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Questions remain about fiscal performance of Minnesota Orchestra's board, management

orchestra hall rendering
Courtesy of the Minnesota Orchestra
The renovation of Orchestra Hall and resulting increase in rental fees has made the facility too expensive for many nonprofits.

The management and board of directors of the crippled Minnesota Orchestra have repeatedly stated that their financial plans are sound. Unfortunately, many outside observers are not so sure.

Emily Hogstad

I have spent much of my spare time since August writing about the orchestra's travails, and I can attest that there are dozens of questions about past and future fiscal performance that the management and board of the Minnesota Orchestral Association (MOA) have yet to answer. Chief among them are the following:

1) Throughout the $100 million-plus Building for the Future fundraising campaign, donors (and legislators) were never told that a "business model reset" was imminent — much less one that could result in the departure of key players or Music Director Osmo Vänskä. I have talked to dozens of people who say they wouldn't have donated to the hall construction effort if they had known what was coming. Their contributions combined number in the millions of dollars. Has the MOA created a plan to address the potential future loss of revenue from these patrons?

2) According to their 990 forms (available on guidestar.org), in FY 2009, the Minnesota Orchestra sold $28.7 million in securities at a nearly $14 million loss. This loss contributed to one of the worst investment income records among major American orchestras during the Great Recession. What were these securities? Who made the decision to sell? What is their value now?

3) According to their Strategic Plan Summary, in 2007, the MOA determined that in the fiscal year lasting from September 2007 to August 2008, the Association's invested assets would be worth a total of $192.4 million. They ended up being worth $168.5 million. Even before the market tanked in October of 2008, the MOA was off by 13 percent ... a mere one year into their projections. Who was in charge of drawing up these numbers?

4) In FY 2011, according to audited financial statements, the board approved an endowment draw of $12.1 million, but only $6 million of that went to operating activities. Where did the other $6.1 million go?

5) According to their 990s, the MOA's program service revenue fell by 15 percent from FY 2008-2011. This is an extremely poor program service revenue record compared to most other major American orchestras. During that same time, according to their 990s, the New York Philharmonic's program service revenue held steady, while the Cleveland Orchestra's increased by 8 percent, and the Los Angeles Philharmonic's increased by 7 percent. Even among orchestras that saw decreases, the Cincinnati Symphony only saw a drop of 9 percentage points, the Boston Symphony a drop of 8, and the Chicago Symphony a drop of 7. Why wasn't Minnesota Orchestra's management able to duplicate its peer orchestras' successes? Is it looking to more successful orchestras for ideas to implement here?

6) According to their Strategic Plan Summary, the MOA is striving for 80 percent paid capacity at Orchestra Hall post-renovation. (Their pre-renovation paid capacity was 69 percent.) However, several hundred seats were removed during the renovation. 69 percent of a 2,450-seat hall is 1,691 tickets sold, while 80 percent of a 2,092-seat hall is 1,674 tickets sold. In short, the MOA's self-described "ambitious but achievable" goal is to sell 17 fewer tickets per concert than it is now. How is this ambitious — or even desirable?

7) In publicly released minutes, the Minnesota Orchestra management praised the Detroit Symphony as an organization worthy of emulation. That orchestra's unrestricted endowment was only worth $23 million when it signed a contract with musicians in 2011 guaranteeing a base salary of $79,000. The Minnesota Orchestra's total invested assets are currently worth more than $150 million, yet it is proposing a base salary of $78,000. The disparity is puzzling. Could the board discuss the Detroit-Minneapolis comparison in greater detail?

8) The renovation of Orchestra Hall and resulting increase in rental fees has made the facility too expensive for many nonprofits. The Minnesota Youth Symphony and Suzuki Association of Minnesota will no longer be able to hold concerts or events there. Is this acceptable to management? What is being done to ensure these groups can perform at Orchestra Hall?

The board asserts that its plan will save the Minnesota Orchestra for future generations. I and many other patrons remain unconvinced. However, regardless of who is "right,"  the board is doing Minnesota a tremendous disservice by not explaining itself clearly, and by letting important questions like these stand ignored and unanswered.

It is discomfiting to know that the Minnesota Orchestra board of directors is led by Richard K. Davis, the president & CEO of U.S. Bancorp, and Jon R. Campbell, the executive vice president and director of government and community relations at Wells Fargo. One can only hope that these men lead their banks more effectively than they've led the board of the Minnesota Orchestra.

Emily E. Hogstad, a musician and writer from Eau Claire, Wis., writes the Song of the Lark blog.

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Comments (48)

The Only People Who Should Be Leaving the MInnesota Orchestra

Are it's current board and management. They are clearly operating according to Friedmanian principles as interpreted by Kenneth Rogoff and Carmen Reinhart,...

principles which have now been completely discredited and, as it turns out were based on sloppy, if not willfully ignorant manipulation of statistics in order to produce a desired,...

and INCORRECT

result.

Who can accomplish this and how can it be accomplished? Can the entire current orchestra and their conductor resign and reorganize under more supportive and financially rational management? Can alternate performance venues be located (Ordway, perhaps?) in which to play,...

until "Orchestra Hall" in Minneapolis collapses financially (which, under leadership of the current ideologically-driven, economically-incompetent management is inevitable, anyway),...

and they can return to playing in the building whose only original and primary purpose was hosting their performances?

There HAS to be a way to pull the rug out from under the cheapskates and chiselers currently operating the MN Orchestra as if breaking their union, impoverishing their workers, and padding management pockets is the only rightful aim of business.

This is MINNESOTA for heaven's sake! (NOT Wall Street.)

The simple clarity of your questions casts light...

exactly where illumination is needed - but where the Board hopes the light of day will never shine.

The Board should be willing and able to give clear answers. But we're not going to get them from these banking industry executives. They've got this game of stone-walling down pat !!

Troubling

This list made my jaw drop, particularly #4.

Business "leaders"

One thing that this fiasco has offered me is a glimpse into how the American "Board of Directors" works. The Minnesota Orchestra board is chock full of current and retired CEOs who rubberstamp whatever Henson/Campbell/Davis put forth. Surely these business leaders are capable of coming up with plans that are more creative than the wrecking ball being swung through the orchestra and the audience, but these plans are hidden and silent. These CEOs are acting as board members in the same manner their own boards act towards them. Rubberstamps.

Surely, some of the CEOs on this list below, ALL of them on the Minnesota Orchestra board, ought to be keen enough to recognize that the current proposal put forth by Henson/Campbell/Davis does nothing but damage the current orchestra as well as damage the faith of the audience which in turn will adversely affect future monetary donations.

Richard K. Davis, Immediate Past Chair, Chairman, President & CEO, U.S. Bancorp
John F. Farrell, Jr., Chairman and CEO, Haskell’s, Inc.
Ben Fowke, Chairman, President and CEO, Xcel Energy
Paul D. Grangaard, President and CEO, Allen Edmonds Shoe Corporation
Michael Klingensmith, Publisher and CEO, Star Tribune Media
Mary Ash Lazarus, CEO, Vestiges, Inc.
Hugh Miller, President and CEO, RTP Company
Chris Policinski, President and CEO, Land O' Lakes
Sally Smith, CEO and President, Buffalo Wild Wings
Gordon M. Sprenger, CEO, Retired, Allina Hospitals and Clinics
Douglas W. Leatherdale, Chairman and CEO, Retired, The St. Paul Companies
Andrew Czajkowski , President & CEO, Retired, Blue Cross & Blue Shield

Serious questions.

Which demand a response. Which raise another question I've often had about some of these memberless 501 (c)(3) "charitable purpose" organizations. Are these "charitable organizations" charitable trusts or not? Do they have any legal duty to serve some public interest? To whom are they accountable, if anyone?

Orchestras are not memberless...

An orchestra's constituency is the public in general, its musicians, Board and staff (in that order in my opinion).

The word "charitable" covers churches, the Red Cross, homeless aid shelters, etc. Orchestras have a mission of serving the public by providing:

- High-level artistic experiences
- Educational programs for schools and other interested parties
- Profiling the quality of life in their communities

Please remember that orchestras on average only charge between 30% and 40% of their actual costs in admissions. An orchestra's annual operating revenue is 60% to 70% of the total budget (capital campaigns excluded). As such, orchestras fully conform with the IRS' 501(c)(3) requirements. They are not charitable trusts, which fall under an entirely different tax code paragraph, and are held to higher governance standards than orchestras.

While orchestras are accountable to their Boards and the IRS legally, they are in reality accountable to their communities. The reason for this is simple: If the orchestra does not serve a public mission well enough, it will lose audiences - and thereby grant and donation funding - to a point when it fails financially. Naturally, an orchestra can go bankrupt for a number of other reasons, but in such cases it is the responsibility of management and the Board, sometimes also the musicians' union (though in my experience musicians and their union tend to be far more reasonable at a negotiating table than a management and Board these days). An orchestra's ultimate test and longevity lies in its community support, which is based on the orchestra's perceived value within its community.

I've wondered whether the duty to provide "honest services"...

...applies to the executives &/or boards of these entities.

Orchestra Hall Rental

I want to clarify why Minnesota Youth Symphonies is not scheduled for any concerts at Orchestra Hall in the 2013-14 season. There is an increase in facility rental, even for nonprofits. However, that would not have kept us from using Orchestra Hall. We were unable to find dates that worked with our schedule and Orchestra Hall's availability. Orchestra Hall is still the best venue for orchestral music and we will always want to make that opportunity available to our students when our two schedules permit.
Vicki Krueger, Executive Director
Minnesota Youth Symphonies

Is the MOA locking out student orchestra musicians, too?

Ms. Kruger, am very happy to hear that financial concerns are not behind the MYS inability to play in Orchestra Hall next year. On the other hand, while I do not doubt your claim that the MOA tells you that the dates you would like for the MYS concerts are unavailable, I find this highly unusual. You have been able to find dates to play in Orchestra Hall for quite some time in the past, but NOW, and especially when there are no classical music programs publicly scheduled (or if there are, wouldn't it be nice for the public to know?), the Hall is unavailable? There have been a number of pops concerts announced (or rather re-scheduled from the cancellations last year) for next year, but the fact that there just aren't ANY dates available for MYS seems very strange.

Guess the MOA must already be doing a booming business with their lobby party rentals, or could it be that they just don't want MYS to play there? Personally, I have heard the MOA argument that "they are full" (re: donor/patron meetings with Mr. Henson) when in fact, they are not, and just are picking and choosing who they want to attend. I'm suspicious! Even though any intelligent orchestral organization should be bending over backwards and begging for community student orchestral concerts, this situation is like biting off your nose to spite your face. But as we all know, you have to hand it to the MOA, they are consistent! Perhaps this is their way of saying, let's lock out the Twin Cities' orchestral students, too!

In any event, best wishes finding other venues for your students and wonderful organization! While I'm sure it is thrilling for MYS to perform at Orchestra Hall, as the locked out musicians and patrons of the Minnesota Orchestra have discovered this past year, there are plenty of other fine locations for concerts. After all, it IS about the music.

Great and pertinent questions!

Emily, thank you for raising these very important and pertinent questions. If the Minnesota Orchestral Association (MOA) wants to frame the contract dispute with the locked out Musicians as only about finances, well then, bring it on! ALL the stakeholders in the Minnesota Orchestra (and this includes the MOA Board, in addition to the orchestra musicians, the patrons, the donors, and the State Legislature) ought to be asking these questions and paying very close attention to the answers to determine whether the current MOA management should be trusted to be good stewards of the Minnesota Orchestra. If the answers to your questions are as damning as the questions themselves suggest, and if I were one of the 80-odd members of the MOA Board, I would be furious! I'd insist on a management reset regardless of the current need (or not) for any type of "financial reset." As you say, it is difficult to imagine that Richard Davis and Jon Campbell would run their own businesses (or their their own personal portfolios) as ineffectively as it appears they have done at the MOA--- albeit with the assistance of MN Orchestra President/CEO Michael Henson and CFO Bryan Ebensteiner. That is, unless it was their and the rest of the Board's plan to destroy the actual Minnesota Orchestra all along, in order to transform the organization primarily into a "Performance Venue" among other deceptive and possibly more ideological goals.

Thanks!

Thank you for the clarification. I have heard from people connected to MYS that cost was the main barrier, and I have also heard that rental rates for the hall have gone up substantially post-renovation, so there does appear to be misconceptions floating around. I have some inquiries into my sources and will submit a correction to MinnPost. Thanks again for your comment. I want to do everything I can to be factually accurate.

If anyone else has additional information to share, please do so.

Sincerely, Emily

Thank you Emily

Emily deserves a journalism award. She is the only writer keeping watch over our withering civic treasure: the Minnesota Orchestra. This latest installment is especially poignant, because the board and management have been able to remain silent and let the orchestra, as we have known it, slide into disrepair. What is clear to me is that musicians and arts-going patrons have a very different world view for the institution, which is all about creating a culture of excellence for Minneapolis and St Paul. The board and management appear to want to turn the organization into a rental hall, welcoming touring acts and a part-time, dumb-downed orchestra. They need to be honest about their honkey tonk concepts. But take a look and read the tea leafs: the management and its very hen picked board's vision is best articulated by its hideous and unnecessary renovation of Orchestra Hall. The design is so second-rate that you can count on it coming down in about 25 years.

There will be no honest response

to this editorial, here or elsewhere. There MAY be some sort of response (aren't they about due to write another canned editorial, rotating the signature line?) but it won't give clear answers to these very troubling questions Emily raises. Instead, we'll get some "leadership student" or "organization expert" or "financial leader" prattling on about "leadership". But they won't answer the question which will then be on everyone's mind:

How can you consider yourself a "leader" if no one wants to follow you on the path you've set?

Excellent Article

Having some experience in the orchestra administration field, I can only agree with your question marks.

Unfortunately, many orchestra managers do not understand finance and accounting well enough even if they get an MA in arts administration. After I graduated with this diploma, I certainly didn't feel ready to manage the finances of an organization in spite of the degree involving many MBA classes. For this reason, I took a job as a financial analyst for some years, which developed my understanding of budget development and management, creating models in Excel to help the budgeting process and designing a chart of accounts which provided useful real-time information. This experience was highly beneficial in my subsequent management experience.

Also, Board development is one of the major responsibilities of an Orchestra CEO. Most people don't understand the variables of how an orchestra functions and its budget, and the CEO should always make sure that Board members are informed and understand the budget and financial decisions based on monthly financial actuals reports, as well as how they impact the longer-term budget plan. In the Minnesota Orchestra's case, having other CEO's on the board should have ensured a rational evaluation of the orchestra's financial planning. That it did not leads one to either think that management didn't inform the Board well or that the Board was disinterested in the information they received. In both cases, this constitutes a governance failure.

Finally, basic economic science dictates that a business should sell goods or services if they cover marginal costs. If the Minnesota Youth Symphony's and Suzuki Association of Minnesota's are able to afford rental fees that contribute even a dollar towards the margin, they should be offered access to the hall at that price. It is not only common financial sense but also community relations sense. Full cost plus income fees should only be charged to out-of-towners. If the MO is quoting rental fees at full cost plus income to these community organizations, they should reconsider their policies.

I wish the musicians and maestro Vanska all the best for the future. It is a pity that one of the finest orchestras in the US, led by an outstanding conductor, should face such circumstances.

Calm, clear point by calm,

Calm, clear point by calm, clear point, waiting for calm and clear responses. This article should be posted daily until calm and clear responses are forthcoming, or upper "management" hits the road. Spot on, Emily E. Hogstad!

Disenfranchisement of patrons

Emily's questions do an excellent job of summarizes the concerns that have been raised since the start of the lockout, and I hope that the management and board of the Minnesota Orchestra give us honest and clear answers to them. If they do not, I hope that the musicians will seriously consider putting on their own programming next season. As a patron, one of the most disheartening aspects of this lockout has been the sense of disenfranchisement and powerlessness. My e-mails, letters, and phone calls to the orchestra and senior board members are ignored; I would appreciate at least a courtesy e-mail indicating that my concerns will be considered, but I do not receive any response at all. My last communication with the orchestra was a fundraising call (in March) in which the representative of the orchestra told me a series of half-truths and manipulative statements; after I corrected her on four or five of her talking points, she finally said, with a air of resignation, "Oh, you're very well informed" and then concluded the phone call. Needless to say, I did not donate. I don't know how the orchestra can survive with the current management; the only constituents who appear to have a voice in its future are the very wealthy donors, but the orchestra also needs patrons who purchase tickets and middle-class patrons who make modest donations (which I would define as $500 to $2,000 per year). For those of us who love classical music and find this music emotionally and spiritually uplifting, it is a truly tragic situation.

Good questions but some comparisons may be unfair

You are asking good questions that show you have done a lot of research. I'm reasonably familiar with your writing on this topic and my main criticism is that you often seem more bent on "sticking it to" the MO management than sincerely trying to understand the issues or present them fairly. This may be my interpretation based on your writing style, but I do feel that the "gotcha" tone of your writing sometimes undermines your credibility.

Please don't misinterpret me -- I agree that the MO has a lot of 'splainin' to do, and the questions you are posing are fair enough. But without a lot more information, the statistics you cite may or may not represent an indictment of MO's management practices.

Let's take the issue of service revenue. Yes, a 15% decline is significant. However, a three-year snapshot comparison of MO with these other orchestras could be misleading. Service revenue is a very broad term and covers such diverse things as ticket sales, education program tuition, contracted fee concerts, program book advertising, hall rental,etc. Different orchestras have completely different product mixes, making apples-to-apples comparisons difficult. Moreover, overall service revenue can go up and down for any number of reasons, some of which may be beyond the institution's direct control, and it is difficult to draw meaningful conclusions unless you are looking at a fairly lengthy time span, a minimum of five years, preferably a decade. As well, the figures can be skewed by events in the life of the other institutions.

For example, LA Phil hired a new MD and he is probably the most charismatic and nationally visible young maestro in the U.S. It would be surprising if L.A.'s service revenue HADN'T gone up (in fact, I'm surprised it only rose 7%). Boston Symphony declared bankruptcy soon after the 2008-2011 time span, service revenue notwithstanding, so they may not be the best example of a well-run institution! Cleveland Orchestra went through a strike during that same time span. Did this result in extremely low service revenue? Did it rise 8% because it had "nowhere to go but up"?

In addition, the host cities of the orchestras you cite as comparisons couldn't be more different than Minneapolis. New York, Boston, Chicago, L.A.? These are the four largest markets in the U.S. Cleveland and Cincinnati are closer to Minneapolis in size, at least. But every city has a different economy -- and the recession resulted in tremendous volatility and unpredictability. Cities were impacted at different levels of severity and over different time spans, and it wasn't always predictable or obvious what would happen. What was the relative impact of the economic downturn in those cities during the same time span -- better, worse, the same?

I don't know the answer to these questions, and maybe you already do -- but sometimes there can be more going on than meets the eye. Again, a 15% decline is significant and it is fair to ask why -- but by itself it is not necessarily an indictment of MO management.

Fair enough - and yet we still hear crickets chirping at the MOA

Andy, you're making some good points, all worth discussing. Why won't the MOA engage the public like this?? They provide no forum for patron feedback except their Facebook wall (which they sweep regularly of dissent or undesirable commentary) (oh, and on which they also discourage any discussion of negotiations via "social media..."!!!), and they've nuked the popular "Inside the Classics" weblog written by MO violist Sam Bergman - whether in retaliation for his barnburning speeches at concerts given by the locked-out musicians, I don't know. But they're gone.

Your points are sound...thanks. You actually seem to be an example of an arts CEO that is willing to debate and discuss issues civilly with the public. Would that the Minnesota Orchestra had one of those.

Thanks for the feedback

Thanks for the feedback.

Re: tone. You might be aware of this, but I - and many, many of my friends - have been trying to engage with the Minnesota Orchestral Association since September. We write letters. We make phone calls. We start petitions. One of my readers heard a few lines from a board member after she wrote him a letter. But that's it. That's it! In fact, several of my readers have been outright lied to in fundraising calls (they were told Cleveland and Chicago were working without a contract, for instance, and that the orchestra would cease to be in six months if they didn't donate, and that the hall construction was over). I mean, they were just blatantly lied to. All that work and time and love expended, and all that research done, and all these intelligent questions raised, and the MOA won't say a word to any of us, besides the canned editorials they trot out every few weeks, rotating the bylines. And in the meantime, our beloved friends and teachers and role models - irreplaceable all - are busting their butts taking (and oftentimes winning) auditions and leaving town, one by one. In the midst of the greatest disaster the organization has ever seen, the MOA has retreated and locked the doors and refused to engage the public, when the public should be the best ally they have. I'm sure you'll agree, in these circumstances, it becomes extremely difficult to remain even-keeled. Especially since I'm not a reporter or a journalist, and I've never ever pretended to be one. I'm a patron. I'm a historian, a fiction writer; not Bob Woodward (or Graydon Royce). The orchestra is the single most important organization in my life, and in many of my readers' lives. And we are panicking. In an ideal world, someone from the outside with no stake in the outcome would come in and provide detailed level-headed reporting. Someone with more practical professional experience would take up the cause and come up with workable solutions. I have my ideas about what could be done, but I'm hesitant to advance too many of them because I don't have experience in the field, and I don't have access to all the information at the MOA I wish I could have access to. But your point is absolutely a fair one. No writer's style will appeal to everyone. Doubly so when the writer in question is very young, as I am, and still finding her sea legs, and facing a steep learning curve in a series of very public forums. (And as a side note, I sometimes get pushes from other patrons to be even *more* aggressive in denouncing the MOA! Oy! I try my best to find a medium, but I'm only human.)

And absolutely you are correct re: program service revenue. (Although the MOA has made a point of saying on their website that their earned revenue has remained "essentially flat"...which is obviously misleading.) That would be a great conversation to have with CEO Michael Henson, preferably in a public arena, where people can learn from his expertise and ask him questions. Unfortunately, Mr. Henson has turned down all such invitations. But if he'd ever agree, we could ask him questions like the ones you asked. How did the program service revenue compare to other cities with similar economies? Cleveland's doing great things with students nowadays: what are his thoughts on that? Did the decrease in concerts in Minnesota have anything to do with decreased revenue? How did he leverage the strengths of the community during the recession in an effort to retain revenue rates (large student population, tons of amateur and semi-pro music groups, many Fortune 500 companies, great philanthropic tradition)? How much program service revenue does he anticipate on seeing moving forward post-renovation and post-recession? And why? And in what forms: rentals? increased attendance? drinks? How do these new revenue streams enhance and serve the core mission of the organization? What is he doing to ensure that the largest group of people possible feels committed and connected to this orchestra?

All of these questions may well have reasonable answers. But the fact that all eight (and trust me, there are more where those come from) have remained unanswered this long is extremely troubling to me...and many others.

Thanks much for your detailed comment. I appreciate it greatly. I'd hope the MOA would be willing to engage in a conversation as in-depth as you have here. Unfortunately, I anticipate nothing but silence moving forward. Let's hope I'm proven wrong, for the sake of our beloved Orchestra.

Also, I think you're thinking of Philly...

Also wanted to mention: Boston did NOT declare bankruptcy. I think you're thinking of Philadelphia. Philadelphia's program service revenue decrease, expressed in percentages, was even worse than Minnesota.

Philadephia, Cleveland and the dark arts of Boards of Trustees

Yes...it was Philadelphia under a black cloud of doom just a few years ago due to the simultaneous convergence of unprecedented crises, namely bad blood between orchestra and music director, inadequate attendance at their new hall (Kimmel Center) and difficulty paying rent at Kimmel (which is owned by the city, if memory serves.) The Philadelphia Orchestra seems to be following a successful turn around plan.

Apparently, an orchestra's endowment has much to do with their financial and artistic stability and a glance at a comparative graph of orchestra endowments shows that Cleveland, Philadelphia are Minnesota have similar, somewhat small, endowments.

The tone and direction of Ms. Hogstad's commentary has been to put the blame and the big questions to the orchestra's board. This is unavoidable, and those who want to put the blame on the musicians, including the members of the board, don't properly understand the role and responsibilities of the board. As you have pointed out only the board really knows what is going on, as the orchestra's financial information is private. Observing this debacle from a distance, I couldn't help but wonder what part of it, if any, is an attempt at union busting. Business executives, especially conservative political types, often seem to have shockingly old-fashioned, contemptuous attitudes about any kind of organized labor. Comments for one of these articles include an angry email response from a board member that certainly suggested this kind of myopic hostility to the musicians union. The question is out there: are these board members Tea Party, fiscal conservative types bent on union busting who feel they have the right to dictate terms and little obligation to negotiate?

When you see the MNO's high base salaries, low endowment, remodeled concert hall project and poor investment performance all in comparison to other major orchestras you see that the Orchestra took on too much risk, made too many promises and was too ambitious. The musicians were mislead by their previous high base salaries. They will need to accept this circumstance, but members of the board need to acknowledge that they are at fault for the orchestra's predicament

Ultimately, the board of trustees is responsible and some members of the board and management must leave if a turnaround is to be possible. If this had been part of the "reset" proposal would the musicians have accepted it?

Thank you Emily for the

Thank you Emily for the excellent article!

Corporate America

This is yet another example of corporate America at it's "Best" (WORST!) Buy our stuff, we don't care how bad it is! Any organization that puts two bankers in charge and then hires someone from outside of the country much less the state has to be totally insane! I cannot believe that the board of directors is buying this! These are good people, who has lead them down this path?

Several months ago I had someone from the Minnesota Orchestra call me for a donation. At first I laughed and then I said, "I don't think so". They assured that my donation could be "earmarked" towards a contract settlement! My reply was, "Seriously?" Your GM lied to the state legislature, I'm sure he would have no compunction about lying to me.

I'm so SAD! I'm so ANGRY! How did this happen? We can pay football players and basketball players and hockey players HUGE salaries! Oh yeah, it's all market driven! BS! Sorry, the arts don't work like a professional athletic teams. The sooner folks figure THAT out we might actually be closer to saving our orchestra!

As for the the new and improved hall? Yeah, well, if you don't have an orchestra to play in it, maybe you can make it into a professional Croquet court! I'm sure lots of folks would pay money to attend that!!

I can't believe the folks in Minnesota are putting up with this! You should take a close look at the board of directors. Lots and lots of "corporate folks" on there. Oh yeah, and lawyers and bankers. Not to say these are bad folks, but once again, corporate America is telling us how things should be. And there's a lawyer there to deal with the litigation of course!

The only way this will change is for the TICKET purchasers to make themselves heard. It's apparent to me the board of directors and the management of the Minnesota Orchestra doesn't give a damn about us!

It's not about the money

These questions have to be asked and answered, and orchestras and boards have to do the hard work to raise the money and present a viable, inspiring plan for the future.

Another question could have been, "Would you readjust your business model if Warren Buffet plopped a billion or two into your endowment and annual operating expenses budget?"

I suspect the answer would be "No."

Any business plan, regardless how fiscally sound, balanced, flush, down-sized, "forward-thinking,'" and "manageable" is doomed to failure if it does not "take into account" the value and human and artistic worth of the individual players, the immeasurable value of the ensemble that is greater than the sum of its excellent individual parts, the value of the generations of community support, loyalty and generosity that have made this orchestra the world-class ensemble it is, and the multi-faceted value an orchestra playing at the level the Minnesota Orchestra has attained brings to the community it and its players serve.

The MOA shows no sign of either valuing these essential intangibles, or of presenting a vision for the future worthy of the support of a generous, informed, and deserving community. Their blindered hugging their bad-bargain-of-a-business-plan all the tighter in the face of near-universal opposition of informed fact, precedent, and opinion poses a terrible threat to the cultural life of Minnesota that could have negative ramifications far beyond the artistic realm for years to come.

Clarification

I have heard from MYS that the primary reason they are not having concerts at Orchestra Hall next season is because of scheduling conflicts; however, if the dates had worked, MYS would have faced a considerable cost increase to rent the facility. I'm unconvinced of the wisdom of Orchestra Hall raising rates for local non-profits that serve and educate young orchestral musicians.

Thanks to all who have responded.

MOA board politics and ideology

What is so perplexing to many is the unanimity of the board, those shakers and makers of Minnesota, many of whom have a great deal of experience assessing balance sheets, projected income, form 990s, service revenue, and the rest of it. We’ve come to trust many of these people over the years, and believe many of them to be good and sincere people concerned about "the good life" here in Minnesota--and that would certainly include the Minnesota Orchestra. Surely, they must see what all the rest of us can so plainly see--that the process set in motion by the MOA board could very well lead to the final destruction of one of the grand old orchestras of the nation at the very moment of its artistic peak.

So who is holding the gun to their collective heads making them so unwilling to break ranks? Is it class allegiance and old line family friendships going back many decades. Other friendships, dinner parties? Maybe that’s part of it. Could it be that a majority of them have confidence in the current direction the board is taking? That seems unlikely, as the state of the lockout would attest. What then?

Business, banking, how to get a quick loan--these concerns may very well trump everything else in the minds of board members in our still weak economy. The shakers and makers of Minnesota, fine people though they may be, do not want to do anything that would jeopardize the line of credit to the many worthy Minnesota corporations they represent. Bankers are powerful people.

And the current chair, and the immediate past chair of the board, are bankers--big bankers. Mr. Richard Davis, has served as President of U.S. Bancorp since 2004, CEO since 2006, and Chairman of the Board since 2007. He is, indeed, a very big player financial player. Mr. Jon R. Campbell, current chair of the Minnesota Orchestral Association board, has sometimes been listed as Vice President for Government and Comminty Relations for Wells Fargo. More recently he's become CEO for “Wells Fargo, Minnesota.” It’s difficult to assess his banking significance, it's certainly not in a league with Mr. Davis's, but it seems to me he must have considerable influence with Wells Fargo. .

These two bankers seem to be the center of power in this mindless lockout that seems so inexplicable to anyone who has put their mind to it. Nevertheless, they hold the trump cards.

So what is they’re personal interest? Why are they even on the MOA board? Neither of them shows any interest in music, and it’s said that neither of them goes to concerts. Why do they care? It’s really not that big a deal to financial players of their status. What’s their stake?

Could it be that the crux of the lockout is an expression of personal ideology meeting politics and the Minnesota Orchestra.

If I were a young and ambitious journalist, I would not bother to "follow the money" any further. Many of us have already learned or surmised quite a bit about MOA finances, and are no longer ready to believe that the crux of the issue is money.

But I would "follow the ideology." I would first investigate the ideological background of these two men: Where did they go to school? Who were their mentors? What philosophers were they drawn to? While growing up, what was the philosophy of their families? What is in their ideological blood? And then I would investigate their politics. What connections to what individuals, and what connections to what groups, have they made over their lifetime--particularly those that are not readily apparent?

Regardless of what such a disclosure might reveal, it may not resolve the lockout. They would still hold the cards. But it would certainly be interesting, and may gird us against the onslaughts that may be coming against other Minnesota non-profits. At the very least, it would inform those boards that it may be a fatal mistake to make idealogically motivated bankers the chairman.

Ideology

Might I suggest that our banker friends idolize Wisconsin Governor Scott Walker? Here are two of the giants of the banking world who would make the musicians pay for chronic mismanagement and ineptitude. It is my understanding that Senator Mitchell, the "Mediator" who recently joined the foray had suggested a fairly reasonable proposal which would have brought the musicians back to the hall for at least two months and good faith negotiations might be re started. It was accepted by the musicians and flatly rejected by the board.

Mr. Mitchell, negotiating a settlement for Northern Ireland was a piece of cake compared to what you will go through in Minneapolis unless there is a change of direction by the board.

No doubt our two banker friends can twist a lot of arms to bring forth financial support from the Minneapolis Corporate community and for that they should be lauded (provided that its true). But rather than new "business models" and self aggrandizing public service by our two bankers, we need board members skilled in raising money who actually care about our orchestra, rather than their egos. Replacing Mr. Campbell and Mr. Davis would be a first step. As for Mr. Henson, his role is unclear in that he is a hired hand presumably doing the will of Campbell and Davis.

Once Campbell and Davis are gone, a next step would be the addition of five musicians to the executive committee of the board. Its hard to believe that the greater Minnesota corporate and private community could not be approached to augment the orchestra's endowment, which even in its depleted state is said to be the fifth highest of American orchestras. More imaginative and aggressive marketing and programming might just improve attendance and performance revenues.

MOA Responding To Letters, Emails And Phone Calls

My experience with MOA personnel the last year has been pleasant. My two letters were answered promptly and courteously. The two emails I sent were answered promptly and courteously. I telephoned three times. The first time I talked to Mr. Henson’s assistant because Mr. Henson was out. The young man was polite and professional. The second time I got through to Mr. Henson himself. Mr. Henson was polite and professional. The third time I called Mr. Davis. Mr. Davis’s secretary was delightful. She told me Mr. Davis would return my call, which he did within an hour. Mr. Davis was polite and professional.

You can kill more flies with honey than vinegar. The MOA probably has been forced to screen out the nuts. Unprofessional communications probably go straight to file 13. This is true in any line of work.

Who do you know?

Because my communications haven't been answered. Not that I have Mr. Henson's and Mr. Davis' phone numbers. And in any case, the above article certainly doesn't sound like it's written by a nut. Somehow, I doubt that it's the "unprofessionalism" but rather the content that they're avoiding. What answers did you get, Ms. O'Hara?

Who Do I Know? No One.

Ms. Kahler, in brief, I raised 4 points.

Instead of 32%, propose salary cuts of 10%, 15% at worst. Engage better guest conductors and guest artists to reverse the decline in attendance. Develop a residency program elsewhere to bring in revenue from other locales. Get the governor or mayor to act as intermediary.

My communications were short and businesslike, not effusive. They were free of editorial content. When I called, I called the main numbers of the MO and US Bank headquarters and asked to be put through.

Interesting points

But how did they respond? It would seem that, at least at this point, none of your points have been put into any public proposal.

Honey and Vinegar

The MOA's initial and final offer of slashed salaries, benefits, and security; documented plans to "reset the business model" with planned deficits when it comes to paying players; disregard for artistic input in artistic matters ranging from auditions to programming, to outreach; and nearly 300 other alterations of the contract hardly constitutes "honey" that would entice anyone in their right mind to gladly leap into trusting and cordial negotiations. I'd feel more like the fly that was about to be swatted.

I do agree there's too much shouting and recriminations going in all directions. It's time to worry less about who to blame and how to save face where mistakes were made, and to step up and take responsibility for what's happened, get past the undeniably needlessly ugly past, and find ways to move forward in positive, productive, and artistically feasible directions. A wise musician and lawyer friend suggested regarding mediation, "there is no chance of fixing it unless both sides eat some of their words and grant some grace that it not deserved by the party on the other side."

Anna Smith O'Hara, we can't wait to hear more about this :-)

You must be a very, very influential person to have actually gotten through to Michael Henson, not to mention US Bank CEO Richard Davis. And the secretary was "delightful"...! Did you have a chat?
Please do tell the rest of us what they said - we're all ears.

I wonder how long a non profit can keep it's status

as a corporation if it doesn't fulfill it's mission?

Well, the simple solution is:

...to change the mission, of course.
A link to the old and new mission statements:

http://www.minnesotaorchestramusicians.org/?page_id=3205

She Was Delightful

I talked to her for 3 or 4 minutes. I should have asked her her name.

The one I spoke to was named Valerie...

...and I agree, she was very polite and professional, though we didn't talk as long as you did.
I must admit, it never even occurred to me that CEO Richard Davis would return a message from a complete stranger. Again: what did he say to you?
And what was Michael Henson's response to your strategies and suggestions - what did he say?

I appreciate this thread...

I'm not much of a classical music fan, truthfully, but I am a supporter of the arts in general, especially those who put creativity and artistic quality ahead of popularity and money. I think there is way to much emphasis on sports and lowest common denominator "art", but truthfully I'll be listening to ZZ Top or John Coltrane again before I hear my next classical piece.

Anyway, I'm not up on these issues and I appreciate this article and the comments for the clarification assistance. Last time I asked a question in one of these threads I got shredded for being an idiot and a bore so I will ask nothing. I do agree with all these questions though. What I don't understand is why wouldn't the books and investment decisions and strategy be open to all who care. This is an organization that survives through the grace of its donors large and small. How can decisions and their results be hidden in the dark. Don't those with a financial stake in this enterprise have a right to know what's going on? So with that in mind I guess I'm moving from being a disinterested party asking questions to being a nominal but nonparticipating supporter of the orchestra members and their fans. And anyway, I'm not much of a fan of old rich white guys and their tightly clenched...

Back atcha, Bill. :-)

Thanks so much for posting your support and interest, Bill.
I'm a big fan of shedding light on issues that rich white bankers bring to the arts. (And Coltrane's Naima).

Maybe there will be some positive news, soon.

Class warfare

What seems to be developing here is a kind of class warfare of the 1% against the rest of us. The Board leadership and the CEO disdain the opinions of the ordinary customers while the ticket buyers distrust the leadership and their "truthiness." Perhaps the most annoying part of this is that in the communications from the Board--or at least its leadership--they claim to be speaking for "the community." Sorry, not my community. The scars of this quarrel will be as damaging to the community and as lasting as the damage to a first class orchestra, to say nothing of the reputation of Minnesota as a state that values not only classical music, but other art forms including popular music (first street station, the Current, jazz at the Dakota, etc.). If anyone wants to see how foolish we look to the world outside Minnesota, just read one of James Oestreich's final columns in the NYT. We look foolish and self-destructive. Maybe a bit of community spirit and pride could overcome all the wounded egos...unless, as I fear, it is too late.

Really, Anna

We'd like to know what these people said to you about your proposals.

Orchestra mismanagement

I just don't see how the possibility that the orchestra has been mismanaged in the past, in itself, is relevant to the Orchestra's financial problems now. What would be relevant is if someone puts forward a positive plan for the orchestra going forward. What would also help is if someone puts some new money on the table. I hear a lot of high talk, but I don't see many checkbooks coming out.

Umm...

It's relevant because the people who mismanaged the orchestra in the past are the ones creating the plans moving forward.

Oh, and the people who locked out the musicans

...are the ones who should stop locking out the musicians.

Change in management

Changing management won't correct any errors that may have been made in the past. And let's be clear here, the problem labor has with management isn't that it sold stock at the bottom of the market in 2009, it's that management want's to cut wages in 2013. I would like to see some positive proposals from orchestra members about how to increase revenues going forward, I just haven't heard much. What I have heard is a lot of second guessing of questionable decisions of the past which gets us nowhere.

Wrong

No one is saying that changing management will correct any past errors. The issue is this: knowing what management did - which still isn't clear - is relevant to whether management and the board should be trusted going forward. And, frankly, it's not the responsibility of the rank-and-file musicians to plot a course for increasing revenue. Right now, it's their job to stand up for what they believe they are worth - in the face of a secretive and dissembling board of directors and management team.

What "gets us nowhere" is failing to learn from past mistakes. We haven't learned the lesson yet.

Questions about past performance are relevant

Hiram Foster, you are correct to indicate that an exclusive focus on past errors will not resolve the current situation. However, an analysis of past mistakes is critical for resolving the financial concerns raised by the board of the Minnesota Orchestra. Emily's point #4 - that $12.1 was withdrawn from the endowment in 2011 (just 2 years ago) but only $6.1 went toward operating expenses - is an excellent example. How was the other 50% spent? Could some of those expenditures be reduced in the future, thereby freeing up resources to maintain better pay for the musicians? Emily's point #5 - that program service revenue at the Minnesota Orchestra performed very poorly relative to peer orchestras for the period leading up to the lockout (2008-2011) - is another excellent example. What were the causes of this poor performance by the Minn. Orch.? Could we increase our program service revenue by correcting some past practices and thereby raise additional funds that could be used to maintain better pay for the musicians and maintain the quality of the orchestra?

I would also question your assertion that the musicians have only complained about past mistakes made by management. One of the earliest requests by the musicians was for an independent financial analysis that would (1) evaluate future anticipated revenues of the Minn. Orchestra given the current business plans and management and (2) compare that performance relative potential revenues under alternate business plans used by successful peer orchestras. The purpose of this analysis was two-fold: (1) to better understand the financial position of the Minnesota Orchestra in order to be able to present an informed counter-offer and (2) to help identify ways to improve the revenue-generating potential of the orchestra. This analysis would be beneficial to all of the stakeholders involved - it would help management identify ways to increase revenues, it would help musicians accept any necessary pay cuts, it would help restore trust between the musicians and management, and it would provide the financial transparency that is needed to build trust with donors and patrons who have felt misled by the management. I am still hoping that management will agree to conduct this analysis; I will remind you that the musicians agreed to help pay for it.

I would also remind you that there has been no shortage of ideas relative to how to increase revenues. Lee Henderson's proposal to ask rank-and-file patrons to pledge $2,000/year to support the orchestra was very well received by patrons but refused by management. Orchestrate Excellence has helped the board and the musicians understand how a peer orchestra in a similar market (I presume Cleveland) has (1) sharply increased its ticket sales and program service revenue while maintaining a focus on classical music and (2) balanced its books while maintaining the salaries needed to keep world-class, experienced musicians. Like many other patrons, I am still hoping that management will reconsider its position and adopt some of these ideas.

The only solution that the management has proposed to addressing the financial problems is to drastically slash musician salaries; patrons and musicians have raised their concerns about past mismanagement because they believe that correcting these past errors will make drastic cuts to the salaries of musicians unnecessary.

The Orchestra Lockout

Just posted, a brief suggestion about how we in the audience of the Minnesota Orchestra must take action, ourselves, if this is ever going to end. http://www.outsidethewalls.org/blog/2013/06/21/. We really have no choice but to act. I have been a fan of the Orchestra since at least 1978, and I see it in a death spiral at this point.