A large proportion of the arts community in England is currently awaiting Arts Council England’s NPO decisions. In this round there has been an increased emphasis on governance alongside a very welcome understanding of different forms of organisation. I thought it a good time to look back on a short paper that I wrote in 2016 for my Master’s in Cultural Economics
Profit or non-profit is a more complex question than it first appears. Leadership and the way that leaders valorise their values is just as, if not more, important than an organisation’s profit-making status.
Organisations as individuals
Without private means, benefactors or benefits, an individual usually works to earn funds that allow them to cover their essential costs and, hopefully, provide enough surplus to fund additional activity. For some this surplus is a challenge to obtain and for others, it may be substantial. Most individuals are not non-profit, even those who work for non-profit organisations. They earn a wage and use a proportion to cover costs and any surplus to fund items or activities that they personally choose to fund, (holidays, luxury items, entertainment, alms to the poor…). This choice is a means of helping an individual valorise their personal values. This applies to people who work for for-profit and non-profit organisations. An organisation, be it profit or non-profit strives to do the same. Again, some organisations generate a substantial surplus whilst others struggle. Any surplus generated by the organisation will be used to valorise the values of the organisation. This may take the form of re-investment, shareholder dividends or staff bonuses. They are subject to ‘the invisible hand of market forces’ (Smith, 1776. p.256).
Most individuals do not codify their values. They may not be conscious of having values but will still invest resources in valorising them. The same is true of organisations, especially smaller ones. Even when an organisation publishes its values they may not represent the true values that the organisation represents but the values that they would like the outside world to believe that the organisation represents. An individual’s values can be selfish, altruistic, both and anything else in between. So can those of an organisation. These values are what is important rather than an organisation’s profit-making status.
The non-profit organisation.
My first job, after graduating with a degree, in Textile Design in 1988, was in the shop at a large museum and art gallery. The museum had been running a loss-making retail operation for years. In 1987 they commissioned Dame Hilary Blume of the Charities Advisory Trust to review the retail operations. Blume had recently published a book, The Museum Trading Handbook (Blume, 1987). Her proposal to the museum, which was accepted, was that The Charities Advisory Trust would take over the shops, in the form of a new trading company, and distance-manage them from London with a share of the profits going back to the museum and art gallery. The Charities Advisory Trust, which still exists, was established in 1979 with the aid of Government Funding. It is a charity and currently states its aim as, ‘We are dedicated to finding practical methods of redressing inequalities and injustice’ (Charities Advisory Trust, 2016). I saw an advert and applied. I was interviewed and appointed. It was not well paid but I felt lucky to have a job in such a fascinating place. It was not until the first day that the five of us appointed realised that we were walking into a very awkward situation. All the previous retail staff had been made redundant and we were their cheaper replacements. Their security, reception and curatorial friends in the museum were not pleased to see us.
Blume’s book seems to have disappeared without trace which is not surprising. We were given a copy on our first day. Even then I winced at the values that it represented. Blume advised museum managers not to employ staff who would get on with each other as they may gang up against authority. She insisted that staff should be paid the minimum possible and that they should be asked to do voluntary overtime whenever possible (Blume 1987). The leadership was remote and unsupportive. In line with the advice in the book, every effort was made to divide and rule the staff. Our perception at the time, which holds true on reflection, was that, although Blume was the founder and CEO of a charity, one that was designed to support other charities, her values were about personal achievement rather than social. Interviewed in 2013 she said ‘I’ve devoted my life to making money, but I don’t want to keep it. It’s a slightly different thing. From quite young, probably age eight, I was thinking up schemes for raising money. But you can’t wear two coats, can you?’ (Tomkins, 2013). Throughout the interview, she talks about winning and personal achievement. She represented what Maccoby would call a ‘Narcissistic Leader’ who can ‘…harbour the illusion that only circumstances or enemies block their success’ (Maccoby, 2000, p.2) The manifest values of this non-profit organisation reflected the values of the leader in charge. The organisation also used the supposed social aims of the charity to justify, what I regard to be, poor practices towards the management of important economic stakeholders – the staff.
The non-non-profit making organisation
Culturapedia was established in 2004 as Robinson Howell Partnership. In 2011 we undertook a values exercise with a values coach and rebranded the company. We had expanded and employed staff, we had developed more project work and were doing less consultancy. Losing our names from the name and brand was a positive step.
Culturapedia remains a private business. We chose this model purposefully, not because we sought profit but because we needed to be unencumbered by the bureaucracy of board management. To retain ownership of our values and freedom to move. By adopting a lean governance structure with two directors, we can respond rapidly to opportunities and challenges. ‘Change in organizations is pervasive because of the degree and rapidity of change in the external environment. The conditions in which organizations operate demand a response without which organizational demise is a frequent result’ (Cameron & Quinn, 2011, p.9). Culturapedia is a profit-making business but profit is no more a motivator than if we were a non-profit business. We need enough surplus from projects to cover costs as does any organisation. We are freer not to take director remuneration if it is not available than the CEO of a non-profit would be.
Simple mechanisms can be put into place that safeguards funders. For example, Mailout was a project of the Mailout Trust. The trust, employed Culturapedia to deliver its services. For this Culturapedia received a fee and reported to the Mailout Trust board in the same way that an individual employee works to earn a fee or cover their costs. Culturapedia is upfront about these costs. They are no different, in principle, to the Mailout Trust employing a member of staff. Arts Council England is admittedly unusual in that it is willing to provide funding to organisations that do not have a non-profit making governance structure. ‘ …[A]rts and cultural organisations need fresh approaches which enthral audiences and attract new sources of Income’ (Arts Council England, 2013). Funding that comes from Arts Council England comes with caveats to all organisations The percentage that can be taken as fees, and what the funding can and cannot be spent on are normal constraints. As a non-non-profit making business, (I use this complex construct instead of ‘profit making’ as this term is loaded with assumptions as to the motives and values of the organisation), Culturapedia is bound to the rules in the same way as a non-profit making organisation.
Discussion and Conclusion
Why then do organisations choose the governance structures that they choose and why do they choose a non-profit model over others? There are three main reasons. The first is practical, it is perceived that it is easier to access funds if you are a non-profit. Culturapedia has proved that this is not the case. The second is about appearances and perceptions – in micro arts organisations with an unpaid board, the CEO usually manages the board and sets the real values of the organisation through practice. Thirdly, most organisations get established as non-profits because that is what everyone does. Alternatives do not get considered.
As to what next? Profit or non-profit is of less interest to me than the values and culture of the organisation we run, work with or work for. Culturapedia is free to adapt and change and is not bound by onerous governance structures, we can take it in whatever legal direction we choose. Our values are very important and are used to test ideas. They work because they reflect the personal values of the two directors or leaders of the organisation. The distinction between a non-profit organisation and a profit-making small arts organisation is academic. The most important thing is the organisational culture and the values of the leaders.
References
Arts Council England. (2013). Great Art and Culture For Everyone: 10-Year Strategic Framework 2010-2020. Second Edition. Manchester: Arts Council England.
Blume, H. (1987). The Museum Trading Handbook. London: The Charities Advisory Trust
Maccoby, M. (2000, January-February). Narcissistic Leaders: The Incredible Pros, the Inevitable Cons. Harvard Business Review.
Smith, A. (1776). An Enquiry Into The Nature and Cases of the Wealth of Nations. Retrieved from http://www.ifaarchive.com/pdf/smith_-_an_inquiry_into_the_nature_and_causes_of_the_wealth_of_nations%5B1%5D.pdf
Tomkins, S. (2013, April). Dame Hilary Blume Interview: It’s a Gift. Reform Magazine. Retrieved form http://www.reform-magazine.co.uk/2013/03/its-a-gift