Paper Title
Arts and business: the impact of business models on the activities
of performing arts organisations in Australia.
Jo Caust
Associate Professor
University of South Australia
Keywords
Arts, government, business models, performing arts organisations
Abstract
The introduction of managerial business models to Australian
performing arts organisations has now been around for ten years.
Until the early nineties, Australian arts organisations were
contextualised as ‘not-for-profit’ entities that had an overall
objective of producing good art. Over the past decade however,
Australian performing arts organisations have been viewed more
and more as part of an ‘industry’. Within an industry construct,
performing arts organisations are framed as business entities,
with a need to prove positive financial outcomes as a first
priority. This discussion explores what is meant by business
models in the context of Australian performing arts organisations
and what has been the impact of this approach.
Background
Over the past decade the framing of performing arts organisations
as businesses first, has been both explicit and implicit in the
Australian context. The creation of the Major Performing Arts
Board at the Australia Council in 2000 (and before that the Major
Organisations Board), signified a shift from the evaluation of the
funding and activities of major performing arts organisations by
peers (that is comparing like with like), to a situation where
major performing arts organisations are assessed by business
people using business performance measures, with little artform
representation, input or evaluation. The approach of the Major
Performing Art Board has trickled down to other artform boards
within the Australia Council, and state arts funding agencies, so
that business plans, performance contracts, boards dominated by
business people and financial expectations of arts organisations,
have become ‘de rigueur’. This paper tracks the development of
this approach and considers its strengths and weaknesses.
Ways of evaluating the success of arts organisations
In terms of accountability it is noted that generally arts
organisations see their major accountability to their largest
funders; generally therefore in the ‘not for profit’ sector,
government or its agencies (Turbide and Laurin 2003).
If arts organisations see that their major responsibility for
accountability, is to their funders, in reverse, the funders see that
the organisations’ major accountability is to them also. So the
reporting demands and accountability expectations are set by the
funder. In the Australian context this is government, be it federal
or state. Brokensha (1996:101) points out that the performance
indicators that funders impose on arts organisations, are not
measuring how the organisation is performing against its own
objectives, but how it is measuring up against the funder’s
objectives. It would seem that ways of approaching the
evaluation of arts organisations, by government funding
authorities in particular, has focussed on measurable quantitative
outcomes, while qualitative and less tangible outcomes are not
considered (Brokensha 1996, Gilhespy 1999, Turbide & Laurin
2003). Major performance criteria can be organised under either
categories of ‘efficiency’ or ‘effectiveness’ (Gilhespy 1999). A
priority given to ‘efficiency’ is likely to favour measures such as
earned income, audience numbers and access while
‘effectiveness’ is more likely to reflect the quality of the work,
the diversity of the audience and the audience response. Belfiore
notes in the UK that ‘data collection’ has been the favoured
means of evaluating the success of arts activities, and this has
meant that,
“Data were collected in a number of different ways:
through audits, performance measurements, time series,
impact studies, and studies on audiences (as well as non2
audiences). Most of it was based on the quantitative
analysis of policy inputs and outputs, and the results of
such number crunching tended to be presented as neat
statistics” (Belfiore 2004: 189)
So the ‘work’ (or ‘output’), which can be intangible in terms of
its nature, is evaluated by positivist methods which do not
necessarily have any relationship with the work itself or its intent.
Brokensha (1996), a major architect of the National CulturalLeisure Statistical Framework, introduced by the Australian
Bureau of Census and Statistics in 1991, believes that
governments have an obsession with numbers and see them as the
only way of evaluating performance. In the case of the arts he
argues that qualitative indicators are essential but are not
understood or used appropriately by government agencies
(Brokensha 1996:99-101).
Governments have certainly become increasingly preoccupied
with a need to justify their expenditure in any domain, given
competing priorities, as well as recent radical conservative
attitudes to smaller government and reduced government
spending. Expenditure by government in the cultural sector is
always bound to be contentious, as, however it is evaluated, it
still does not necessarily lend itself to clear objective, measurable
outcomes. In fact there are likely to be disagreements about the
nature of the outcomes, and what weighting should be given to
different outcomes generated from the same activity. Further it is
noted that,
“In the arts and culture sector, management control
systems need to balance monitoring the artistic mission
with ensuring that the organization respects budget
constraints. Many leaders deplore, rightly or wrongly, the
fact that financial matters often take undue precedence
over artistic matters in evaluations of the organization’s
performance.” (Turbide et al 2008: 10).
Throsby (2001:163) says however that, an exclusive emphasis on
the commercial benefits of the arts skews the discourse, and
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ignores the essence of what the arts are about. In addition the
multi-dimensional character of cultural activity makes it
unsuitable for evaluation by means of conventional market
surveys or economic models (Choi, Papandrea & Bennett 2006;
Throsby 2003). The use of the industry model to frame the arts in
the Australian context has been dominant since the publication of
Creative Nation by then Australian Federal Government in1994.
It has encouraged a mind set that sees the production of art as an
industrial process, which can be evaluated by statistics set within
a business model. The people who are best suited to doing this,
are of course, business people.
The Advent of the Business Model
In 1999 the “Major Performing Arts Inquiry’ was commissioned
by the then Federal Government. They appointed a committee
(composed of two corporate bankers, a corporate lawyer and a
CEO of a large corporate company) to enquire into the position of
the major performing arts companies, given the precarious
financial situation of several of them. The aim of the inquiry was
to examine and make recommendations for the future, given an
implicit acknowledgement that these large performing arts
organisations were an essential part of the nation’s cultural
infrastructure. The main premise of the inquiry was to ensure the
future financial viability of these major performing arts
companies, hence the title of its report, Securing the Future. The
report made several recommendations but perhaps the key
recommendation was the:
“…endorsement of a new funding model that reflects the
cost of the artforms; each company’s strategic role; and the
commitment to geographic access.” (Nugent 1999: x).
From the government’s point of view, the maintenance of the
major (usually large) performing arts organisations with
minimisation of risk and the least exposure of government to
provide additional funding, were seen as primary goals. From the
companies’ perspective, they wanted to be free of regular
4
government interference and allowed to get on with their
‘business’, with a long term guarantee of future funding.
Companies such as the Australian Ballet Company or the
Australian Opera Company, may have also wanted to be free of
conditions that demanded that they demonstrate they were doing
sufficient Australian content or developing new forms or doing
the work of Australian writers/ composers or choreographers (as
per the Australia Council’s mandate). Many of these companies
believed their existence was not in question anyway, given that
they were seen as an essential part of the country’s cultural
infrastructure. They were therefore generally happy to be treated
differently from the rest of the arts sector, if their funding was
guaranteed and they were able to make their own choices re
repertoire etc.
As an outcome of the report, the Major Performing Arts Board
(MPAB) was established as a separate entity at the Australia
Council in 2000. Its role was to monitor and evaluate the arts
organisations under its mantel. The MPAB operates under a
different mandate than the other artform boards at the Australia
Council, given its primary focus on financial issues. The Chair of
the 1999 inquiry, Helen Nugent, a former merchant banker,
became the first chair of this Board. The membership of the Major
Performing Arts Board (MPAB) of the Australia Council has
continued to reflect a business paradigm in terms of its
membership. Of the eight members of the MPAB Board in 2008,
only one has had hands on arts experience. The majority are from
the business/commercial sector (Australia Council website at
www.ozco.gov.au viewed April 2008). They are corporate
accountants, corporate lawyers, full-time company directors and
chief executives of corporate entities. This profile contrasts with
the membership of the other artform boards at the Australia
Council, who are all employed or work in their artforms (that is it
is a system of ‘peer assessment’).
It is stated on Australia Council website that:
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“To be included in the Major Performing Arts Board, a company
must meet all of the following criteria:
 be a dance, music, opera or theatre company or a hybrid
thereof
 demonstrate the highest artistic standards in performances
 show an ongoing commitment to the development of the
artform
 demonstrate an ongoing commitment to the development of
artists within the artform
 show evidence of a sizeable and increasing audience base
 have a minimum average annual total income of $1.54
million over the previous three-year period
 demonstrate an ongoing ability to be financially viable,
including increasing levels of financial support from the
broader community.
In 2000 there were 31 companies included as clients of the MPAB
coming from the areas of Dance, Theatre, Music and Opera as well
as Circus.
Securing the Future
Recommendations for the performing arts companies examined in
Securing the Future (1999) included: the goal of filling all their
available seats by improved marketing, seeing private sector
support as their future major provider for earned income and
reducing costs by establishing tender processes for productions,
increasing economies of scale by merging functions of different
companies (such as an opera company and an orchestra) and
expecting more flexible practices from musicians and arts workers
in general (Nugent 1999: xiii-xiv).
A major strength of the report was the detailed statistics provided in
it about every performing arts company being considered under its
mantel (then 31 in total). These statistics included information
about subsidy per seat, average ticket prices, cumulative deficits by
artform and by company, international benchmarks in relation to
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revenue and in relation to numbers of performances and profile of
performance income by artform and by company. It is a wonderful
set of numbers and an amazing snapshot of these companies in
1999. It doesn’t tell you about the quality of their work, their
artistic highlights, the people who were employed or how their
work was received. There is one table however that says it gives an
‘overview of the artistic development process comparing artform
differences’ at four different stages (Nugent 1999:201). These
stages are called: ‘create work, ‘create production, ‘build
production’ and ‘rehearse and perform’. This table highlights
whether particular people such as composers and designers are used
‘frequently’ or ‘occasionally’ in a typical production process in
dance, theatre, music and opera. While this table may provide
information that has some meaning to an uninformed observer of
performing arts, it does not however provide meaningful or even
accurate information to those who are from the performing arts.
Perhaps its intent was to address the goal of “expecting more
flexible practices from musicians and arts workers in general”
(Nugent 1999: xiii-xiv).
In 2003, 2005 and 2007, follow up progress reports were published
by the MPAB and submitted to government. These summarised the
achievements of the Board and the organisations it funded, over the
period 1999-2007 (29 companies after 2001). The major thrust of
these reports was again the presentation of statistics that were
quantifiable and reflected issues such as earned income, financial
health, number of performances and box office returns. In addition
statistics about the number of new productions and the numbers of
productions of Australian work were also included as tables. There
is not as much detail provided as the original report, nevertheless
they continue to use some identical tables as ongoing comparisons.
These tables are organised under three categories: ‘Artistic
Vibrancy’, ‘Breadth of Access’ and ‘Financial Results’. Under
‘Artistic Vibrancy’ they compare both ‘New Works by Artform’,
‘Total Australian Artworks by Artform’ and ‘New Productions’.
Table 1 shows the total of Australia Artworks by Artform for the
years 2001-2006.
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Table 1
(Securing the Future 2007 :8)
From Table 1 it is possible to deduce that there has in fact been
an overall decline in Australian works over the period under
review. This is most noticeable in Dance but also in Theatre.
There has been a slight increase in Chamber Music and in
Symphony Orchestras. But the figures used here only refer in the
case of the Symphony Orchestras to the years since 2004, or
since the orchestras have been completely separated form the
Australian Broadcasting Commission (ABC) (The ABC
controlled the orchestras until this time). So it is not possible to
know if this is an overall increase from the previous period when
the repertoire was controlled by a central body. In the covering
letter for the 2005 report to government from the Board, the then
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Chair of the Board, Mel Ward (another former banker), notes
however that,
“ In meetings with companies with regard to the review, a
number of representatives have expressed concern with
regard to artistic compromises and to, some extent, access
compromises that they have been forced to make in order
to achieve positive financial outcomes” (Ward 2005).
So this would suggest that there was concern being expressed
from the arts organisations, that the focus on healthy financial
outcomes was negatively impacting artistic decisions or
outcomes. Certainly there is likely to be an impact in the
production of new Australian work because this is likely to be the
most risky financially. Again there is no qualitative information
provided. Artistic achievements in terms of critical successes,
breaking new artistic ground, recognition by peers, international
invitations or even response by audiences, are not presented.
A major goal of the original recommendations of Securing the
Future in 1999 was to increase access of audiences, by increased
participation. This was expressed as “the goal of filling all their
available seats by improved marketing” This does not seem to
have occurred in most artforms in the evidence provided under
Table 2. In Dance, Theatre and Symphony Orchestras from this
evidence, there has been a decline in attendances, a slight
increase in Chamber music and an increase in Opera attendances.
9
Table 2
(Securing the Future 2007 :11)
Another set of statistics by city (Table 3) also confirms that
generally there has been a decline in attendances in all cities, with
the exception of Canberra.
10
Table 3
(Securing the Future 2007 :13)
The evidence from Table 2 and 3 would suggest there is a problem
in terms of generating new audiences despite the added focus (and
expenditure) on marketing. At the same time there has been an
ongoing concern about the capacity of companies to take enough
artistic risk and continue to promote the development of new
Australian work when they must focus primarily on fiscal
conservatism.
A major success of the Major Performing Arts Board has been the
levels of Net Assets held by the companies. The 2007 report notes
that,
“The number of companies with positive net assets greater than
$1m has increased from six in 1999 to 19 in 2006, with a 356%
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growth in total net assets of this category of companies from
$18.9m to $67.4m. Conversely the number of companies with
aggregate negative net assets had reduced from 10 in 1999 to
two in 2006”
( Securing the Future 2007: 30).
So perhaps the central goal of Securing the Future in 1999 has
been achieved; a majority of the companies in 2007 under the
mantel of the MPAB now have assets and are not in the ‘red’. But
this begs the question of whether the drive to secure assets, has
been made at the cost of doing new/risky/ artistically adventurous/
challenging work.
The trickle down effect
The Australia Council for the Arts is the Australian Government's
arts funding and advisory body. Aside from the Major Performing
Arts Organisations Board, other performing arts activities are
assessed at the Australia Council by artform Boards such as Dance,
Theatre, Music. The term ‘major’ therefore only refers to size. It
does not refer to quality, contribution, influence or significance.
The establishment therefore of two forms of evaluation (depending
solely on an organisation’s size) within the mandate of the Australia
Council, might be seen as contributing to an undermining of the
principles of the funding body itself. That is the large performing
arts organisations are primarily assessed on meeting their
performance indicators related to financial goals. The smaller
organisations in addition to achieving financial goals, are expected
to make a significant contribution artistically.
The Australia Council web site notes that:
“Its mission is to enrich the lives of Australians and their
communities by supporting the creation and enjoyment of the
arts. This mission is underpinned by a commitment to:
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Excellent and distinctive Australian art - assisting Australian
artists to create and present a body of distinctive cultural
works characterised by the pursuit of excellence
Access for all Australians - assisting Australian citizens and
civic institutions to appreciate, understand, participate in,
enjoy and celebrate the arts
A strong and vibrant arts sector - providing infrastructure
development for Australia's creative arts.”
(Australia Council website at www.ozco.gov.au viewed April
2008).
But the operation of the Australia Council has become increasingly
‘corporatised’ from the late nineties onward. For instance in the use
of language to describe what they do, the Council talks about
“investing in artists and arts organisations” (Australia Council website
at www.ozco.gov.au viewed April 2008 - Author’s italics). Several
years ago this might have been described as providing ‘support’ or
‘funding’ artists or arts organisations. The term ‘investing’ seems to
be more associated with banking or the finance sector, than the arts.
The present and previous two Chairs of the Australia Council are
from the corporate world (Terry Cutler, David Gonski, James Strong).
The present Chief Executive Officer of the Australia Council also has
come from a corporate background. So the key people setting the
agenda for all arts activities at the Federal level come from a
corporate background, not from the arts. It is likely therefore that their
preferences in terms of framing, evaluating and monitoring, are based
on the model they are most comfortable with.
The business paradigm has been adopted by other artform boards to
some extent in their approach to evaluation and accountability.
Middle to small scale arts organisations are certainly evaluated by
their success as businesses. Arts organisations are encouraged by
funding authorities to have business people on their boards rather than
artistic people. They are expected to produce business plans before
they receive any funding and are measured against financial
success/performance criteria during their period of funding.
13
The CEO of the Australia Council recently observed that the,
“ …vast majority, something like 90 per cent of new work comes
from the small to medium sector” (Keele in the Age 2007)
So while it is accepted by Council that this sector (the small to
medium, not the major!) is critical for artistic innovation, is it also
being evaluated primarily by financial indicators rather than artistic?
What is the impact of the business paradigm?
The framing of performing arts organisations as businesses, therefore
produces several questions: What is the impact of the business model
on performing arts organisations in terms of their priorities and
outcomes? Has the business paradigm influenced the leadership,
structure, culture and outcomes of performing arts organisations?
Does the adoption of a business model influence artistic choices of a
performing arts organisation, and if so, how? Is the implicit agenda of
arts organisations being framed as businesses, essentially a drive for
all performing arts organisations to become increasingly independent
of government support?
Answering these questions adequately is not simple. Certainly in the
case of theatre, it has been observed that the production of new
Australian work by state theatre companies has fallen dramatically
over the past decade (Neill 2006). There is also a perception that state
theatre companies are taking less artistic risks in order to maximise
their returns at the box office (Archer 2005, Latham 2004, Neill
2006). A small theatre venue that has contributed enormously to the
development of new Australian work over the past 30 years, was
placed under review by the Australia Council in 2007, because it was
not seen as operating within a good business model (i.e. it was unable
to generate a profit) (Perkins 2007).
In the dance field, a national contemporary dance company that has
been producing internationally renowned artistic outcomes, has
recently come under review from the Australia Council, because they
believed it was not attracting enough sponsorship. This client was
14
rejected as a client of the MPAB in 2001 because it did not generate
enough income. This company has been invited to perform in New
York, Paris and London several times over the past five years, and has
had its latest work commissioned and funded by a New York
producer. Until late 2007, the artistic director also occupied a
position on the board of the company after a State Government
Review recommended this action in 1998. As a result of the 2007
Australia Council review however, the Board then restructured the
company and advertised the position of General Manager as Chief
Executive Officer (CEO), with the Artistic Director being taken off
the Board and effectively needing to report through the CEO to the
board. So in effect the person who has been providing the artistic
inspiration to the company and its international reputation, is being
sidelined. In 2007 another major contemporary dance company was
rescued by the Federal government with a large financial package
through the MPAB, because it was seen as essential for the cultural
infrastructure, despite the fact that it has gone broke three times in the
past 10 years. Currently this company has no artistic director and has
not received an international invitation for several years, yet it is
deemed more significant and worthy of help than the other company,
without having to undergo a review.
Different individuals working within particular arts organisations will
also have different interpretations of the environment and the
outcomes achieved depending on their role within the organisation.
In the music area for instance, the corporatisation of a state orchestra
has significantly reduced the income of the artists within it, while at
the same time placing much greater expectations on them in terms of
versatility, number of performances and after hours’ commitment. In
conversation with the official representative of the musicians within
the orchestra, there is a view expressed that the musicians feel that
their views are not being heard by the Board or management. In 2008
the wages of the musicians had fallen to up to 60% less than those
being given to their colleagues in other orchestras, and up to 30% less
than members of the local police band. In addition the average wage
of the musicians in 2008 represented only 75% of the Australian
average weekly wage. The musicians feel that they are the ‘meat in
15
the sandwich’ between the drive by the Board to increase the
orchestra’s earned income and the perceived shortfall in government
funding to the orchestra as a whole. There is also concern that the low
musician salaries will mean that good musicians will not be interested
in working with the orchestra in the future, so that over time, the
quality of the orchestra will decline.
On the other hand the management of the orchestra is positive about
the recent achievements of the orchestra. For instance there has been
an increase in box office income of over 50% over the past 3 years.
In addition unusual collaborations have occurred with rock, pop, hip
hop and jazz musicians thereby attracting new audiences to a
symphony orchestra experience. What is not clear though, is why the
additional earned income, has not been translated into better wages
for the musicians?
It is noted in a recent doctoral study about the corporatisation of
Australian orchestras that earned income has increased by up to 25%
since the orchestras became independent of the ABC (Boyle 2007:
210). However there are significant differences between the earning
capacities of large orchestras in big cities and smaller orchestras in
smaller cities. At the same time from the musicians’ point of view, the
drive to increase earned income has resulted in more conservative
programming aimed at increasing box office returns (Boyle
2007:211). In addition in the smaller orchestras, the drive to increase
activity has meant shorter rehearsal times and hence an impact on
quality (Boyle 2007: 212).
Certainly the business paradigm has influenced the membership of
boards of arts organisations, priorities of board of arts organisations,
selection of Chief Executive Officers of arts organisations,
organisational structures and performance measurements of arts
organisations (Caust 2005, Lawson 2003, Neill 2006, Palmer 1998).
Economic justifiers for cultural activity have been the major argument
used both to government and by government for their involvement in
cultural support (Bott 2004, Nugent 1999,Throsby 2001). To achieve
a business like approach arts organisations have to produce business
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plans, have a business strategy and be led by a business focussed
board, if they are to continue to receive subsidy (Caust 2005). A
senior Australian arts consultant recently noted that,
“The pendulum has swung so far in the direction of appointing
people to arts boards whose primary skill is to be business people
and who are appointed on the grounds that maybe they've been a
subscriber or an audience member or they're described as a lover
of the arts… This move had restricted the ability of arts boards to
make informed judgments.” (Macdonnell qtd. in Morgan 2008)
MacDonnell suggests there is a possible ongoing impact of the
dominance of a business culture on the board of arts organisations.
For instance a board composed of business people is likely to focus
on financial outcomes (an area they feel knowledgeable about),
ensure the company is at limited financial risk (encouraging little
artistic experimentation), modelling the organisational structure of the
companies on a corporate model ( hierarchies with a CEO at the top
and the most senior artistic person having to report through that
person to the board) and appointing CEOs who are not from the arts
but from the corporate sector (thereby again reflecting the culture of
the board).
Another part of the change in the environment is the changing ratio
between government funding and earned income in the organisations’
income overall. This change may in fact produce the greatest
differences in approaches to performance indicators in the longer
term. Certainly the ratio of earned income to grants in some major
performing arts organisations has changed considerably over the past
decade, so that grants now represent less than 40% of an
organisation’s income (from around 80%) (Eccles 2004, Neill 2006).
If this trend continues, then as an organisation’s dependence on
government funding decreases, their obligation or desire to follow the
demands of government may also reduce. Where or what they see as
their major accountability, will be interesting to watch. Perhaps it
might happen that,
17
“…performance indicators <could sic> be developed by cultural
organisations themselves, primarily for their own use and benefit”
(Brokensha 1996:101)
Conclusion
The focus of this discussion has been on the impact of the business
model on the funding and evaluation of major performing arts
organisations in the Australian context. From the evidence, it would
appear the financial health of the organisations is generally better than
it was ten years ago, given the amount of reserves that many of the
organisations now hold and their general increase in earned income.
However this picture is not evenly spread between either artforms or
states. In addition there has not been an expected increase in
audiences as was hoped by the implementation of a business focussed
model from 2000. There has also been a reduction in the production
of new Australian work particularly in dance and theatre. It is also
evident that artistic outcomes are not seen as important as financial
outcomes. There are limitations with using a business model as the
main tool for evaluation, as it does not include the very core of the
activity; the quality and impact of the artistic output. It would appear
too that the focus on accountability and financial outcomes may have
skewed the balance in terms of governance, expectations and activity.
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