Failure is not an option if you can’t define success

In the ten years from 1998 to 2007 at least 10% of the companies on the Forbes 150 list had closed, been acquired or otherwise faded away. Notable corporate giants such as Bankers Trust, Compaq, DEC, and Enron all ceased to exist. And this is before the Great Recession. Our general reaction to this is that business failure is normal and acceptable aspect of our economic structure. We are mildly surprised—but not shocked—that any given company might collapse, be merged away, or pared down and sold for scrap.

What is curious is that while so many leading companies fail, how can it be that in the same time period every one of the 153 museums that participated in the 1998 Association of Art Museum Directors’ survey remained independent and open ten years later?

Do museums persist because they are better run than many for-profit businesses? Are museum professionals smarter managers than most business leaders? Or do museums have stronger strategic plans and the discipline to adhere to them? None of these answers seems very convincing and it’s doubtful anyone believes that the average museum has a tighter, more effective structure than the average Fortune 500 company.

One telling difference between the profit-seekers and non-profits, however, might be the way success is defined and understood.* In business, the bottom line is profits, revenue, market share, stock price, and other financial measures. These facts are usually out in the open for all to see (certainly for public companies), and are updated at least quarterly, if not monthly or weekly.

Museums and other cultural organizations, on the other hand, strive to contribute to society not with products and profits, but rather by enhancing their communities and the wider world. They yearn to directly stimulate individuals. Their objectives and bottom line are materially different from those of commercial enterprises.

Yet the way museum boards and leaders tend to evaluate overall performance is often based on traditional financial and business oriented measures. Not surprisingly, these measures don’t adequately respond to the organization’s qualitative, mission-based objectives. The lack of accepted, affordable and apprehensible measures, therefore, means that mission-based performance is not regularly or clearly assessed.

As a result, museums don’t fail because they can’t really discern how successful they are. With no clear definition of success, neither is there a definition of failure. Ergo, museums by definition (or lack thereof) can’t fail.

Still, if museums aren’t successful, why do smart, successful people (e.g., Board members, foundations, and other funders) keep giving them money to stay “in business”? The reason is simple: Museums are a good thing. Collectively, they benefit all aspects of society, promoting education, open and frank discourse, creative thought and production, cultural heritage, future thinking, etc. Museums are worth preserving, promoting and propagating. Fortunately, members, visitors, individuals, foundations, corporations, and governments agree with this.

Accepting that museums are a public good and that the public is willing to sustain them, the question becomes “How much better can museums become in pursuit of their objectives?” Without some sort of tangible measure of impact, it’s virtually impossible to increase, let alone maximize the impact museums have.

These thoughts aren’t brand new of course. For example, Max Anderson wrote the widely read and influential “Metrics of Success in Art Museums” in 2004. Harvard’s Robert Kaplan, author of “The Balanced Scorecard”, presented a 2001 case study on venture philanthropy and trying to capture a strict ROI assessment of cause-based (rather than cultural-based) non-profits. In 1991 British researcher Peter Jackson offered up the concept of capturing a value-for-money framework, although in the end admitted that he’d raised as many questions as answers. Yet while academics, practitioners and other concerned parties have taken up the cry for useful and appropriate measures, the reality is that few museums have actually made the effort, and taken the risk, of developing these tools.

To be clear, I do not suggest any single number or set of numbers providing a perfect perspective on museum performance. Still, better measuring tools would contribute to a much more robust and effective management discussion. Imagine a board meeting, perhaps your board meeting, if it included not just the traditional “financial” measures you currently use (e.g., number of members, visitors, and student bus-loads; and revenue from the gift shop, rental spaces, galas; etc.), but also some data about the impact your museum is making. Add to those financial and impact measures the strategic thinking and professional experience of your staff and board and you will have a dynamic and productive meeting.

Building impact measures
“So sign me up for those measures,” perhaps you’re now saying. The good news is that any cultural institution can develop and benefit from a hearty set of metrics. Every organization can do it by following these three steps:

1. Establish enterprise and departmental objectives
2. Identify specific, tangible measures for your financial objectives and observable and tangible surrogates that approximate your mission-impact objectives
3. Track and report the observations and react to the results

The devil of any simple three-step process, of course, is that while the process is relatively simple to describe, it takes considerably more work to implement. With a sincere commitment of resources and time, and management’s dedication to the process, you can make the effort bear fruit.

The first step is setting objectives. The old saying is that if you don’t know where you’re going, any path will take you there. To assess progress along a path (or against a strategic direction), you have to have a destination. The destination for a cultural organization is its mission and vision, with more specific way stations defined by mid- and long-term objectives. A well-crafted mission and vision provides a broadly defined true north. Strategic objectives provide the more tangible and actionable descriptions of what the organization wants to achieve in the near- and mid-term. Your existing strategic planning process enables you to set your objectives every three to five years and recalibrate them annually.

A principle benefit of well-defined strategic objectives is ensuring that everyone involved shares a common understanding of what the museum is striving to achieve. Getting everyone to that point requires extensive research, awareness of your market and competitive environment, understanding of the organization’s ambition, assets, liabilities, financial options, etc. Well-made objectives offer management a broad range of tactics to pursue, while at the same time effectively filtering out some activities. For instance, “become an important education resource for our region” might be too broad an objective, while “become part of the curriculum for at least 75% of graduate art students at the local university” might be too narrow. Setting objectives, and the overall organizational ambition, is essential for creating measures, not to mention for creating a sound management environment.

The museum’s objectives then flow through to each department, ensuring that objectives at all levels of the organization are in alignment. Note that this is not strictly a top-down process; rather, once the entire organization – board, staff, and executive management – buys into the overall objectives, they are then leveraged to develop more specific departmental direction.

With museum and department objectives in hand, you can then begin designing metrics. Metrics should consider your objectives in the context of things such as how well you engage your public, the effect on your public, the scholarship and quality of your offerings, and the sustainability of the museum. As you think about performance in these categories, you will find that both financial and impact measures are needed. For instance, engagement can be the percent of members you retain and the level of volunteering you generate. Quality of scholarship might look at percent of loan requests granted and peer recognition. In all cases, the data needed for the metrics should be relatively easy to observe and inexpensive to collect. While this paper is promoting the use of mission-impact measures, financial measures of course remain extremely important. Depending on where your museum is in its trajectory, financial measures can count for 50 – 75% of your assessment.

The newness of mission-impact measures means that it is important to understand that there are no track records or trend lines to compare against. These measures tend to be more amorphous than financial measures. Just because we are comfortable with the concrete and easily comparable attendance and financial tallies, however, we still need the discipline and patience to track and evaluate the mission-impact results.

For example, we should become comfortable assessing the effectiveness of an exhibit to communicate its concepts and content. Even if the scale is crude (e.g., high-medium-low) and the sample size relatively small (e.g., only 2-5% of visitors respond to the assessment survey and even they are not a perfectly balanced representation of the visitor population), the information can still be useful. It will become more useful as you gather results from more and more exhibits, starting to build your own data trends. It will also become easier to set targets for each measure as you gain experience. You’ll need to persevere during the early stages of using these directionally accurate measures, recognizing that they are as much art as science.

The final step—reporting and responding to the results—must not be overlooked. Too often, goals are set without funding or support for gathering and analyzing the results. If you choose to follow the dual paths of financial and impact measures, make sure to include the back-end follow up as part of your plan. Decide who should see the results, how often, and structure in which they should be discussed. Decide when and how to include results in department meetings, all-staff meetings, executive management team meetings, board meetings, and so on. Then make sure to provide the funding to gather the data and place one person in charge of the overall process.

The bottom line is that measures are a powerful management tool. You are no doubt using some measures already (e.g., attendance, earned revenue). The idea presented here is to expand the range and strength of the measures. While no set of measures can fully “answer” how your museum is performing, a blend of financial and mission-impact measures, along with your team’s personal and professional savvy, will enhance decision-making and overall achievement. As mentioned above, museums are a public good; your job is to make them even better.

* One could certainly make many cases for why for-profit companies fail more than museums. For instance, aggressive competition, malfeasance, tight credit markets, rising cost of labor and material, etc. Unfortunately, museums are no more immune to those than other businesses.