(The following remarks were given at the 2013 TCG National Conference in Dallas at the opening homeroom session of the Financial Adaptation arc.)
Financial Adaptation – It seems that’s what we’re all here to talk about.
But what does that mean?
“the act of adapting; the state of being adapted; adjustment; something produced by adapting: an adaptation of a play for television”.
But I like the biological definition the best:
“an inherited or acquired modification in organisms that makes them better suited to survive and reproduce in a particular environment”.
Over the past five years, as theatre makers we’ve all been placed in situations where our ability to adapt to a particular environment has been particularly tested.
Some of us have successfully traversed the yawning chasms and achieved a new-found fiscal stability.
Some of us are mid-journey on a path between where we are and where we’d like to be.
Some of us are left wondering if there’s a definable path to sustainability at all – and are wandering the theatrical desert searching for an oasis that’s not merely a mirage.
The challenges that theatre makers face are legion.
Begin with the secular decline in the number of patrons who are open to purchasing multiple event tickets from us – whether traditional style subscriptions, mini-subscriptions, memberships or cleverly designed package and/or affinity event performance series – one clear trend is that many theatres have fewer of these patrons to rely upon than they once did.
Danny Newman in the 1960’s wrote his seminal book “Subscribe Now” and sparked a movement of theatres and arts administrators who followed his teachings, which then served as a backbone of the fiscal strength of theatres for years.
Now I’m thinking of writing a sequel and titling it “Subscribe, Please! I’ll come to your house, I’ll walk your dog, I’ll clean your oven, I’ll wash your car….”
Subscriptions remain a challenge for us all…
Then there’s the collapse of the window of social planning. Performances that used to be well sold weeks in advance now have sales that peak in the days immediately before the performance- making marketers and managers constantly on the reach for the Costco sized bottle of Tums…
Well, at least we have the role of charitable gifts to our theatres to console us.
Not so much.
Foundations are still in recovery mode from the great economic dislocation of 2008-2009 – some would call it a depression – and the pay-out policies of many not yet recovered. Some have changed the focus of their philanthropy by either narrowing the geographic region served, or by narrowing the spectrum of philanthropic interest – or both.
State and Federal funding has been in decline for most as tax payments to government dried up, and as a result deficits ballooned. Arts funding has been one of the first places that governmental units turned to in order to cut their budgets.
Corporations have been left to pick up the slack of social service sector programs not funded any longer by governments – and asked to do that with smaller levels of profit than what was once the case. I get told all the time that arts programs are simply not part of the current philanthropic portfolio’s of major company’s.
About the only one of the four major sectors of philanthropic support that’s moderately encouraging is the role of the individual philanthropist, where many theatres have seen increases in the past few years, driven largely by increases among those who have the most capacity to give.
In the meantime, we continue to produce high quality theatre for our communities with incredibly lean staff counts; with incredibly imaginative artists who create magic on stage despite severe resource limitations.
My own journey with financial adaptation over the past few years has been much like a paraphrased line from the 50’s film ALL ABOUT EVE, “Fasten your seat belts, it’s going to be a bumpy ride!”
After a bit more than ten years at the helm of the truly wonderful and remarkable Milwaukee Repertory Theatre, I accepted the position as Managing Director at McCarter Theatre in September of 2008. You know, the same month as the financial world as we knew it ceasing to exist?
What I found at McCarter was an organization that was successful in its own terms, but was doing so financially only by drawing on special pools of capital – pools that once exhausted (as they would be within a year of my arrival), cause the operating budget to be placed under extreme duress.
In response, we began the process of working towards a shared vision of the future which might be able to answer the question, “How do you produce theatre with many fewer resources than would ideally be the case?” I wish that I could tell you that we saw a clear path to having that be true.
But that’s not the case.
At McCarter, prior to the current fiscal year (which is closing on June 30th), we had three consecutive years of operating deficits – every year since I arrived. It’s enough to want me to challenge the scientific validity of the rule of cause and effect.
Here I quote an obscure baseball manager who said of his team “I managed good, but boy did they play bad.” The McCarter team actually played very well, and I’d like to think that I managed well, but boy were the results bad!
Over a four year period on an annual budget of a bit more than $11m, we ran a cumulative deficit of about $1.5m. For some here that’s chump change, for other’s that’s the size of their budget for all four years combined. But for us, it was enough to command our attention in a very pointed way.
We were fortunate enough to have Board designated funds tucked away within our endowment funds, but covering the cash shortfall from these deficits wasn’t easy, and once drawn down, caused the amount that we could draw on for the next fiscal year to shrink as well.
Our reactions have been what I would characterize as the classic ones. We’ve cut expenses like demons. We’ve down sized staff, frozen pay rates, ceased contributing to employee retirement accounts, reduced show budgets. We sought to increase earned income through an increased focus and investment in new ways of marketing, along with and – yes can I say it here – play selection that takes into account to large degree the notion of putting butts in seats
And we’ve worked hard to increase contributed income, mostly from individuals – with our Trustees tripling their giving in the past three seasons, and other categories of individual giving climbing as well.
The net result of these actions has been to allow us to reach a surplus for this fiscal year, and to be able to project a balanced budget for next year – with a pay increase for the staff, and with the restoration of employer contributions to employee retirement funds. So that’s great.
But we still haven’t begun to restore the fiscal and production capability that we once had. So we’re in the early quiet phase of a capital campaign to add to our endowment funds – which stand at $12m today – with the ambition that we’ll at least double the size of that fund. Last month we received a $5m commitment to this campaign, which represents the single largest gift that McCarter’s ever received.
If we’re successful in our ambition, we’ll have enough endowment funding that will lesson the dependency on other earned and contributed income growth and allow us to be able to produce theater with a sufficiency of resource.
Our fiscal adaptation continues. It will be some time before these endowment contributions come to fruition and full effect. In the meantime, there are artistic seasons to produce, and fiscal bottom lines which must be met. Maintaining the appropriate balance of resource and product, of the artistic and the financial will continue to demand that we remain financially flexible and adaptable.
So with that as a background, what are we here to experience together in the next two days or so? For me, it’s exposure to new ways of thinking, an exposure to new perspectives, the knowledge that another theatre or theatre maker has dealt with the same issues that I have and has done so with success.
My own personal goal for TCG meetings is always to be able to bring something new back with me to my theatre when I get on the plane home. I hope that in the program that’s been constructed to be the Financial Adaption arc, you’ll find at least that.
During the span of the conference, you’ll be able to attend “homeroom sessions” where you’ll be able to share a financial adaptation issue/challenge and seek the advice of your peers; or to share a success story with the room; or even more juicy you can share a failure. We can learn from that just as we learn from success. There will be two of the sessions and we’ll try to ensure that all in the room will have the chance to speak.
I’d like to ask a favor of each of you in these sessions. To allow them to be as helpful as they possibly can be, I’d like to ask that each of you who will be in the homerooms to be generous of spirit, and to be generous with your sharing of thoughts.
You can curate for yourself a path through the conference that’s rich with opportunity. Opportunity to collaborate, to discover, to learn, to share.
I hope that when the conference is over, you’ll have found that it’s been time well spent, and that you have a new idea or two to take back home with you.
Thanks for making the time available to be here, and thanks for so kindly listening to me prattle on.
I believe that we have a few minutes here for a town hall – for questions, or for general observations about the conference. Let the sharing begin…
Timothy J. Shields has been Managing Director of McCarter Theatre Center in Princeton, NJ since January of 2009. This is his second period of employment at McCarter. From 1983 through 1992 he was McCarter’s Business Manager, and later General Manager. His professional experience spans 30 years and includes serving as Managing Director of Milwaukee Repertory Theatre for ten and a half years and as Managing Director at Geva Theatre Center in Rochester, NY for six. He has also held administrative positions at The Children’s Theatre Company in Minneapolis and at the Denver Center Theatre Company. He is the President of the League of Resident Theatres [LORT], the nationwide management association of seventy-five professional non-profit theatres. During his career, Mr. Shields has also served on the boards of Theatre Communications Group, the national service organization for professional non-profit theatre; Milwaukee’s Latino Arts Board; and the Cultural Alliance of Greater Milwaukee. He was co-founder of Wisconsin’s statewide theatre association, Theatre Wisconsin, and served as its President for eight years. He has been a panelist, panel chair, and an on-site reporter for the National Endowment for the Arts. As a consultant he has led strategic planning retreats and conducted searches for leadership positions for other theatres. He holds a Bachelor of Fine Arts degree in Drama Production from Carnegie-Mellon University in his hometown of Pittsburgh, PA.