The Perils of the Detroit Institute of Arts and a Little Bit of History

You would have to have lived in a cave if you weren't aware, at least to some degree, of the perils of the Detroit Institute of Arts (DIA) .To briefly summarize, the City of Detroit, in debt to the tune of $18 billion, last December formally declared bankruptcy. Not long thereafter, reports emerged that  the city's creditors, the largest of which are those who are owed pensions, were looking to sale of the DIA art collection to help relieve the debt. William Schambra in The Chronicle of Philanthropy writes that the collection is "the most valuable remaining disposable asset" of the city.

Christie's, the prominent art auction house, was commissioned by the city's Emergency Manager to appraise the fair market value of the collection, particularly  the works purchased by the City of Detroit. The response was a range from $452 million to $866 million. Some then weighed in that was too conservative.

Then the cavalry - in the form of 10 major foundations (Kresge, Ford, W.K. Kellogg, etc.) - rode in, apparently, to the rescue. They have pledged $370  million, with the major beneficiaries being the City, retirees and employees  and the DIA. But there are conditions. The State of Michigan has to match it. The Governor recently pledged $350 million, pending legislative approval. The DIA has to itself provide $100 million for the City pension fund - each  over a period of years.  Another condition is that the DIA become a nonprofit organization and not an agency of city government. The matching conditions especially represent a high hurdle. Presumably all this, assuming it can come to fruition, would protect the DIA collections from the auction block.

Certainly the prospect of a selling off the art is a very distressing one. Major works would be removed from public view, as most museums cannot compete in the hot auction market. The Institute would be gutted, representing, as some have said, an attack on the soul of the city itself. Ironically,  if it weren't for the emotional public response to the possibility of losing the DIA collections, the foundations might  have lost one rationale for their unprecedented use of private funds to help bail out a city. These  foundations do however have longstanding relationships with Detroit.

Why has this situation come to pass, aside from the economic reasons for the bankruptcy? One could understand how the creditors would be attracted to the DIA collection, with the frequent reports of astronomical  prices for art being fetched at auction. The other reason is more basic - the DIA is owned by the city, thus vulnerable, and here is where the history lesson come in.

When the American Museum of Natural History and the Metropolitan Museum of Art were founded, before any hole was dug or even much material collected, an agreement was reached with the City of New York whereby the trustees would own and acquire the collections, and the City be responsible for the real estate and its maintenance. The years were 1869 and 1870 respectively, and the author of this arrangement was one of the museums' founders, the lawyer, and later Ambassador to Great Britain, Joseph H. Choate,  a great grandfather of mine. I have been researching his life and career. 

In a 1917 memorial to Choate, the Natural History Museum's president Henry Fairfield Osborn described a "wise union of public and private endeavors…Choate worked an  entirely new conception, namely, provision for the  independent and untrammeled  management of the museum by the most intelligent men of the City combined with its establishment as a public institution, to be  built and partly maintained by public taxation, and to be endowed and enriched with specimens brought together through private gifts and donations.” 

The DIA was established in 1885. It is of course a pity its founders didn't follow the New York City model. If it had, its collections would not be at risk today. Let us hope the complex arrangements to satisfy Detroit's creditors will work out. The goal is to keep the art in Detroit, but more broadly to lessen the possibility that city-owned museums' collections elsewhere will be similarly exposed, should their owners face bankruptcy.  Perhaps the stewards of such collections should take heed and build their firewalls now. Forewarned is forearmed.

New Year's List of Resolutions for Nonprofits

As 2014 is upon us. I thought I would review what I wrote in 2013 to form the basis of a  resolutions list for nonprofit leaders. It might even encourage you to return to my blogs in case you missed some, all of which can be accessed in the blog archive on this page.

I resolve to: look on fundraising  as an organization-wide  team effort not just solely the responsibility of the director of development. In my post of January 24, 2013 "Oh-Oh...disturbing stats about nonprofits fundraisers" I cited a nationwide study that showed  difficulty in filling senior development positions and widespread dissatisfaction among chief fundraisers about their jobs and even careers. I suggested that one reason for the unhappiness is that too often an organization will assume the responsibility of raising money rests just with the development department. I urged a team approach - staff and board - in an effort to create an institutional culture conducive to philanthropy, about which the philanthropist Eli Broad said: "it is not charity, Charity is writing checks. Philanthropy is an investment where you can see return."

I resolve to; examine closely the purpose and design of any new program, building or otherwise,  to be sure it fits into the architecture and mission of the organization, including the program's sustainability, before embarkation.  The post of February 28. 2013 was entitled "Nonprofits - Get With The Program!' and cited personal experience about what became a successful building project in Richmond VA. There are far too many examples of projects/programs undertaken because of a promised gift or a "now that's a great idea" consensus and later to have either foundered or ultimately done damage to the institution. The old adage of looking before you leap still makes sense.

I resolve to: question the purpose of any meeting before calling or attending it. My post of April 2, 2013 "Join the Meeting Revolution"  addressed the growing widespread unhappiness in every kind of business  regarding what is called meeting glut. I enjoyed a cartoon in a recent New Yorker magazine  (12/23) that showed a number of people seated in a semicircle in a room, where one pipes up and  says: "Refresh my memory -why do we meet once a week?"  Everybody's time is a scarce commodity and should not be squandered needlessly. I suggested some techniques to make meetings, should they be necessary, more efficient and productive.

I resolve to: respect the value of board members' knowledge and experience, not just their bank accounts. The blog of June 13  "Mr. X's Dilemma - Stay or Go on a Nonprofit Board?" described a case where a prominent retired executive, new to a board, at his first meeting asked a probing question about governance and was in a later phone chided by the board chair and told to back off in future meetings.  He wasn't sure he should continue to serve on a board where right out of the gate its leadership sought  to stifle him. The piece received a good deal of comment including one I published  in full on July 9 "Riveting Response to my Mr. X Post..."  My correspondent wrote in detail his experience serving on several  boards where he found his knowledge and insight was valued by leadership almost in direct proportion to the degree of his financial support. He called this "the Sugar Daddy theory of nonprofit governance."  His provocative comments are well worth your review.

I resolve to: husband my organizations' financial resources. This would seem to be obvious but in my post of October 4, 2013 entitled "Shutdowns" I wrote about the sad case of New York City' Opera's bankruptcy. One reason for its demise according to James Stewart in The New York Times was both the mismanagement  of its financial  investments and at the same time  major invasions of its endowment. The figures are astonishing. In 2001 the endowment was $51.6 million; in June 2013 the market value was just $5.2 million. In the May 10 post "the Corcoran Conundrum - Woes of a Great Art Museum" I described how management (board and staff) blunders over the years had sapped the museum's resources to the point that the board in 2012 had actually considered selling its iconic downtown D.C Beaux Arts building home. Apparently the situation at the museum has become, if not completely resolved, at least calmer. The New York City Opera however is kaput, the shards of its busted piggy bank laying at its feet.

The above list is selfishly incomplete. I am sure you have your own New Year's resolutions. With them I urge consistent application (me too!). If you belong to a gym or health club you have seen  the phenomenon where in January the place is packed - then the  numbers diminish as the weeks go by. Managing and governing a nonprofit is one of the most difficult of all business enterprises. Stay the course. May you have organizational success and personal fulfillment in 2014.

Just a quickie...

This will be a short post. I haven't written anything since October but I have a good excuse. On November first I underwent surgery for a total (left) knee replacement and have since been undergoing rehab. Those of you who have taken that elective procedure  (what a friend called "a  self-inflicted wound") know that the operation and hospitalization are the easy part.. it's the weeks and even months of rehab that try the soul. I am one month out and things are going pretty well. But if there is any test for the old saw "patience is a virtue" this is it.

I am writing for two reasons. First is to be true to my inner pledge, taken when I started this website in April 2011 to post monthly. Here I am  just under the wire for November 2013.

Secondly is to wish everyone a Happy Thanksgiving, with the hope that the "weather event" wasn't too disruptive. We are expecting 10 for dinner...it may end up being less. I know we all have much to be thankful for. True to the purpose of this site, I want to offer thanks for all those people - paid  and unpaid - who work for, or contribute to, nonprofits. They - you -- mean so much to the health of this sector, which in turn, makes up a  critical part of the fabric of  the  nation. I know some of you who toil in the nonprofit vineyard may not agree with the health description above, given the vicissitudes of the financial environment. Nevertheless despite all  the challenges, nonprofits press on doing wonderful work.! Thank you for that.

More substance in December. Gobble,gobble.

Shutdowns

The news, as I write this, is all about the shutdown of the federal government precipitated by a small number of Republican congressmen obsessed with Obamacare. I won't tarry on this subject, as opinions and reports are legion elsewhere. I want to concentrate on two other important shutdowns- those of the New York City Opera and the Minnesota Orchestra.

Although the orchestra is still in business technically, it is frozen in a labor dispute that has  dragged on for a year. The  issue of course is money. On October 1st the musicians rejected the latest - and fourth- offer from management. Furthermore its music director since 2003,  the highly respected Osmo Vanska resigned - as he promised - if no agreement could be reached in time for the orchestra to prepare for concerts at Carnegie Hall this fall. The orchestra  cancelled  its 2012-13 season and won't open its 2013-14 season in Minneapolis  scheduled for October 4th. Even the solution offered by the renowned mediator, former Senator George Mitchell, failed.

Mitchell, who had helped broker peace in Northern Ireland and been a special envoy in the Middle East, ran into the special environment that exists in labor negotiations in non profit arts organizations. Many years ago (40 to be exact) I wrote my thesis at the Harvard Business School on collective bargaining in symphony orchestras. My professor, James J. Healy was a nationally known arbitrator in numerous labor-management disputes. In discussing my paper with him, he shook his head and said: "My goodness, I've never run across anything quite like these situations."

Here's a current example. There is now  a dispute between the management of the San Francisco Ballet and its dancers. The  dancers, in a recent statement, said they are seeking "provisions that
demonstrate a sufficient level of respect" and "protections against bullying by the artistic staff." You can write in salary and benefit provisions as well as basic work conditions, but it is difficult to craft language that will successfully guarantee respect. 

In Minnesota, according to The New York Times, players called the last management proposal "artistically unsustainable" referring to the concern that too low salaries (latest proposal was an average of $104, 500 a year) would mean the orchestra would not be competitive in the market for the best players. Well, unless the sides can get together, there won't be an orchestra.... period.

[Speaking of average annual salaries and labor disputes, the stagehands union on October 2nd  struck New York's Carnegie Hall, causing cancellation of the opening night gala with the Philadelphian Orchestra. At Carnegie Hall, the average  total compensation for a stagehand is  over $400,000 a year . No comment.]

The October 2nd  announcement of bankruptcy and folding of the New York City Opera is a very sad story This company, now in its 70th year, was started as "the people's opera" and was housed for years in the relatively small  City Center. Offering lower ticket prices and often more adventurous programming than the august Metropolitan, it also was the starting stage for the likes of Beverly Sills and Samuel Ramey. In 1965 it moved to the State Theatre in Lincoln Center, across the plaza from the Met. Here is where some think the trouble began. The theater was much bigger with more seats to fill, higher fixed costs and poor acoustics to boot..  Deficits began to mount.

In 2009 the theater renamed the David H. Koch Theater began a long-term process of renovation.. In 2011, City Opera management decided  not to produce a season there, electing rather the next year to perform in a number of venues elsewhere in the city. To finance  the "dark" year, the endowment was raided to the tune of $ 24 million. The number of performances fell, as well as the size of the audience, along with the finances. A last minute fundraising appeal failed. At the time of declaring bankruptcy, City Opera was earning more from its thrift shop than from its endowment.
Clearly along the way there were strategic errors on the part of management, compounded by the effects of  the "Great Recession."

In both the cases of the Minnesota Orchestra and City Opera, their shutdowns mean a slice of a city's soul is removed. We need all the soul we can get these days. The arts and music give us solace; politics, especially in D. C,  provide the opposite.
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Summer Idyll for a Nonprofiteer

I began writing this in the kitchen of a family house on an island in Penobscot Bay, Maine where we had been rusticating the first two weeks of August. It was raining, otherwise I'd have been outside, on the water or the 9 hole golf course. There is no TV, lots of books and we were largely free of the endless streams of information and commercial entreaties experienced elsewhere in time and space. Pausing to reflect on the past year since last on the island - as the non-profit world continues its struggle with  the effects of the recession and faces challenges of internal governance -  I realize that since late July I had been on an idyll. It's a word little used these frantic times. It means experiencing a period of calm and contentment.

Being in beautiful places in Vermont, New Hampshire and then Maine helped. My wife and I were lucky to begin our idyll at Marlboro, Vermont where we visited friends and attended  two concerts at the Marlboro Music Festival. This event, held on the lovely campus of Marlboro College, has just celebrated its 63rd  season. It is devoted exclusively to chamber music and was founded by the great pianist Rudolph Serkin and friends. Its present artistic directors are the renowned pianists  Richard Goode and Mitsuko Uchida.

Marlboro Music is unique. Over a five week period there are only two public performances a week. The community of about 80 musicians, a mixture of internationally known older artists and younger performers are formed into 60-80 groups, which have the luxury of unlimited rehearsal time.  Typically only about 20% of works rehearsed are ever performed publically. Only those deemed to have reached especially excellent results will be programmed. As a result, the repertoire  and personnel are announced to the public only a week or so in advance.

Furthermore, the program handed out to concertgoers is a photocopied single sided  sheet,  simply listing the pieces and names of performers. There are no musicians' biographies and quotations from music critics. There is however a handsome booklet available that gives more information about Marlboro Music, lists of supporters, advertising, etc. The organization would appear to have a devoted following.

The auditorium is barn-like with superb acoustics. The audience sits on folding chairs. Ticket prices are reasonable. A  good seat can be had for $30. The atmosphere is informal, yet charged with the expectation of hearing great music performed impeccably. And that is the result.

Why, you might ask, would musicians of such high caliber spend most of their summer engaged in intensive rehearsal and study when  the chances of public performance are slim? The answer lies in the Marlboro tradition of community, collaboration and  learning. The focus is on music, not personalities. I could not help but notice a wonderful photograph tucked away in an auditorium hallway of the youthful (barely out of their teens)  James Levine and Van Cliburn seated at a Marlboro piano keyboard, score in view - had they any idea of the fame awaiting them?

The great music-making aside what struck me was the non-commercial aspect of  Marlboro Music. Perhaps purity is too strong a word but it comes close. What better way to launch an idyll than experiencing an organization that strips away the extraneous to allow performer and listener alike to focus on why they have come together...and that is for music.

I am back home now and the world has crept back into my consciousness - from the horrors of Syria to the perils of the Detroit Institute  of Art. My next blog post will doubtless be less idyllic, but  for now why not savor the memory of hearing Mozart in the mountains of southern Vermont and of enjoying Maine sunsets? Thanks for your indulgence dear reader.

Riveting Response to my Mr. X Post...

It would be helpful, but not necessary, if you reference the post of June 13 entitled:  "Mr. X's Dilemma -Stay or Go on a Nonprofit Board." You can access it on the Archives side of the Blog section (on the left).

I have received some great responses/suggestions from that post, about a new board member who was criticized by the board chair for asking a (good) question about board governance. Below is the most interesting. Read it - as it is a revealing and even disturbing piece of personal testimony by a reader from the "front lines." Note: by director is meant board member.

Please allow me to share ( anonymously) the story of a business person who recently sold his firm for over $10 million and who gave away 30% of that amount. These are not, I admit, Bloomberg numbers, but neither are they penurious - 30 donations of $100,000 would make a positive difference for a lot of nonprofits. But giving away this amount of money has not been a happy experience for me. Your blog post really hit a nerve, and if you think it is helpful, you are welcome to share it with your readers.

Twice in the past couple of months I've seen boards of venerable institutions alienate directors who might have been helpful to the long-term future - indeed survival- of those institutions. But before those directors could offer their wisdom and strategic insights based on decades of professional experience in the corporate and nonprofit worlds, it became clear to these directors that is was their bank account rather than their endeavors at serious governance, that was the subject of interest to the nonprofit organizations they had sought to help. In the short term this strategy might work. When operating deficits are mounting and many nonprofits have not recovered from the financial crisis of the past five years the quick buck has its appeal.

But the Sugar Daddy theory of nonprofit governance only delays the inevitable. Without accountability and standards, the hallmarks of effective governance in any organization and the essence of Geoff's blog post, the donors preferred by entrenched boards and nonprofit management will delay, but not avoid, the day of reckoning. Sadly, those donors who opened the door for consideration as board members, will find their advice is less valued when that advice is no longer accompanied by out-sized donations.

Here's a tip for nonprofit organizations who recruit people who have had a financial windfall, such as selling a business or cashing out of property and partnerships that were built over a career. When we "suddenly" - that is after 30 or 40 years of labor- become wealthy, we were happy to share that bounty with nonprofit organizations. Opportunities for board memberships soon follow. But while the financial windfall lasted only a few years, the judgment and insight that might have been of value to nonprofit organizations could have continued for a lifetime. Unfortunately it is very clear  that once these windfalls have ended - for me and for the nonprofits  to which I have been so generous - the invitations to board service have also come to a close. This is precisely the reason that many entrepreneurs choose to create their own foundations rather than become involved in those that already exist,. Our energies are perhaps best exerted. even in our 6th or 7th decade and later, in starting new enterprises rather than contributing to those that have as their primary interest recruiting people who are engaged primarily in sustaining the mistakes of the past,

Well, Dr. Geoff, that was certainly therapeutic for me. I hope it will serve some of your readers. If nonprofits need board members and leaders who are capable of building organizations and sustaining them through difficult times, then they might start by valuing those board members for their acumen rather than their back account.  

Many thanks to my necessarily anonymous reader for this candid and articulate testimony. I hope it will be of use. Feel free, as always, to pass it on.

Mr. X's Dilemma - Stay or Go on a Nonprofit Board?

The other day an old friend and colleague told me a story, one that ends with an interesting question.  Here's the scenario: a gentleman, recently retired as a senior corporate executive is invited to join and accepts a position on a non-profit board of some prominence in his community, where he enjoys a fine reputation. Aside from his professional career, the man we'll call Mr. X, has served on a number of boards of notable nonprofit organizations.

He attends his first board meeting and at one point speaks up, raising a question of governance procedure, namely does the board engage in an annual self-evaluation? A noncommittal answer is given by the executive director who has served in that position for many years, in fact since the organization's founding. That evening Mr. X receives a phone call from the board Chair who in a chiding tone, tells him in future meetings to calm down, to cool his jets and not to be so aggressive.

The mild-mannered Mr. X is taken aback - in fact insulted. He asks a friend: I am 70 years old, with many professional accomplishments and can offer a lot to a board, why should I continue to serve on a board where right out of the gate its leadership seeks to stifle and gag me? A good question...

For an answer, let's engage in some conjecture about the reason the board Chair made that call. It might be he said to himself:  "Oh-oh, Mr. X is on to something and we don't want him to go down that road." This defensive posture suggests the Chair is a control czar, along with the director. Another possibility, and a kinder one, is that the chair wanted to educate, albeit brusquely, Mr, X about the culture of the organization.. If so, he might want to figure out what role the board  plays in governing the institution aside from a select few.

I discussed Mr. X's quandary with the colleague who brought it to my attention. I offered perhaps a)Mr.  X stay on for at least enough time to quietly take the temperature of the board and its leadership at meetings, and plan his participation accordingly or b) take a "Damn the torpedoes full speed ahead"  approach and continue to raise questions that might cause discomfort. That latter option would have to jibe with his personality. It might result in his being pigeon-holed as a troublemaker.

As for the former idea, my colleague suggested an examination of Mr. X's reason for joining the board. If he is deeply committed to the mission of the organization, then he might be able to ignore the style of its leaders, including  their domineering attitude, and press on. But if he is more interested in management issues,  given the controlling nature of the leadership, he could undergo grinding frustration as he finds his ideas routinely brushed aside.

I don't know how much time Mr. X spent with the leadership before agreeing to serve on the board. His quandary might not have arisen if in thorough pre-decision discussions he could have explored issues and scoped out management styles. Perhaps then he might not have signed on.

I have written before about the importance of thoughtful, mutual vetting in advance between a potential board member and the nonprofit. Such a process can determine if there is a good fit. This story only reinforces that need.

What do you think Mr. X should do? Hang in there, or resign and return for more time with the comforts of retirement? Comment below or write me at: info@geoffreyplattconsulting.com