December 12, 2014

Arts Groups in Flux but Trying Out New Ideas, Survey Shows

Nonprofit Finance Fund received more than 5,000 responses to our annual State of the Sector survey in early 2014, including 919 arts and cultural organizations covering a broad cross section of artistic disciplines and budget sizes.

In addition to questions on financial health and viability, we asked cultural organizations about specific challenges they face and how they are working to address them.

The story that emerged depicts a sector in flux: amid constant concerns about financial health, arts organizations continue to experiment with new programming and audience-engagement tactics.

  • Perhaps not surprisingly, “achieving long-term sustainability” was cited by 47 percent of organizations as a challenge—the leading response to that question by far.
  • Seventy-one percent of respondents are working to develop programs targeted to specific visitors and audiences, 59 percent are collecting data on audience preferences and behaviors, and 56 percent are implementing new marketing strategies.

Barriers to Success

Although these new investments and programs may promise positive results, a number of systemic challenges continue to exert an outsize influence on the viability of arts groups.  Our 2014 survey responses point to the following barriers in the arts-funding ecosystem:

Mismatched funding. Financial reserves are a necessary part of doing business, whether for operations, facilities, artistic risk-taking, or to protect against the unexpected. Yet organizations often struggle to obtain or even discuss a more balanced capital structure.

Missing dialog. While 53 percent of respondents could have an “open dialogue” with funders about program expansion, only 12 percent felt the same about operating reserves, and the numbers were even lower for facility reserves (9 percent) and growth or change capital (9 percent). A colleague at NFF recently drafted a blog on the specific obstacles preventing healthy dialogue and transparent conversation.

Misaligned or outsized reporting requirements. Grant makers often neglect to support the costs associated with managing their grant awards, like proposal writing, continuing reporting requirements, and impact measurement. (For example, a grant of $50,000 with reporting requirements that cost $10,000 is a “net grant” of $40,000.)

Funding that falls short of full costs. Planning for financial sustainability begins with an organization’s ability to truly cover the full costs of operations for the short- and long-term. Tightly restricted program grants with unrealistic provisions for overhead will often sustain immediate programs but stymie an organization’s chances for long-term mission success.

(The survey brochure has additional detail on barriers and the full range of program and financial strategies that organizations are pursuing.)

Breaking the Barriers

Arts leaders have shown incredible creativity and resiliency, piecing together funding and developing innovative ways to support their mission amid financial uncertainty. But for many organizations, there is a real question about how long new programming and revenue strategies can be sustained if they don’t deliver positive financial results—and quickly

Arts leaders can slice and dice the data using the Survey Analyzer tool; it’s filtered here for arts organizations. Nonprofits can sort by budget size and sub-sector for their peer group and use this information in making the case for support to donors.

Likewise, donors can filter the data to help understand benchmarks and dynamics affecting the organizations they fund.

Ultimately, the benefit of the data depends on how organizations can use it to inform a path forward.