The Cycle as Insurance Policy

10/03/2011 08:26 am ET | Updated Dec 03, 2011

I have written frequently about the concept of the cycle: that great, exciting programming supported by strong programmatic and institutional marketing helps to build the organization's family -- the people who care about and support the institution. These are the ticket buyers, subscribers, volunteers, board members and donors who are integral to the health of the organization. When the family is large and growing and becoming more engaged, they produce more revenue for the organization. When that revenue is spent wisely and reinvested in more great programming and marketing, the family grows larger and more engaged, producing more revenue. Hence: the cycle.

I introduce this concept to many donors, boards and staffs of arts organizations, especially troubled organizations. I believe embracing the cycle is the only way to create sustained health; troubled arts organizations almost always have deficiencies in their programming, marketing or their ability to embrace new family members. Revealing these deficiencies and addressing them can be remarkably therapeutic.

But it is clear to me that the cycle has equally important implications for healthy not for profit organizations.

Those organizations that mount important art, pursue aggressive marketing campaigns and build their families consistently, create an insurance policy against economic downturns and programmatic failure.

Over the years, these arts organizations have systematically built such a large, engaged family that losing several donors or a modest percentage of ticket sales during bad times do not materially threaten the organization. There is enough earned and contributed income available to pick of the slack because new donors and new ticket buyers are constantly being attracted to the organization.

And healthy arts organizations are at lowest risk to lose donors during an economic downturn anyway. When family members are deeply engaged they reduce their support for other organizations before they cut their giving to the institution they care about most.

But arts organizations that embrace the cycle have another major, albeit less obvious, advantage: they are always focused on future programming and presenting such a wide menu of opportunities to funders that they look much more vibrant and interesting. This is especially true during downturns. While other arts organizations are pulling back, the healthy organizations are mounting important work (that was funded before the downturn) and discussing other exciting projects for the future. This is a substantial competitive advantage over organizations that can only discuss small, short-term projects that were planned, in large measure, to fit within tightly constrained budgets.

This is why certain organizations have performed well even during the past three years of economic turmoil. They had created such a large reservoir of support that, while life has certainly been more challenging, their health and existence have not been threatened.

It pays to invest in family-building.

Just ask any board or staff member of an organization that can focus on future programming and achievement rather than on cash flow dilemmas and budget cutting. The good, disciplined work these healthy organizations did during good times created an insurance policy against the current bad times.