Monday, April 9, 2012

Translating Internal Assessment to Arts Institutions

The articles for this week on companies’ internal capabilities1 and organizational agility2 naturally left me wondering about the applicability of these strategic elements to the nonprofit arts sector. While strategic planning as a whole is certainly talked about frequently in arts circles, only the “larger” arts institutions (roughly $30 million and above) ever seem to put in the required degree of effort to make the strategic planning process worthwhile. In recognition of this trend and in fulfilling his duty as one of our nation’s many cultural leaders, The Kennedy Center President Michael M. Kaiser wrote a 145-page manual entitled, “Strategic Planning in the Arts: A Practical Guide.”3 Like Ulrich and Smallwood in the Harvard Business Review, Kaiser outlines an internal audit for organizations to follow in undergoing a SWOT analysis. It differs, however, in assessing core competencies rather than looking more broadly at organizational capabilities. Regardless, I do see elements of Sull’s description of organizational agility in The Kennedy Center’s operations. As nonprofit arts institutions are continuing to look more and more like corporations, I wonder if we may draw additional insights from these articles about how the arts may stimulate a more sustainable cultural environment.

Ulrich, Smallwood, and Kaiser all discuss the value of identifying an organization’s current strategic goals before assessing the capability of the organization to meet those goals. Ulrich and Smallwood discuss Boston Scientific’s capabilities audit by emphasizing that it is important to “identify and build capabilities that will have the strongest and most direct impact on the execution of strategy.”1 This infers that the strategy must come first. Kaiser spends half of his chapter on “Internal Analysis” describing the five stages of organizational development so that an organization may determine its capabilities within the life cycle. He then states, “Having identified the key areas of concern, one can then proceed to gather the internal data that will prioritize these problems.”3 While the authors agree, then, that organizational assets should fit within overarching goals, Kaiser describes the internal assets of an arts organization as much more tangible and tactical than Ulrich and Smallwood describe the internal capabilities of a for-profit company. For Kaiser, internal analysis involves a quantitative assessment of: Programming, Education/Outreach, Earned Income, Marketing, Development, Board of Directors, Staffing, Facility/Equipment, Financial Performance, and Support Groups/Volunteers.3 I think Ulrich and Smallwood would consider most of these elements “core competencies,” as they are all functions of any nonprofit arts organization. “Organizational capabilities” take a much more top-level view to consider the intangible elements that weave through an entire organization to set it apart from competitors. Surely collaboration, customer connectivity, innovation, and efficiency are important to nonprofit arts groups, too, so why does Kaiser focus his internal audit on an organization’s tactical competencies? I would argue that he avoids the hard work of looking at interconnections throughout an organization partially because it is easier to track something such as earned income, but also because most arts groups are barely even doing that. Most arts institutions are struggling with day-to-day operational work, so how can we encourage them to think beyond these tactics to more long-term capabilities? How can we create an environment where innovation, learning, and coherent brand identity weave through the organizational culture?

Nonprofit arts organizations, too, have encountered the “market turbulence” that Sull describes in his article on organizational agility. However, his article is predicated on a particular definition of market competition, which the arts sector defines more loosely. While arts groups do compete for talent and audience, even the larger organizations will only tangentially focus on their strategic, portfolio, and operational agilities. Again, we must return to The Kennedy Center as an example. A behemoth of an arts organization in Washington, DC, over the years The Kennedy Center has acquired a number of struggling arts groups. About a year ago, they acquired the failing Washington National Opera (WNO).4 By Sull’s definitions, this move can be viewed as an example of both strategic and portfolio agility. It was a “golden opportunity” for the WNO to save the nation from the loss of its premiere national opera company and for The Kennedy Center to act as its savior. It was also an opportunity for the WNO to gain control of its debt (a requirement before the acquisition to mitigate The Kennedy Center’s financial risk) and for The Kennedy Center to both serve as an example of a fiscally responsible arts organization and to diversify its programming options. In the process, The Kennedy Center demonstrated its portfolio agility as it shifted personnel and fiscal resources to the WNO’s operations. In the Development Office, for instance, staff shifted to work with the WNO’s donors and the WNO was added as a potential sponsorship opportunity for any corporate prospects. The Kennedy Center also made its Opera House available for the WNO as part of its operations rather than as an outside renter. Outside of this merger, we can see The Kennedy Center’s operational agility as it takes advantage of its position in the market to capitalize on constantly changing audience preferences. The theatrical dramas War Horse and The Book of Mormon are both hot sellers right now and expensive shows to purchase. The Kennedy Center has the organizational agility to recognize these trends and to arrange to produce these shows during the 2012-13 season. From my personal experience of working at The Kennedy Center, I can verify that the downside of its organizational agility is its large, bureaucratic structure, which also cramps its ability to “translate corporate priorities into individual objectives.”2 What are other ways that a large arts institution such as The Kennedy Center can think more broadly about competitive forces to change the dynamic of the constantly struggling arts industry? How can strategic, portfolio, and operational abilities play a role in making the case to the public that the arts continue to deliver value?

1Ulrich, Dave, and Norm Smallwood. "Capitalizing on Capabilities." Harvard Business Review June (2004): 1-8. Print.

2Sull, Donald. "Competing through Organizational Agility." McKinsey Quarterly (2010): 1-9. Print.

3Kaiser, Michael M. Strategic Planning in the Arts: A Practical Guide. Washington, 2009. Print.

4Midgette, Anne. "Kennedy Center to Take over Washington National Opera." The Washington Post. 20 Jan. 2011. Web. 9 Apr. 2012. .

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