Board Governance: Is A Change In Governance In Your Future?
Rick Biddle, Vice President
January 2010

Whether you call it organizational transition, privatization or a shift in management structure, today’s new economy of less public sector funding and declining revenues from contributed programs has caused many cultural institutions to consider what is the best public/private management structure for their future success, viability and sustainability.

Schultz & Williams has successfully guided the transition of many cultural attractions and institutions. At the AZA Director’s Policy Meeting in January 2010, Schultz & Williams Vice President Rick Biddle identified the following key planning criteria for insuring a win/win governance change for cultural institutions:

Why Consider a Change in Governance?
While many cultural institutions are experiencing higher annual attendance, they are also facing a number of financial challenges, including lower funding levels from their public partner, higher operating costs due primarily to employee costs and facilities maintenance, and declining support from annual giving programs and unrestricted contributions. In a number of cases, the cultural institution's public partner (city, county, state) are facing huge financial deficits. These financial pressures are the number one reason why cultural institutions are considering a change or shift in governance – “never let a good crisis go to waste!”

In addition to the lack of a reliable and sustainable funding source from its public partner, the other significant reasons for a shift in governance are to improve cost efficiencies; reduce the duplication of efforts and services; and create a new entrepreneurial approach to managing and operating your institution.

What Tools Must Be in the Toolbox to Ensure Success?
Leadership on both sides of the public/private partnership is key. Both the cultural not-for-profit institution and its public partner must have the passion and foresight to embrace the vision of the cultural institution. There must be willingness to accomplish the shift in governance within the best interest of both parties. There must be a commitment of financial resources in terms of an annual contribution from the public sector and the not-for-profit’s commitment to generate additional visitor revenues that promote increased operating and capital improvement contributions from donors. Lastly, negotiating a guarantee with your public partner is difficult, but working towards an almost guarantee can be achieved if the partners are creative in their approach and seek to achieve a win/win for both the public partner and the cultural institution.

While every change in governance has a different outcome, remember to position this opportunity for success, not failure and know the real numbers to operate your institution – whether direct, indirect, incurred, allocated and/or supplemented and, since we have the expertise and knowledge to leverage your long-term success and viability, contact S&W.

Schultz & Williams is a national consulting firm based in Philadelphia; providing management, fundraising and marketing consulting for nonprofit organizations, along with full-service direct marketing, database and creative/production services.