Written evidence submitted by Mission,
Models, Money (MMM) (arts 45)
1. SUMMARY
1.1 This submission is from Mission, Models,
Money (MMM), a network of thinkers and doers whose vision is to
transform the way the arts use their resources to support the
creation and experience of great art. All of our activities are
dedicated towards building the resilience of creative practitioners
and organisations in order to help strengthen their capacity to
be externally aware, rigorously self critical and risk positive.
1.2 An important strand of current work includes
a project called Capital Matters which is exploring how best to
support arts and cultural organisations in becoming more financially
resilient. Our report will include recommendations about public
and private sector funding.
1.3 Work for the project has comprised a number
of elements—the main ones being research amongst medium
sized arts and cultural organisations perceived by funders and
support organisations as being at the leading edge in changing
or adapting their business models in order to become more financially
resilient, conversations with funding and financing organisations
and consultation meetings with arts and cultural organisations.
We are currently drafting a report on this work which we aim to
publish for consultation by the end of September.
1.4 Capital Matters builds on previous MMM work
and tests and develops our analysis. Our hypothesis is that many
medium sized arts and cultural organisations are undercapitalised
and over-extended. But while they are cash poor, they are often
rich in other assets (particularly intangible assets in the form
of creative or other IP, a strong brand or reputation and the
good will of supporters and donors). Our analysis suggests that
with access to appropriate capital, in the form of development
grants, loans and quasi equity (or revenue sharing arrangements)
and an injection of appropriate support with business development
arts and cultural organisations could achieve greater financial
resilience.
1.5 The Capital Matters report will consider
financial capital and support needs in the arts and cultural sector
and how these could be best met in the future by both the public
and private sectors.
2. INTRODUCTION
2.1 MMM's vision is to transform the way the
arts use their resources to support the creation and experience
of great art. MMM's current fourth phase of work, which has been
running since 2008, comprises a number of strands. The objective
of all these strands has been to research, design and prototype,
where possible, new ways of thinking and new ways of doing which
will help organisations evolve their mindset and working practices
in response to an increasingly turbulent operating environment.
You can read about the MMM work streams in more detail on our
website at www.missionmodelsmoney.org.uk, including in the resources
section of the website and in the provocations section of the
website where you will find "The Art of Living".
2.3 One of our work strands focuses on collaboration.
It has included piloting new collaborative, networked approaches
to back office functions and externally facing service innovation
and design amongst six groups of arts and cultural organsiations
in Scotland and the North East of England. Learning from the pilots
will help develop a greater understanding by funders on how to
approach, allocate and distribute grants and technical assistance
for collaboration and a larger pool of specialist expertise which
arts and cultural organisations can draw from to aid collaborative
working.
2.4 MMM is also currently engaged in a project
called Capital Matters which builds on our previous work and which
will make recommendations about how arts and cultural organisations
and public and private sector funders can build financial resilience
in the sector.[26]
We are currently writing up this work. A draft report will be
published for consultation by the end of September.
3. THE CAPITAL
MATTERS PROJECT—WHAT
IS IT
ABOUT?
3.1 Since 2007 MMM's research has established
that thousands of arts and cultural organisations in the UK, critical
to both the historical and contemporary cultural canon, are over-extended
and under-capitalised. Typified by high fixed costs, inflexible
business models and weak balance sheets, many are overly dependent
on annual public sector grants in order to survive. However, our
hypothesis is that the arts and cultural sector could become stronger
and more resilient in the future if creative practitioners and
organisations had access to appropriate financial capital and
support in building organisational capacity.[27]
3.2 Capital Matters is a project with three
main elements:
— Research to examine the approaches that
creative practitioners and organisations are already deploying
to evolve current business models and/or develop new business
models which assist them to build financial and organisational
resilience.
— Consultation with frontline creative
practitioners and organisations to investigate what changes to
existing infrastructure support and/or what new kinds of support
including changes to public and private funding policy and practice
would help to build resilience.
— Discussions with public and private funding
and financing organisations about how their practice supports
or inhibits the building of resilience in the arts and cultural
sector aimed at encouraging good practice.
3.3 Our overall goal is to encourage a funding/financing
environment that invests in the sector's long-term health and
vitality. In MMM's view this means providing access to an appropriate
range of financial capital including grants, loans, quasi equity,
exchange and barter arrangements and contract income.[28]
It also includes understanding non-financial support needs better.
This is necessary to enable creative practitioners and organisations
to deploy their existing assets better and to develop new assets—whether
tangible or intangible in order to generate more of their own
income into the future.[29]
3.4 The project is being financed and supported
by The Gulbenkian Foundation's Innovation Fund, The Northern Rock
Foundation, The Scottish Arts Council and Arts Council England.
4. WHY IS
THERE A
NEED FOR
CAPITAL MATTERS?
OUR ANALYSIS
TO DATE
4.1 Consultations with arts and cultural organisations
carried out by MMM in 2007 strongly suggested that creative practitioners
and organisations are both under-capitalised and over-extended.
People working across the arts sector reported to us that:
— Public sector and foundation grants were
spread ever more thinly.
— There was pressure to do more with declining
revenue funding.
— Funding was tied to artistic product
so organisations lack resources to invest in the development of
their business model.
4.2 The research confirmed that the nub of the
problem was as follows:
"Insufficient investment in the core of
A&COs (arts and cultural organisations)—the leadership,
management and systems that help to ensure organisations run efficiently
and effectively. This lack of investment creates a vicious circle.
Organisations lack resources—skills, expertise and money—to
invest in creative ways of generating resources (for example for
investment in research and development and to exploit the intellectual
capital generated)".[30]
Amongst our recommendations, designed to address
the problem, was the setting up of a new underwriting fund (where
a sum of money is reserved and called down only if needed) to
provide creative practitioners and organisations with the confidence
to take artistic risks, develop new initiatives or simply to enable
them to weather cash flow difficulties.
4.4 The 2007 MMM research also confirmed two
other important issues:
— The need to provide advice and expertise
to help creative practitioners and organisations better understand
their finances.
— The need to clarify and match the correct
funding/financing options with the right sorts of projects or
activities in order to enable organisations to flourish.
Without such matching, investment may at best
be unproductive and at worst counterproductive. To quote Clara
Miller, head of the Non Profit Finance Fund in the US:
"It's no good accessing investment to enable
you to make more widgets if you're making a loss on each one;
it simply makes your situation worse".
4.5 Clara Miller argues that there is a fixed
relationship between mission (programmes), model (organisational
capacity) and money (capital structure) with any change in one
inevitably having an impact—planned or unplanned—on
the others. Action is therefore needed on all three fronts at
the same time to enable non profit organisations, including those
who work in the arts and cultural sector, to flourish.
4.6 During 2008 and 2009 we have developed our
analysis further concerning the difficulties reported to us in
2007. Through a consultancy project in the North East of England
we have been able to work closely with a group of building based
arts and cultural organisations and funders to develop a strategy
aimed at achieving greater financial resilience.
4.7 The organisations we were working with found
it difficult to raise funding for core operating costs. As a result
they did not have adequate reserves and they lacked resources
to invest in their organisation and their future artistic development.
Typically this meant they could not do one or more of the following:
— make provision for future spending needs
in relation to building and plant;
— finance adequate rehearsal time;
— commission new work and support emerging
talent;
— invest in improving existing methods
of income generation—for example, employing an additional
fundraiser or events person;
— develop new income generating ideas;
— purchase an appropriate share in the
IP produced by the artists they worked with; and
— invest in their organisational capacity
to support their work.
4.8 Interviews with the organisations suggested
frustration and thwarted ambition:
"We do what we do but we aren't able to
grow content and content is all".
And a drift towards a position where it was
becoming more difficult to take artistic risks because the imperative
to cover significant fixed costs demanded conservatism in programming.
4.9 Although these organisations were cash poor,
they held significant assets in the form of buildings or intellectual
property they had helped develop and they also had access to significant
social capital through their pool of supporters and donors. MMM
concluded that they could become more financially resilient by
better exploiting their existing assets and developing new ones.
We proposed a number of measures aimed at assisting them to do
so, including:
— Grants to support research and development
work on collaborative income generating ventures; and
— The establishment of a revenue and risk
sharing fund providing support for new income generating projects
and providing access to appropriate business support.
You can read more about this project in the
Resources section called Money on the MMM website.
4.10 During 2009-10 we reviewed a small action
research project also in the North East of England aimed at testing
whether an injection of capital (in the form of a grant) coupled
with appropriate business support could help four different arts
and cultural organisations develop new projects which would enable
them to generate more of their own income over the medium to longer
term.
4.11 All four of these projects are about digitisation.
The approach taken is one of "asset based development".
Put simply this means building on existing skills and expertise
and better exploiting products and services that have already
been developed. For example, bringing popular off-line products
and services online to reach a wider audience and using techniques
such as up selling and cross selling.
4.12 Although it is very early days and some
of the projects are still in development, this initiative suggests
that relatively small capital investments may generate lasting
value in a range of ways including financially.
Benefits to this cohort have been:
— Access to effective and appropriate business
diagnostic skills to identify and refine market opportunities
and a critical pathway.
— Development of new on-line products and
services.
— Development of audiences through social
marketing.
4.13 This piece of work suggests the potential
of digitisation for some arts and cultural organisations; it demonstrates
that digital tools can be the corner stone or catalyst for some
strategies designed to support greater resilience.
4.15 The results of this review have helped
us to understand better the key role that appropriate business
support plays in helping arts and cultural organisations develop
successful new income generating ventures and the challenge that
organisations face in funding the transition to more financially
sustainable ways of working.
4.16 Key findings were:
— For the organisations involved the capital
provided was contributing towards greater public engagement; art
form and content development; progress in the articulation of
value and development in management and governance.
— All the business ventures pursued were
core to achieving organisational mission.
— All the ventures were helping the organisations
involved to build new communities of interest, extend reach into
new markets, build their reputations and articulate their value.
4.16 In summary the new research commissioned
through Capital Matters reflects further on these findings. In
Capital Matters we are looking more deeply at how arts and cultural
organisations are adapting and changing in order to become more
financially resilient and what organisations identify as.
— funding and financing options;
— attitudinal barriers they encounter and
how they are being overcome; and
— support needs and how these are currently
met.
4.17 The findings from this new research will
be summarised in our consultation report which will be published
for public consultation by the end of September.
September 2010
26 MMM is using Mark Robinson's definition of resilience
"resilience is the capacity to remain productive and true
to core purpose and identity whilst absorbing disturbance and
adapting with integrity in response to changing circumstances". Back
27
Innovation in Arts and Cultural Organisations, Bakhshi
and Throsby, Nesta Interim Research Report, (December 2009). Back
28
See http://bit.ly/aADLnI for a longer introduction to this subject. Back
29
Tangible assets include buildings, equipment, dance floors etc;
intangible assets might include intellectual property, brand strength
or social capital generated by communities of interest including
users, audiences, donors, funders and partners. Back
30
New and alternative financial instruments : final report for
Mission Models Money, catalysing a more sustainable arts and cultural
sector, Margaret Bolton and David Carrington (2007). Back
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