What should I cut?

I have read a couple of reports in the past few weeks that reported that most arts organizations are planning to reduce their expenses in the next year in response to the economic crisis. If you find yourself in this situation, you might be wondering what to cut. Just my two cents...

1. Printed Programs. Do you really need a four color, glossy, forty page program for each performance? Programs are created to provide vital information for audiences. If you take a serious look at your programs, I bet you can find numerous ways to reduce costs. The easiest -- reduce the number of pages in your programs, use lighter stock paper and avoid doing anything in four color.

2. Advertising. This is a tricky one. I wouldn't normally advocate for cutting advertising expenses, however as previously reported, I am finding that you can get 15-20% more for your dollar these days then you could even six months ago. If you can keep your same level of exposure for less, then count the savings. If you can't, then either get more aggressive with your negotiations or look somewhere else for cuts.

3. Audience Communications. How many of us spend thousands of dollars on printing audience handbooks, complete with performance calendars, box office policies, subscriber services, etc. More than 90% of the audience at Arena Stage regularly uses the internet. Save the money on printing these types of materials, and make the information easily accessible on your website.

4. Travel/Professional Development. Even though I am a huge believer in professional development, this might be an area in which you can cut back. Instead of flying cross country to attend a conference, is there one closer to home? can you stay with a friend? can you take a bus instead of a plane (for those traveling between DC and NYC, take the $20 Bolt Bus)? If you do need to travel, then Priceline your trip. If you name your own price on Priceline for your flight and hotel, you can save hundreds of dollars. You might not find yourself staying in the conference hotel, or you might miss a session or two because of flight times, but the savings are definitely worth it.

5. Invest in areas where your ROI is higher. Washington DC is perhaps has the most competitive theater environment outside of New York City. With that being said, I am always looking for ways to get a higher return on investment. At Arena Stage, I normally get a 6:1 ROI on traditional advertising expenditures. However, my ROI for the investment I make in group sales is 20:1. Next year I am slightly reducing our advertising budget and redirecting those funds into group sales.

6. Telemarketing. In October, Arena Stage ended its telemarketing campaign at our normally scheduled time. However, I found that telemarketing was a very effective tool for driving more sales, but I had maxed out my expense line for telemarketing services. At the same time, I noticed that our box office would experience lulls in their work, mostly between shows. We have always considered our box office to be a sales office, meaning they are not just responsible for taking orders, but also for selling. I proposed adding telemarketing to their responsibilities during the lulls. As you can imagine, at first this wasn't received enthusiastically. However, we offered sales associates incentives for making sales, and soon they started performing at the same level that our telemarketing firm was. We have some great sales people! Maybe that is why we are the best sales office in the world.

7. Make sure you RFP all your major projects. The communications department has an internal rule that we live by: if we anticipate that a project will cost more than $10,000, then we send out a request for proposal (RFP) and get competitive bids by at least three separate companies. I instituted this last year when I learned that we hadn't competitively bid our major printing projects in years; we kept going to the same company year after year. The first project that we sent out for a competitive bid was our season brochure. We got three bids, including one from the company we had consistently used for years. The company that we had used for years provided us with a bid that was $20,000 more expensive then the next expensive bid. We enjoyed working with them, but made it clear that if they couldn't match the second most expensive bid, we would go elsewhere. Guess what -- we saved $20,000 because the company matched the other competitive bids.

8. Press Materials. Are you still mailing out press releases, faxing PSAs and putting together heavy media wrap packets to ship to actors, designers and directors? Stop it all. Most editors and writers want press releases e-mailed to them these days. It has to do with timing. Imaging telling Editor A that Editor B scooped him on a story because Editor A's press release was still in the mail while Editor B received his electronically. Unless specifically asked by a major media personality, don't waste your money or time on purchasing expensive letter head, printing media releases, and then spending the money to mail them out. You can also send out PSAs and media wrap packets via e-mail (with links to photos, reviews, etc). I would also experiment with sending press invitations via e-mail. I bet the media doesn't cover your productions because they are enticed by your beautiful, four color invitations.

9. Posters. Be honest, how many of us print hundreds of posters for each show with the honest intention of placing them everywhere a couple of weeks before a show opens. Then as we get closer, we run out of time as well as places to stick the posters, and only use maybe 100 of them, throwing the rest away. Either find a more efficient system of distributing posters, or don't print them. They don't help you if you have to throw them away.

Renegotiate Your Advertising Contracts

Everyone is tightening their belts these days, and as much as I would like to moan and groan about doing more with less, I worry more about those companies that aren't challenging their staff to come up with inventive ways to maximize revenue while minimizing cost.

At Arena Stage, I am currently in the process of renegotiating all of our major advertising contracts. Most of our major advertising contracts are for the entire fiscal year, and I leverage the entire amount I plan to spend to get better rates and more promotional opportunities. So in essence, we have signed contracts until the end of the fiscal year, and although most people would think that would limit your ability to renegotiate, major media sources understand that if they aren't willing to renegotiate, then you will spend less when the contract renewal comes up.

Don't be shy! Trust me, vendors won't make a deal with you unless they are going to make a profit, so get the best deal that you can. It is the wild west out there. Companies are losing advertising dollars right and left, and that has made them hungrier for business. Throw your contracts and their rate cards out the window, and start from scratch. If they aren't willing to renegotiate, don't use their product.

Most arts organizations are planning for a 10-20% reduction in revenue during 2009. To remain healthy, you need to negotiate advertising contracts that get you as much as you had in 2008 for 10-20% less than what you spent.

There are very few advertising outlets that are so powerful and large that they will refuse to negotiate with you. In days past, newspapers could claim this status, but falling revenues and declining readership has changed all the rules. Tell your advertising reps that you view them as a partner--if they help you become more successful, you will spend more money with them. Your fates are tied together. Make them work for you. And if they aren't willing to renegotiate a better deal in this horrible economic climate, go to one of their competitors. If they take care of you, remember the gesture and take care of them when it is time to renew your advertising contract.

Want a bailout of the arts? Don't make the ask in an Armani suit

When the big three automotive CEOs flew separate private jets to Washington, DC to plead for public funds, I remember thinking to myself that I was thankful that I was a publicist and marketing director for a non-profit arts organization. The type of arrogance it takes to fly corporate jets to ask for billions of dollars in public aid surely could only be found in the private sector.

However, recently there has been a dust up about executive compensation in the non-profit arts sector, particularly because as the economy tightens, more and more arts organizations are pleading their case with stakeholders, some going as far as Mr. Kaiser in asking for a government bailout of the arts. Although I have tremendous respect for Mr. Kaiser, I am convinced that perhaps he isn't the best emissary for the non-profit arts--how does it look for a non-profit arts administrator who makes more than $1 million a year in salary to be the champion of the suffering arts scene?

Two separate stories have broken in the last month questioning the salaries of non-profit arts administrators. The most recent reported that Joe Dowling, Director of the Guthrie Theater in Minneapolis, made $682,229 last year, which represents 2.6% of the organization's $27 million budget. When compared with similar sized and larger organizations, Mr. Dowling's compensation seems high. Todd Haimes, who leads New York City's Roundabout Theatre which is twice the size of the Guthrie, makes $487,439 per year (and the dollar doesn't stretch in New York like it does in Minnesota). Similarly, Andre Bishop, the Artistic Director of Lincoln Center Theater which is 25 percent larger than the Guthrie, makes $428,183. So why is Mr. Dowling's compensation not in scale with his peers, or even peers at larger organizations? The second recent story takes a look at proposed legislation in San Francisco which is trying to limit non-profit executive compensation to a maximum of six times the salary of the lowest paid employee.

Executive compensation isn't a new concern. In the past couple of years, we have had several large controversies over this issue, including the infamous Lawrence Small, previous Secretary of the Smithsonian, and Josiah Spalding, Jr., CEO of the Citi Performing Arts Center. Mr. Small left the Smithsonian under a lot of pressure and controversy surrounding his lavish spending habits, which included a $15,000 receipt for the replacement of French doors at his home and spent $48,000 for two chairs, a conference table and upholstery for his office suite. In Mr. Spalding's case, he was awarded a $1.265 million bonus in 2006 even though he presided over five straight years of budget deficits, cuts to programming, and a dramatic drop in performances at the Wang and Shubert theaters, which the Citi Center operates.

Over the past year, I have read numerous articles about the woeful state of symphony orchestras, which are trying to remain competitive with downloads of classical music and are struggling to develop sustainable business models. Just in the past couple of months, the Santa Clairta Symphony, Pasadena Symphony, Kansas City Symphony, Las Vegas Philharmonic, the Virginia Symphony, the Detroit Symphony, and the Cleveland Orchestra have reported major financial problems. But when you look at the top 10 salaries for Music Directors in the United States, one would conclude that symphonies are flush with cash. The conductor of the cash strapped Cleveland Orchestra is seventh on the list of the top 10 and makes $1.2 million a year. The lowest on the top 10 list is Osmo Vanska of the Minnesota Orchestra who makes $713,518 and the highest on the top 10 list is Lorin Maazel of the New York Philharmonic who makes $2.189 million.

On the flip side of the argument, there are CEOs in the private sector who are so linked to the success of their company that even rumors of their illness cause stock devaluation. Over the past several months, it has been rumored that Steve Jobs, the CEO of Apple, has a terminal illness, and these reports have caused Apple's stock to fall. The tie between Steve Jobs and the success of Apple is so strong that it lead to Mr. Jobs holding a press conference where he released an update on his health, stating that "reports of his death are greatly exaggerated." After this announcement, share prices for Apple jumped four percent. When the success of the organization is tied so directly to the CEO, it might be entirely appropriate to compensate them at such a high level.

Either way, this argument over executive compensation reminds me of something a professor said to me when in graduate school--"when making an ask for money or pitching a sponsorship, never arrive at a meeting with the prospect dressed in an Armani suit or a Walmart suit--either way you are screwed." I have to think that in some cases the arts are arriving at these meetings in an Armani suit.