From Bankruptcy to Sustainability: Stakeholder Engagement and Strategic Renewal in a Performing Arts Organization

By Donna S. Finley, Alana Gralen, Larry Fichtner

Many orchestras have been struggling with fiscal sustainability for as long as its members can remember. Across the North American continent, orchestras are typically undercapitalized, too often generate operating deficits and are fighting to stay solvent. In Canada, fiscal instability was exacerbated in the mid-1980s when public funding was significantly reduced. This is a new reality to which the orchestra industry has not yet been able to adjust. The conventional operating models continued, and with each new annual deficit, operating capital was further eroded. When levels of deficits and negative working capital became intolerable, orchestras typically devised temporary solutions such as private “save the orchestra” recapitalization campaigns, government bailouts, temporary wage rollbacks, or bankruptcy and restarts. Never had a creative and innovative model that would lead to true fiscal sustainability been designed and implemented.

Assuming that artistic excellence remains in place, the fundamental components of true fiscal sustainability are: an expense structure that provides some flexibility in the event of unforeseen obstacles; a commitment to building an operating reserve pool within the organization to weather some storms; a significant endowment and/or trust capital pool to help offset reductions in public funding; and, perhaps most importantly, total earned revenue levels that approach or exceed 50% of total revenue. When these components are in place, the orchestra has very likely established true fiscal sustainability.

In late 2002 the Calgary Philharmonic Orchestra (CPO), one of the premier Canadian arts organizations, was facing the threat of dissolution. However, by undertaking an intensive renewal process that involved the collaboration of musicians, staff and board members over the span of seven weeks and 8,000 hours, the CPO developed a comprehensive renewal plan that enabled the organization to overcome challenges similar to those facing many orchestras across North America.

The CPO case illustrates how an organization-wide visioning process can be used to leverage and unleash the forces of change. It demonstrates extensive use of visioning and strategizing groups, broad-participation visioning processes, innovative operational models, market-focused audience development and a commitment to trying new approaches.