I was saddened to read this week about the
closing of the North Shore Music Theater in Beverly, Massachusetts. This non-profit theater had been around for 54 years, but couldn't survive a combination of a fire, borrowing to rebuild (beyond what the insurance paid,) an apparently rocky transition of leadership, and the precipitous downturn of the economy. I don't know all the details, but what I have learned about NSMT over the past several months seems to
provide some lessons for non-profit arts organizations, and other non-profits.
Full disclosure: I learned about NSMT this past fall, as I was in the midst of negotiating with them for either a consulting contract or employment as their full-time VP for Development
(it wasn't clear at the time which way they wanted to go, then became clear that neither would be possible due to their financial disaster.)
One of the stories I heard from several sources was that while NSMT has always been a non-profit theater, it didn't like to admit it! That is, under the previous administration, the theater attempted to operate on its ticket revenues (and education, etc.) alone. It really didn't want to behave like a non-profit by making a substantial effort at development.
Only in the past year or so had the theater begun putting a donation envelope in all of its programs and mentioning that it depended on contributions to help fund its programs in its evening-opening announcements.
After the fire in 2005, there was apparently some fundraising done, but the loss from the fire, the shortened season, and the reconstruction was apparently more than $4 million, and this debt was never paid down by fundraising or any other means. Understand that I am not suggesting that a campaign to pay down debt would have been easy -
it's never easy to fundraise to pay down debt. However, the rebuilding campaign that was held apparently did not raise nearly enough. Perhaps this is a case (I've seen this kind of behavior in other institutions) of wanting to build a certain kind of facility, and deciding to do so whether or not the money has been raised.
"We can borrow the money to finish the building, and then raise the money later to pay off the debt." Too many non-profits say this, and then end up in trouble. The truth is that
the board has the responsibility to either find the money to pay for the building at the time, or find the money to pay off the debt. Too many non-profit boards don't live up to their fiduciary responsibilities to oversee the staff when it comes to making realistic financial decisions, or to raise the money to fund those decisions. This is the hard work non-profit boards must do, and too often do not. North Shore Music Theater is not the only non-profit in the Greater Boston area that has had financial difficulties in the past few years because of overspending on construction projects not fully funded by donations or income.
We hear often about how important it is for non-profits to behave more like businesses. This is true especially when it comes to living within your means, but this is also one of the most difficult things for non-profits to do when it comes to fulfilling their missions.
It is very hard to say "no" to mission-critical expenditures. So where does the money come from? It is the responsibility of the board to provide the funds needed to fulfill the mission of the organization. That doesn't mean board members need to give it all themselves, but if they aren't willing and able to participate fully in the process of raising the funds needed for the organization to fulfill its mission, they probably shouldn't be on the board. What this really means is working to develop relationships with potential funders (mostly individuals and families, but also including corporations and foundations) that will lead them to make gifts to the non-profit. The hardest thing for most organizations to figure out is that you can't just turn on the spigot of charitable contributions.
If you haven't built relationships before you need the money, you almost certainly won't be able to raise the money when you need it! This is the sad cause of the failure of the North Shore Music Theater. The new administration had recently begun building relationships with potential funders, and there were some promising starts; but unfortunately there weren't enough potential donors ready to step in when the crisis really hit.
So we must sadly say "good-by" to the North Shore Music Theater. There are apparently still some options for rebuilding. If a buyer can be found to take over the property and lease it back. Or if an "angel" comes forward. Unfortunately, there were not enough relationships built with those who might be able to help for any of these possibilities to be very likely. Too bad.
So what's the takeaway? It's never too early to start a development program, but unfortunately it can get to be too late. People make gifts to organizations they feel connected to - especially large gifts. So they won't respond to emergency appeals if they haven't already been connected. Want to talk about ways to better connect your donors? Give me a call.
There was a really odd short posting on the Boston Globe website last month. It says that the union representing health care workers asked the board of a hospital to consider whether a trustee "should have disclosed that he helped raise money for the hospital from at least one person with whom he had done business." This makes it sound like raising money for a non-profit medical center is somehow wrong or at least underhanded. At this particular hospital, being a trustee is an honorary position - the board of directors has fiduciary responsibility, and a hospital spokesman said that only directors must disclose conflicts of interest. Further, the spokesman said, "while trustees cultivate relationships with donors, they do not ask for money; that job is handled by hospital staff." This response is what I find so odd about this story. (Aside from the issue of why the union is making these kinds of requests at all.)
