January 2009
by Helmut Anheier

Image: Credit cruncher by earnest70six


What the economic crisis adds now is a potent mix of new challenges to what was an already complex set of issues:

• At the societal level, there is a loss of trust in the ‘system’, a general sense of insecurity among the general public, and opportunism among some political actors on the left and the right.
• European governments, many more fiscally secure than the United States and with more room to maneuver, rediscover Keynesianism. They interpret it to their own political advantage, typically resulting in massive public spending programmes (of which only a rather small portion will reach arts and culture). Increases in public investments are combined with reductions in current budgets, and create shortfalls, of which some, often indirectly, are passed on to non-profits.
• Businesses engage in short-termism while trying to calm shareholders. They are eliminating programmes for corporate social responsibility and giving, including arts and culture funding. At the same time, they are looking for government handouts and subsidies in return for some guarantees, typically related to employment and performance.
• Philanthropic foundations see continuing drops in asset values of a scale not seen in decades, with expected reductions in grant payouts, concerns about the sustainability of current programmes and commitments, and a growing emphasis on asset protection.
• Many households face both greater financial uncertainty and declining net worth, which could lead to drops in donations and a decline in volunteering.

For arts and culture non-profits, the current crises undoubtedly mean fewer resources for current expenditures; however, depending on public spending priorities, it may also yield some additional funding for investment programmes. First and foremost, it means greater financial instability, more uncertainty for management and staff, possibilities of unfulfilled contracts and obligations, and unmet demand. The reaction of boards and management could easily fall victim to common extremes: on the one hand, to a ‘do nothing approach’, because of denial or fatalism; and on the other, to different forms of over-reaction and blind activism. There are, however, other options that reveal themselves only when appreciating what sets non-profits apart from other organisations.

Three features are central:

• The presence of deeply embedded values (religious, political, humanitarian, moral, artistic) is a distinct feature of many non-profits. How far these values influence organisational behaviour varies, but the significant presence of values implies at the very least a more complex means-goal relationship between operational and ultimate objectives. These values can be enabling or restraining; protecting or stifling; leading or misleading; invigorating or distracting.
• The presence of multiple stakeholders (trustees, staff, volunteers, users/clients, state agencies, etc.) makes non-profits inherently political organisations, and turns managing them into a complex task of creating and coordinating coalitions around a common purpose.
• The presence of multiple revenue sources (markets, quasi-markets, membership, various forms of transfers from government, various forms of donations and sponsorship, contracts, etc.); at the same time price mechanisms (the best indicators of performance) are frequently absent. This means that non-profit leaders manage multiple revenue streams when performance is uncertain.

1. How can the cultural sector survive the financial crisis?
2. How is the arts and culture sector responding to the crisis?
3. How should non-profits rise to new challenges?
4. Six tips for weathering the storm
5. Preparing for the future

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