The way in which the arts sector is organised and arts organisations are run is being debated as never before. Jon Harris looks at business structures in the arts and argues that arts organisations need to lose their hang-ups about charitable status and start competing with other industries.
Over recent months a series of questions has been raised, not least in these pages, about the future of arts organisations. In a paper commissioned by the Mission, Models, Money (MMM) programme, John Knell rightly bemoaned the undercapitalisation and lack of professionalism of many organisations, and called for a more challenging public conversation about the arts. Similar thoughts were also expressed by Arts Council England (ACE) Chief Executive Peter Hewitt, when he announced ACEs public consultation about what it is in the arts that people value (ArtsProfessional 127, 31 July).
Meanwhile, managers of subsidised arts organisations engage in an increasing number of conversations about becoming more business-like. For example, there have been proposals for paid board members or chairs. And with new charity, tax and VAT regulations, some organisations run more and more of their operation through trading subsidiaries and less and less of it through parent charities.
Marginalisation
So, whats the connection between all these simultaneous ideas? At the heart of Hewitts concerns is the fear that the arts world is of only marginal interest to most people. Knell takes this further, and connects that fear to the judgement that we have created a sector at the margins of business practice an industry outside the rules of industry. I think that the managers who are moving their organisations in new directions unconsciously echo this fear.
As far as I am aware, the MMM process has so far avoided one area which is, to my mind, critical: I contend that the whole framework of charitable arts organisations as currently constituted is wrong. It keeps not-for-profit arts organisations marginal to the world of business. I want to see a thorough examination of ways in which the current framework might be dismantled and improved. I emphasise that I am not arguing against subsidy. I love public subsidy of the arts and I think that there should be much more of it, not less. But I think we have, over time, fallen into the wrong position by equating the need for subsidy with the need for not-for-profit status.
So whats wrong with being a charity? First, it creates a culture of dependency psychologically unhelpful when what youre running is a business. Were competing with businesses, not charities; customers relationships with an arts organisation are akin to their relationships with restaurants, cinemas, sports clubs or shops, not their relationships with hospices or with Oxfam. The premise that arts organisations need the same kind of help as charities is insidious. It is often an excuse for amateurishness, or a barrier against acting with sensible, adult independence.
Second, when you deal with a commercial company, you know that, fundamentally, you are dealing with its owners however many levels of hierarchy there may in fact be between, say, the board of Marks & Spencer and the shop assistant taking your cash. But who actually owns charitable arts organisations?
In some cases, arts company board members feel a very strong and long-standing association, which closely resembles the feelings that key shareholders have about a business. In many other cases, I suspect the feeling is rather different; trustees will certainly feel that they have been entrusted with an important responsibility, and that they must ensure money and relationships are properly dealt with. But key staff members, key stakeholders, service users, etc. have just as much a sense of ownership as trustees and trustees know it. This is not the dynamic of a business. Since theres no legal ownership, theres no realistic accountability. Instead, theres a confusion about status, which risks wrecking the very basis of governance.
Third, charities cant do many of the things that normal businesses can. They have no monetary value beyond their assets; they cant raise capital; they tend not to merge with other organisations or acquire each other; they cant take out loans secured against assets. Of course, subsidised activity needs to have certain rules and controls, so that we ensure that the activity remains as much of a driver as does the need to make surpluses. But can we really compete as efficiently as possible in todays fierce and fast-paced leisure market with our hands tied behind our backs in this way?
Most importantly of all, I return to my point about marginality. The current structure is special, unusual and, therefore, marginal; it stops us from operating in the world that most people operate in. Business people in general would take more interest in the arts industry if it didnt operate by strange, remote and seemingly incomprehensible rules.
Charitable intentions
So why is there a continued premise that subsidised arts activity needs to take place in not-for-profit organisations? Why has it been thought such a good idea for many years? There are four main reasons, and I would like to show why I think they are now mostly incorrect, irrelevant or out of date.
- Public subsidy can only be given to not-for-profit organisations.
There is no doubt that this view has common currency in the arts world; but consider the many other publicly subsidised industries (car manufacturing, farming, public transport, environmental development, construction) where public subsidy intrinsically forms part of the mixed turnover of thousands of ordinary businesses. As long as EU regulations on state aid are followed, there is no reason why the government or its quangos cannot subsidise private sector enterprises. Indeed, private companies can already apply for EU structural funds.
- Trusts, foundations and individual supporters would not make donations to commercial organisations.
That some would not do so is probably true, but I doubt that the some is most. Trusts and donors are entitled, of course, to have firm views on what should be done with their gifts, but the way this is controlled need not be related to the legal structure of the applicant. It can simply be controlled by the nature of the contract between the two parties.
- Charities can benefit from support such as corporation tax relief and business rate relief.
This is, of course, true, but if more profits were to result from a privatised system of subsidised arts organisations, as I argue they would, then the profits should outweigh the benefit of reliefs £10 of profit taxed at 40% is better than £5 of profit untaxed.
- People working in the subsidised arts do it for altruistic motives.
I dispute that the voluntary sector has a monopoly on a sense of worth. Dont commercial producers care just as passionately about their work as subsidised managers? There are many examples of industries and careers farming, picture-framing, graphic-designing, glass-blowing, cooking - in which the people doing the work do it because they like it and believe in it, earning less than they would if they became estate agents. That criterion doesnt mean that the organisation concerned has to be a charity. There is no reason why a private sector subsidised arts industry would not work in the same way.
Making arts matter
Some of my arguments might look like arcane posturing about matters of no interest to anyone except a handful of accountants. Look again. Over-reliance on outdated business models is the heart of what is going wrong in the subsidised arts and how it can be put right how limited resources can be spent in the best way, and how dynamism and professionalism can be put at the centre of our sector. A good deal of public and private funding has been put into the MMM project, and a detailed examination of these ideas would be one of the best ways in which some of that money could be spent.
Peter Hewitts central question, in his July lecture, was why the arts are not in the core script of the country, despite Tony Blairs 1997 promise to that effect. I can come up with some answers that are to do with the particular British psyche as compared with the European and the American, and some that touch on the hard, personal, intellectual work that the arts sometimes unexpectedly require. But my main answer is that we have unwittingly created a meaningless economy for the subsidised arts. We need to be on the business pages, not on some dwindling pages at the back that most people dont dream of reading. Special cases are very, very hard to plead. They just turn people
off.
Jon Harris is an Associate of Actorshop Ltd., which supplies training and consultancy services. Its conference, The Psychology of Managing Arts Organisations will take place on 29 November. He is also Producer at the touring company Shared Experience.
e: jonharris@actorshop.biz