Nonprofits are vital to alive communities because they typically provide significant services that fall in the gap between commercial enterprises and government agencies or tax districts. Yet more than a few nonprofits barely fulfill their missions, if at all. Noble intentions do not automatically provide desired outcomes. Some nonprofits specialize in survival, instead of service.

Under-performing nonprofits can have a negative impact on day-to-day living for a significant percentage of the people in a community. Below is a case study of a nonprofit in a community similar in size to Truckee or the North & West Shores. The case study provides a chance to learn from the experience of others.

A Community Theater
The case is about a splendid, relatively new, theater facility built in 1998. It was, and is, a gem funded by generous donors. The population (around 10,000) and cultural level in the community was sufficient to support the enterprise. Yet the theater has been on the brink of financial misfortune off and on for the last five years. Even though it is in fair fiscal shape at the moment, due to the Herculean efforts of a few people, it may end up on the brink again very soon if the pressing matter of its "ownership" is not properly resolved.

Why? When ownership is unclear, as is now the case, important questions go unanswered. They include: Who is in charge and responsible for the theater's viability? How shall the assets be used? What shall the theater become in the years ahead?

Right now everything points to the likelihood that these building-block issues are being neglected. Neglect is harmful to the enterprise and, therefore, to the community. In short, the future of the enterprise is falling between the cracks because the buck doesn't stop anywhere.

Taxpayers?
So, who "owns" this nonprofit? To start, taxpayers do not own the theater. It was not constructed, and it is not maintained, with tax dollars. Elected officials in neither the town nor the county in which the theater sits assume any responsibility for its performance or continuance. Likewise, there is no taxing district for the theater such as there is, for example, for the community’s local medical center and emergency medical organizations.

Users?
How about theater users? Are they the owners? There are a number of users in a calendar year, but the single biggest one is the local school district. Teachers and pupils are in the theater a significant percentage of its available hours. As a practical matter, the theater is an extension of the nearby school facilities. But the school district pays zero for the upkeep and operation of the theater. Even though the theater provides a vital element in the school district's enrichment program, the school district's support in terms of dollars is less than the cost of a box of footballs.

Participants?
Do the performers, directors, and crews own the theater? Clearly these devoted people make a major contribution. But in a sense they are paid to do so. A few, very few, receive cash; the rest--on stage and behind stage--receive at least psychic income! So, in the sense of overall responsibility, theater-use policies, and longer-term development, performers, directors, and crews are not the owners and probably don't want to be. They are artists, not managers.

Audiences?
People like you and me buy tickets and go to shows. Ticket dollars, after paying for the direct cost of the performances, contribute about $30,000 per year toward the annual cost to keep the theater going. This is 12 percent of the theater's budget of $212,000, a budget that covers staff salaries, insurance, routine maintenance, phones, tickets, advertising, utilities, etc. So we ticket buyers don't qualify for a chunk of the ownership position (and responsibilities), even though many of us are interested in the theater’s success in the years ahead.

Friends?
The organized Friends of the Theater group is far and away the primary, organized booster of the theater. Its volunteer members put on events and benefits that generate hard dollars--over $35,000 a year--for the theater. Without the Friends the theater might not have survived in recent times. Together with an ad hoc legion of volunteer financial supporters, the Friends has provided the regular cash flow vital to the theater's staying solvent. Does Friends own the theater? The people in Friends apparently don't think so, and they, like the other prime participants, don't wish to do so. The same is true for the many other volunteer, financial supporters in the community who in recent years have collectively put up about half the money required to meet the payroll and keep the lights on.

So, who does "own" the nonprofit theater? The only remaining candidate is the theater's Board of Directors. And given the recent fiscal, staffing, and programmatic ups and downs, it is possible that, collectively, the directors are having difficulty functioning effectively in their important organizational work. In short, the Board is doing a poor job in carrying out its responsibilities. Effective management is required of a nonprofit just as much as it is of a for-profit organization, and maybe nonprofits require even more, precisely because they don’t have the discipline of a bottom line.

Why is the Board doing a poor job? Here are three possible reasons.

1. With 22 directors, the board is probably too big. The Supreme Court of the U.S. only has nine people. This case study’s local Hospital District board has but five people, and it has a much larger annual budget and a bigger physical facility. When a volunteer board, such as the theater's, is oversized, responsibilities can easily slip between well-meaning members. Everyone assumes someone else (such as a staff person) is minding the till and making the hard decisions that really can only be made at the top of any organizational structure. Without coherent policy decisions and steady implementation, a nonprofit (or for-profit) becomes rudderless.

2. The directors apparently cannot agree on a comprehensive managing process or plan. In the absence of agreement, it is a natural temptation for volunteer board members to sprinkle opinions and ideas around at random ("try this;" "try that") without giving much serious attention to the (non-defined) direction and (generally ignored) health of the total enterprise. The end result is, in this case, an organization with limited resources trying to be all things to all people. This is a formula for continuing crisis.

An honest plan requires focus. The practical alternative to being all things to all people is to be (only) some things to some people. That is what focus means. Getting it requires tough decisions. It requires saying no to pet projects, marginal ventures, old events that have passed their primes, and, perhaps, new artistic directions for which there is scant support in the community. By saying NO to certain things, the deck is cleared for a YES or two for other initiatives. Big volunteer boards often have difficulty with these kinds of tradeoff decisions, first with reaching them, and then with sticking with those made when it comes to actual plan execution.

3. The Board may need a little fresh blood--perhaps from outside the established community. What are the needs of the theater looking ahead? Here are some examples that could fit this case: Longer-range planning in terms of artistic direction, operations, and the facility is needed; fund raising for the annual budget and the endowment is needed; staff management including performance and performer oversight is needed; and much-improved community and volunteer relations is needed after the missteps of the last five years.

In this particular case, there were people within 75 miles of the community with proven, theatrical expertise in one or more of the subjects listed above. Some would probably be delighted to serve on the theater’s Board for a modest stipend or just travel expenses. It isn’t necessary to reinvent the local theater with just local talent; there are already successful community theaters in the region that can serve as models. One or two new people on the local board could provide fresh perspective that might make a world of difference in the value the theater provides to the community.


So what does the case illustrate? It is a presumption of the case that a theater can be a vital element in the life of a community. But as this case suggests, a nice facility is not enough. A theater can fail; and many have, whether they disappear completely or not. Nonprofits, in general, tend to be fragile organizations. Often a relatively small cadre of enthusiastic supporters can keep an enterprise afloat..for a while. But the people tire in the task, sooner or later, if they are not relieved. It’s up to the primary "owners," the Boards of Directors, to avoid such scenarios.


Copyright (c) 2009 Steven C. Brandt