A Case for Centralized Management: Austin Lyric Opera's Managerial Response to Crisis

A significant percentage of U.S. CEOs also serve as chairmen. They prefer this model because executive authority is combined in one person. Decisions can be made faster. One can argue whether this may be better or worse for the interests of shareholders. But certainly, in times of crisis, centralized management is key to getting things done quickly. Below, a case study.

A little over a year ago, I became both president of the board and acting general director of Austin Lyric Opera, a regional opera company. This was unusual because the general director had resigned, and the board president resigned shortly thereafter. Prior management had failed to meet its financial responsibilities. We were just a few thousand dollars from bankruptcy. Immediate action was required to keep the opera alive.

By holding all executive authority, subject to approval by the opera’s executive committee and Board of Trustees, I was able to take actions without extensive discussion.

Immediate Steps Were Taken

• To control available funds, no bills were paid without my approval.
• All hiring stopped.
• Several long-term contracts that were up for renewal were cancelled pending renegotiation.
• We cut the number of performances.
• We placed incoming funds in escrow pending a board decision to stay in business. If we closed down, the funds would be returned. In the past, those funds were used when received.
• We stretched bill paying to acceptable limits.
• We asked the most able active and emeritus board members to provide counsel.

Next Steps

• Once we staunched the immediate bleeding of funds going out, we needed to decide on whether we would stay in business, and if so, on what terms.
• We established single-purpose task teams, bypassing a slow committee process, to recommend actions to take if we went forward; or, alternatively, to close down in an orderly fashion.
• Under board leadership, we established an emergency fund that raised $1 million in six weeks with 100 percent board participation. The 100 percent participation was key to establishing credibility within the community and among our donors that our own board supported the effort to stay in business.
• We placed the opera’s major asset, its building, on sale.
• We sought advice from Opera America, the service organization to all U.S. opera companies and hired an outstanding interim executive director.

What Happened?

• The board agreed with the recommendations of the single-purpose task teams, and we remained in business.
• We sold the building successfully, with the considerable help of a board member with commercial real estate experience who worked with our broker.
• All debts were paid off with the sales proceeds, and the remainder was placed in a secure reserve account.
• A conservative business model, and an integrated budget and operating plan were adopted.
• We hired a new general director, artistic director, and finance director.
• We switched external auditors and established an internal audit function.
• Surplus funds are now controlled by a special funds committee, which releases money only with an 80 percent super majority vote (four out of five). Significantly, neither the board president nor the general director serve on the committee — the two officers who usually want to use funds.
• We have invigorated our committees, naming professionally competent trustees as chairs.
• We now seek out trustees with business, bottom-line experience. The business of opera is art, but the art can survive only with a business approach.
• The finance committee met weekly for almost a year (as opposed to six times annually) and became the key board group maintaining fiscal integrity.

Some Take-Away Ideas
Some take-away ideas for any reader of this column who may be in either a for-profit or not-for-profit organization

• Select a strong leader.
• Move quickly and decisively.
• Conserve cash above all.
• Bypass established structures and enlist the help of the best people.

I received great help in getting all of this done. Numerous board members gave time and money. We harnessed the expertise of board members and friends of the opera. They were pleased to be asked to help; their work was invaluable. Our interim general director performed with skill, calm, and good humor. Our artistic director supported the need for a balanced budget and continued to produce first-class art with those constraints.

One thing is certain. Had we followed the normal management paradigm of continuing dialogue and glacial management through our committees, the opera would be out of business. Crisis conditions warranted the strongest central control. With operations and finances now stabilized, and a new management team in place, my challenge is to modify my management style to be more collaborative. It’s a work in progress.

NOTE. Auerbach remains president of the board of Austin Lyric Opera. A new permanent general director joined the company in June 2012. A solid season for 2012–13 lies ahead.