Funder Dialogue: Ben Cameron, Doris Duke Charitable Foundation

Ben Cameron is program director for the arts at the Doris Duke Charitable Foundation. He is a passionate advocate for artists and their organizations, and a powerful partner to all of us working toward a well-capitalized arts sector. NFF has worked with Ben and the Foundation on projects including Leading for the Future, a pilot initiative designed to help a group of artistically outstanding performing arts organizations strengthen their business in a shifting environment. The Foundation has also provided support for NFF's analysis of arts sector trends and opportunities.

This is the second in our interview series with foundation leaders about the intersection of philanthropy and financial strategy. We're honored to work with leaders such as Ben, who are challenging assumptions about how grantees and funders can pursue a more vibrant and viable arts sector.

Antony Bugg-Levine: We've seen some of the arts organizations we work with emerge from the 2008 economic crisis with a new or renewed sense of purpose, while others are still hunkered down trying to make sense of all of the changes. What are you seeing in the field, and what excites you about where the arts sector and its funders are going?

Ben Cameron: For organizations that survived the crisis, many can draw confidence from the fact that their communities have validated their importance, funders have indicated an interest to continue with them on the journey, and there IS a future for them, even while it may be challenging.

I'm excited when I see organizations stand back and ask, "What are the possibilities that this new world is opening to us?" and think expansively, particularly about how changes in demographics and technology might be an invitation to embark on new activities. This also demands that organizations be absolutely rigorous and unsentimental, and stop doing things that are serving them less well in order to free up time, energy and resources.

I am also personally cheered by the work of Ron Heifetz at Harvard's Kennedy School, who is exploring how we think about the capacity of an organization to continually adapt and change in the face of challenges that we can't yet foresee. The tendency for many arts organizations and their funders to be reflective about long-term capacity — of which healthy capitalization is one key — seems to me to be a positive way of helping a more vibrant arts sector thrive now and in the future.

ABL: It's encouraging to hear that more people are moving out of crisis mode and able to think about the future. But we still get pushback from people who say that worrying about financial resilience is a distraction from the artistic mission. A lot of our work is about helping people realize that finance can be a means to achieving artistic mission. How do you approach this, and how do you encourage arts leaders to engage with this issue?

BC: Arts organizations of course have at their center an artistic imperative. There has been an unfortunate tendency in the arts field, at times, to position the arts and management as adversaries and to see fiscal solvency as a strategy occurring at the expense of artistry, and there are very real examples of where conflict has occurred. Especially now, as funding is falling in certain sectors and the pressure to increase earned revenues is growing, tensions between artistry and management are again appearing, and artists, in particular, worry that box office imperatives are distorting artistic priorities. That leads to a defensive posture that on one hand is understandable, but in a certain way is a false dichotomy.

The best organizations we see are true partnerships between artistry and management. The artistic objectives and the impact the organization wishes to have on the community are absolutely clearly defined, and the management isn't there to impose programming on the artistry but to look very carefully at a responsible way those artistic objectives can be achieved.

ABL: Beyond a general focus on financial resilience, we have a shared belief in the importance of building the adaptive capacity of nonprofits — that is, not just to help them make some specific change, now, but to invest in financial health so that they are able to implement changes to advance their missions or to better serve their clients in the long term. The Leading for the Future Initiative that the Doris Duke Charitable Foundation and NFF partnered on piloted the idea of giving money to arts organizations with this aim. What did you learn from that and other similar work, and what does the Foundation do in terms of funding practices and strategies to support this aim of nimble nonprofits?

BC: We've found that multi-year or sustained funding can be more valuable than annual grants. Some of the managers I've admired most over the years think in multi-year cycles. I remember Michael Kaiser, during his tenure at the Kennedy Center, saying that it's not just about a 5-year financial plan, but about having a 5-year artistic profile as well. Thinking beyond a 1-year budget allows arts leaders to think more strategically about which opportunities might be the right fit for which funders.

Similarly, David Hawkinson at Steppenwolf has said they use 3-year rolling budgets; the allocating and monitoring of that budget becomes an ongoing planning mechanism. Along with multi-year funding, we've learned a lot about the value of individually determined payout schedules, depending on the needs of particular projects.

Also, we regularly provide additional planning money to grantees in certain initiatives. The pressure to run an arts organization is so immense, and the changes so fast and furious and just keeping your head above water is so difficult, that when it comes to longer-term visioning, to undertake new directions or new platforms, few organizations have had the luxury to engage in significant planning activities, especially if they're convinced no one will fund it at the other end.

In some cases, we approach grantmaking as an investment in a core set of principles and indicators, and then give people planning resources and flexibility in how they implement next steps.

ABL: That approach requires a trusting relationship between funders and grantees. Can you share more about how you approach "investing in a set of principles?" In today's environment, flexible grants are rare and powerful, particularly with the increased focus on measurable outcomes, which may in some cases be a good thing, but can also be limiting.

BC: In the case of Leading for the Future, which is a good example of this, we started with the premise: In a rapidly changing environment, how do you think about activities, programs or capacities that may help you respond more appropriately?

We were particularly interested in two major changes in the arts environment: changing demographics, in the fullest sense, encompassing age, race, sexual orientation, physical ability and more, and technology and how it changes arts consumption patterns. Anyone applying to the program had also identified these factors as critical to their destiny.

We also looked for key indicators that gave us confidence that an organization we might give money to is one that highly prizes learning, is deeply self-reflective, is rigorous in the way it thinks, and has the capacity to implement change when it sees the opportunity. We looked at past examples of significant change, what the organization had learned and how that changed future behavior. And then, rather than asking for a plan, we looked at how they were approaching critical problems and what they saw as the key first steps.

All of that is what led us to make investments in the selected organizations, and trust them to grapple with the particulars. We continue to use this same logic in other specific initiatives today.

ABL: In many ways, the support you are able to provide is an exception. Resources for true exploration, or capital to pursue new lines of work, remain scarce. What do you say to funders who are skeptical of supporting this type of adaptation?

BC: When people first started to talk about adaptation and its related term, innovation, there was a misperception in the field about both the degree of change on the table and the implications for current programming. Over time, there has become more confidence that what we are really looking at is incremental testing of activities, at a survivable scale, against a backdrop of ongoing activity. And so, some of the initial panic that "we've got to throw the baby out with the bathwater" has now been replaced with this idea that this may not need to be a revolution, as much as it needs to be a very deeply reflective evolution as we find our way into the future at a more appropriate rhythm and scale. And that is reassuring to a lot of people.

ABL: Our 2014 State of the Arts Sector analysis found that 47% of arts organizations identify "achieving long-term sustainability" as a top challenge. What can funders do to help management teams improve financial sustainability?

BC: There is an opportunity, especially in this climate, for nonprofits to drive a different agenda as they pursue support from funders.

We are very interested in expanding the conversation about capitalization in the arts; Grantmakers in the Arts is doing a whole series of workshops around the country on this, and we hope there is an opportunity for arts organizations to say to funders, "Let's look at the balance sheet together and talk about our longer-term capitalization needs."

If a nonprofit doesn't understand its balance sheet and capitalization needs, it might be missing an opportunity. Also, the more the arts community can come together to talk about patterns that will increase healthy capitalization — beyond individual organizations talking one by one — the stronger that case will be made over time.

More so than "sustainability," I've been thinking in terms of "viability." Sustainability can often orient people to preservation of the status quo, or shut the door on potential short-term activities that could be breakthroughs for the organization for fear that they may not be “sustainable.” I'm more interested in how we can ensure that organizations have the nimbleness and capacity to respond even if some of their current activities may not be sustainable.

ABL: We hear many arts organizations say that they are comfortable talking to their funders about programmatic support, but not about general operating support, multi-year grants, capital support and other types of resources aimed at building the strength of the organization itself. When it comes to overhead, we don't believe there is a magic number that is right for all organizations, though we're often asked to weigh in on that. We believe that determining the correct levels of enterprise-level support comes down to how you answer the question, "What does it take to run an effective arts organization?" How do you think about this issue and address it with grantees and peers?

BC: I think increasingly, we need to address the question of long-term capitalization, and the totality of the costs needed to undertake a given project. In the current climate, this mantra that the administrative costs shouldn't exceed X-percent of a grant — a number that may be measured by an organization outside of the arts sector and then used in ratings — seems to me deeply problematic. I'm inspired by Jim Collins, author of Good to Great and Good to Great and the Social Sectors, when he argues that these kinds of percentages are arbitrary and that if you want the equivalent of a championship sports team, in a nonprofit sense, then you will need to individually determine what the appropriate percentage of administrative costs needs to be in order to achieve those results.

Certainly, no one wants to see callousness or indifference to very real considerations of appropriate salary levels, but at the same time, this insistence that overhead can't violate 15 percent is deeply short-sighted and damaging to the health of nonprofits over the long term.

In the arts, our desire to be efficient, to operate at minimal costs, and some very real disincentives historically that we have bought into, has led many groups to shortchange true long-term infrastructure needs. So, nonprofit arts organizations minimize those costs, and funders have been intolerant of much higher.

I've started to wonder whether greater transparency about the micro, even while we are all being encouraged to look at the macro, might position organizations better in terms of helping people understand the genuine costs of doing the work. For example, often budgets will capture a big lump sum of "artistic salaries." If you also say, what this really means is that dancers are making $200 per week or even less, that is a much more useful number in order to advance an understanding of the true cost of doing work and how that can reverberate into a negative impact on artists.

I think a lot of the freneticism in the arts scene is because some funders want to "buy at discount" and not at the true cost. Nonprofits must bring an understanding of true costs and a willingness to share that information, and funders must think more generously about the full costs of projects.

ABL: We think about that a lot in terms of making a distinction between buy money, which pays for programs and the associated organizational costs, and build money, which works on an enterprise level to support goals such as growth and adaptation.

BC: In cases where we are playing a role to help a grantee build or change, we ask, "What will your organization look like the day after our funding ends?" If you don't ask the question about where you will be, you can't plan backwards to determine what you should do now. There is a tendency to treat this year's income statement as a way to get through this year at breakeven, but if that is your approach, you can't begin to adapt in a proactive and intentional way.

Peter Culman of Center Stage has one of the most interesting perspectives on budgets and finance. As I was getting started, he impressed upon me that the budget should be a manifestation of your desires and your purpose. Looking at the budget as a manifestation of purpose and values — as a philosophic statement — rather than a set of numbers divorced from that reality, sparks a different conversation.

When it comes to adaptation, if you are really saying that your organization is going to change, those new priorities should find realization in the budgets. If you are saying, we are going to move in a whole new direction and our priorities are going to shift, but in the budget your relative proportions remain the same, that can't help but call into question whether you are authentically pursuing a new direction or not.

ABL: Thank you for sharing your perspective on the interplay between artistry and finance. You and your work at the Foundation demonstrate that one can be passionate about the artistic mission as well as thoughtful and rigorous about long-term financial viability.