variables, along with the fact that Americans are better educated than before, create a need for a different type of event programming. “The market response to art products is also influenced by the act of consumption, since art-producing organizations sell potential meanings rather than finished products” (Kjorkegren, 1993, p. 3). The success of art is determined by how well it is accepted by the target markets. If the product develops into a popular brand, the chances of its success increase as it establishes itself in the minds of potential consumers.

Funding is another concern for arts managers. Over the years, there has been a decline in contributions to the arts. Many organizations have seen a decline in National Endowment for the Arts (NEA) grants as well as a reduction in corporate funding of the arts. Since funding is not coming from the traditional sources, “art organizations will need to increase earned income from audiences and visitors” (Holtzman, 2000, p. 32). New strategies will need to be developed in order to address the changes that are occurring in the arts industry.

Strategies. In order to meet the challenge of managing the unpredictability of the market, Bourdieu (1977) suggests two different business strategies — cultural and commercial. A cultural business strategy is a long term approach, and is driven on the artist’s terms. Organizations that prescribe to this type of strategy tend to spend more time and money on developing artists and hoping that their efforts will help the artists to become successful. On the other hand, if an organization elects to pursue a commercial strategy, the art product is driven based on the market’s terms. This strategy promotes controlling the supply, limiting the amount of the product that is given to the market, and obtaining a rapid return on investment by implementing a strong marketing initiative. Organizations have to decide which approach has the best fit with their mission and vision.

Management. There has been much change in the way organizations conduct their business. “As the non-profit community progresses from founder-dominated to professionally managed institutions, there has been increased emphasis placed on utilizing strategic planning” (Holtzman, 2000, p. 32). Many have concluded that they will need to make changes to their operational practices in order to survive. The first area that an organization should tackle is the management team and structure. Every organization needs a visionary who embraces the need to change at different phases in the life of a company. The leader is the person who has to persuade employees, the board, and other stakeholders of the need to change. It’s important that all of these groups support the change initiative and work together to improve the organization. One way to ensure success is to develop a viable strategic plan. Holtzman (2000) makes some recommendations on how to get off to a good start, and these steps include:

• Before a retreat, perform a situational analysis which defines the issues.
• This step should include developing an understanding of the needs, desires, and innovations of the constituents as well as an understanding of the competition. Many nonprofit organizations tend to overlook analyzing the competition, but it is important to know what the competition is doing and what your organization is good at doing (i.e. niche or unique selling points).
• Mission definition and objective and strategy development.
• Select the best people in the organization to be a part of the initial exploration team. These individuals should be open to change management.
• Build your team.
• Once the exploration team has been established, there should be a campaign to include others to participate in the process. Each organization wants to make sure that they avoid group think. The team should not become an “inbred” group, and there have to be members who will not always go along with the popular point of view. Diversity in the skills and opinions of the team members is essential.
• Determine the obstacles to change within the organization.
• It is important to determine where the team expects resistance to come from. There may be people and processes in the current structure that will not support a change initiative. The team must develop strategies to deal with these obstacles.
• Determine an action plan that contains deadlines and responsibilities.
• Although the planning process is important, the team wants to make sure it can show progress. There has to be a beginning and end. In order to get from one point to the other, the team will need to establish an agreement that is supported by all members. The agreement should list the roles, responsibilities and deadline dates for all of the tasks required to implement the plan.
• Gain the support of the board and other stakeholders
• Everyone has to be on the same page and support the initiative. It is important to get buy-in from all stakeholders. Otherwise, the project may fail before it starts.
• Monthly review of action plan progress.
• In order to build momentum, it is important to provide feedback at different intervals of the project. Members will need to know if they should continue as planned or tweak different parts of the plan.

Role of Unions. It has been established that most art products do not produce a profit. One reason is that many nonprofit organizations have a hard time balancing their art and business (Richardson, 2006). This creates a problem for those that are employed in these organizations. Most employees who work in the performing arts industry tend to belong to a union. Unions are responsible for representing these employees and looking out for their best interests. Unions make sure their constituents receive a decent salary on the designated pay dates. As with any organization, payroll is usually the largest item in the budget. If the budget falls short, there may not be sufficient funds to make payroll.

Given the nature of the business, “unions have penetrated more deeply into the management of artistic enterprises than is typically the case for unions in manufacturing and other profit-making sectors, and they are responsible for determining the availability, quality and charter of artistic performances” (Kleingartner & Lloyd, 1972, p. 128). In summary, unions have a lot of power in the art world. Not only do they have a strong voice in setting wages, but they also have some control over the quality of performances since they are responsible for getting the right performers for the available work. Therefore, it is important for struggling artistic organizations to develop a partnership with unions so that they have the available personnel to complete the necessary work for a project. It is also important for the organizations to keep the unions abreast of financial issues.

Funding. Studies indicate that up to 70 percent of Americans believed that most charitable organizations misspent and mismanaged their funds (Pallotta, 2012). Many people do not believe that nonprofits are held accountable for how their operations are run. The media became part of the equation as they made attempts to expose organizations that were guilty of mismanagement. In order to get past this obstacle, organizations have the opportunity to implement a funding strategy based on two different perspectives.

Internal perspective. An organization can conduct a self audit and develop a plan that can turn the situation around. The arts managers can select a team of different stakeholders who will assist them with analyzing the situation. One recommendation would be a process that has been utilized. Holtzman (2000) worked on such a project, and the focus was on the number of visitors required to increase revenue. The team projected the different types of scenarios that a visitor would participate in an activity. There were three levels of plans — realistic, mildly optimistic and highly optimistic. These plans set the foundation for what could be expected. The next step was to look at the competition. By investigating the revenue and range of visitors that other arts institutions realized through auxiliary services such as the gift shop, catering, the café, etc., the team was better able to predict their own figures. Once the results were collected and analyzed, a final document was prepared to share with the board.

External perspective. The external perspective is that nonprofits need objective assistance in revamping their process in order to establish creditability. Based on the nature of their work, grant makers could be the “knight in shining armor.” Robinson (1997) provided several compelling arguments as to why grant makers should serve as the catalyst in cleaning up the image of nonprofit organizations. Some of the arguments include:

• Enlightened Self-Interest — Research has shown that a business can be affected even if it is only marginally affiliated with an organization that is operating poorly. A nonprofit’s finances may affect the grant maker directly. Therefore, it is in the grant maker’s interest to assist in increasing the nonprofits’ financial stability.
• A Powerful Position — Grant makers are often a nonprofits’ primary customer due to the fact that they determine whether or not a project will be funded. Therefore, they are in the best position to offer suggestions on how to improve a nonprofit’s financial position.
• A History of Success — It has been found that grant makers are successful stabilization proponents. Cutting edge foundations are encouraging their grant seekers to improve their financial situation.

In the new economy, management teams at art institutions are challenged to address issues such as competition, marketing campaigns, labor issues, and fundraising, and they will need to reflect on how they make decisions. They will have to be more creative in the way that they arrive at their final decisions. A study (Barrett, Balloun, & Weinstein, 2005) was conducted and found that arts managers could benefit their organization by:

• Developing their creative climate and learning orientation with the understanding that the former reinforces and leverages the latter.
• Continually scanning their environments for relevant market information, acting upon the gathered information and sharing this information with all levels of the organization.
• Acting proactively to use this knowledge as a starting point to introduce new initiatives to benefit their target markets.
• Using cross-functional, empowered teams to analyze, create, develop and execute strategic marketing responses into diverse environments.

Implementing this process will assist arts managers with providing better insight, planning and guidance on how to manage their nonprofit organizations in the new economy.

Application

Economic Impact Analysis. There is much focus on money in the management of the arts. Therefore, it is important that organizations in this industry understand the impact of their budget on their ability to continue to do business. Economic impact analysis is a way that arts managers can strategically evaluate the financial impact of their programs (Hearney & Hearney, 2003). This approach is an attempt for arts managers to collect data that will assist them in making and justifying their marketing and management decisions. There are three different aspects (i.e. direct impact, indirect impact, and induced impact) that managers can utilize in order to measure program effectiveness (Woodward & Teel, 2001).

• Direct Impact This aspect will allow managers to analyze the spending patterns and preferences of the target market. After evaluating the data, managers can determine which programs they should offer based on participation. By offering programs that interest participants, managers may be able to increase participation, satisfaction level and loyalty. Also, the analysis should be able to assist the managers in determining how much participants are willing to pay for each program.
• Indirect Impact. This aspect will allow managers to determine other programs that may be of interest to the target market. Art managers can use the information collected to initiate new marketing campaigns, which may increase community and financial support for their organizations.
• Induced Impact. This aspect can be used to increase the stature and validity of the organizations within the community (Hearney & Hearney, 2003). Arts managers will be able to take the data that they have collected and use it to apply for grants, government and community contributions. It will provide objective information based on reliable and validated data.

By performing an economic impact analysis, art managers will gain credibility. The information can assist with new marketing campaigns as well as allow the art managers to run the organizations similar to for-profit organizations. This type of strategy has the capability of assisting managers with understanding and measuring marketing concepts, understanding customer segments, positioning their organizations, determining whether or not they have a loyal customer base, and generating government and community support (Hearney & Hearney, 2003).

Issues

Risk Management in the Arts. The market for securing cultural property has soared in the past. “The inflation of values and concentration of risk makes fine arts management a highly complex problem area” (Pfeffer, 1972, p. 117). The nature of fine arts items has created an environment where their high value has made them susceptible to loss or damage. Given the fact that most fine art pieces are authentic and original, many organizations have found it necessary to take actions that may not serve it in the long term. In order to protect themselves, many have self-insured to excessive limits, not allowed private collectors to lend their property to public exhibitions, allocated portions of the budget for insurance premiums, or reduced the public’s access to important pieces.

Risk managers have given the arts organizations several ways to deal with this problem. According to Pfeffer (1972), the most popular choices are avoidance, evasion, prevention, protection, transfer, assumption, neutralization and combination.

• Avoidance. A strategy of identifying certain hazards and adhering to a policy of non-exposure to them. If this is selected as the choice, organizations may limit the public’s access to items of great value in order to avoid risk.
• Evasion. A practical approach of shifting the burden of financial liability by comprising with creditors or filing bankruptcy. Many see this approach as a last resort because they want to avoid the public stigma.
• Prevention. If selected, this choice will minimize the chance of loss and its severity before a loss occurs.
• Protection. This strategy usually occurs after the onset of a loss. Work completed by such entities as the police and fire authorities fall into this category.
• Transfer. This approach occurs when responsibility or liability for potential loss is shifted to another risk-bearer who becomes the insurer. This type of coverage will protect the fine arts from the time it leaves an owner’s presence until it is safely returned.
• Assumption. This technique is the same as self-insurance. The person who is exposed to the loss absorbs the loss.
• Neutralization. This technique is also referred to as hedging, and occurs when offsetting risks may cancel each other out.
• Combination. This approach combines risks or pools similar exposures together. By spreading the risk, there is a reduction in the probability of the average loss for each covered interest.

Conclusion

Nonprofit organizations often suffer from poor money management, which leads to financial shortfalls that can have an adverse impact on the products that makes them valuable to the community (Richardson, 2006). Arts managers, who are increasingly accountable for their financial and resource allocation decisions, should be able to use economic impact analyses to assist them in predicting, managing and justifying their managerial decisions (Hearney & Hearney, 2003). By using these three aspects, art managers will be able to understand and justify their decisions in marketing and management. In addition, the analysis can assist arts managers with creating marketing campaigns to promote new and existing programs, survey customers in order to determine what they are interested in and if they are satisfied with the organization’s offerings, and gain support from external entities such as the government and the community. Such an analysis will provide nonprofit organizations an opportunity to document financial practices with the same level of accountability as for profit organizations (Alexander, 1991).

“From a risk management perspective, an art collection is a target risk with an escalating financial catastrophe exposure” (Pfeffer, 1972, p. 117). Therefore, arts managers must evaluate whether or not they will need to reduce access to the public in order to protect the cultural properties. There are several choices that the organizations may evaluate when selecting an approach to deal with the risk. The key is to select an option that is appropriate for the specific piece of work involved.

Based on the information that has been provided in this article, there is an awareness that cultural funding has become quite complex. As a result, the demands on the arts manager continue to grow. In order to prepare themselves for the challenges that lie ahead, many higher education institutions have developed graduate arts management programs. Although the field of arts administration has been a combination of many professions, master’s degree programs have been in place for over 30 years to provide advanced formal training for arts managers (Bienvenu, 2004).

Individuals are able to earn a master’s degree in arts administration or arts management. The programs are designed to provide a foundation in marketing, fund raising, business, management, accounting, law, and other topics of concern to arts managers. Many institutions encourage the arts managers to come into the program with a personal project so that they can apply the theoretical concepts to an issue that they are faced with (Reiss, 2001). Many have graduated from these types of programs and they provide the management pool for arts organizations (Bienvenu, 2004).

Terms & Concepts

Arts Fundraisers: Individuals who raises funds for the arts industry.

Arts Management: With a foundation in business in economics, arts management concerns itself with the management of art institutions in a way that promotes art, raises funds, manages finances, and supports new program development.

Economic Impact Analysis: A way that arts managers can strategically evaluate the financial impact of its programs

Fine Arts: Paintings, etchings, prints, drawings, rare books, manuscripts, rugs, tapestries, statuary and other bona fide works of art, of rarity, historic value or artistic merit.

Nonprofit: Not seeking or producing a profit or profits: a nonprofit organization.

Performing Arts: Arts, such as dance, drama, and music, that are performed before an audience.

Risk Management: The awareness and supervision of the risk inherent in decision making and operations so as to counter the cost of risk with the perceived benefits.

Unions: Organization of workers which concerns itself with meeting the members’ wage and working condition desires.

Bibliography

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Heaney, J., & Heaney, M. (2003). Using economic impact analysis for arts management: An empirical application to a music institute in the USA. International Journal of Nonprofit & Voluntary Sector Marketing, 8, 251-267. Retrieved on May 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=10434081&site=ehost-live

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Resiss, A. (2001). Graduate arts management programs grooming new generations of arts fund raisers. Fund Raising Management, 32, 27-29. Retrieved on May 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=5021590&site=ehost-live

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Suggested Reading

Experts discuss fine arts risk management. (1997). Best’s Review/Property-Casualty Insurance Edition, 97, 84. Retrieved May 30, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9702194664&site=ehost-live Yun, T. (2012). The efficacy of audience building among nonprofit cultural organizations: The impact of marketing strategies and organizational attributes. Megatrend Review, 9, 173–199. Retrieved November 19, 2013 from EBSCO online database, Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=77462370&site=ehost-live

Francis, A. (1998). The culture business. Management strategies for the Arts-related business. Organization Studies (Walter de Gruyter GmbH & Co. KG.), 19, 345-346. Retrieved on May 23, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=708178&site=ehost-live

Hume, M., Sullivan Mort, G., Liesch, P., & Winzar, H. (2006). Understanding service experience in non-profit performing arts: Implications for operations and service management. Journal of Operations Management, 24, 304-324. Retrieved May 30, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=20822946&site=ehost-live

Schoenberger, C. R., & Binns, C. (2017). Stanford Social Innovation Review, 15(4), 66–67. Retrieved February 12, 2018, from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=124734164&site=ehost-live&scope=site