Cost Containment Matters Too

10/12/2010 08:23 am ET | Updated May 25, 2011

I have spent so much time in my career talking about the importance of increasing revenue by creating exciting art and marketing that some people believe it is all I think is necessary to run a successful arts organization. This is clearly not the case. There is a wide range of requirements for managing a healthy arts institution, from developing a productive board to inspiring staff and maintaining the facility to reaching out to the community. The list is a long one and arts managers must be able to focus on many issues at once.

Because I stress the importance of building revenue, many people believe I am not interested in the other side of the profitability equation: cost reduction. I have often written that one cannot save one's way to health in the arts, and I mean it. I have yet to see a struggling arts organization turn itself around simply by reducing cost. Health in the arts is tied to increasing the amount of both earned and unearned income.

But I also know you cannot remain a healthy arts organization if cost control is ignored. For me, it is a way of life.

The cardinal sin in the arts is to waste. Wasting money, wasting time, or wasting opportunities cannot be tolerated in a resource-constrained world. If one can accomplish a task for less money, and doesn't, one is reducing the amount of resources that can devoted to other important projects that help the organization achieve it mission.

Cost control can be achieved with budget cuts of course, but far more effective in the long-term is developing a culture that supports and rewards saving money against budgeted expenses. Every staff member must understand that they make a direct contribution to the health of the institution when they save money. (Of course, if everyone on staff consistently spends less than is budgeted, there is unnecessary padding in the budget. While this might seem beneficial, padding budgets is dangerous because it artificially reduces the amount of mission-focused activity an organization pursues.) But when staff members make an effort to spend less than is budgeted, through good planning or negotiations with vendors, the amount of money released for other activities can add up quickly. Particularly in bad economic times, arts organizations can bargain with vendors to achieve cost savings.

My staff is very familiar with my ardent desire for cost reduction. I joke that I squeeze every nickel until the buffalo poops. And I do. I have yet to find a budget that I cannot cut. I find waste and inefficiency everywhere.

But I also know organizations that focus only on cost containment can become depressing places to work. Artists, staff and even board members must appreciate what the organization is doing to increase the revenue, build an audience and expand a donor base. Cost containment must be part of the equation but it cannot be the entire equation.

Ben Franklin was right. A penny saved is a penny earned. It just isn't as much fun.