- Definitions from an arts management perspective (Parker, 2012):
- The mandate is an authorization of an arts organization to perform particular actions (e.g. provide education, mentorship, leadership, and other services) as well as to serve clients coming from all existing artistic fields with any budget.
- Mission (mission statement) is a written declaration stating the reason for the existence of an arts organization and presenting a formal summary of its goals and values. Mission statements aim to determine what audience an art organization is going to target and provide direction of development.
- Vision is an aspirational description of the achievement to be pursued by an arts organization for the accomplishment of its mission. Vision shapes the mental representation of the future directing present-day actions of artists, staff, management, and other stakeholders.
- Values are the most significant and long-lasting beliefs forming an ideology of an arts organization. Values provide principles and standards of behavior and form the attitude of organization members to the sphere of arts.
- Goals are the desired results to be achieved, the objects of the organization’s ambition, and performance. Goals are set to guide decisions and the general policy of an arts organization and are not necessarily connected with monetary benefits or other measurable outcomes.
- SWOT is a model for analyzing the strengths, weaknesses, opportunities, and threats of an arts organization. It is meant to provide an accurate evaluation of the major aspects of an arts business venture.
- Incorporation is basically the inclusion of an arts organization into a bigger whole. It is the legitimate action with the purpose to form a corporate entity that is separate from its owners and follows its own obligations.
- Charitable status is the registered status of a non-profit arts organization that obeys the regulations provided by charity law. However, charity is not an official form of organizational structure.
- Provincial incorporation is the process of integrating an arts organization in a specific area, which entitles it to operate in the jurisdiction of the province providing no protection outside its borders.
- Federal incorporation is the inclusion of an arts organization into a federal unity, which provides it with brand name protection on the whole territory of the country.
- The not-for-profit is a type of arts organization whose owners do not get any benefits from its existence. All the income is used for maintaining organizational performance.
- A registered charity is an arts organization that was founded for charitable purposes and is involved in charitable activities.
- Charitable return is a tax relief that an arts organization can get due to its charitable activities.
- CRA (Canada Revenue Agency) is a federal organization that is responsible for the collection of taxes and the development of incentive programs within the framework of the tax system.
- Letters patent is an open legal document issued by the head of state to grant a patent, monopoly, or other right to an individual or an organization.
- Bylaws are regulations introduced by an arts organization for successful performance.
- Trademark is a sign, word, or phrase that an arts organization can register to represent it.
- Board of Directors is a group of people who are elected to represent stakeholders of an arts organization and to make decisions on all key issues.
- Officers are individuals occupying senior management posts in an organization.
- Directors are appointed members of the Board who is responsible for ensuring implementation of the arts organization policy.
- Members are people who have a share in the arts organization but can exercise limited rights and privileges when it concerns governance.
- Governance is a set of regulations, practices, and rules that allow controlling an organization.
- Board Committees are groups of people including members of the Board of Directors who perform particular functions, launch programs, or projects that were initiated by the Board.
- Minutes are protocols of organizational meetings that include its attendees, topic, discussion points, and decisions.
- In-camera stands for meetings conducted by members of an arts organization privately, without press representatives.
- Quorum is a minimum number of members of an organization that have to attend all its assemblies for decisions to be considered valid.
- Secretary is an official member of an arts organization who oversees its correspondence and records.
- Treasurer is an official member of an arts organization responsible for financial aspects.
- Terms of office are time periods during which a person occupies a certain position in an arts organization.
- Bankruptcy is a financial failure of an organization resulting from its inability to pay debts.
- Strategic plan is a documented direction of organizational movement. It includes allocation of resources and other key strategic points.
- Conflict of interest is a situation when opinions and aims of two or more members of the Board of Directors are incompatible.
- Six possible committees for an arts organization are (Kushner & Poole, 2006):
- Executive Committee
- Internal Committee
- External Committee
- Finance Committee
- Artistic Committee
- Communications Committee
Governance Boards run arts organizations using their authority and power guaranteed by the owners whose best interests they have to pursue. Boards act an inseparable whole and focus on the future of the organization. Unlike them, Working Boards not only lead organizations but also perform employees’ functions. This situation is typical of small-sized or community organizations that cannot afford hiring staff. Thus, they are more present-oriented and have to deal with current problems rather than considering prospects (Kushner & Poole, 2006).
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Media and Marketing
- A marketing and media strategy for an arts organization can run as follows (Cherbo & Wyszomirski, 2011):
- an organization must establish clear media goals and objectives;
- it should identify where the potential audience is likely to be found;
- an arts organization should know what type of content it is going to promote using media channels as it is important for estimation of offer and demand correlation;
- it must determine the most reliable sources of content;
- an organization should decide how much time will be devoted to social media;
- it should maximize its presence in social networks;
- an arts organization should keep track of all arts events in order to estimate their success.
- it should strive to minimize paid media (which involves investment into advertizing) and maximize the use of earned media (publicity that is generated due to PR).
- The major marketing and media challenges include (Cherbo & Wyszomirski, 2011):
- generating demand for your services (as we have to deal with the society suffering from saturation);
- providing return on investment of your company’s advertizing activities;
- securing enough budget in order to prevent bankruptcy;
- managing Internet performance (including website, social networks, etc.)
- finding suitable technologies for satisfying your company’s needs;
- trying to target content for international acceptance (which is hardly possible owing to cultural discrepancies);
- finding talented professionals;
- providing constant training to the personnel.
Business of the Arts
- Definitions from an arts management perspective (Finkler, Smith, Calabrese, & Purtell, 2016):
- Audit (from the internal perspective) is an official inspection of the accounts of an arts organization performed in order to provide objective assurance and consulting that could help add value and improve organizational performance.
- Audit (CRA perspective) is the examination of the records of an arts organization (typically small or medium) performed to ensure that they meet their obligations, pay taxes, and receive everything to which they are entitled.
- AGM is a meeting of general membership of arts organizations (membership associations or organizations with shareholders).
- Budget is an estimated correlation of income and expenses for a specific period of time.
- Financial year is period conventionally accepted for accounting and taxation purposes.
- Deficit is the excess of expenses over the income.
- Accumulated deficit is the prevalence of cumulative losses over cumulative benefits.
- Debt is the amount of money an arts organization owes for funds it previously borrowed.
- Earned revenue is the amount of money an organization receives from its operations.
- Surplus is the amount of resources that results from generation of services or goods exceeding their consumption.
- Cash flow is the total sum of money that moves in and out of an organization.
- General ledger is a set of accounts that cover all transactions occuring within a particular entity.
- Income statement is a report of the financial performance of an organization over a particular period of time.
- Fiscal year-end is the completion of an accounting year, which can differ from a calendar year.
- Balance sheet is statement of all available assets and finances of an arts organization at a specific moment.
- Asset is economically valuable property an organization owns, which has a potential to bring benefits.
- Disbursement is a part of cash flow coming from a fund.
- Operating expenses are those necessary for ongoing functioning of an organization. Unlike them, capital expenses are aimed at creating benefit in perspective.
- Pro bono is legal actions of an arts organization that are free of charge (e.g. performed for low-income clients).
- An organization should choose its financial year end for it to correspond with the end of the busiest season.
- Revenue categories for arts organizations (Young, 2013):
- earned income (all revenues coming from admissions, sales of goods or services, auctions, funds, etc.);
- public contributions (donations from the government or corporations);
- private contributions (donations from individuals);
- investment income (revenue coming from previous investments).
- Philanthropy is an absolutely unselfish act of donating money to support an organization. On the contrary, sponsorship pursues non-monetary benefits such as logo recognition (Young, 2013).
- If a lawyer agrees to do work for an arts organization (valued at $10,000) a receipt cannot be issued as a gift of service is not a gift of property.
- If a ballet dancer performs without fee for an arts organization (valued at $10,000), a receipt cannot be issued for the same reason.
- If a wealthy Canadian donates a painting by Picasso valued at $12 million dollars to a Canadian charity, he/she may not receive a receipt if it is done for sponsorship. Otherwise, the receipt should be full.
- If someone donates $500 to an arts charity, his/her receipt should be $500.
- Reasons to donate to an arts organization are: 1) to contribute to arts development; 2) to feel connected to the arts world; 3) to improve self-image; 4) to acquire the role of a leader prompting others to donate; 5) to pursue sponsorship goals; 6) to satisfy one’s personal (religious, cultural, intellectual, etc.) need and ideals (Young, 2013).
- In-kind is a charitable practice of donating goods and services instead of giving money (Young, 2013).
- Four reasons why someone would volunteer for an arts organization (Young, 2013):
- you will have an opportunity to learn more about various artistic forms;
- it will give you a chance to contribute to the well-being of the whole community;
- you will acquire useful knowledge about business planning and event organization;
- you may find friends who will share your artistic interests.
- One of the major advantages of using volunteers is to get assistance that is free of charge. It allows art organizations to complete tasks that they would be unable to perform for the lack of money or time. Moreover, some volunteers have high motivation and can suggest new and creative ideas. However, a lot of companies are afraid of resorting to their help as volunteers are not under contract and no one can guarantee high quality of their work (Young, 2013).
- Reasons why it is a good government policy to provide grants or funding to the arts (Gallagher, 2014):
- it promotes high cultural standards in the society;
- it encourages young people to venture upon artistic professions;
- it will pay back with ticket sales;
- it will attract foreign investors;
- it will lead to opening new touristic attractions (museums, galleries, theaters, etc.).
- The key differences between not-for-profit and for-profit art organizations include (Gallagher, 2014):
- not-for-profit art organizations cannot distribute income to shareholders;
- income cannot benefit any individual unlike in for-profit organization;
- not-for-profit organizations have no owners;
- not-for-profit organizations have an ultimate goal of satisfying the customer’s need while for-profit organizations are focused on maximizing benefits of their owners.
- Art business environment is quite similar in its major characteristics to the traditional business environment: it is also highly competitive; it pursues customer satisfaction as the ultimate goal; it makes use of modern technologies to obtain competitive advantage; etc. However, unlike traditional businesses that are mostly concerned only with the level of income of the potential consumer as it is the key factor identifying his/her purchasing power, the arts business provides more spiritual than material goods, which implies that it has to deal with the following challenges (Parker, 2012):
- it must take into account the age of potential clients as it directly affects preferences and, being neglected, can undermine the business success;
- it has to deal with different education levels that determine the choice of business strategy;
- arts organizations environment should not neglect lifestyle differences.
As we can see, unlike traditional business environment, arts industry has to be more flexible. The comprehensive analysis of the potential client is a key factor of the prosperity of the business, which implies that any minor error of judgment may lead to total failure.
Cherbo, J. M., & Wyszomirski, M. J. (2011). The public life of the arts in America. New Brunswick, NJ: Rutgers University Press.
Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell, R. M. (2016). Financial management for public, health, and not-for-profit organizations. Washington, DC: CQ Press.
Gallagher, B. K. (2014). How we pay the piper: the impact of sources of government funding on arts and culture nonprofit organizations. Denver, CO: University of Colorado at Denver.
Kushner, R. J., & Poole, P. P. (2006). Exploring structure‐effectiveness relationships in nonprofit arts organizations. Nonprofit Management and Leadership, 7(2), 119-136.
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Parker, S. (2012). Building arts organizations that build audiences. New York, NY: Wallace Foundation.
Young, D. R. (2013). If not for profit, for what? Lanham, MD: Lexington Books.