(11-8-2010) At the GIA annual conference in Chicago, we rolled out the work we’ve done so far on capitalization. Capitalization is defined as financial, human and physical resources that lead to the fulfillment of an organization’s mission. This has been a yearlong journey that started initially as a discussion between national foundations. It quickly became evident that Grantmakers in the Arts had a responsibility to share the research, literature review and thoughtful conversations about the financial stability of the nonprofit arts sector.
Basically, this conversation is so relevant because I have yet to talk to an arts manager or a funder who says, “There is no problem with the financial stability and sustainability of the nonprofit arts sector.” We know there is a problem and it has been growing due to behaviors of both funders and nonprofit arts groups. In its National Capitalization Project Summary, GIA is making a recommendation that funders adopt the set of common practices identified by the work group who spent endless hours reading and discussing this issue with support from leading capitalization experts.
In very brief, the set of common practices are:
These are pretty simple and basic concepts. The common practices do not suggest that certain sizes or types of organizations should be funded and others should not. Nor do they suggest how funders determine whom and what they fund. They outline ways that funders can help grantees become better capitalized and more sustainable over time. The document from which this simple list comes includes greater detail on these practices.. If you really want to understand that GIA is saying here, please read it.
One of the statements from the summary that caused some stir at the conference was this, “…there is an oversupply of product in some marketplaces and current funding practices do not address this issue.” Over supply of art? Sounds like blasphemy to me. I realized that the negative reaction to this statement, which I had myself when I first read it, comes from the fact that we are continually living in two worlds. We are people torn between divine passion and mundane practice. This makes us conflicted and sometimes blind to the reality around us.
“Over supply” is an economic term (mundane practice). Great artists, high emotion and enthusiastic patrons inspire us to continue our work (divine passion). We are, at times, blinded by our love for our product that we don’t see ourselves in the practical world of supply and demand, consumer education, hard-sell marketing and assets and liabilities. Sometimes we can’t even talk about “business” because it means admitting we live in a world driven by a marketplace. By admitting this, we are denying the fact that the arts should just be there, indefinitely and in all abundance. That’s what I’d do if I were Queen. But…
The reality is that many of our institutions are losing market share and have not altered their behavior to adjust to that loss. Business as usual is no longer a viable strategy. As employers, they continually need to find ways to decrease pay to the artists that are the creators of the product. And the nonprofit business model allows them to be “rescued” by a large gift from a passionate donor. Unfortunately, this gift doesn’t fill the real need, which is to fully capitalize the organization so that it can pay artists, administrators properly and go about its business without debt. They get the gift and the cycle begins anew.
This is exactly the right times to be having this capitalization discussion. It is not just the economy but also the changing behaviors of society. How can we have a more sustainable and financially healthy nonprofit sector representing the full eco-system of arts groups that serve our diverse communities? It’s going to take new conversations and changes in behavior from both funders and nonprofits but our communities and the artists who live in them will be better off for it.