22 October 2015

Aside: More measuring...

In Wednesday's post, I outlined one possible method by which arts organisations could measure their cultural footprint. Whilst there are obvious flaws to be pointed out (for example, does the shape really matter more than the number?), the more time I've spent thinking about this method of measurement, the more I warm to it.

Reach will generally be the major unit of measurement (or the start of the funnel if you want to think about it that way) and represents how many people have witnessed an organisations work. It doesn't matter if that work is monetised or not, all that matters is that people were witnesses to the work. For a producing theatre company, this is probably the priority: get the work out to a wide audience.

Engagement is normally a function of reach (IE not everyone you reach will be engaged. However, on rare occasions work may create more engagement than reach) and I suspect (although lack the data to back up this hypothesis) that there is generally positive correlation between the two. The conversion ratio of 'reach:engagement' could drive organisational activity: increase your reach and you likely increase your engagement (although the same is not necessarily true - you could have a very engaged but small audience)? Engagement would perhaps be key for community organisations.

However, engagement could also be a function of participation (which could be a function of engagement - depends on the organisation!). Fun Palaces is an interesting organisation to consider because arguably everyone they reach is also an engaged participant but engagement also extends beyond the participants.

So the character of different organisations would be shown in their shapes but (here's where things go up a notch) if we're really trying to measure cultural footprint then we need to account for time in a better way (particularly if we're trying to create a useful model for organisations). Since the resonance of an organisation's work is affected by time, one would assume the same should be true for the cultural footprint. So, creating one piece of work every 5 years would show as a zero footprint on 4 out of 5 years for all the above 3 measurements and that's incorrect.

If you were comfortable using one of the above 3 measurements as a proxy for cultural footprint, you could create a model that factors in decay:


The blue line in the chart above represents the cultural footprint. The yellow dots are events where reach occurred (so, performances if you prefer) and time is shown on the horizontal axis. What you're looking at is the cultural footprint of a hypothetical show that did a couple of previews before Edinburgh followed by a full run at the festival (with one day off) and have nothing planned for the rest of the year. If they continue to do nothing then in 6 months their cultural footprint will have halved. In another six months it will have halved again and so on (never reaching zero because 'art never dies' obviously).

What's useful about this model is that it can be used for planning activity to maintain or expand their footprint. For example, the below chart shows that week long run at a certain attendance level would substantially increase footprint and ensure it was preserved going into 2016.


It would take a lot more research to establish the theoretically correct half-life of cultural footprint (the 6 months in this model is an absolute guess and undoubtedly the major flaw). This modelling could be done with engagement or participation numbers if that was the preferred focus. Couple a model like this with a robust forecasting model and maybe a MILP model for capacity planning and you have some incredibly powerful and potentially very useful tools and insights.

21 October 2015

Aside: Measuring cultural footprint

In an earlier post, you may have noticed me throwing out 'growth facilitated' as a key metric for the organisation being discussed. Whilst it's very easy to throw around a conceptual metric within the context of a post exploring the hypothetical structure of a theoretical organisation, things start to get a bit thornier when you actually begin to consider how that measurement would work in practice.

Key metrics are important for organisations. At their best, they ensure everyone is on the same page, foster understanding of how individual contribution affects the whole (see open-book management) and drive the organisation forward. At their worst, they can be distracting, de-humanising and detrimental.

Looking through the accounts of ACE Portfolio organisations (and at examples like this from the Royal Exchange), it's interesting to see what measures are picked out as headline figures. Metrics such as performance attendance (largely relevant) and capacity percentages (sometimes relevant) are commonplace amongst strategic reports, but increasingly numbers such as 'YoY Facebook Likes' and 'YoY Twitter Followers' (largely meaningless) are creeping in as well. No doubt this is fuelled by talk concerning how we measure the impact of the arts, what the 'value' of culture is and how arts organisations need to embrace the world of big data. Unfortunately, these metrics feel indicative of a siege mentality or that economic impact analysis has been forced on the organisation.

So, how do you quantify the impact of an arts organisation? How do you measure their cultural footprint in a way that would actually benefit the organisation? Well, you shouldn't do it fiscally because the value that these organisations primarily create is not monetary. Maybe something like this:



Reach is the number of people engaged. Maybe it's ticket sales. Maybe it's people who walk through the door. Use the same measurement, show YoY changes and discuss what the shape should look like.

Impact is the traceable web of social interactions resulting from engagement. You could get this from Twitter. You could send out email surveys. Use the same measurements, show YoY changes and discuss what the shape should look like.

Participation is the number of people actively involved as a result of the organisations activities. You could use workshop attendances. You could get this from post-show talk attendances. Use the same measurements, show YoY changes and discuss what the shape should look like.

You'll notice it has no numbers on it. This is because the shape is what matters, although size relative to other organisations would also be of interest. This approach is so simple it has probably already been done somewhere and I've missed it. I do have some other (more complicated) ideas about how you could robustly measure cultural footprint across all arts organisations but sadly lack the raw data to play with (WLTM: NPO w/large dataset).

12 October 2015

Forced Entertainment 2014 (Act II: expenditure and assets)

Tomorrow's Parties - 2011

As shown in Act I, Forced Entertainment operate a very simple revenue model where approximately 39% of their 2014 income (£655,922) arrived via ACE's portfolio fund and the majority of the remainder via production income. Their expenditure is similarly binary in nature, cleanly split between charitable activities and support costs:

Forced Entertainment's 2013/2014 expenditure
The substantial jump in Production Cost spend is likely due to the fact that the company celebrated their 30th birthday in 2014 and dug through the back catalogue to present 12 different shows from their repertoire over the course of the year. In contrast, in 2013 the principle artistic focus was The Coming Storm which attracted £85,000 of external co-production funding. Adding that amount of funding back in makes it much less of a jump in production expenditure, particularly given the variety of pieces performed. One would assume that 'Touring' costs include things like transportation and accommodation but it would be nice to see a clear breakdown.

Forced Entertainment's largest expense is clearly 'Fees, wages and expenses' (down to a total of £315,434 in 2014 from £375,953 in 2013). The reduction in 2014's figure likely comes from the loss of one member of the creative team in 2013 which incurred exceptional redundancy costs of £10,353 and of course saved one salary in 2014. Forced Entertainment employ 10 people, 6 in the creative team and 4 on the management team. The average wage looks to be around  £36,000 on the creative team and around £25,000 on the management team (taken with the usual caveat that staff numbers include any part-time staff).

All of which means that for 2014 Forced Entertainment were left with a surplus of £14,839; nearly double the previous year's surplus of £7,665.

For the last couple of years, Forced Entertainment's revenues have come through the ACE Portfolio and from production income. The immediate benefit of this is that both of their income streams are unrestricted (barring those funds set aside by the trustees as reserves). Consequently, there seems little need to break down the various funds (hence looking at expenditure and assets here in one post).

The most interesting change on the balance sheet is the reduction in the 'other creditors' number (IE money owed which is due within one year), which was at £70,520 in 2013 but is down to £33,469 in 2014. These numbers are always slightly troublesome because the balance sheet represents a snapshot of a particular day, but hopefully it's an indication that Forced Entertainment were in a more stable position at the end of the 2014 accounting period.

Any organisation that creates performance (or indeed physical goods) must deal with 3 principle areas: Source, Make and Deliver. The panoply of business models seen across the arts sector is testament to the innovation that can occur within each of these silos. For example, a new writing company could set itself apart specifically via methods of sourcing (there is often talk of developing content platforms as part of the 'Deliver' silo but sourcing platforms could prove equally effective). Alternatively, a new writing company could focus on making/developing the work, ensuring that output met specific criteria (speed of development, quality, production values etc.). The delivery platform could perhaps also be the primary focus and maybe emphasise specific spatial/temporal or concerns. If feeling particularly rowdy, organisations may even look to innovate across all 3 silos.

Forced Entertainment's focus is clearly on the 'Make' function described above: sourcing is taken care of by retaining a core creative team and delivery is provided by the management team and various co-production relationships. This makes for a relatively simple business model on paper but it's a level of simplicity that's been painstakingly etched out over 30 years. One important note: Forced Entertainment have previously grown by exporting their brand overseas but they have similar levels of attendance in both new and developed markets (around the 75% mark in 200-250 seat venues). This means that substantial growth of audience/engagement really relies on taking the repertoire to new markets (a 'more of the same' approach) and the major flaw of this business model is exposed: future growth is effectively capped.

However, this probably isn't an issue for a company that's been doing whatever the hell it wants since 1984.

7 October 2015

Aside: fostering a messy vibrancy (a response to John Knell's provocation at No Boundaries 2015)

If you missed No Boundaries 2015, you can watch John Knell in action on their website. Worth doing if you're going to spend any time reading what follows. Also worth visiting his website to see that he has seemingly been screaming at a wall for the last decade or so.

As someone who occasionally appreciates hard-headed economics, Knell's argument that 'some of our larger national arts organisations are not too big to fail but too small to succeed' initially seemed appealing. This proposition was based on the winner take all nature of content markets in the digital era: since content markets are now so efficient, consumers seek out only the most sought after content. Few, if any, subsidised national arts organisations have the resources to compete effectively in that marketplace as things stand. Given the cultural footprint of those that succeed, surely it makes sense to get national organisations involved? Problem is that this focuses on whether organisations could compete, whereas more time needs to be spent researching whether organisations should compete.

Let's be very clear that market participation in this way (IE competing toe-to-toe) is absolutely a war of attrition (or a dollar auction if you prefer) because time is infinite but the resources required to compete are finite. The optimal way to play the game is simply not to become involved in the first place because the only true winner is whoever sits in the middle and facilitates the contest. Those participating in the arms race will eventually draw ever further away from those not participating and it will be increasingly impossible to make the jump. Rather than creating the more collaborative sector Knell also spoke about, attempting to expand cultural footprint by creating competitive giants would likely strengthen the 'us and them' mentality: the pyramid gets higher and steeper rather than lower and flatter.

Knell also advocated the establishment of scalable dynamic platform organisations that could amplify artistic and audience footprint (which I will now lazily term 'growth') and create a glorious messy vibrancy. On this point, I agree with him wholeheartedly and began to actively consider what one such platform organisation could look like.

The starting point was the skills chasm that Knell identified in the public arts sector (also present in all industries across the private sector but a more efficient employment market helps paper over the cracks there). Knell provided a list of requirements (incomplete) for an arts organisation operating in today's complex mixed-economy:
  • Outstanding creative leadership
  • Investment expertise
  • Funding expertise
  • Entrepreneurial expertise
  • Great management skills
  • Excellence in data driven decision making
  • Strong governance
  • Capacity to engage with a variety of stakeholders
  • Up to date on relevant issues: legal, funding, compliance etc.

If present within an organisation, those qualities also have to be in balance and correctly aligned to the overall vision/strategy since organisations themselves are ecologies. If balanced, they then need to be utilised properly and developed. Even if the skills are present, balanced, utilised and developed correctly, the sad truth is that a small organisation simply does not have the capacity to maintain the relationship network required to generate substantial growth for themselves.

So a good starting point for a platform organisation would be to address this skill gap and provide the required resource for network construction and maintenance. The platform organisation would be an amplifier with the arts organisations as the input. Simple, quality components (people with the necessary skills to foster organisational development) could be used to create configurable feedback loops of resource for organisations. The resulting amplified output could then be tweaked depending on the context.

To illustrate how the platform organisation would be effective, I took the 168 organisations in the ACE Portfolio that list 'Theatre' as their primary discipline and conducted a quick ABC analysis to get them quickly into tiers. The chart below shows how many of each type there are:



A - The National and The RSC
B - Organisations who (in addition to the above) cumulatively a receive 80% of allocated funding
C - Everybody else

I was expecting a power curve relationship where 20% of organisations received 80% of available funding (or 80% of orgs only receive 20% of available funding) but actually 30% of organisations receive 80% of the funding (or 70% of orgs receive 20% of funds). The below shows how that breaks down:


I believe that the most efficient way to rapidly improve is to identify the lowest level at which something occurs and then look to reduce the amount of time spent at that minimum level (rather than focusing on the highest level you can possibly achieve which invariably leads to diminishing returns as it takes more and more effort to improve marginally). So, if we are looking for growth in cultural footprint and we accept that generally organisations in category 'C' have lower cultural footprints, that lower tier of organisations should be the focus. Remember that this is just an example of a small sub-category of organisations: the platform should be a vertical organisation that facilitates movement up any pyramid, perhaps turning it into a diamond or inverting it completely.

So, our theoretical platform organisation could collaborate with the large number of organisations with smaller cultural footprints to help them grow by providing resource in the form of skills and distributing opportunity by establishing and maintaining a collaborative network. To ensure that it can work with a large number of organisations, the platform organisation itself would need to be scalable, operationally efficient and extremely agile. It should not be distributing funds, only resource (which it will likely need to initially acquire from the private sector).

Ideally it would only have one source of annual funding (ensuring operational focus on output rather than inputs) which could be linked to target metrics defined by the ecology approach mentioned earlier. The important measure would be 'growth facilitated': how did the platform amplify the input of an arts organisation beyond the initial signal by providing resource? The most efficient form would likely be a NPO funded by ACE - any other form would just mean that ACE funds will have to pass through other organisations anyway to reach the platform.

It should be a "Yes and..." platform and never say "Yes but...". As an amplifier, it would be in place to expand on possibilities rather than to limit them.

Practically speaking, this hypothetical platform organisation would offer support to organisations with the desire and potential to improve and grow their cultural footprint. It would work alongside those organisations to identify steps required for rapid and sustainable growth, for example:
  • outlining, implementing and refining a successful long-term growth strategy
  • identifying routes to funding
  • encouraging operational and artistic innovation
  • identifying and addressing skills gaps
  • championing the use of data driven decision making
  • identifying opportunities
  • bespoke business development
  • establishing a growth oriented community

I strongly suspect that raising the bar for the many in this way would have a much wider impact on artistic and audience footprint than by partaking in a war of attrition in the content markets at the other end of the pyramid.

Guess now I can look back in 10 years and see how I got on screaming at that wall.



4 October 2015

Forced Entertainment 2014 (Act I: revenue)

Speak Bitterness (2004)

Forced Entertainment have been doing whatever the hell they want since 1984, which is an impressive durational piece in itself. Taking into account the work that they've produced over that time, you'd be hard pressed to find a company that has succeeded in confounding audience members worldwide so consistently. Luckily, their accounts are devoid of the signature confusion/laughter dynamic and provide some valuable insight into how Forced Entertainment work when they aren't at play.

The revenue streams are certainly nice and simple:



In 2014, the only grant received was the ACE Portfolio grant and this level of funding has been confirmed out to 2018. For an organisation with 'Theatre' listed as their discipline within the portfolio, Forced Entertainment's grant is below the mean, which was £579,056 for 2013/2014. That number is slightly skewed by the enormity of the grants provided for The RSC and The National but even without the two behemoths included, it's still well below the adjusted figure of £386,059. The ACE Portfolio grant was also the bulk of grant revenue in 2013, although they did receive £103 from The British Council that year. What's good about this is that Forced Entertainment don't have to manage a web of funding relationships: operationally they can be much more efficient.

The Investment Income isn't something highlighted in previous posts, normally lumping it in with 'Other Income' is sufficient since it's such a small percentage of revenue for arts organisations. Since most organisations keep reserve funds and money sitting around doing nothing is of little use artistically or financially, it makes sense to try and make it work a little harder. However, the income number will always be low across non-profit arts organisations since the primary activities of the organisation are artistic and not financial hence investment activities are limited according to policy set by Trustees/Directors.

If you sum the cash reserves held by the ~165 ACE portfolio organisations with 'Theatre' listed as their primary discipline, the result is a lot of money (conservative guess of £200k average reserve x 165 orgs = £33mil) currently invested in the arts that is not seeing a cultural return but serves as passive 'protection'. You could argue that such thinking discourages the risks that should be taken to fuel the growth of the sector and that in reality, 3 month's running costs is not going to save any organisation if the ship starts sinking because all organisations are linked into the same economy: if one organisation is struggling then it's likely others are. It follows that if everyone is battening down the hatches then 3 months is simply not enough time to secure new emergency funding streams because those roads will be cut off from all parties. The illusion of safety given by inadequate reserves is potentially more dangerous than not having them at all. You'd have to be a real doom-monger to argue that though...

Returning to the revenue streams, the good news for Forced Entertainment is that although their revenue streams are simple, their reliance on ACE is relatively low and their portfolio grant represents only 39% of their revenue. Compare this to The Gate's 2014 ratio where the portfolio cash was 43% of revenue and Paines Plough's 46% of revenue. The other good news is that Touring and Production income has seen a substantial rise year on year, allowing for modest growth despite the reduction in Sundry and Agency Income.

Growth can be a thorny issue for an organisation as established as Forced Entertainment and although the reliance on ACE is low, the amount of funding received will not drive future growth in itself (unlike in an organisation like Paines Plough who at the time of writing have just been awarded £750k over 3 years to tour new writing with The Roundabout, no doubt ensuring future additional funding as their footprint continues to expand). Although Forced Entertainment's revenues have grown year on year (up from £586,000 in 2011 to £655,922 in 2014), future revenues will likely follow the same organic growth pattern (seemingly due to audience growth overseas) unless a major strategic step-change is made.