Foundation Friday: Retrospective Evaluation

Institutional funders could perform a great service if they would analyze their giving records going back twenty or thirty years.  Which agencies survived, and which died, and why?  For any one type of nonprofit–arts group, social service agency, advocacy group–take ten extant groups of roughly equal size, and compare them to ten defunct groups of roughly equal size and vintage, asking:

  • What proportion of earned income, of grant income, of individual giving turned out to be the golden mean? 
  • What financial or client/audience figures should have rung alarm bells?
  • When should the Board have known it was throwing good money after bad?

These aren’t simple questions, but they should be answerable, and the foundations–with their years and years of grant applications containing financial records and their ability to do (or pay for) sophisticated statistical assessments–can be the ones to answer them.  Ascertain these algorithms, and then share them with your grantees so they don’t have to keep reinventing the management/fundraising wheel. 

Early in her consulting career, the Nonprofiteer actually proposed to a funder a research project answering this description.  One of Chicago’s most honored theaters had gone very suddenly belly-up, demonstrating with blinding clarity that artistic excellence alone wouldn’t sustain a theater–business acumen was required.  Yet the likelihood of a theater’s having such business acumen was almost inversely proportional to its artistic quality: the better the artists, the more focused on art; the more focused on art, the less likely to be able to read a balance sheet, or notice that the light bill hasn’t been paid.

Certainly, some theaters lucked out by finding or growing business talent equal to their theatrical gifts, but why should the survival of fine art be a matter of luck?  Experience shows there are better and worse ways of managing a theater; why couldn’t the funders ascertain what those were, and make that experience–in the form of financial guidelines–available to all theaters, so they could avoid obvious business mistakes and stand or fall on the quality of their productions alone?

Perhaps not surprisingly, the funder’s response to the idea that it open its files to the Nonprofiteer for a research project–and pay her for the privilege–was, "We create our own research ideas.  We don’t get them from consultants."  Fair enough: but Not Invented Here isn’t really a good enough reason not to do something that might make charities more efficient and effective at relatively little cost.

No one has access to the same kind of detailed financial histories as the funders; no one has the expertise they have to see what works and what doesn’t.  How ’bout it?


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3 Responses to “Foundation Friday: Retrospective Evaluation”

  1. Ellen Wadey Says:

    As director of an organization that is working to balance artistic and business management excellence — which in my mind isn’t a one time fix but a continual “well-being” assessment — I’ve often struggled with the foundation factor in this equation. On the one hand, I think a comprehensive business assessment could benefit the field, but I worry about the interpretation between what makes a healthy large institution, mid-size organization and grassroots shop. (My place falls in the grassroots shop category). In all the meetings that I’ve attended — which I try to be a good citizen and attend a good number of them — about marketing, audience development, financial management, board development, etc. — I’ve found the conversation automatically skews to large institutions — and that apple doesn’t match my orange. For larger institutions, we’re talking more about portfolio management and a highly diverse fundraising strategy. At grassroots shops we’re talking more about cash flow and $100 individual gifts being labeled major donors. I’m not sure you can have that nuanced reading of information if you haven’t been out in the field raising dough for a number of years. (So, maybe that funder really did need a consultant to do the work. I know only a handful of program officers who were former fundraisers at medium to small organizations. I think if you’ve had to ask for money you have a different understanding than if your main experience has been budgeting money.) So, I’m not sure that I would want this assessment coming from the foundations — even though they do have a wealth of raw statistics.

    I remember being in a meeting between one of Chicago’s largest funders and a host of grantees and the question was asked, “Why don’t foundations work together to assess their impact on the comprehensive artistic vitality of the city?” (Maybe I’m a weirdo, but I think this also includes making sure organizations aren’t putting on a great show while teetering on financial ruin). We’d all been through the “Chicago is a small theater” wave, followed by “Chicago is a dance town” wave. For those of us in other art forms — and doing quality work — we felt a bit like our noses were pressed against the bakery window while the tea party was going on. Why do the foundations get to choose what art gets supported in the city? (And, in my estimation, the criteria has not been based on sound business management — beyond not having an outrageous deficit over several years.) The answer that was given explains, “Because we all get to control our own money.” And so some organizations who are the current darlings get to focus on their artistic product because they have a good flow of foundation money coming in the door, but when the favored child status changes, most of those same organizations haven’t focused on the business side of things, and they go topsy turvey. I will say that a number of foundations have come to realize that easing the rug out from under (a notification of a final grant a year in advance) versus yanking it (the “sorry we had so many worthy applicants and a limited amount of funds” letter) has at least given organizations a fighting chance to adapt.

    I’m not sure what all my ramblings add up to except giving voice to the muddled ruminations of my brain. I do think good business management needs to be analyzed, assessed, encouraged for organizations to make it in the long term. I also believe that organizations have life cycles, and poor or neglected business management will bring that life cycle to a conclusion sooner. I know the Arts & Business Council’s smARTscope program and the Trust’s support of this program through its funding is trying to promote the conversation, but I’d like to see an analysis of how organizations who have gone through this process are doing five years out, ten years out.

    I guess I’m saying that I wish foundations were more concerned about how — as a whole — they impact a city’s cultural life, how they help to educate organizations that have a great artistic product but aren’t equally healthy on the business side — isn’t the reason they ask for our financials because they’re analyzing this? — but, I’m not going to stand with my hand on my hip waiting. And, I think organizations need to start realizing that if they want to be around in another five years, ten years, beyond, that sound business management is an art form in itself. Focusing on the business side doesn’t take away from the art, it makes sure the art keeps going.

  2. Nonprofiteer Says:

    You’re absolutely right that business management is an art–but just as artists can be taught perspective as the basis for any other work they’re going to do, business managers can be taught earned-versus-donated ratios–if only we, as a field, determine what those are. Of course we don’t want foundations dictating acceptable kinds of art but I don’t see (to extend the metaphor) why they shouldn’t offer drawing lessons.

    Foundations that only fund the performing arts won’t have useful information about the management of visual or literary arts; foundations that only fund large agencies won’t know much about how to make small agencies thrive; foundations that only fund white people’s programs will have only limited information that’s transferable to agencies rooted in minority communities. But with each contributing a piece, the big picture should emerge. And remember that this is as opposed to the current model, which requires every artist to figure out for him/herself how to represent distance, or draw a persuasive human figure. We’ll never make progress if everyone in the field has to start from square one every single time. As it is written: once was plenty for inventing the wheel.

  3. Peter Says:


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