Leaders from an array of nonprofit organizations around the globe recently gathered at Harvard Business School for the executive education program “Governing for Nonprofit Excellence: Critical Issues for Board Leadership.” Offered under the auspices of the HBS Social Enterprise Initiative, the program aims to maximize the skills and effectiveness of nonprofit board members.
Among this year’s participants were Sako Fisher, president of the board of the San Francisco Symphony (SFS), and Lowell Noteboom, chairman of the League of American Orchestras, which champions the cause of some 800 orchestras—both big and small--across North America.
A former commodities trader and banker, Fisher joined the SFS board in 1992 and was elected its president in December 2012. Noteboom is an attorney who served for many years as a member of the board of the Saint Paul Chamber Orchestra, including nearly seven years as its chair.
In an interview with HBS’s Jim Aisner, they talked about the challenges and changes ahead.
Aisner: What are some of the primary concerns facing symphony orchestras in this country?
Noteboom: Let’s start with the external things. In the past twenty years in particular, there have been shifts in people’s entertainment interests and habits, including more choices and ways to access music. We find ourselves in a more competitive environment for people’s time and attention than we did a generation ago and certainly more than we did two generations ago.
There are also internal things about the “symphony industry” that create unique challenges in terms of steadily increasing fixed costs without the option of efficiencies that are available in other businesses to help reduce expenses. We still have the same number of nights for concerts and the same number of seats to sell. We can’t raise ticket prices beyond a certain limit. Nor can we decide that we’re going to run with an orchestra that has fifteen members instead of 85 or 90. So all of that creates a widening gap between what we can earn and what we need to spend, and that gap has to be filled by contributions.
Which brings us to the fact that trends in philanthropy are also changing and that the money that was available to us in the past is less available now. My parents’ generation and the baby boom generation saw the cultural arts as a community priority and something they were willing to invest in. My children and their contemporaries have a different set of priorities. As wealth shifts to that group, I think symphonies will face greater competition in benefiting from their philanthropic dollars.
Fisher: I would add a few more things. Another obstacle we face is the loss of music education. Statistics show that eighty percent of a classical music audience has had some kind of training in a musical instrument, from a recorder class in primary school to a high school orchestra or band. In the San Francisco public schools, for example, we have a shortage of music education. So one of the missions and services of the San Francisco Symphony is to provide all the public schools in the city with materials about music. We also send out four ensembles to play over 1,000 performances in the schools and bring the 25,000 students in the San Francisco United School District, along with students from outlying areas, to Davies Symphony Hall for a concert experience every year. If we don’t help create our own future, we’re in trouble. We regard it as an important long-term investment.
I’d also like to follow up on Lowell’s point about the changing nature of philanthropy. It used to be more checkbook oriented. When you wanted to be considered a contributing member of your community, you supported the arts. Now I find that younger philanthropists are looking for impact. They’re looking for different kinds of experiences in terms of their individual philanthropy. What I’m seeing is that in families where a matriarch or patriarch has traditionally been a big donor, when that person dies, the donations often end. The next generation says, “Mom and dad did that, but that’s not what I want to do.” As a result, we’re looking at a hard stop as our big donor population ages. We have to make a different kind of case.
Eventually, we may also have to change the nature of the concert-going experience. Our younger attendees want a more immersive experience. They want more visuals. What about the format of a concert? Should it be shorter than the usual two hours? Should we start later? Since people are working more hours than ever, they’re not finishing at five anymore; they’re finishing at eight and ready to go out at ten. Well, our concerts generally finish at ten. In light of all this, can symphony orchestras adapt their labor contracts to be responsive to the demands and changing tastes of younger audiences?
Noteboom: Consider recent actions of the Detroit Symphony. Since fewer people have been coming downtown at night, its strategy is to travel to the suburbs on a regular basis. Sometimes the orchestra is split in two, so that the musicians can go to more neighborhood venues. These concerts have been very well attended, and the audience is much younger, with young parents eager to bring their children. It’s too early to draw deep conclusions, but this is at least an attempt to rethink the old model and delivery system and to try to address the community’s realities and buying preferences.
In addition, a lot of creative young musicians coming out of conservatories today are mindful of this changing environment and doing some very different and creative work while they’re in school and when they graduate. To one degree or another, all this will have an effect on the symphonic repertoire of the future.
Fisher: At the same time, this kind of change is bound to create some tension between our diehard subscribers, who are in their late 50s and 60s, and the next generation. The diehards like what they like--the signature pieces from great composers such as Beethoven, Brahms, Mozart, and Mahler--and we don’t want to alienate that group. They are our bread and butter, the folks who buy our twelve-concert subscriptions rather than random seats when a particular concert strikes them. My 24-year-old son would rather walk over burning coals than sign up for a twelve-concert subscription. He doesn’t want to make that kind of lengthy commitment.
Noteboom: Exactly. Audiences for classical music performance have been in steady decline as a percentage of population for the last two decades, and subscription sales have been declining even faster than that because even the veterans who like the product are not so inclined to buy the twelve-concert series anymore; they might want six or four.
So where do we go from here? I’m thinking of one of the lessons Prof. Frances Frei taught us in this program – that you can’t be good at everything. As she puts it in her book [Uncommon Service], organizations must dare to be bad in some things in order to be great service providers overall. How does that apply to a symphony orchestra? If you ranked the quality of a performance on a scale from one to ten, most folks can tell the difference between a one and a ten, a really bad performance from really good one. But the vast majority can’t tell the difference between an eight and a ten most of the time; yet we spend an awful lot of our time, money, and energy on delivering tens while ignoring the rest of the experience, which has become much more important to the millennial generation. They want to know what goes with the concert – the ambience of the venue, the quality of the food and drink. We have to start paying more attention to those things as well.
Fisher: Frances’s thesis is thought provoking. But I worry about the fact that my product is a musical performance and my constituency is an audience, with critics to tell me how we’re doing. A company with a more tangible product can take the hit, but can a symphony orchestra? How do I get everybody who is involved in the experience into alignment about what we’re going to be fives at and what we’re going to be ones at? It’s a lot like Formula One racing. To be a winner, you have to have a great car, which is the orchestra. You have to have a great driver--our conductor Michael Tilson Thomas—and a great pit crew—our staff and administrators. And then you need sponsorship, because the whole effort is so expensive. In Formula One, it’s a number of companies. With us, it’s the board and our donors. Creating a winning team requires great coordination, commitment, and alignment among all these players.
Aisner: Speaking of boards, what are your thoughts on corporate governance in the nonprofit sector?
Noteboom: I’ve spent a lot of my time in the last decade thinking, writing, and teaching about this in the orchestra environment. These days, many major orchestra boards can be quite large. I know that Sako’s board, for example, numbers around eighty members. My feeling is that large is only a problem when it prevents the board from being fully engaged and effective. Fact of the matter is, it is possible to engage a big board if you’ve got discipline, good governance practices, and the right people on board, along with clear expectations and some level of accountability. You’ve got to help the ones who don’t remain engaged to move to some other kind of relationship with the organization. On the other hand, if you have an undisciplined operation, you can be pretty much out of control and unfocused even with just fifteen or twenty people on the board.
Fisher: My board’s size is the result of the merger of two organizations, so it’s historical. Based on our discussions in this HBS program, I think it’s worth at least thinking about whether we have the right model or whether separating governance from fund raising is a more effective approach. I don’t mind having a big board, but I want to be sure it’s a big board for the right reasons.
Aisner: When it comes to fund raising, I’ve heard some people say that symphony orchestras in this day and age are a kind of niche product that should depend completely on the resources of their board members and other well-to-do patrons, while “the rest of us” focus on more needy causes. What do you think of that?
Fisher: I think art and music are essential ingredients in the making of a community and a civil society. The young men and women who work in Silicon Valley, for instance, prefer to live in San Francisco, even if it means a long commute or a ride on the Google or Apple bus systems. Why? Because the city provides the things they consider of value, including a wide range of cultural activities. These options play a huge role in making a city like San Francisco or Boston or Chicago or Cleveland or New York a very special place to live for people of all ages and from all different backgrounds. The reality is that none of this can happen without the support of the entire population. It should not be a question of ”or,” as in one or the other, but “and.”