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.

Time & Money

By Jon

To my surprise, it was Benjmain Franklin who coined the phrase ‘Time is Money’ (although like most of Western civilisation he was simply repackaging an idea inherited from the ancient Greeks).

Since time is the most precious commodity we have, it provides an uncomplicated measure of how important something is. Not unreasonably, we conclude the more time someone spends doing something, the more valuable (or enjoyable or vital) they consider it to be. As a printer-scientist-statesman-author-cum-diplomat, Franklin certainly filled time with things that were important to him.

Back in April, the National Endowment for the Arts (NEA) released one of their periodic research notes entitled ‘Time and Money: Using Federal Data to Measure the Value of the Arts’. While this is now a couple of months old, it seems like as good a place as any for Bad Culture to start. Here is the opening sentence from the abstract:

This Note examines large datasets from multiple federal sources including the U.S. Economic Census, the Bureau of Economic Analysis (BEA), and the Bureau of Labor Statistics (BLS), to arrive at monetary and non-monetary value measurements of the nation’s performing arts sector.

The Key Findings from this report are short and eminently readable, so I won’t repeat them verbatim here. Suffice to say that the report suggests Americans value the performing arts highly, due to some big numbers derived from the time and money spent on them.

Digging a bit deeper, the standard categories used in federal datasets are not designed to facilitate this kind of analysis in the arts. For example, the relevant category in the Bureau of Labor Statistics Consumer Expenditure Survey is ‘Admissions to movies, theatres and amusement parks’. I’m assuming that, in an ideal world, the NEA would disaggregate at least two of these subheadings from the numbers. (A similar issue arises if you try to quantify time spent in galleries. These are commonly subsumed into a general ‘Museums’ category, although it doesn’t doesn’t really come up here as the focus is on the performing arts).

On monetary statistics where direct comparisons can be made, the performing arts come out as less valuable than sports, and have mixed results when compared to movie-going. Drawing conclusions from such general and high level numbers is hard, but this kind of relative analysis is rarely done and is all the more interesting for it.

Section 3 presents summarised time use data, based on day long diaries in which people denote their activities. Here the performing arts look to be well attended and sociable. Again, the data is notable for presenting the kind of relative statistics that aren’t always available – performing arts attendance is done later in the evening than sports, while museum visits occur at lunchtime. More people go to the theatre than to a baseball game with their spouse.

The NEA has had a difficult few months (although it has a difficult few months every year at budget time) but irrespective of the merits of that debate, I’m a devotee of their research notes and reports. They generally contain interesting interpretations of reliable data, but don’t overstate the conclusions that can be drawn. This is not always the case in the cultural sector, hence the blog.

Where their methodology is imperfect, they are upfront about it. Where it is unclear whether data is showing correlation or causality, the NEA themselves point this out  the question (their comprehensive 2010 report on technology and engagement is a case in point). Time and Money is no exception, as they note the difficulties in each dataset and the inherent limitations of trying to assign value on temporal and monetary statistics alone.

That said, I’d like to a level of analysis above and beyond what they pesent here. The relative statistics are interesting, but I wonder about the possibility of assessing the level of separation between populations that attend sports, arts, movies and other cultural activities. To put it another way, in a Venn diagram showing attendance for each category, how significant is the overlap between the arts circle and the other cultural circles? To put it still another way, are we talking about a small number of Ben Franklin-types who engage in all types of cultural activity, or separate groups who engage in one activity but don’t stray across to others. I’m not sure whether it is way the dataset is collected that prevents this, or whether it is simply outside their scope.

The ‘Final Thoughts’ section is also of particular interest as a whistle stop tour through the benefits and difficulties of performing a quantifiable assessment of the value of the cultural activity. It looks at similar techniques and comes to similar conclusions as to the recent DCMS report Measuring the Value of Culture, although it is less dense and more accessible. I would love to see how the performing arts compare to sports, museums, TV watching and surfing the internet across different measurement techniques.

The ‘Final Thoughts’ promises a follow up report on Value Added methods of assessing the value of the arts. That promises tomake good reading, and we will certainly cover it here.

Finally, I note with satisfaction that an average of 0.5 million Americans write every day for personal pleasure, and that they write (on average) for 1.5 hours, generally in the evening. Alas, it isn’t possible from the data to tell how many are constructing poetry or prose, and how many merely doing something more functional.

Like blogging.