Saving the Performing Arts—The Business Case

When I became president and interim general director of the Austin Opera four years ago and learned that the company was $14,000 away from bankruptcy, a hard fact hit me. Although opera is an art, running an opera is a business.

On the heels of the 2008 financial meltdown, a number of fine performing arts organizations closed their doors, including the New York City Opera, Opera Boston, and Baltimore Opera. Austin Opera was about to join them. What signs did the leadership miss, and what did they need to do about it?

Some Signs of Impending Financial Doom

• The number of season subscribers declines year after year.
• Seasons consistently end with a financial deficit, and the board leadership and general director do not bring finances under control.
• The deficit in covering operating costs through ticket sales is not made up by donations and other income.
• Donations decline as formerly generous patrons don’t want to see their donations wasted by a board and management that do not use funds well.
• The board raids the endowment to pay operating costs because the usual funding sources, tickets sales and donations, dried up.

In times of crisis, collective leadership does not work. The need for strong — even autocratic — leadership is paramount. That leader can be the general director, the president, the chairman, or an outsider. A strong leader must develop a plan and execute it quickly if the organization is to be saved. For those of you with private sector experience, this is old news. When a company is in trouble, the chief executive pulls in power.

Characteristics of Needed Leadership

• Leaders act, and they act quickly once a sound plan is developed, even when messy details need to be cleaned up later, but they are typically winners.
• Leaders do not act alone. A good leader works with the board of trustees and senior staff to get their advice and concurrence for the actions to be taken.
• Actions are taken when enough information is on hand. In a recent interview, General Colin Powell said that when someone has between 40 and 70 percent of available information, that person should probably decide on a course of action.

Immediate Steps

Austin Opera took steps to stem the crisis. The key measure was to conserve cash above all other actions. Among the others were:

• No bills were paid without my approval.
• Staff hiring was frozen.
• No new contracts were signed.
• Upcoming season’s subscription monies were placed in escrow, pending knowledge there would be a next season.

We set up single-purpose task teams, not relying on existing committee members. We needed the most able people with time to give the effort. They addressed the budget, ability to raise funds, a plan for the upcoming season, and even how to close down the opera appropriately if all else failed. We developed short- and long-term action plans. I received great support of time and treasure from some active and emeritus trustees, and that support cannot be overrated.

Some Short-Term Actions

• We hired an excellent interim director.
• We sold our donor-gifted building and paid off all debts — and had money left over.
• Surplus funds were put under strict control.
• Internal controls were strengthened.
• We undertook intensive communications with major donors.
• We cut administrative expenses.

Some Long-Term Measures

• We hired a new general director from the Metropolitan Opera in New York City, appointed an artistic director, and hired a new finance director.
• We strengthened the board of trustees by adding people with bottom-line experience. If you agree that managing an arts organization is a business, bring business people onto the board. We had all the “arts” people we needed.
• We selectively continued to use single-purpose task teams for specific actions. One cannot do this for every action as this unduly diminishes the role of standing committees.

Some General Observations to Stave Off Poor Leadership, Weak Financial Management and Organizational Failure 

• Encourage rigorous and open debate in committee and board meetings.
• Periodic financial review by the finance committee and review by the full board of trustees are strong tools. These steps are perhaps the most important  for continued financial stability. Get issues out in the open early.
• Limit terms for the president and chair. Groups stagnate, become inward looking, and stifle new ideas without turnover of leadership.

Finally, if you become leader of a struggling organization, expect sniping and criticism. Your job is not to win friends but to save a group that hasn’t saved itself. Ignore the naysayers who will try to thwart your goals. Success will be your reward. The opera experience is equally valid for any performing arts group. 

Note: When Auerbach’s presidential term ended in 2013, the Austin Opera had no debt, money in the bank, a new rehearsal hall and administrative offices, and a strong board of trustees. This article is taken from his soon-to-be published book, "Saving Performing Arts, How to keep Your Organizations Fiscally Healthy & Artistically Vibrant."