Fixing American Arts Philanthropy, Part 1

A frantic crows of people (Photo CC by Superlekker, originally posted to Flickr)

A frantic crowd of people (Photo CC by Superlekker, originally posted to Flickr)

“Fixing American Arts Philanthropy, Part 1” was originally published as “Fixing American Arts Philanthropy: 1. Accept Fewer Applicants”  by SF-based composer Aaron Gervais on his blog.

There is never enough money in the arts. Equally problematic, the money we do have is not always used very efficiently. In the United States, most arts funding outside of ticket sales comes through philanthropy, whether by individual donors, private foundations, or nonprofit advocacy groups. While individual donors don’t usually have the clout to sway an entire sector, the larger arts funders can and do. As such, they shoulder greater responsibility for the financial inefficiencies that affect the arts—not out of malice, but simply because many a well-meaning initiative has relied on accepted wisdom that isn’t actually all that wise. Now, there are indisputably organizations conducting innovative work. But doing philanthropy well is really damn hard, and the bar could certainly stand to be raised.

Philanthropy is about 90% how and 10% what—it’s not enough to have an endowment and good intentions. The historical record is scattered with well-meaning institutions that left gaping holes in the support networks they sought to weave, either because they hadn’t fully understood the nature of the problems they grappled with, or because of the caprices of donor psychology: money gloms onto the issues-du-jour, donors attract other donors, and the funding landscape quickly begins to resemble growth in a petri dish, with some areas well funded and others completely barren.

As such, many arts funders find themselves unwittingly working against the grain, even though the efficiency problems they face are immanently fixable with the resources all institutional funders have at hand. So in this article and a handful of follow-up pieces, I will describe a few philanthropic blind spots that I’ve come across repeatedly in my work as a composer. Then, for each, I will offer concrete, boots-on-the-ground suggestions that arts funders can use to make things easier for themselves and the artists they serve.

Openness doesn’t work

Openness and inclusivity, perhaps the mantras of modern arts philanthropy, are laudable as concepts. But they create pernicious side effects when applied indiscriminately. Yes, in an ideal world arts funders should “open up” their programs and accept as many applications as possible from a diverse body of practitioners of all sizes, organizational structures, aesthetic proclivities, and artistic goals. But we don’t live in that world, and accepting more proposals comes with tradeoffs, most of which are borne by the applicants. This is especially true of individual artists or small ensembles; applicants who by nature do not have the support networks needed to mitigate the effects of an unsuccessful application.

Of course you’ll never be able to fund everyone, but there is a direct connection between your success rate and the utility of your endowment: the more applications you turn down, the less effective each dollar you hand out is. On the other hand, the higher your success rate, the more applications you’ll attract—so it’s a balancing act, but the sweet spot is not in the single digits. You should probably aim for a success rate in the range of 20%. If it’s lower, you would do well to significantly decrease the number of applicants, even if this means making arbitrary choices like, “This year only brass players whose middle names start with A–E may apply.” For perspective, MAP Fund received 900 Letters of Intent (LOIs) for its Fall 2013 round and issued 39 grants, for a success rate of 4.3%. A success rate of 20% would have meant limiting LOIs to 200 submissions—a not unachievable target.

Applying to grants is not without costs to the applicants. For every application you receive, someone (or someones) has either spent time preparing the materials or spent money hiring a grant writer. And let’s not kid ourselves: a competitive grant application isn’t something you whip up on your iPhone on the way to a gig. Flautist Meerenai Shim calculates that it takes her about $560 worth of labor to apply for a grant, assuming roughly one full day spent planning, coordinating, writing, revising, editing, etc. This is also incidentally about what it would cost to hire a grant writer, so I think her figure is about right as a ballpark estimate.

Of course different types of programs will have different application costs, but I don’t think it’s unrealistic to claim that each failed grant application costs the arts community roughly $500 worth of potential: energy, time, money, or all of the above that might have been more productively spent making art or looking at alternative fundraising channels. By definition then, to justify the existence of your granting program, you at least need to get your success rate above the point where application costs exceed grant disbursements. Ideally, however, you want to go higher, toward the point where your disbursements do the maximum good for your stakeholders. As I’ll explain below, that sweet spot is probably around 20% for most arts funders.

I also suspect the sweet spot is largely independent of endowment size, since bigger pots of money attract more applicants, larger prizes encourage applicants to invest more resources into the application process, and the economy of the arts is this weird sociological phenomenon that generates virtually insatiable demand. As such, there probably isn’t a point where you can have enough money to balance the tug-of-war between success rate and endowment utility automatically. Left to its own devices, your success rate will always drift toward inefficiency, because the attractiveness of a career in the arts means any new supply is immediately outstripped by new demand.

Dutch economist and visual artist Hans Abbing provides empirical evidence for this proposition in his pivotal work Why Are Artists Poor. Analyzing historical records, he compares the relationship between the gross amount of arts funding available and the number of practicing artists in Holland at any given time over a 150-year span. What he finds is that the ratio of artists to funding remains stubbornly fixed, no matter how much money there is to give out. An increase in arts funding doesn’t help the artists already practicing, it just encourages more people to try their hand at an artistic career—or in other words, more funding generates more poor artists, not a rise in the standard of living of existing artists.

As such, you can’t rely on fundraising to boost your success rate or (more realistically) use the lack thereof as a convenient cop out for why your rate is so low. Your success rate is a structural problem, and it can only be solved from the inside through intelligent program reform.

Fixed costs and negative utility

So how did I get to my 20% figure? By way of explanation, I’m going to crunch the numbers for New Music USA. This advocacy organization provides a handy case because it introduced a new model in late 2013, combining five previous grant programs into a single, more inclusive program. This allows us to look at the before and after effects of opening up your program to more applicants, which in turn provides us with the numbers needed to compare success rate and endowment utility. (Full disclosure: I have received grant funds from New Music USA under its previous incarnation as Meet the Composer, and its journalistic arm NewMusicBox has published my writing.)

New Music USA’s stated goals for the redesign were to increase response from traditionally underrepresented groups, simplify the application process to minimize the burden on applicants, and reduce overhead so that the previous constellation of programs could be administered more efficiently. These are laudable goals, and by all accounts, New Music USA was successful at achieving them: the organization received 1,618 applications in the first round of the new program, more than the entire previous year combined under the old granting structure, and it did so with a significantly lower per-applicant administrative outlay. It funded 60 projects out of 1,618 in that round, for a success rate of 3.7%. The second round of the new program received fewer applicants, maybe due to the low success rate in the first round, but the numbers were still up 46% over the old model, and the success rate was 4.9% (57 out of 1,174).

We also need to look at how the new model affects costs per applicant, for which I’ll use Shim’s estimates. New Music USA doesn’t have an LOI stage, so we can avoid tricky questions like how much a preliminary round costs applicants versus the full meal deal. Furthermore, the Web-based nature of the new application process, with relatively austere character limits for each text box and a set number of slots for supporting materials, ensures that all applicants have to prepare roughly the same amount of materials; there are few opportunities for overzealous applicants to provide reams of auxiliary verbiage. As such, I’m inclined to accept New Music USA’s claims of a streamlined application process at face value, and I’ll discount Shim’s $500 artist investment to $400 per applicant.

In terms of funds awarded, the organization gives out approximately the same amount of money now as it did for the equivalent half-year period under the old system, so I’ll average the funds given out in the first year of the new program to come up with the equivalent amount for a half year under the previous group of programs (exact figures were not readily available at the time of writing, since New Music USA was created through the merging of multiple, previously independent entities). Everything combined, we have enough information for a back-of-the-napkin calculation:

Net impact on the arts of New Music USA’s old and new granting programs (all figures rounded)
Previous (half year) Revised (Fall 2013) Revised (Spring 2014)
Number of applicants per half year 800 1,600 1,175
Cost to apply per applicant $500 $400 $400
Total cost to applicants $400,000 $640,000 $470,000
Total amount awarded $325,000 $340,000 $310,000
Net gain/loss to the arts –$75,000 –$300,000 –$160,000
Utility of funds disbursed –23% –88% –52%

Even under the old model, New Music USA’s success rate was arguably too low to justify its granting program’s existence: it cost the arts community slightly more to apply to New Music USA than what it got in return. But under the new model, wasted effort has increased between 200% and 450%. In the Fall 2013 round, waste was worth almost as much as the total amount issued, before administrative costs. That’s not exactly the message you want your donors to take home.

Of course we can quibble over the numbers. Maybe the true cost to prepare an application is closer to $200 per project when you consider the large number of inexperienced artists in every round who are cutting their grant writing teeth for the first time. And it’s indisputable that certain applicants have benefited from the program, even if most others (some deserving, some probably not) have wasted their effort. Regardless, it’s pretty hard to argue that a success rate in the 4% range is ideal, and you can make a convincing argument that it causes real harm: utility decreases—and can end up negative—when the ratio of applicants to endowment size converges, due to the fixed costs of applying.

Based on the numbers in this example, we see that endowment utility doesn’t get into breakeven territory (0% utility) until you get to a 7–8% success rate, and you don’t hit 50% utility until you see a 15% success rate. Go too high, however, and you’ll basically be pre-selecting the winners yourself, which introduces its own problems. Therefore, to maximize the good of your disbursements, the ideal success rate falls somewhere above 15% and below the “cronyism range.” I’ve therefore chosen 20% as a safe, achievable target.

Non-monetary impacts

There are also non-financial implications to consider, especially when looking at individual artists and small ensembles. Shim’s article is pessimistically titled Grants vs Gambling, her premise being that the odds of getting money from a grant are about equal to putting that same $500 on a roulette table. Also in roulette’s favor: it’s less work, more fun, and you don’t have to wait months to see if you’ve won. A single-digit success rate thus fosters disillusionment and bitterness. It inspires unwarranted accusations of selection bias and distrust of grant administrators. It shifts the burden of refining your organization’s mandate onto your jurists, because you’re asking them to figure out how to pick a small subset of winners from a large pool of qualified, deserving applicants. Then it scapegoats your jurists no matter who they choose, because invariably they will have turned down applicants that are very worthy of support. Basically, it’s a PR disaster any way you spin it.

A low success rate also creates the illusion that there are more funding options available than there actually are. Artists frantically work to meet grant deadline after deadline, each with casino-like odds—because how could you not get at least something when you put in so many applications for your really amazing project? But that’s just the gambler’s fallacy at work, and when you look at the stats, most of those artists would be better off not applying, but rather coming up with alternate funding strategies.

Given the state of arts funding in America today, all but the most established artists should abandon grants with low odds and instead focus on attracting private donors and finding established groups to partner with. Yet they don’t do this, or at least not with the same diligence as they generate checklists of upcoming grant deadlines and slave over project narratives. Why? For one, most artists by temperament are not good networkers and self-promoters, so the idea of funding their projects by working a room or knocking on doors is intimidating. But beyond that, applying for a grant feels safer, more concrete, more responsible—in other words, easy access to grant applications creates a disincentive for financial innovation.

Notice, however, that all these headaches magically go away when you find a way—any way—to decrease the number of applications received. I know it’s not exactly heartwarming to turn people away without giving them a chance, but that more limited focus will, counterintuitively, let you do more good for the arts.

Toward viable solutions

You can effectively limit your focus in any number of meaningful ways, there’s no need to go with something as arbitrary as my tongue-in-cheek “brass player’s middle name” example. Below are a few ideas to help guide you toward an approach that’s a good fit for your organization:

Match your mandate to your endowment size – If you’ve got a broad mandate like “fostering the growth of the arts across America,” then you better have a multi-billion-dollar endowment to match. Otherwise, you’re just setting yourself up for failure. There’s no shame in saying, “Our eventual goal is to support everything under the sun, but since we can’t afford that here is what we’re choosing to support.” In fact, just that statement alone benefits the arts, because it makes it easier to see which areas are actually being funded. When artists or producers approach private donors, it’s a much easier sell to say, “There are no grant programs meeting this urgent need; your money will do a lot of good,” versus, “Technically we qualify for a bunch of grants, but the odds of getting them are nil.”

Make your guidelines as simple as possibleMAP Fund just announced a series of in-person information sessions for its 2015 round, to be held in cities across the US. I would venture to state that if you need to travel across the country explaining how to apply for your program, you’re doing it wrong. Not only are these travel sessions a waste of money, they’re a flashing red light that you’re tackling a mandate that is much too broad. Applicants should be able to tell from your website whether or not they have a chance of getting funded—and besides, your mandate should be narrow enough that promising projects aren’t automatically sunk by less-than-perfect applications. You’re not running an olympic qualifying test, after all: the point is to fund the best projects, not to discredit as many applicants as possible on technicalities.

Provide detailed feedback to all applicants – You’ll quickly narrow your focus if you commit to helping each unsuccessful applicant with specific advice on how to succeed next time. And this advice should be robust enough that it actually works: publish statistics on how many repeat applicants succeed after incorporating your suggestions. Providing detailed assistance on the front end of the application process is also an option, but the onus then becomes to find an effective pre-screening process (so that the task is manageable) as well as a transparent evaluation process (so that it’s obvious you’re not rigging the game). Either way, an audit of your “advice program” should be able to demonstrate, objectively, that you are increasing the number of worthy projects that get funded, and the only way to make that realistic is to keep your mandate narrow.

Use a short screening tool – LOIs can be useful in limiting applicant waste, but the ones I’ve seen are usually much too detailed, nor do they do anything to dissuade poor-fit applicants. A good LOI should be something an applicant can prepare in under an hour, and it should have checkpoints that prevent underqualified applicants from completing the process. Ideally, use a questionnaire format. For example, let’s say you want to ensure that applicants are working with established presenters, in order to maximize the odds that the projects you fund actually get off the ground. The first question on your LOI could then be something like this:

Provide a contact name and phone number for a presenter with an annual budget of over $250,000 that has agreed to present this project (you may serve as your own presenter if your organization meets the budgetary requirements). We will call to confirm your presenter’s participation, then email you a link to complete the rest of this LOI.

With one question, you will have done two very good things for the arts: (1) prevented scores of underqualified applicants from wasting their time, and (2) guided would-be applicants toward a preparatory activity you consider best practice (namely, pairing with an established presenter).

Employ a self-selection approach – For funders like government-backed arts councils that are required to serve a broad constituency, consider transforming the LOI into a self-selection tool. You could create a “call for projects” questionnaire (keep it short!) designed to gauge interest in different types of art activities. Distribute this among your stakeholders, then use the results to choose a focus that is both useful and sufficiently narrow, taking into consideration past grant cycles and present demand. After that, announce what the current cycle’s focus will be, and invite all respondents who meet the criteria to apply (or to submit an LOI, if there are still too many applicants):

Based on the demand shown in our last stakeholder survey, for this round we are inviting the following types of applicants: (1) multidisciplinary dance companies with five members or less, and (2) music presenters with annual budgets over $500,000 seeking to commission local composers.

Not only would this approach make your program more efficient for applicants, the data collection involved would position you to provide a host of other tangential benefits. By publishing your focus-selection methodology then providing statistics on the “call for projects” responses, you (1) make your process transparent and fair, (2) provide important historical data on changing trends in the arts, (3) demonstrate the extent of the funding needs going unmet, and (4) give prospective applicants a concrete sense of how to design a project that fits your mandate.

Of course, this is only scratching the surface, and there are institution-specific challenges to work out under each scenario. But my point is that there are many realistic ways to limit your applicant pool, and done right they also enhance your overall effectiveness. The “open,” low-success-rate approach to arts philanthropy, on the other hand, is counterproductive and needs to be abandoned.

In my next piece, I will look at the unwritten incentives that influence how your jurors select winning applications.

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