Assorted links

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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.

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

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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.

The strategy for NPOs? Grow

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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.

What Fresh Hell…or KPI Madness?

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By Dawn

“Poetry is indispensable…if only I knew what for.” (Cocteau, in Fisher, 1986:1)

Key Performance Inidcators

What fresh hell...

It is true that I am quite exercised at the moment and not in a heart strengthening, fat burning sense. All because of those three little letters – KPI. For those not familiar with Key Performance Indicators they are intended to be measures that enable you to judge organisational performance in the medium and longer term.

If developed appropriately and properly monitored they should be a valuable part of any organisational performance toolkit. Nothing contentious there, in fact, it seems terribly sensible. Is it not right that people should know what they are working towards, what success might look like?

Unfortunately, the term has become widely used and abused and often now relates to anything that can be measured. The Advance Performance Institute talks about the growth of what it calls the ‘ICE’ approach:

  • Identify everything that is easy to measure and count
  • Collect and report the data on everything that is easy to measure and count
  • End up scratching your head thinking “What the heck are we going to do with all this performance data stuff?”

Not only are KPIs often misunderstood, there are darker forces at work, and some funding bodies are currently minded to hand out KPIs to their beneficiaries. In my view the recent mandatory KPI distributed by a certain arts funding body that shows its overall contribution to an organisation’s funding declining over three years seems curiously out of step with the context in which the arts now operate. Not that I don’t respect its right to set expectations around future funding levels by why, oh why, wrap it up as a KPI? Particularly one rooted in financial growth.

Recent retail figures show Tesco is facing its worst returns in 20 years, ONS and the OECD have both downgraded the UK’s economic growth, and George Osborne has made it clear that cuts are the bedrock of the Coalition’s Plan A. Greece is currently held up as the basket case but the UK economy is incredibly fragile and the US has had its credit rating downgraded. Moodys and Standard & Poors, who arguably played their own role in a lot of this mess, are still presiding over rating the world’s economies, need I go on…

Yet it appears that certain agencies believe that the arts (and I can also see it happening in the wider nonprofit sector) can valiantly cast aside these obstacles and look to growth. In trying to unravel this confusion I am struck by Cohen & Pate’s phrase ‘precarious armistice’ in terms of the relationship between government and the arts.

Attempts by government to evaluate arts organisations have not been hugely successful to date and this most recent phase does little to suggest this will change. Just where do people think the growth is going to come from? Apart from this question about practicalities it also seems to me to create further confusion about what could otherwise be a valuable method for understanding organisational performance.

If you are grappling with your KPIs at the moment can I suggest:

  • Setting KPIs for your organisation first then consider wider stakeholder requirements
  • Beware the promises you are making both internally and externally
  • Make sure everyone understands the KPIs (and really make them ‘key’) and that you have systems in place to collect the data you need
  • Then make sure you have the systems and processes to turn that data into knowledge and wisdom
  • Negotiate clearly with your stakeholders about the KPIs that are right for your organisation

“The arts world … is both fickle and self-regarding, and it is difficult to predict the reaction of that world to initiatives which seek to control it.” Cohen & Pate, 1999

If you are undertaking a KPI process at the moment we would really appreciate hearing your experiences.

Reserve judgements

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By Jon

On her Turning Point blog, Susan Royce has posted a short interview she recorded with me a few months ago about reserves and Visual Arts organisations.

I’ts part of her series of posts on financial strategy. I’m never quite as lucid as I’d like to be, but we cover most of the salient points.

Size Matters – Matters of Value

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By Dawn

Cropped view of a pear and an apple side by side

Apples & Pears?

Is it possible that in the current economic environment smaller cultural institutions face the most uncertain futures?

There certainly seem to be a number of smaller arts organisations (turnover under £1m) that will have their public funding significantly or completely cut next financial year.

These tend to be organisations that have limited capacity to generate alternative funding streams. They do not have the tangible assets of their larger counterparts and are often unacknowledged for the research and development role they play.

Size Matters,’ the recent report by Common Practice and Sarah Thelwall of MyCake fame, attempts to surface some of these issues. I found it a good read. It is a well-considered and thoughtful piece that genuinely surfaces the concerns I have heard many smaller scale organisations raise. Issues that it seems to me are generally ignored.

There is a lot packed into its 41 pages, probably too much to do it justice in a single blog. It touches on:

  • The inability of many of the standard metrics around visitors, costs per head and earned income to capture the true value of these organisations
  • The misleading mismatch these metrics create in comparing large with small organisations
  • The lack of recognition of intangible assets
  • The lack of scope for development and growth
  • The poverty trap that many arts-workers in smaller organisations become caught in, and so on

Two things in particular caught my attention:

  •  The need to build a more sophisticated understanding of the concept of value
  • The notion of lifecycle assessment/investment

In developing a more nuanced understanding of value Size Matters suggests the need to consider: artistic; social; societal; and fiscal value. Opening up notions of value and measurement is something I very much support, as evidenced in my previous blog on Valuing Culture.

I do have a slight concern over the clarity of social as compared to societal value. I would offer sectoral rather than social, as it seems to refer to value created within the arts system itself. The report refers to this as an ecosystem but I find this metaphor can also be problematic, something for a later blog!

A number of examples are offered from Studio Voltaire, Chisenhale Gallery and Mute Publishing that illuminate the four interlinked values in practice.

“What we immediately see from these descriptions is that value accrues over the lifetime of an object or idea and that it does so in the four areas of artistic, social, societal and fiscal value in ways which are hard to separate out; indeed it is the fact that they are intertwined that is key to understanding how value accrues in an artwork.” (Size Matters: 26)

In laying out this approach to attributing value what follows is the challenging proposition (primarily for traditional funding sources) of deferred value. My understanding of this is that the four elements of value may be realised over different timescales, if at all in the case of fiscal value.

This is a particular challenge for the smaller organisations as they often serve as the catalyst for an artist or artwork but it is others in the system that then gain the full range of value. It is suggested that smaller organisations most often ‘forfeit two of the most measurable types of value created – the realisation of social value through the development of audiences and of fiscal value through sales via the art market.’ (Size Matters: 29)

While in some ways this seems obvious it is really refreshing to have it spelt out so clearly at a time when it definitely needs saying. My experience is that many of these smaller organisations need to build their confidence in order to take more control of how they are measured and understood.

The proposition for a move away from annual comparisons towards lifecycle-based assessments and investments carries with it significant challenges but I do find it persuasive. I hope Common Practice will pursue it further.

The Big Gives

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By Tina

The UK Culture secretary recently announced the launch of an Endowment Fund worth £55 million, which should purportedly leverage at least £110 million over four years through match-funding from private donors. In his speech, he realistically acknowledged however, that “endowments aren’t for everyone.” It is therefore quite clear that endowments are not a long-term strategy for culture in the UK, but only for a handful of organisations, with wide-reaching appeal and significant resources and capacity for fundraising to begin with.

Encouragingly, since November 2010, there has been a series of good news regarding philanthropy in the sector, with multi-million pound donations from the likes of the Sacklers, Lloyd Dorfman, Dame Vivien Duffield, Andrew Lloyd Weber and most recently Sir Terence Conran.

These gifts alone add up to more than £70 million, which is of course to be greatly commended. Such gifts could therefore potentially increase the overall levels of philanthropy (individual giving) to culture by about 20% from the previous year (assuming there won’t be significant decreases in other parts of the sector).

The recipient organisations of these recently announced gifts include the National Theatre, Tate Britain, the Serpentine Gallery, the Chickenshed Theatre Company and the Design Museum. Most are large or major organisations and based in London.

These are the organisations that are able to raise big gives from major donors, and it will be those organisations that will be best placed to start building their endowments. And to be clear, that is by no means a bad thing – it’s great that very worthwhile organisations are able to raise high-level gifts, with which they can start planning ahead to secure their financial autonomy and sustainability.

So though there is no doubt that these gifts are to be welcomed and encouraged, two obvious questions should be raised:

a) Will the momentum continue and will more wealthy individuals contribute, even if only to the larger organisations? Or is this an ephemeral hype, spurred by the pressures of the current government and the immediate need for more to go to the arts?

b) And what of the smaller organisations without the resources to raise the big gives? What is the strategy and government policy to enable their long-term financial security?