So, little fella, how much do you get in unrestricted operating revenue per program? Photo: Shutterstock
The latest report from NCAR — SMU’s National Center for Arts Research — is the second of what’s going to be annual updates on the financial, administrative and audience well-being (or lack thereof) of American cultural organizations. In the new study’s conclusions, there’s nothing likely to gather the national attention that previous reports on gender disparity in art museum directors’ salaries or the center’s observation that charges the NEA represents a ‘wealth transfer’ from the poor to the rich are not based on actual arts attendance.
Mostly, this report lends further details to what NCAR’s previous research has shown. For instance, receiving a NEA or IMLS (Institute of Museum and Library Services) grant is pretty much a Good Housekeeping Seal of Approval: They have “a positive effect on nearly all performance outcomes.” Also, arts groups that rely much more on live, in-person contacts with audiences don’t have the attendance reach that arts groups more invested in digital programming do — with efforts like live-streaming of operas or symphony concerts.
The prime focus seems to be on fundraising returns. But there are also geographic-specific details that beg for more study. Chicago organizations have the highest return on their marketing dollars when it comes to program revenue, while LA groups have to spend more than anyone else to attract audience members.
Ultimately — that is, some time in 2015 — curious arts managers will be able to go online and — through a dashboard developed by NCAR and IBM — be able to delve into these results and compare their own performance against others in their city, budget size, art form, etc. But right now, they can go here and get some brightly organized big-picture charts and pull-out numbers.
Here’s the full release:
SMU’S NATIONAL CENTER FOR ARTS RESEARCH PUBLISHES SECOND MAJOR REPORT ON ARTS INDUSTRY HEALTH
Report Measures Industry Health by Sector, Organizational Size, and Geographic Location and Examines What Drives Performance
DALLAS (SMU), December 4, 2014 – The National Center for Arts Research (NCAR) at Southern Methodist University unveiled its second major report that examines the financial, operating, engagement and staffing health of the nonprofit arts industry. The report is available online here.
The Center, the first of its kind in the nation, investigates important issues in arts management and patronage, making its findings available to arts leaders, funders, policymakers, researchers and the general public. Driven by its mission to act as a catalyst for the transformation and sustainability of the national arts and cultural community, NCAR develops annual reports based on a uniquely comprehensive set of arts organizations’ data, integrating organizational and market-level data. It assesses the industry from multiple perspectives, including sector/art form, geography, and size of the organization, and it determines what drives health from the organization’s conditions and its community’s characteristics.
“We don’t want to only report on ‘what the performance of the industry was,’ we want to examine what practices and decisions by arts leaders drive performance. We’ve also taken it one step further to explore the community and cultural policy factors that impact the health of the industry,” said Dr. Zannie Voss, director of NCAR and chair and professor of arts management and arts entrepreneurship in SMU’s Meadows School of the Arts and Cox School of Business. “Doing this is a first step in helping organizations understand how they compare to others in the industry given their community and organizational characteristics and identify particular areas of respective strengths and concerns.”
With input from the field, NCAR researchers have identified 184 performance indices that provide insight into the financial, operational, and engagement health of an arts and culture organization; data for 128 of these indices has already been gathered. These performance indices fall into nine general areas: contributed revenue, earned revenue, expenses, marketing impact, bottom line, balance sheet, community engagement, program activity and staffing. The second report takes a deep dive on 26 of the 128 indices, presenting many as comparative measures (e.g., operating bottom line with and without depreciation). Each performance index answers a specific question, such as:
• What is fundraising’s return on investment?
• To what extent do unrestricted contributions cover expenses?
• What is program revenue per attendee?
• What is the total cost of serving each participant?
• How much total marketing investment does it take to bring in one person, first considering all
marketing costs, then only non-staff costs?
• Is the organization breaking even or better, considering operating activity only, calculated first before depreciation then after depreciation?
• How many months of working capital does the organization have?
• What is the reach of our community engagement, first looking at in-person and virtual participation, then at in-person engagement only?
• What is the amount of total unrestricted operating revenue generated per program offering?
For each of the 26 indices, the report provides 2012 results for: 1) the average for all arts and cultural organizations, 2) the average by arts and cultural sector, and 3) the average by organizational size (measured by total operating budget). The report also provides the index average by geographic market cluster and provides some additional traits of these clusters. It then looks at how different operating conditions and community characteristics affect each measure of performance.
NCAR is partnering with IBM to create an online “dashboard,” which will be accessible to arts organizations nationwide. Arts leaders will be able to see how they compare to the highest performance standards for similar organizations in areas such as community engagement, earned and contributed revenue, and balance sheet health. The customized dashboard application is expected to be ready for use in early 2015.
For more information, please visit smu.edu/artsresearch.
Highlights of the Second Report:
• There appears to be a ceiling on the amount of dollars that can be raised for each dollar spent on fundraising ($7.80).
• There is relative consistency in return on marketing: $4.15 earned for every dollar spent on marketing.
• The receipt of an NEA or IMLS grant has a positive effect on nearly all performance outcomes.
• Arts sectors that are heavily into digital distribution of their programs (podcasts, virtual tours, high-def broadcasts, etc.) engage far more people, through virtual attendance, than sectors that rely solely on live, in-person attendance. Operas and symphonies lead all other sectors in attendance at digital programming.
• Art museums and “other” museums average negative bottom lines but have the highest levels of available cash. By contrast, multidisciplinary performing arts organizations experience tight cash flows and limited financial flexibility.
• In terms of organizational size, the larger organizations become in terms of budget size, the more diversified their contributed revenue sources become. They tend to become increasingly strategic about raising money now for projects in future years, ensuring that they will be able plan and execute them.
• Larger organizations are also more likely to have a lower return on fundraising and are more likely to run a deficit.
• Among the top geographic-related findings is that individual contributions cover the highest proportion of expenses in San Francisco.
• Organizations in Chicago have the highest return on program revenue per dollar spent on marketing.
• It costs more in marketing dollars to attract one attendee in Los Angeles than any of the other geographic clusters.
• New York organizations tend to have a negative bottom line – the most negative bottom line of any of the geographic market clusters.
• Higher socioeconomic level in the community is associated with lower physical attendance and engagement – likely reflecting increased access to other leisure opportunities like travel – but positively associated with contributions from trustees, other individuals and corporations.
• The higher the median age in the community, the lower attendance and engagement tend to be.