Final Paper

These are my answers to the questions on the final exam.  I meant to post the questions along with the answers, but that will be a while later because the questions are in storage until the fall.  We had very strict limits on the length of the answers to each question.  Professor Honan designed the exam to make us highlight what we, as individuals, thought were the most important themes in the course and imagine in what real-life scenarios we might use the information.  Many of the references are to cases we studied in the class and to personal experience, so I hope it all still makes some sense.

Question 1.

Accounting and Control

a. As Professor Honan summarized in his last lecture for the course, the money is a tool that makes it possible for an organization to function.  To extend the metaphor, tools only work well when they are used properly.  Accounting is the primary level of handling and using money.  Keeping track of the particular transactions accurately produces data that is useful for all the other planning and analysis functions of the organization.  For an group of people to be able to use collective resources towards a mission would be impossible without careful attention to detail, and the specific ways they use money makes them more or less able to do their work.

b. One way to know whether an organization has control over its resources or not is to see if they are functioning.  If one takes the example of the San Antonio Symphony, which suspended its operations on May 3, trouble with their finances superceded their ability to perform at all.  An organization that is functioning well must have some system for managing its financial resources.

    Another way to tell if an organization is under good control would be to examine the procedures they have in place for tracking money.  If the paper trail is clear, clean, and helping the people in the organization do their work, there is an effective accounting and control system in place.  For a professional, external evaluation, one could look at the annual auditors’ reports to specify the particular strengths and weaknesses they found.

Financial Analysis and Cost Accounting

a. Analyzing the finances of an organization can be a way of making sure that the details of accounting come together to serve the larger mission of the organization.  By careful attention to the financial statements and some information about the organization, one can start to see how the numbers interact with the actions and policies as we read in the Brattle College case.  In order to figure out a plan of action, the trustees needed to interpret a huge range of data about the college—the different sources of income, costs of employees, cost of tuition, and a variety of ratios—to even begin to get an idea of how to move forward in the operations.

b. The financial analysis system is effective if it allows people to see a larger picture of how the organization is allocating and using its resources.  Four questions suggested by the Harvard Business School’s Professor Herzlinger to evaluate an organization’s position are:

Are the organization's goals consistent with the financial resources it needs to finance them?

Is the organization maintaining intergenerational equity?

Is there an appropriate match between the sources of resources and the uses to which they are put?

Are present resources sustainable?

If the collection and presentation of data are accurate, by examining these questions, one can enter the difficult work of making sure that the purposes of the organization are achieved and maintained.  In combination with these questions, one can also compare costs and ratios with similar organizations to get a broader view of the field.

Budgeting/Resource Allocation

a. Both the course lectures and readings emphasized ways to tie the mission and budget discussions.  The cycles of accounting, planning, and budgeting in real time need to happen in a sequence where there is interaction.  The Redding School and Boston Public School cases illustrate how complex the process is in real life.  Though it is important for all stakeholders to feel involved in the process in order to maintain sufficient support, it takes an enormous amount of time and energy to try to get people to understand the situation deeply.  In the end, the top administrators and trustees make the final budget decisions. In both of the cases, a relatively centralized process is opened to public scrutiny.  It is unclear whether including more voices actually makes it more effective or just more complicated.  

b. On April 3, Professor Honan provided a list of “Some Criteria of Effective Budget Systems.”  I have taken the liberty of rephrasing the list of criteria as questions that one could use to begin a discussion of perceived strengths and weaknesses:

Is the budget system fair and equitable?

Does the budget and the budget process support the mission?

Does it support effective leadership in the organization?

Is the system flexible and feasible?

Is it based on good chart of accounts?

Does it produce timely budget reports?

Are there clear lines of responsibility in the process?

Does it provide data that can communicate to a wide enough range of constituents?

None of these pieces is simple or small.  Each part requires people from all levels of the organization to be collaborating, and working at a high level of quality.  

Strategic Planning

a. To paraphrase our class discussion of the SUNY case, “If you don't have everything you want, how do you still do what you need to do?”  Considering the organization’s place in the larger environment, the amount and flow of resources, and other factors that influence the health of the organization, what do you do and how do you do it?  Seeing, interpreting, and acting in a way that creates opportunity and some stability for the organization in a changing stream of time is a remarkably complex process.  Our conversation with University of Southern Maine President Richard Patenaude highlighted the ways in which he inherited, adapted, and refocused the strategies of the university while taking into account the experience of the people in the organization.  Additionally, having a long-term understanding of these issues can prepare an organization to adapt to changes by having a repertoire of possible actions for different scenarios.

b. One criteria for an effective strategic plan is to find an “operational plan” in use by the organization.  As Professor Gelatt from the University of Maryland emphasizes, plans are often not used because they are too general to account for the details of daily life.  For a plan to be truly strategic, he argues for the qualities of “shorter range, specific, focused, [and] action-oriented.”  Whatever strategy exists should be in a useful format.  On April 29, Professor Honan presented three questions to orient an organization toward measuring the success of a plan: What does success look like? How do we know if it’s working? What happens if it’s not working?  If the organization can assess its own successes and failures, and react strategically to environmental changes, there is evidence of some successful planning.

Question 2

    As an interviewee for the position of Director of Outreach for a symphony orchestra, there are many questions that would be important for me to ask based on the role of the outreach program to the organization as a whole and to the larger community.  Part of the reason an orchestra has an outreach program is for an educational presence in the community, but different organizations fund it in different ways.

    As support for symphony orchestras becomes more difficult to secure, having a firm base of services and support within the community is essential.  As one example, the Cedar Rapids Symphony has had exponential growth in their education programs, securing funding for a new building to house both the education activities and symphony offices, even as they had to cut their number of performances in half.  Education and outreach can be the lifeline for an orchestra in this time of financial limitations.  

    I would be interested to know more about the funders who give money to the education programs, and what they like to support.  In my last position within the Florida West Coast Symphony’s education department, I was able to build relationships with people who not only gave significant contributions to the symphony, but also volunteered substantial time as board members and mentors.  Through those relationships, I was able to ensure that the programs I worked on supported the larger mission of the orchestra, and that in turn, the orchestra had a long-term commitment of support for the projects.  By asking about specific funders and their interests, I could start to find ways to build allies while serving community’s needs.  

    I would ask for a much more detailed overview of the history of the education program, its mission, and funding sources.  By combining the information about the whole organization with the program specifics, I could begin to interpret how effective different aspects of the program are for the community and therefore for the symphony.  I could also gather information about how to strategize for the future.  By knowing which sectors of the community were already served and tapped for resources, I could begin to conceptualize ways to reach underrepresented populations.  For example, in Sarasota the symphony already had support from local businesses for performances and educational programs.  However, their mission includes providing musical and educational programming not only in Sarasota County, but also in the neighboring two counties.  The musicians were asking for a salary raise for more services (both education and performance services), and the surrounding communities were underserved, not involved with the organization, and large businesses were looking to support enriching opportunities for the children of their employees.  There was a clear connection between the mission, the money, and sustainable support for the organization to grow even as the economy was shrinking.  

    A third area in which I would like more information is about what kinds of partnerships opportunities the organization has.  It is highly likely that any symphony would have some kind of partnership with the schools in their area, especially as music is being cut from public education.  However, many orchestras have not yet moved in that direction.  Other partnership opportunities that could be very useful include after school programs, senior citizen community centers, hospitals, community arts organizations, children’s museums, and pre-school programs.  In each case, there could be specific opportunities.

Question 3

    To support the employees in a symphony orchestra effectively, a CFO can do several things.  First, she can find ways to communicate well with the different constituencies in the organization.  Rather than assuming that people will understand or go along with management decisions, she needs to make sure that the people that are affected by her decisions understand and have a presence in the process.  If she is meeting with staff members, she is already working on that objective.  In the middle position between administration and staff, she is obligated to walk a fine line of supporting both sides.  She needs to make sure that everyone is bought-in to the same kinds of goals and missions for the organization as a whole. Musicians are notorious for not understanding how money works and complaining a lot about it. Through open communication and building personal relationships with musicians (something they do understand), she can educate and possibly build a valuable resource of opinion and support.

    Building on that, something that both the CFO and staff can do to help each other is to have an understanding of the goals and limitations of the organization.  By keeping in mind the common mission, there is a greater likelihood that everyone will be putting his or her efforts towards similar purposes.  If the musicians understand the limitations a little better, they will be more willing to help solve the problems rather than just complain about them.  In my orchestra, the din about the $15,000 full time salary is omnipresent.  The new executive director is in the process of trying to build a new concert hall to increase the revenue stream over time, but the musicians tend to see the endowment and capital campaign as resources for their salaries.  To my knowledge, the CFO has not become an ambassador in this process.  If there was a better common understanding of how different constituents of the organization could contribute to the long-term mission, the musicians might be able to work for the sustainable health of their symphony instead of just making noise about what they do not understand.

    A related common point that both staff and CFO can do to support each other is to understand that people in different positions within the organization have different roles and therefore different perspectives.  The Gumport article and the class lecture on strategic planning both identified ways in which the process of resource management has different meanings to diverse constituencies.  By understanding how to use language better to communicate about the circumstances in the organization, the CFO can present information in a way that is more useful to the staff.  Over time, the staff could then learn better ways to engage in that dialogue.  

Question 4

Rule 1: The mission is central.  Make a good one, write it and say it clearly, pay attention to it, and use it.

    In her book Financial Planning for Nonprofit Organizations, Jody Blazek begins her chapter on the role of the mission in the life of the nonprofit organization with, “A nonprofit’s reason for existence or its primary goals are mission-based… The nonprofit’s financial goals are secondary to its mission and not the top priority.”  Without this rule, no other rules for this game matter at all.

Rule 2: Managing financial resources is complicated and hard.  Take the time and effort to do it well so you can stick to Rule 1.

    Consider again the case of the San Antonio Symphony this month, or any number of orchestras like it that have to suspend or cancel their operations.  Perhaps if one watches for signals of future difficulties, accounts and strategizes well, and cultivates good leadership, the chances of encountering such a disheartening situation decrease.

Rule 3: Unlimited ideas and limited resources can work together to do something good.

    The way SUNY Farmingdale President Gibralter handled the strenuous transition of the university is inspiring.  He combined local resources, a former cosmetics industry vice president for public relations and marketing, creative use of partnerships, and a refocusing of the mission to renew that campus of the university.  The case is an example of using innovative solutions for a very complex problem.

Rule 4:  Pay attention to what you’re doing and how you’re doing it.

    From accounting, to financial analysis, to budgeting, and strategy, we explored multiple ways of handling each aspect of the financial life of an organization in class, cases, and readings.  If there was one sure way to handle money in an organization, everyone would be doing the same thing.  Feeling settled in a single path creates its own problems:

"The problem with this, of course, is that eventually situations change-- environments destabilize, niches disappear, opportunities open up.  Then all that is constructive and effective about an established strategy becomes a liability.  That is why, even though the concept of strategy is rooted in stability, so much of the study of strategy focuses on change.  But while the formulas for strategic change may come easily, the management of that change, especially when it involves shifting perspective, comes hard."

Some kind of continual evaluation and modification can be necessary to maintaining quality programming.  

Rule 5: Constrained resources will happen.  Build some kind of preparation into the annual process.

    One way to talk about possible options is to consider the matrix of strategic and tactical responses to retrenchment:

By discussing options in each of the four central areas during each budget cycle, the constituents in an organization can re-examine their priorities and figure ways to handle difficulties when they arise.