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How Arts Organizations Can Survive A Pandemic
Episode 75

How Arts Organizations Can Survive A Pandemic

CI to Eye with Brett Egan

This episode is hosted by Erik Gensler.

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Brett and Erik discuss the seven clear steps arts leaders should consider when institutions are being put to the ultimate test. Brett also provides his guidance around fundraising, marketing, programming, and leadership during this unprecedented time. Note: Any and all resources mentioned in Brett's episode have been linked below 

Brett Egan: That bifurcated brain of the manager and of the artist and of the board member, at this moment, today, in our sector, is asking individuals to pay attention to the two deep ends of the same spectrum, simultaneously, on the same day, maybe even the same hour, which is, on the one hand, to be looking at the profit and loss statement, to be looking at cashflow with a more exacting scalpel than ever. And it is painful and it is scary. And then to put down the pen, turn off the laptop, go for a walk, hopefully someplace green with lots of fresh air, and at the very same moment, go back to the absolute kernel, the source of what brought us to service in this industry, our mission and our vision and the importance of the story and the importance of this charge which we’ve taken up in the arts and culture industry of creating meaning in life, which is such a privilege to be able to focus on that and to go as deeply into that as we possibly can and pull together a vision for the purpose of our organization moving forward. I think that it’s those two totally separate brains that are going to have to come together and coexist in a minute-by-minute relationship over the course of the next week or two. Donors are not going to follow cases that look hopeless.

Erik Gensler: Brett, thank you so much for joining me on such short notice. I’m really happy to … we can have this conversation today.

Brett Egan: Pleasure to be with you, Erik.

Erik Gensler: I’d love to bring up a question that we’re seeing a lot from our clients in the field, which is, when is the appropriate time to ask for money from individuals and how do you think about that in this moment of crisis, of the fact that everybody, on some level, is going to be impacted economically? How do you strike the right tone and having those conversations at different levels of individual gifts and donors?

Brett Egan: That is such an important question and it’s such a difficult question. The average American cultural nonprofit has less than two months of working capital or cash liquidity. The average performing arts organization and museum has fewer than two months. The average orchestra has fewer than 15 days. So, the concept of best practice in this case is slightly amended, given what we can expect to see the urgent requirements on the part of cultural nonprofits to sustain operation during this period, on the fact of, most organizations simply do not have the cash to be patient. And this is very helpful data that slowly and quietly, over a period of years, was being amassed by our friends at the National Center for Arts Research at SMU.

Erik Gensler: Yeah, Zannie’s been on the podcast to talk about that exact research.

Brett Egan: Zannie and the SMU team have done a very fine job of articulating the 800-pound gorilla in the room for years and it is exactly a moment like this where that data illustrates how stark the line between viability and crisis is for most American nonprofits. This question of, “How long do we wait? How do we characterize our approach to donors within this context?” meets that very cold reality that there is simply not time to wait. And so, we come back to your critical question, which is pointing to the fact that, for most of our peers in the field, this is … Yes, it is an expense problem, in the sense that certain expenses are simply not able to be constrained without totally shutting down operations or halving or cutting entirely a payroll. So, expense certainly is part of the equation here, but cultural organizations are already so frugal and so good with the money that they have that there is no cutting our way to health in this scenario. The only way out is going to be through a very fine balance between, likely, constrained expenses and revenue development. And revenue development in this context, where we’ve seen the market plummet 30, 35% in two weeks, where endowments are being hit hard, where 401ks are being hit hard, where we’re expecting to see not only our peers, but our friends and neighbors and colleagues in sectors throughout the country, losing jobs, the context for individual philanthropy has radically shifted and here’s how I’m looking at it. Cultural organizations have survived, for as long as we in the States could remember, on the generosity of their friends and colleagues and what we would call at the Institute, a family of donors, of board members, of subscribers, of members, of volunteers, of strategic partners, of alumni. And it is exactly at this moment that cultural organizations are going to need to go to the inner circle of that family and make the case that preserving the operation is a necessary step. And I want to return to that concept of “necessary.” The expectation has got to be that even the most loyal donors are going to have constrained ability to give. They’re going to be acting from the same position that many of us are, which is a position of absolute uncertainty and lack of visibility on what the days, much less the weeks or months ahead, bring. And so, our expectations here need to be very finely tuned to that reality. At the same time, and this is critical … At the same time as we are focused on this highly tactical process of viability in the short term, I believe that our donors are going to be attracted to nothing less than an absolutely visionary concept for the future of the organization.

Erik Gensler: That’s right. Yup.

Brett Egan: And it is only going to the organizations that are able to articulate that at this exact moment that are going to get the attention of people who are going to have people tugging at them from every direction. They are not going to follow cases that look despondent. Our job now is to be practical and to convey our need in a practical way, but to couple that, immediately, with an increased and not business-as-usual vision for the future. And that, I think, is going to take different forms in different organizations, but in my mind, that’s the play with individual donors, in particular.

Erik Gensler: Clive Gillinson, the Executive and Artistic Director of Carnegie Hall was on the podcast and he put it so succinctly. He said, “Money follows vision, not the other way around.”

Brett Egan: I think that’s exactly right The fact is that money follows success and right now, success has been severely reframed, what that means. But we have to remember what’s out there right now that people are going to be asking for support for. If we are basically arguing that we are looking for support to preserve something that looks like a digitized version of business as usual, I think we’re going to fail. I think that the storytelling around the vision and muscle around a vision and a vision for the future of the organization and what this organization will be over the course of the next weeks and months, but very importantly, what it will be when this rebounds—and it will—that is what’s going to inspire donors to make a gift to an organization that, no matter how important we think our work is, is going to look secondary to the immediate and necessary steps to just keep people fed and keep people employed. And so, without that, I’m afraid we don’t have much to stand on. And I believe in our sector and I’m already seeing it, that our artists and our managers and our board members have this ability to tell that story and I’m starting to see organizations push vociferously in that direction.

Erik Gensler: You’ve written a lot about the importance of marketing and Michael and you both talk about, the gut reaction when things get bad for organizations is to cut marketing, to take a scalpel to all expenses, and you’ve written about the negative long-term impacts about that. Also, Colleen Dilenschneider, who’s an amazing resource here-

Brett Egan: Yes, she is.

Erik Gensler: … says that, as a rule of thumb, it costs five times more to acquire customers than it does to retain existing customers.

Brett Egan: Hmm (affirmative)

Erik Gensler: In light of this crisis, how would you guide organizations to be thinking about their marketing and outreach?

Brett Egan: I think we need to think about marketing in two chunks. There’s marketing that we typically spend the majority of our money on, that we would call “programmatic marketing,” and, Erik, that’s what we would characterize as, you know, advertisements, promoted posts on social, brochures, direct mail, et cetera; things that actually have hard costs that live behind them. And I think for practical reasons, for organizations that have canceled productions, canceled exhibitions, the need to be printing and posting brochures is decreased, perhaps radically decreased, in the short term. So, I think in the area of what we would call programmatic marketing, there are very likely some expenses that can be curtailed. The good news is that the other kind of marketing, marketing we would call “institutional marketing,” does not require a lot of money. It is the type of storytelling that conveys the importance of the institution, particularly at moments like these. It is the type of storytelling that through thought leadership, through essays and op-eds, through speeches, through high-profile collaborations, gives a community a sense that if they take their eyes off of this organization for more than three weeks, they’re going to miss something that makes their life feel incomplete and it’s a very different type of communication than a postcard or a brochure or a tweet, although those things can be very effective, also. What we’re saying here is that institutional marketing is really the muscle that tells the story of the importance, the necessity, of the work that is being done and that’s the type of marketing has to go into overdrive right now. That’s the type of marketing that can be issued, sure, on a website or through email. It’s the type of marketing that can be distributed through coordinated talking points by board members, by staff members, by artists, to that family that I was discussing a few minutes ago, that says, “Let’s focus on the value that we bring to this community, rather than focus exclusively on the short-term, urgent, immediate cash requirements.” That institutional marketing narrative has to be more vibrant, more robust today than it was a week ago and that’s where we would be encouraging most organizations, if they need to cut—and I think, understandably, in this particular moment, there will and probably should be cuts to certain types of paid advertising—the institutional marketing piece needs to go into overdrive and the good news is, that shouldn’t take a lot of capital. It will take ingenuity, it will take cohesion across an organization, and it will take empowering people, like our board members who can be spokespeople and very effective spokespeople for organizations at this time, with that narrative. That’s where I would be focusing.

Erik Gensler: And I would argue that a lot of that, with people at home, needs to be through social and digital and video and, if you’re spending money, spending your money on promoting, over and over, your messages to your family of supporters, people who have been to your institution over the past three years, hunkering down on the people in your database and those near to it with these consistent messages and just being consistent and being sharing that vision, I think, of your institution as the cultural anchor that it should be.

Brett Egan: That’s right, Erik. I think that’s right. And I think Colleen’s insight is accurate in this case, absolutely accurate. You know, this is, in my view, not the time to be going to people who don’t know us. That’s an interesting instinct and it’s an instinct that I think some of us would have, to say, “Look, we need to throw this open as broadly as possible.” I think it’s highly unlikely that we will see much return on that investment. I think it’s much more likely that through consistent, organized, optimistic, potent communication about the necessity of the institution, tying the necessity of the institution, perhaps to practical needs of the community, but probably tying it to the needs of the human spirit during this period, that message communicated to the people who have already had a strong encounter with us would be my first play. And I think that’s an important and strategic decision that many managers are going to have to make here, which is, “Where are we going to focus?” and for my money, I would be focusing first on the people who I know have the ability to help and that are closest to us and then the next circle of people who have had a recent positive experience with us and not worrying too much, now, about going out to people who they know that we exist but haven’t had a recent experience with us for may not know that we exist, but we believe should be interested in our mission. Those, I would leave for a bit further down the road. So, I think Coleen’s data, here, helps us a lot in clarifying that point.

Erik Gensler: Absolutely. I think a lot of folks in the sector have recognized that there’s going to be a short term … how much time, not quite sure—weeks, months, quarter—of no performances or events so people are thinking about, of course, next year and next season. And the other piece of marketing, of course, in addition to the institutional marketing, is thinking about subscriptions moving forward. And I’m curious for your thoughts about how that fits into this whole communications picture in this moment.

Brett Egan: There’s so much that’s uncertain here, as we’re sitting here on March 19th at 12:15 PM, 2020. We’re seeing things move so quickly. It seems on one day, there is something that looks optimistic and then on the next day the floor falls away from the Dow again and there’s another restriction on travel and we’re all caught a bit breathless and it’s so difficult to think about what the right move is here. I think the reality is that we’re going to have to wait. Hopefully, there will be some clarity about what stability the months of June, July, August, September may bring. Assuming that, for many, “normal” programming would resume in the fall, I think we can expect that announcements regarding productions would be happening on a later time frame this year. I think we can assume that many more of our materials are going to likely end up being distributed digitally than in print. I certainly would be in that space myself, assuming that we will be back to work in the fall and laying the groundwork for that now. I wouldn’t say there’s any upside to what’s taking place, but one of the idiosyncrasies of what’s taking place is that, ironically, while our brains are running at a fever pitch, activity has slowed down, meetings are being canceled, activities are being canceled, so there is an irony in that time allows us to perhaps take a breath and get certain conversations started or mature certain conversations. We can be doing a lot of planning right now and that is something that I think will prepare us to be able to act very quickly in the coming weeks or months, when clarity is achieved about what life will look like in September, October, November, December. I would be planning for something that looks like a modified business-as-usual in September and remain optimistic about that, and, yet, also be practical about the fact that we’re going to need to very likely announce a bit later and very likely be announcing in a different way, probably relying a great deal on digital media, in, hopefully, the late spring or early summer.

Erik Gensler: Brett, you and Michael published what I thought was a really powerful and helpful blog post or letter a couple of days ago, which is what made me reach out to you. And given the situation, you proposed seven steps that arts organizations should consider in light of this and so, I’d love for you to walk us through those.

Brett Egan: Sure, Erik. There’s a lot of good counsel out there. These are a few things that occurred to us as being immediate, practical, short-term steps that can be taken to help produce, perhaps, a bit more comfort on the expense side and lay the groundwork on the revenue side. The first thing, that should be actually, relatively straightforward from most folks who have invested in the arts, is for us as leaders of arts organizations to go to donors, go to foundations, go to government agencies that have made restricted grants or donations and ask for those restrictions to be relieved, freeing that capital for general operating support needs. That’s a pretty quick first step that most governments that I’m looking at have already said, “We will look at that very closely. Please be an open communication with us,” and many foundations, I’m seeing that as well. The second thing is, while we certainly hope and anticipate that everyone will be made whole as part of this process, I think that this is a moment where the entire ecology of both suppliers and providers in this business are going to need to be in constant communication about feasible payment plans for services. And this means going to vendors, going to landlords, going to others who have provided services and asking for reasonable amendments to timelines. The implications of this pandemic do not sit solely within arts and culture industry, to say the least. It’s going to hit everybody and so, the level of flexibility that different institutions will have to do this, I think, is going to vary, but I would say, in our business in particular, a lot of organizations spend a significant amount of expense on occupancy and on real estate and I’m hopeful that we will be able to have reasonable conversations with landlords and with property holders about extended payment plans, given that that chunk, for many cultural organizations, is one that can eat up five, 10, even 15% of the annual expense line.

Erik Gensler: Definitely. I’ve heard … I had a conversation with someone who talked about, even if you need three to six months relief, adding three to six months on the other side of your lease. So, if you can get the pause now, you know, agreeing to pay in the future when times are brighter.

Brett Egan: That’s … I think that’s very reasonable and, you know, we saw a bit of that during the 2009 recession and I’m hopeful that our friends in real estate will be partners to cultural organizations at this time. The third thing that we’re focusing on is highly practical and is certainly not an innovative idea, but for organizations that have sold tickets or have sold gala seats or gala tables or fundraising tables, we’re seeing a lot of success with those organizations going to the people who purchased those tickets in those tables and asking for them to not take that as a refund, but to convert that into a general donation to the organization. And that can certainly help. The argument there, of course, is that that money goes, in many cases, directly into the pockets of the people who are working in the institution. The fourth thing that we’re focusing on—and this gets back to the second bullet point—is for those in city-owned or government-owned facilities to be asking for delayed payment or payment forgiveness. The fifth … and this one, you know … this one is no fun, but it’s going to be necessary for lots of folks, I think, is to seek renewal on lines of credit, seek out first-time lines of credit. So far as I can tell, and speaking to our peers in the field, they’re not having trouble with this at present, for those who have reached out to local lenders, that there does not appear to be a concern regarding liquidity. I don’t want to create a rush, but I would encourage organizations to strongly consider their cash needs for the next six months—and I’m sure that everyone is—but to take a look at whether or not an instrument like that will be needed down the line and to start a conversation with local lenders about that now. I’m seeing organizations also thinking about creating in-house lines of credit or low- and no-interest loans with board members who have the ability to do that. That’s something that our most generous board members, who have made contributions but cannot make another contribution commensurate to need, might consider, and then I do, of course, realize that access to that type of individual is not equal across all organizations in America, to say the very least, and I do realize that’s not an option that would be available to many. I’m hopeful that—and, in fact we’re seeing that—many foundations and government agencies are also contemplating this strategy, in addition to easing restrictions on current grants and making additional unrestricted, general operating support, emergency grants. So, that’s another tool in the arsenal. The sixth one, in ordinary cases, I would say, “For better or for worse,” but in this case, probably just for worse, a lot of the people who love our organizations are at home and they’re not spending a half hour, 45 minutes going back and forth to work. There’s going to probably be latent capacity to support our organizations in a volunteer function. This isn’t cash, but any dollar that’s not spent, in my mind, is as good as dollar raised. And so, thinking about how to activate that broader organizational family as volunteers is really important. I would also say—and this is something, Erik, that’s come up for me about a dozen times since we issued that email a couple of days ago—and this is another just gritty and not fun topic for organizations that are thinking about having to lay off personnel, in that very moment, where we’re thinking about what might look like last payments or severance payments or decreased payments, if the work of doing the show or putting up the exhibition or teaching the class has fallen away because we’ve had to cancel the class or cancel the exhibition, how can those individuals’ talents be repurposed for revenue-generating activities? And that’s a tough one. I don’t know how that is going to play out in every organization, but, for instance, I’m working with a pretty darn resilient youth development organization right now and that relies a great deal on tuition and also relies a great deal on teaching artists. And, right now, we’re thinking about how we can convert the talents of the teaching artists into a team to go out and help continue to engage people, not only online but also to get people thinking about enrolling for fall classes, kind of turning that teaching-artist corps into a recruitment SWAT team. And I’ve met … we’re fully …we’re having to think through the detail of that. The point is that we’re contemplating as many ways as possible to keep as many people as possible on payroll, but we may need to ask people for flexibility in the type of services that they bring to the organization. So, that’s a kind of an amendment to that sixth point. And then, the seventh point— and again, this is one that is no fun to contemplate and it is also … cuts straight to the question of equity in our sector and whether or not organizations have been in a position to amass generational or institutional wealth, and for all of the reasons that, I think, we all acknowledge at this point, pertaining to institutional bias and institutional racism and the implications of that at the intersection of that with the ability to accumulate wealth, this seventh point is not one that is going to apply in any fair way across all organizations. Nonetheless, for organizations that do have restricted reserves, for organizations that do have endowments, this is a time where we believe there is a sober conversation, a conservative conversation to be had regarding the principal or the corpus in those restricted financial instruments. And while there are legal implications and while there are implications regarding donor trust involved in looking at accessing the corpuses of endowments and restricted reserves, there is a legitimate argument to be made that these circumstances provide context for really thinking through the alternative. So, that’s the seventh point that we’re contemplating. In the end, however, all of these things are … probably need to be thought of as short-term strategies. The long-term strategy will rely on being able to resume the development of revenue in some critical way. And this gets us back, Erik, to the point regarding vision and the necessity of our organization that we were speaking to earlier in our conversation.

Erik Gensler: Absolutely. I know you can’t predict the future, but for the sake of just imagining and to collect your thoughts, where do you see the arts landscape on the other side of this crisis? I’ve been saying and thinking for a long time, when you look at the financial picture, like you mentioned, from Zannie’s research, so many organizations are an economic crisis away from not being around anymore and that’s a scary and terrible thing. But I’m curious, if you had to predict a year from now, what would the arts ecosystem and landscape look like versus say, three weeks ago?

Brett Egan: I think there are three types of organizations that are going to weather this. One are relatively wealthy institutions that have amassed generational and institutional capital over a period of months or years proceeding this crisis and that will find a way to weather the storm. That is a very small minority of our sector. However, I do know organizations large and small that have been prodigious in building reserves and this moment is going to give credence to that foresight. The more likely path, I think, for the vast majority of cultural organizations is bifurcated. I think a year from now, the first type of organization that survives and maybe even flourishes is the organization that is able to prove that during this period of time, it remained a necessary partner in its community. How that’s defined, I think, will be different for each organization. Already, and I think actually inspired by the great recession in 2009, we have seen a major tilt in the sector toward cultural organizations functioning as problem-solving partners to local government, to social service agencies, to educational institutions, to parks and recreational centers, to aging facilities, et cetera; and we’ve learned many lessons, in fact, from our community-based organizations that have created real value, a very practical value, through creative practice, in service to areas of civil society that other functions were not able to provide the same value. So, whether we look at creative practice at the intersection with restorative justice or with sanitation or with transportation or with healthy aging or with abating loneliness amongst elderly populations, I think that that organization has an argument, at this particular moment, that can be emphasized and that, in fact, might even find some investment. And I would encourage organizations that have the ability to be thinking about applications for their work that serve two ends, both a creative end and a more instrumental end, in partnership with social service organizations, municipal agencies, other functions of relief and functions of support for our friends and neighbors. That, I think is an organization that has a path through this and can make an argument toward being a necessary part of the community. I think very far end of the spectrum, Erik, is also a potential path for some organizations. And the very far end of the spectrum, I will say, aphoristically, is the organization that through the power and through the talent that is characteristic of great artists throughout the history of mankind is able to come up with creative interventions that remind us of the importance of cohesion at a moment of social distancing, that remind us of shared humanity at a moment of xenophobia and heightened racism, that remind us of the power of even abstract art to communicate in a language that is actually uplifting, that is actually a reminder of something that we have a difficult time putting into words, but that we all know that we share and that we all know that we need now; that that visionary institution can also make it through. And I want to be very clear—and this saddens me to say this—I believe that is a very substantial plateau jump from what we might call just doing a business-as-usual great performance or great exhibition. I don’t see a lot of room—although nothing would make me happier than to be proven wrong on this particular point—I don’t, personally, see a lot of room over the course of the next three months, six months, maybe even nine months, for the presentation of just the next version of what we would have been doing, had this not come about. I think it will be tough for that iteration of business as usual, even if it’s strong, to build and retain an audience. I think this is going to be a moment where our communities, if they are looking for art at all, are looking to art in the most epochal sense of what art has been and I have faith will continue to be for us as a species moving forward. I just think it is going to take relentless innovation and relentless visioning, right now, from the people who have been gifted with this talent, to lead our institutions in that direction. And that’s, Erik, kind of my view on the three types of organizations that are going to make it through this. Sadly, I do think there will be some contraction and I don’t think I’m alone in forecasting the implications of the data that we have from folks like SMU that say so many of us were already on such a fine line. I think that this cauldron that we find ourselves in at this moment, that heat can produce a meltdown but it can also produce entropy. There are opportunities to be thinking about joint venture, long-term strategic partnership, shared administrative structure, even mergers. I think that there are some institutions, in particular, universities, that may have the ability to subsume infrastructural needs of small nonprofits. They may have facilities that are not going to be used at capacity over the course of the next six, nine, 12, 18 months. I would like to think that the cultural sector would be looking very carefully at partnering with and even possible mergers with universities and academic institutions in their cities. And there’s a long track record, obviously, of partnership, very strong partnership, between cultural enterprise and universities. I would like to think that arts and cultural organizations would be able to open conversations with libraries, with hospitals, with community centers, with recreational centers, with underutilized public infrastructure. And if we’re being forced to make the tough decision about whether to not pay the rent or not pay our people, to be thinking creatively and thinking now about what those partnerships might look like.

Erik Gensler: Definitely it’s a, it’s such a moment of reinvention.

Brett Egan: I believe that a strategy without a sense of the sacred underneath it is not a strategy because it doesn’t get done. So, right now, I think we have an opportunity as managers to use this energy to innovate again and I think cross-sector partnership and I think partnership with some of the larger civic institutions in our city is a decent play to be considering and it would be a very interesting and, I suppose, somewhat positive outcome to see higher levels of relevance for our sector in relationship to the other major vectors in civil society result from this moment. So, I’m optimistic that some innovation can be found there and some sustainability can be found there

Erik Gensler: So, we’ve talked about a lot and all, I think, super important to our listeners in our field. At the end of our podcast, if you’ve listened to past episodes, we ask for your “CI to Eye moment”, which is the ultimate boil pulling down of some of this. And the question is, if you can broadcast to the executive directors, leadership teams, staff, and board of thousands of arts organizations, what advice would you provide to them right now?

Brett Egan: This is the moment where everyone goes deep and answers, again, first for themselves and then for the community, what makes this work necessary? That’s the message that our donors need to hear. That’s the message that our audiences need to hear. And my belief is that that must be a visionary statement and that it is the visionary organizations during this period, not the organizations that grow quiet and retreat for three or six months, that are going to find their footing when this starts to rebound. And that requires both pragmatism and optimism in equal measure and constantly in the weeks that come. It’s a time where we’re going to stick together, as we always have, and take care of each other, and we have the great privilege, the great privilege, of working in the business of producing meaning and producing a vision for the future and I have great confidence, as I always have, our artists and our managers are going to step up to that plate and continue to serve.

Erik Gensler: Brett, thank you so much. This is going to be so helpful to so many people and the sector at large.

Brett Egan: Erik, I’m really grateful for the invitation.

About Our Guests
Brett Egan
Brett Egan
President, DeVos Institute of Arts Management

Brett Egan is the President of the DeVos Institute of Arts Management at the University of Maryland, where he provides training for arts leaders on strategic planning, fundraising, board development, and marketing.

Read more

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