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Creative Data?

By Tina

It’s heartening to see in short succession the use of hard stats around private investment in culture. However, there is always more that can be done to complement some of the data and to make it more useful, both for the sector and for policy.

To begin with, Arts Quarter’s ongoing reporting of arts professionals’ attitudes about the recession and its impact on income is useful – however, it would benefit from more regular reporting to show the peaks and troughs and the changes through time, to compare more effectively the difference between stability and uncertainty. The wave-on-wave trends, based on only 4 installments of the survey, were quite reactive in nature (considering when and why they were conducted) and thus reflected the volatility of the time in which they were conducted. This could mean that the findings are slightly skewed, as respondents are influenced by the ‘heat of the moment’ and are likely to be affected by media hype surrounding some of the issues they are being questioned on. More positively, the level of detail is useful and provides an interesting backdrop against which to have any considered debate about the likely growth of private investment in the next three years or so. However, other than the summary, which neatly describes the landscape as it currently seems to stand, the data itself is not provided in a very user-friendly way and the pages of tables means that most people are not only likely to skip through them, but are also therefore likely to miss important trends within the data.

Spotting the differences and assessing why they’re taking place, or trying to predict what might happen next should therefore be made easier through data visualization and interpretation. What would make it even more useful, is triangulating with consumer trends and attitudes about likelihood to donate to the arts. And that’s where the data from We Did This for example, would come in handy, as it adds that all-important perspective of the consumer and profiles the behaviours of the very people that the arts professionals are speculating about. More business intelligence into likelihood for investment in the arts would also help – we are seeing some big businesses have a greater presence in this area lately, but at the same time, we don’t have a sense of the businesses that are opting out or playing safe at the moment. Finally some insight from trusts and foundations on how many arts applications they receive a year and how many are successful for example, would also be helpful in mapping the competitive landscape for the arts and understanding how difficult it is.

The issue here is that in terms of research, much can be said about the gap between what people say and what they do – particularly when it’s what people say about what other people are likely to do. Therefore any such attitudinal research should, in most cases, be considered indicative, though that’s not to say not useful. More research on actual behaviour and giving patterns would therefore helping in bridging some of those gaps and creating a more representative picture of what is happening and what might happen in the future.

The annual Arts & Business survey on Private Investment in Culture should help in answering some of these questions. Though the analysis is retrospective, it is useful and interesting in its own right (and much anticipated I should imagine), but again, could be strengthened with more forward-thinking and market-scoping research.

I know there have been many attempts in getting these projects to speak to each other, to save readers and policy makers from adding this all up themselves, but it seems that there are still other more urgent priorities. The risk with undermining the importance of robust and holistic research is basing recommendations on assumptions, many of which might therefore be misleading or even wrong.

Assorted links

by Jon

Too many interesting things in the last couple of weeks, too little time to blog. So here are some assorted links that may be of interest.

– For those campaigning against changes to higher education funding in the UK, Alex Tabbarok and Tyler Cowen have some posts at Marginal Revolution that make challenging reading. This one on puppetry is particularly good. Statistics of the type quoted make the economic case for an arts education a tough sell. Other arguments are much stronger, as Tabbarok suggests, and his new book on Innovation will be one to read.

– Proof that there is value in an artistic education, albeit only for a given definition of value… Should we be surprised that the biggest gains accrue to men?

– Artsblog have been doing one of their periodic blog salons on arts and business. As ever, the content is mixed, but there is some good stuff in there. Repeat after me, though – Creativity does not equal Innovation.

– The Jack of Kent blog is written by David Allen Green, one of the UK’s best and highest profile skeptics and here he writes about art, art exhibitions and the value of thinking for yourself. As ever the comments are extremely high quality.

– Robin Hanson writing that the psychic value of an artwork depends on the direct physical connection to the artist.

– Public subsidy for solar power is causing controversy. I’m not entirely clear on the balance of funding for this scheme, but it is a fascinating way to wean an arts organisation off public money.

– Mitt Romney made headlines when he pledged to cut arts funding by 50%. This is a compelling read on what the pledge says about him and why it is likely to fail. I would ask: why 50%? What is so special about 50% that it’s become the percentage of choice for attention-seeking right wing politicians?

– Finally, an interview with me in Swedish in a Swedish newspaper. We talked about cultural policy, arts funding and the impact the recession has had on both. I have no idea what it says, so I’m choosing to believe I come across very well.

Lost and Found: Cuts and Impacts

By Dawn

Lost and Found

This is unashamedly a call to get involved. There are two projects going on at the moment that I would really encourage you to engage with. The first is specific to the arts and cultural sector but seems to me to be something that might be replicated elsewhere as an important piece of longitudinal social and economic research.

Lost Arts has been set up by eight unions whose members are directly affected by cuts to the arts: the MU, Equity, BECTU, the Writers Guild of Great Britain, the National Union of Journalists (NUJ), UNITE, Prospect and PCS. Over the next three years the unions have undertaken, to record and catalogue all of the projects, events, initiatives, performances, organisations and companies that will be lost due to the cuts in public funding.

They are not saying that the arts are more important than other sectors just that the effects of the cuts should be properly recorded, recognised and publicised. This seems to me to be a really important undertaking and will provide a unique set of data that can add to the debate about how best to value arts and culture.

The second, is aimed at the wider nonprofit sector but I think it is important that the creative and cultural sectors engage, it goes back to a point I made in an earlier blog (Valuing Culture) that if we don’t start creating our own measures someone else will do it for us. The Principles of Good Impact Reporting is another significant partnership project. It brings together seven[1] of the key organisations concerned with the performance of the nonprofit sector. Collectively, with the endorsement of the Charity Commission and the Office for Civil Society, they are endeavouring to set out a number of universal principles for charities and social enterprises to use when measuring and talking about their impact.

The aim is to help charities and social enterprises to shape the way they are perceived. By better defining ‘how’ and ‘what’ charities should communicate in terms of impact, it is hoped the focus can shift from arbitrary measures of effectiveness such as administration costs, to focus on capturing and measuring the real difference charities and social enterprises make to those they help.

The principles have been released for consultation and they are seeking feedback from anyone involved in impact reporting. Whether you support the approach or not it is important that you add your views to the consultation. I’m sure Bad Culture will be covering the project as it evolves.

For more information about the principles, or to give your feedback, email Tris Lumley at tlumley@philanthropycapital.org.

Do try and add your voice to these important projects.

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[1] The seven organisations are New Philanthropy Capital, ACEVO (Association of Chief Executives of Voluntary Organisations) incorporating the ImpACT Coalition, CFDG (Charity Finance Directors Group), the Institute of Fundraising, The SROI Network, NCVO (National Council for Voluntary Organisations).

Where’s the feel good? Are we locked in a vicious cycle of despair?

By James

I was speaking to a music exec last week – don’t worry, this isn’t quite another copyright rant – and he told me the industry lobby group the BPI had a policy of putting a negative spin on all sales news, because piracy was supposed to be killing the industry… And, if it didn’t appear that way, they wouldn’t get the laws needed to tackle piracy and create a sustainable future for recorded music.

But, my contact feels, this policy could be self defeating. The persistent negative slant could put off talent and investment.

A second contact from the industry tells me the indy sector is booming, but this message never gets out. The fact the message never gets out is again part of an orchestrated policy to bury good news and hype-up the bad.

My second contact is frustrated that the digital crossover sector gets no recognition despite the buzz it’s creating in some quarters.

I’m being told the internet has fuelled a renaissance of the small label record producer. It’s well known the internet provides a low-cost distribution model, but this alone doesn’t make the self-styled, self-recorded, self-produced and self-promoted band a viable model.

A Tumblr page is no substitute for promotion, it’s a backstop. The artist or band still needs promoting to DJs and online channels, and often the most effective way of doing this is to sit down and play it to them; despite the internet!

The web offering – whether it’s Facebook, Tumblr or Twitter – itself needs nourishing, or the feed just gets lost in the ever-increasing background noise. Fans need a helping hand to root-out even the most talented bands and artists.

And then there’s the business side; licensing, registering with collecting societies, clearing any samples or songwriter royalties.  Even the most organised and business-focussed bands would struggle to do all this and make the music.

So we have a new generation of musicians turning to a new breed of music publisher, where signing fees and advances are a rarity. Instead, the new publishers are out to give [what they claim to be] a fair return on each sale (minus, of course, promotion and other fees – we’ve all got to eat and pay the mortgage).

But I digress – a lot! The gist here is I’m being told there’s a lot of good news in the British music sector, but it’s being swamped by a cynical agenda driven by those controlling large back-catalogues. Indy labels have nothing to be gained from extending copyright, yet the majors – so I’m told – are already looking at a 90-year protection term despite having just won the extension from 50 to 70 years.

The rub for the independents comes when the gloom-laden publicity agenda of the majors starts to impact their own business. What self-respecting bank or angel investor would pump money into a business we’re all told – at regular intervals – is being “decimated” by piracy.

Yes, the term “decimated” is being used by industry press monkeys, see here and here, despite the Latin origin meaning “reduce by one tenth”. The irony being that the strict meaning is probably an accurate portrayal of the state of the sector as a whole, a 10% hit not being so bad considering the prolonged recession.

If good news doesn’t start to reach the ears of lenders and investors the death of the music industry could become a self-fulfilling prophecy, with overly cynical press and lobbying, not piracy, delivering the fatal blow.

An interview with John Kreidler – Part II

By Jon

A few weeks ago we featured an interview with John Kreidler conducted when launched the online cultural modelling tool, Medici’s lever. In this second interview, we asked him what insights the lever had provided, one year on, and talked about the wider implications for cultural policy and arts funding.

How has Medici’s lever fared in the year or so since it was launched?

My fondest hope would be for Medici’s Lever to advance a conversation within the worldwide circle of cultural policy thinkers about the underlying dynamics of arts and culture, and about appropriate interventions that might lead to greater public engagement in active cultural expression. Also, a significant objective is to provide a useful platform for training a new generation of cultural policy thinkers and activists.

So far, the progress toward these objectives has been slight, but that result is neither surprising nor disappointing. When Steve Peterson (systems engineer) and I set out four years ago to produce Medici’s lever, we were inspired to formulate what we hoped would be a ground-breaking logic model of the dynamics of arts and culture, to translate this model into a working simulation, and then to devise user interfaces that would make the simulation understandable to two select audiences: Cultural policy experts and students. Finally, we were determined to make Medici’s Lever available on the Web as a public-domain simulation whose programming was fully transparent and open to further development by anyone wanting to expand upon our work. All of this has now been accomplished except, for technical reasons, we have not yet been able to make the model’s detailed programming available online. For the moment, we have to be content with distributing hard copies of the programming.

Still, some movement has taken place. Quite recently, I have been contacted by a U.S. university that previously used Cultural Initiatives’ 2001 policy simulation, entitled “Great Cities”, for students in its arts and entertainment management program. The university may now move on to Medici’s Lever. Also, few months ago, a Geneva-based agency of the United Nations asked me to make a presentation in the Philippines that would incorporate Mecici’s Lever.

Readers of this blog are invited to try Medici’s Lever at http://forio.com/broadcast/netsim/netsims/Medici/medici-home/index.html and to post comments on this blog, or to me personally at jdkreidler@sbcglobal.net

Those are ambitious objectives – no wonder you invested so many resources in developing in the model. Did you have a strategy in mind for raising awareness of it? And did you anticipate spending as much time and effort as you have after the development phase was finished?

Actually, the resources invested in Medici’s Lever were modest, certainly by the standard of commercial game simulations. The cost was in the vicinity of $60,000, and the two principal workers on this project spent, on average, a few hours per month over the four years that elapsed from project conception to completion.

Early in the project, we had employed an experienced Silicon Valley game designer to create the user interfaces for Medici’s Lever, on the premise that a flashy interface would attract a broader audience, but this approach required the development of original software that was expensive, time-consuming and risky, so after a year it was abandoned. At the project’s conclusion, discussions were held with a California-based public arts planning and funding agency that had an interest in promoting Medici’s Lever to advance its own agenda. The idea was to give Medici’s Lever an organizational home, backed by marketing and staff resources that would continue to support it. Even though these prospects did not materialize, we were still able to place Medici’s Lever on the Web, which provides a vastly more accessible platform for users than the CD-ROM format of our original Great Cities cultural policy simulation, which was produced in 2000-2001.

In the end, I believe that we have created a sophisticated and insightful simulation/logic model that is presented online through a bare-bones, and at times humorous, game interface. As I said previously, the audience for this package is narrowly focused on cultural policy makers, funders and students, so over the past couple of years, I have been promoting Medici’s Lever to my professional contacts who are connected with these groups. Still, I am looking for an organization that would have an interest in serving as home for Medici’s Lever and could promote it broadly.

From your own experience and talking to others who have used it, what are the main insights you think the tool provides?

The best that one can hope to achieve with Medici’s Lever is that users will begin to appreciate that the arts and culture are embedded in complex systems. Once this appreciation materializes, it has significant consequences for those in a position to influence cultural policy. Awareness of the existence of underlying systems requires an effort to understand the complex dynamics of these systems: Does X influence Y, what is the nature and amount of this influence, and does this influence feed back in some way from Y to X? I am afraid that many do not want to expend this effort, because it requires the abandonment of entrenched theories of how culture operates, and often the crucial breakthroughs in understanding can only occur through years of experience and research. A high-ranking official of the U.S. National Endowment for the Arts once said to me, “This systems approach to arts policy gives me a headache. All I want is to stay in Washington and give money to artists and arts organizations. All considerations other than quality are irrelevant.” Many of my former colleagues in the domain of pubic and private arts funding share this view. Providing resources to artists and arts organizations can be a rewarding career by affording opportunities for advancing your own tastes in art, and exercising your ability to leverage funds from other sources that choose to follow your inspired decisions. This world view might seem, at worst, harmless, but the discipline of systems thinking teaches that:

Any entity having the ability to intervene in a system is more likely to cause harm than good if this intervention is made without reference to the complex behavior of the system.

Doctors, presumably, understand the dynamics of human physiological systems, auto mechanics understand mechanical systems, and environmental scientists understand natural systems, so why shouldn’t cultural policy makers, including funders, have some basic understanding of cultural systems? The initial step is to appreciate that systems exist, and Medici’s Lever may promote this fundamental awareness. However, I never underestimate the ability of policy makers in all fields to deny the very existence of underlying systems in favor of simplistic expedients. The current debate in the U.S. over global warming is a great example because it shows how senior elected officials can deny the very existence of environmental dynamics that have been the subject of extensive research for more than 30 years.

I would also hope that Medici’s Lever offers some substantive insights gleaned from my own research and experience. These are described in the text accompanying the simulation model. For anyone ambitious enough to wade into the model programming, all of the systems logic is transparent and open to question and debate. So far, I am not aware of anyone who has taken up this challenge.

Given that so many cities, states and authorities in the USA, UK and beyond continue to strip away their funding for the arts, do you think those insights are well understood?

Taken in isolation, decisions to reduce arts funding do not necessarily show any more understanding of cultural dynamics than decisions to increase arts funding. Hypothetically, a decision to decrease arts funding might be found to have overall positive outcomes. Whatever the direction of the funding, up or down, the questions are: Do we understand the systems in which we are intervening (funding is one form of intervention), do we believe that we can affect changes that are likely to yield net positive results, what specific outcomes, both positive and negative, do we expect, and are our interventions reversible so that we can restore the system if the results turn sour? If this line of thinking has been fully implemented, policy makers then have a basis for evaluating whether upward, downward, or unchanged funding or other policies are merited. In the U.S., the Federal Government’s housing policies of the 1950s and 1960s are sometimes cited as an example of actions that were well-intended as a means for decreasing urban poverty, but were not systemically informed, were irreversible, and resulted in a multitude of negative results including higher poverty, crime, illiteracy and dissolution of families. One prominent U.S. arts funder has quietly confessed that its attempts to “stabilize” prominent arts institutions actually resulted in their destabilization through unintended escalation of their fixed costs, though this result was viewed as reversible, and then led to an ambitious and more systemically driven effort to correct the problem.

My knowledge of public funding of the arts in the U.K. is limited, but in the U.S. the defunding of the arts in many jurisdictions is due, in some measure, to the failure of cultural policy makers to demonstrate that funding has yielded a strong net increase in noncommercial cultural goods and services that are broadly desired and consumed by the American public. The quantity of consumption is a much more forceful rationale for public support, in the arena of U.S. politics, than improvements in quality, which tend to be difficult to prove and prone to allegations of elitism. Viewed from this perspective, I believe that public libraries, parks and athletic activities are generally in a better position, as cultural institutions, to make a case that they are serving broad publics, in comparison to performing and visual arts organizations. Here in California, I hear vigorous public expressions of dismay about proposed funding reductions for state parks, municipal libraries and public broadcasting, but almost no protests about performing and visual arts cuts.

Do you think it si possible to make good (or better) quantitative arguments in favour of arts funding? Here in the UK they are sometimes viewed unfavourably because it is believed that the quality (or intrinsic value) of the work is sacrificed in order to appeal to a wider demographic or because of the second order benefits funding the work will bring.

The debate over intrinsic versus instrumental justifications for public funding of the arts in the U.S. has been fairly intense for at least the past half century, but with a few caveats, I am decidedly on the side of the instrumentalists. My personal life is a very different matter. There, intrinsically motivated choices are paramount in my selection of what dance performances to attend, what books to read, and how to craft a piece of sculpture, though instrumental considerations, including convenience and cost, inevitably come into play. The same is true of other realms of culture: What sports to play, what religions to observe and what clothing fashions to acquire. By extension, it seems reasonable to me that private funders, including individuals, foundations and corporations, can make whatever intrinsic cultural judgments they might choose, with or without reference to practical considerations.

Governmental funding is a different matter. For many reasons I am skeptical about intrinsically-based public policy decisions about art, just as I am skeptical about governmental decisions about religion, athletics or fashion. In a democratic society, the central question is whether a given policy, including funding, will yield an appropriate return of public goods, services, or other benefits, which is mostly an instrumental cost/benefit equation. Ultimately, individuals will make their own decisions to partake of these public goods or services based on their own evaluations of intrinsic and instrumental merits, but I find it hard to accept that government should, in effect, make pre-emptive decisions of what is best for the public based solely on evaluations of quality. In the U.S., this approach has tended to result in the anointment of a small cadre of professional artists and organizations who receive a disproportionate amount of the funding and recognition, leaving others on the fringe. In many instances, there is little, if any, consideration given to the public’s interest or attraction to this anointed art, and not surprisingly, this indifference to public demand has been a contributing factor in the stagnation and decline of public arts funding in the U.S. over the past decade.

To be fair, public funding for a select, often elite, core of professional American artists and arts institutions is a similar phenomenon to governmental patronage and protection of many other professions, including medicine, law, teaching and law enforcement. Professions tend to accumulate political power, to protect those within the boundaries of the profession, and to label those practicing outside the profession with a long list of pejoratives including “amateur”, “unqualified” and “low-quality”. In my view, governmental policies that focus intensively on judgments of quality tend to lead almost nowhere except to bolster the various professions within the art world and to satisfy the cravings of a narrow band of the public, mostly defined by high income and educational attainment.

Far more satisfactory would be systemically conscious public policies aimed at enabling the broad public to gain maximum benefit from artistic and other cultural experiences, with quality being an ingredient, but not the sine qua non, of policy formulation. “Medici’s Lever” is one version of how systemically conscious policies might be constructed, and of the mostly quantitative measures that might be used to measure effectiveness. Within “Medici’s Lever”, a healthy cultural environment is defined by three factors, the most important of which are widespread public literacy in the arts, and building on this literacy, extensive public engagement (amateur participation) in various forms of artistic expression, including singing, all forms of dancing, writing poetry, drawing, and much more. The point of literacy and engagement in artistic expression is not that they necessarily lead directly to great works of art, but rather that they have the capacity to bring high levels of meaning, gratification and civility to individuals and communities, all of which can be detected and in some ways measured, and employed more effectively to secure governmental support than quality-based assertions, which are beyond measurement.

The third factor incorporated into the logic model underlying “Medici’s Lever” is the production of publicly available artistic goods and services, mostly supplied by professional artists and institutions. Certainly, these goods and services are significant within a well-balanced artistic domain, but “Medici’s Lever” incorporates the view that this professional sector will be best supported only when a sufficient foundation of public literacy and engagement has been achieved.

While I take the view that quantitative measures of benefits are most appropriate for formulating and evaluating public arts funding and other policies, I also recognize that some purported benefits may be overstated. For several decades, studies of various state and metropolitan areas in the U.S. have tried to show, for example, that public expenditures on the arts produce high multipliers for generating tax revenues, restaurant income and assorted other commercial revenues. These studies are then used to advocate for higher public investments in the arts. Naturally, this same investment multiplier rationale has been used in virtually all other domains of public policy, including education, urban renewal, crime prevention, parks, and health care, and seemingly very few studies use the same methodology. The end result is that many policy makers have become jaded by the claims resulting from these studies.

Nevertheless, as I have said in response to a previous question, rigorous logic models using quantitative data have come to be widely applied in many fields of public policy, most notably in economics, environmental affairs, military planning and health care. Significantly, all of these fields embody both quantitative and qualitative elements. If the arts are to be taken seriously in the public sector, then they need to apply similar rigor. “Medici’s Lever” sets forth a nascent logic model that suggests that the arts can bring widespread meaning, gratification and civility to individuals and communities, while also making a secondary (and hopefully not overstated) contribution to education and the economy. It does not promise world peace and happiness for all

In the previous interview, we touched on the importance of ‘market makers’ and the flows between the levels of the pyramid within Medici’s lever. Earlier this year, Arts Council England has focussed its core annual revenue grants on organisations that ‘directly produce or present work’. This has left intermediary bodies, audience development agencies and those that play particular strategic roles (notably focused on Business) on reduced budgets or reliant on one-off funds. The Arts Council itself will have to reduce its administrative budget by 50% over three years, drastically reducing the development work it can do itself. Do policy shifts of this type seem ‘systematically informed’ to you?

Historically, Arts Council England and its predecessor, the Arts Council of Great Britain, have exercised a more systemic view of the arts than arts councils in the U.S. According to one version of that history, the early beginnings of the Arts Council of Great Britain grew out of a somewhat instrumental imperative: Bolstering morale in the air raid shelters of London by providing concerts during the Blitz. I would venture a guess that public morale was a more important objective than musical quality.

Regarding the specifics of your question about the recent actions of the Council with respect to its core annual revenue grants, I can only answer your question with a two-part, question: Does Arts Council England have a logic model of how the arts function in England, and informed by this model, are the recent funding decisions intended to yield the greatest, most enduring benefits to the broadest public?

Incidentally, the U.S. National Endowment for the Arts recently announced a request for proposals for the formulation of a logic model of how the arts operate in this country.

With the NEA’s request in mind, what are you future plans?

With regard to the NEA’s announced plan to formulate a logic model of the arts, I have communicated to their staff the existence of Medici’s Lever, and have offered to aid their process as a volunteer. One of the consulting teams competing for the contract to produce this logic model has requested my permission to use parts of the Medici’s Lever logic model in their application to the NEA. All of Medici’s Lever is in the public domain (no copyright), and anyone is welcome to copy or modify it to suit their own views of the arts universe.

As for my future, I am happily retired and occupy my time with welding steel sculpture, making furniture (a craft I studied in Totnes, England with Christopher Faulkner) and growing grapes. Medici’s Lever probably represents my last concerted effort to build a computer-based logic model of the arts, though I will continue to write and lecture on this subject.

KPIs – an Arts Council response

by Jon

Dawn and I wrote posts last week on the thorny subject of Arts Council KPIs, a theme then picked up over on Thinking Practice by Mark Robinson, former Executive Director at Arts Council NE.

The Arts Council is keen to engage in the debate and has asked us to host a response, which we are delighted to do. Roddy Gauld, the National Portfolio Director sent us the following:

In the current environment where funders and arts organisations alike need to demonstrate clear results in return for public funding, Key Performance Indicators (KPIs) are way of measuring our collective performance.

The Arts Council doesn’t see KPIs as a pass or fail measure, instead we hope arts organisations can use them as a tool for self-improvement, which allows them measure the extent to which they have achieved their ambitions. Demonstrating achievement, rather than just reporting data, is an exceptionally powerful argument for investment in the arts and our discussions with NPOs are helping us learn the extent to which it’s possible to reflect these achievements.

The majority of the Arts Council’s funding for the portfolio comes from the Treasury – so we need to be able to report convincingly on what our investment will achieve. The Arts Council is looking to National Portfolio organisations (NPOs) to be accountable for the funds they receive, with greater self performance management playing an important role in this.

We do realise the difficulty of standard KPIs, and that putting together one-size-fits-all measures of success for 700 very different organisations is an ambitious and challenging thing to do. Our ongoing conversations with NPOs are revealing areas where the Arts Council knows it will need to be flexible in both the design and the assessment of KPIs.

The finance KPI is a good example. It reflects the Government’s private giving agenda and also challenges NPOs to increase in the proportion of income they generate from non-Arts Council funding. We want these KPIs to be ambitious as we all consider how NPOs can make significant steps towards becoming more resilient. But we know that in some cases organisations will not be able to increase income for other sources, and for others it would be unrealistic to expect a year on year increase. Biennial festivals, for example, would not be expected to increase their non-Arts Council income in the years the festival isn’t running.

That’s why final funding agreements will contain KPIs agreed through discussion and negotiation with NPOs. Final figures should reflect the individual circumstances of organisations and be adapted if these circumstances change during the funding period. This process is based on working with NPOs to reflect our shared goals. It’s the first time the Arts Council has worked in this way and we are learning about how we can best use KPIs for the benefit of both the Arts Council and the organisations we fund.

We will continue to reflect as the process goes on, and we will decide if we need to change or adapt any KPI, or simply improve the explanation and guidance behind it. Whatever we decide, it will be based on the feedback we’re receiving from the discussions we are having with NPOs across the country.

It’ll take more than just a catalyst…

By Tina

Following on from Jon’s and Dawn’s posts, I have been thinking about growth for smaller arts organisations and the expectation of raising more income from different sources in the next three years, particularly in regards to private investment from businesses, individuals and trusts and foundations.

In theory, encouraging diversifying income sources is a good thing… but in reality smaller arts organisations have three years to achieve some rather difficult targets. Raising £10k or even £5k in a year without any previous experience in, or current budget for, fundraising is not easy to do.

Fundraising takes time and investment, particularly as it requires research, an overarching strategy and plenty of patience, time and perseverance. Results do not happen overnight and relationships have to be cultivated in a sensible and sensitive way. Freelance/ consultant fundraisers can help, but they need to become really involved with the organisation in order to represent it with the conviction and passion required to make the right asks and to the right people.

And boards can and should also help, but how hands on can they be, particularly if their own resources (time, money and networks) are limited? And what about organisations’ audiences? A small touring company, for example, might have numerous loyal fans but not necessarily their contact details, as they come through the venues where they are booked. In which case how will they build a strong database which they can start using for fundraising? And what kind of support can they ask for if these audiences are often the very same underprivileged people they are trying to reach out to and empower through their work? And how will they reach the big sponsors and major philanthropists instead? In most cases, organisations will therefore start by applying to trusts and foundations, which must by now be inundated with applications and which therefore make this a very competitive “market”.

These are amongst the serious challenges which smaller organisations are faced with and which encouragingly the Arts Council seems to recognise. It will therefore in turn, try to address some of these issues by promoting fundraising capacity building through the Catalyst fund. However, I’m not sure how far it will go in equipping organisations in need of support with the appropriate knowledge, skills and expertise to start successfully fundraising from a variety of sources and in a very challenging economic climate.

To begin with, more than half of the money available through the £100m fund (£55m) is ear-marked for large organisations seeking to start or build an endowment. With a maximum of £5m allocated to an individual applicant, there could be a minimum of 11 (large and already successful at fundraising) organisations benefiting from this tier of the fund.

The £30m that will be directed towards fundraising capacity building and matched funding, again is targeted at the more experienced and successful organisations (in terms of fundraising). And though matched funding has proved a useful mechanism to incentivise giving in the past and for other sectors such as education, smaller NPOs with little or no fundraising successes to date (and in many ways those that most urgently need support), will have no access to it. They will only be able to apply for a grant between £15k-£25k in April 2012, and it is not clear if this will be a one-off for one year or if it will be repeated across the three years. I am assuming this would come from a total of £15m (the remainder of the original Catalyst pot), though this is not clear either and therefore it’s hard to estimate how many arts organisations might be able to benefit from this. In the meantime, targets for this financial year need to be met and without any resources or some strategic guidance, this will be hard to do.

Not to mention the fact that, as Dawn pointed out, the economy is likely to continue to have ongoing spill-over effects on sponsorship budgets, endowment yields and disposable income (and ultimately on philanthropy). So how successful will a fundraising gala be?

Effecting an Impact

by Jon

Efficient and informative post by Dr David McGillivray on a Scottish conference about research and knowledge exchange in the cultural industries.

Is it just me that gets excited reading about this kind of thing?

The strategy for NPOs? Grow

By Jon

This is a bit more esoteric than other posts you’ll find on BC. Normal service will be resumed when I post next on the value of books, but prompted by Dawn’s post on KPIs a couple of days ago, I thought I’d write something myself.

FYI ACE NPO KPI

The funding agreements for Arts Council England’s new National Portfolio Organisations (NPO) contain a number of KPIs, and one in particular has been attracting attention:

Achieve an increase in the proportion of your income generated from non-Arts Council funding of x% in 2011/12 to x% in 2012/13, X% in 2013/14 and x% in 2014/15

I think there are two reasons this KPI is attracting attention.

What does it all mean?

First, the exact scope of the KPI isn’t clear, and NPOs want to understand what they are signing up for.

For example, does the % of funding received from ACE over the period have to decrease year on year, or across the period as a whole? This is important to festivals, organisations with cyclical programmes, and anyone whose three-year plans include a period of increased activity, such as an anniversary year.

Does the % refer only to NPO grants or will it apply to all Arts Council funding? NPOs can no longer apply to Gfta, but many orgs are likely to receive large capital awards or strategic funds at some point over the next few years. If these monies are included in Arts Council funding, you’ll see large spikes in the % in some years. If they are excluded, then receiving a non-NPO award from ACE would actually reduce the % in the relevant year, which would be very odd.

There is a related point to make about grants made to orgs working in partnership, which are increasingly common. Dawn blogged a week or so ago about Common Practice, a group of several small London visual arts organisations. Common Practice has been supported by ACE funds in the past couple of years, but for practical and legal purposes, the money is channelled through the Chisenhale Gallery. As I read the KPI, the grant would greatly distort Chisenhale’s %. Perversely, it will probably making it easier for them to achieve the objective, since their % will drop significantly when Common Practice’s current funding runs out.

I’m also interested in how the %s are to be measured. In all other KPIs, ACE has left the basis for calculation to organisations to suggest, and one might assume that is the case here. But with other KPIs the wording is open to negotiation, so with a KPI mandatory ACE may have a fixed basis in mind. Yet nothing is set out, so while the obvious basis is to take a calculator to the financial statements, I think it’s open to interpretation whether management accounts or ACE’s own annual submission can be used.

Bigger is better?

A lack of detail is one thing – it can and probably will be tidied up in discussions and supplementary guidance. But a second and more significant issue is the message that the KPI sends & the potentially distorting incentive it provides. As Dawn hinted, there is only one strategy NPOs can adopt if they want to achieve the KPI – growth.

Its easy to see why with some numbers.

Let’s assume org x gets 100k NPO grant and 100k from non-NPO funds. The following year it receives 105k in NPO funding (a 5% increase). The organisation needs to raise at least 106k (a 6% increase) from non-NPO sources in year 2 in order to achieve the KPI. Overall, the NPO has to grow by 11k (5.5%)

ACE has awarded a significant majority of NPOs year-on-year uplifts, meaning NPOs must adopt a strategy of increasing non-ACE funding sources by a higher % year on year.

Why bother?

By making this and only this KPI mandatory, ACE have signalled that they attach special significance to growth in NPOs over the next 4 years. This is causing comment for several reasons.

First, it marks a policy shift for ACE. I’m happy to be proved wrong, but I think the KPI represents a greater level of direction for funded organisations than at any time in the past. Yet, NPOs are independent from ACE and both sides rightly cherish this about the relationship. An NPO is run (in most cases) by a Boards of Trustees whose role is to set strategy and secure the organisation’s future. These Trustees may well disagree with strategy the KPI requires.

Second, again as Dawn suggests, growth is very difficult for nations, supermarkets and investment banks at the moment, let alone arts organsiations. Standing still is a significant achievement in the current economic climate, and a contraction may be an organisation’s best strategy. So, it seems odd to include a requirement for all NPOs to grow at this time.

Third, while the KPI reflects the Secretary of State’s priorities and the goals set out in ACE’s 10 year strategy, the wording used means this is not simply a case of ACE passing on requirements from DCMS. The wording of DCMS’s own indicator (see #2) shows this, as it clearly refers only to charitable giving. The assumption is, therefore, that the KPI reflects ACE’s own focus or policy.

Finally, if you play with the numbers a bit more (which I won’t try to do here), it is likely to be harder to achieve for organisations who depend on income from a limited number of sources. Small organisations more often fall into this category, and a drop in (say) local authority funding will require a disproportionately high increase in funding from other sources in order to hit the target.

So, all in all, it’s hard to know what conclusions to draw.

Where once I would have asked for answers on a postcard, do write any thoughts you have in the comments. We have received some private correspondence from readers since Dawn’s post, but it would be nice to share them more widely.