SUMMARY OF RECOMMENDED STEPS TOWARDS TRANSLATING THE QVMAG FROM A COST CENTRE INTO A COMMUNITY SOCIAL ENTERPRISE
Against the background discussed below there are a number steps that seem logical to apply as an alternative to continuing to fund the QVMAG as a Cost Centre as it has been for decades. In addition, these steps are offered as an alternative to the counterproductive and the often failed strictures of economic rationalism typically applied to operations when their sustainability is questioned. The proposed steps in summary are as follows.
- In accord with the musingplace’s publicly articulated and revised purpose in a 21st C context, divine an operating cost centre budget in accord with recent history.
- Ensure that the funding required can indeed be secured in a socially cum politically sustainable manner.
- Set the target for year one of a longer term budget review process with the expectation that 10% of that year one budget must be realised through entrepreneurial activity, excluding grants for recurrent expenditure. Underwrite this mechanism via a GAL (Guarantee Against Loss) to provide a level of security for the operation in it transition from cost centre budgeting towards more entrepreneurial budget models.
- Allow for any income achieved to be held in a ‘suspension cum carry-over account’ towards the next years recurrent budget and/or capital expenditure depending upon its source.
- Review the year one outcome and set the year two recurrent budget accordingly. As a part of this review determine which parts of the recurrent budget are in fact project and program funding and which parts are to do with the recurrent maintenance of the operation.
- Reset the institution’s Strategic Plan and report the review findings, including year one outcomes, directly to all the institution’s funding agencies, sponsors and donors.
- Set the target for year two of the process with the expectation that 20% of that budget must be realised through entrepreneurial activity and underwrite it via a GAL and as for Step 4 allow for the carry over of appropriate generated income be carried forward.
- Review the year two outcomes towards setting the appropriate level for the operation’s sustainable recurrent budget and continuing level of program delivery.
BACKGROUNDING
The QVMAG, like most public museums, is currently imagined as a Cost Centre. The argument goes “museums cannot make a profit … full stop.” It may or may not be so but it depends where you look and what you are looking for. In the ’business world’ a cost centre is that part of an organisation/operation that:
- Does not produce a direct profit; and
- Adds to the cost of running a company/operation – the Council in the QVMAG’s case.
But Councils, Governments generally, are not businesses. They are monopolies set up to service a constituency. In essence, for their constituents, they are cost centres for them. By design nothing is done, or is intended to be done, for a fiscal profit.
Constituents invest in their Councils by paying rates & fees, on the expectation that they will receive a set of services with tangible and intangible outcomes – often intangible dividends rather than a fiscal profit.
Although Cost Centres are not always demonstrably profitable, they are there to add value indirectly and/or fulfil some other corporate mandate. While research and development departments may deliver profitable outcomes, while effective public relations and customer service departments may build customer loyalty, in themselves these things are not profits but they do add value to an operation.
Typically cost centres have a negative impact on the bottom line – at least superficially – they are normally first in line for rationalisation and cutbacks. Likewise, operational decisions are typically driven by cost considerations.
Investments in ‘Cost Centres’ – new technology and staff etc. – are typically difficult to justify in a profit driven organisation because their indirect profitability is difficult to translate into the bottom-line.
Business’ metrics are employed to quantify the benefits of a Cost Centre and relate costs and benefits to those of the organisation as a whole.
However, Councils are not businesses. Rather, they are service providers delivering, typically, services that in turn provide both tangible and intangible dividends. More to the point, their purpose is to ensure the amenity of place – and they are thus engaged in the ‘profession’ of placemaking in a not-for-profit context.
Unproductive, lazy or ineffectual Councils are directly accountable to their constituencies but the functional ‘service providers’ are not – the public servants, officers, et al. They are cushioned from accountability and are often able to insulate themselves against uncomfortable scrutiny.
Given that the assessment of the relative ‘quality and quantity’ of the services delivered and the amenity/value achieved, in effect, can only be done subjectively.
In democratic governance models those assessments can only be done, effectively, at elections albeit other options may be available. Consequently, it is contingent upon the directly accountable ‘governors’ to hold their service providers truly accountable.
The cost centre mantra, and its assumption that it cannot/shouldn’t generate a profit, and by extension says that a cost centre cannot/shouldn’t generate income either, is one dimensional and fundamentally flawed – an in all likelihood, self-serving in the laziness it affords.
SURVIVAL MISTAKEN FOR SUCCESS
Entrenched cost centres operate in accord with the MICAWBERprinciple, they can only survive and typically by design they can neither flourish nor succeed. Charles Dickens’ character’s, Mr. Micawber’s, dictum that goes "annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery" comical as it is, it defines the one dimensionality of cost centres.
MICAWBERprinciple accountancy counts beans but does not allow for them to be planted because that would present risks deemed to be unacceptable. The principle invokes the metaphor where an accountant counts the beans that are stored out of the reach of rats and insects but nonetheless they loose their viability because of the environment provided to ‘protect’ them.
It follows that value is typically lost under the aegis of the MICAWBERprinciple or at the very least is diminished. It’s a metaphor for ‘unintelligent stewardship’ that fits the cost centre centrality of all too many musingplace imaginings all too well. Like Mr. Micawber, they teeter on the edge of fiscal disaster waiting for “something to turn up” – typically a philanthropic handout, or a benevolent government windfall or via some other ‘White Knight’.
Public musingplaces’ MICAWBERprinciple accountancy is careless of its income sources and never more so than when ‘governors’ can be persuaded by their officers/servants to conscript the funding needed, and without recourse or real constraint, to build their bureaucratic empires and 'grow their pies'. By extension, the paradigm continually supplies bureaucratic overlords with underlings fully cognisant of the principles of Parkinson’s Law – "work expands so as to fill the time [and use the resources] available for its completion[and/or doing]."
MUSINGPLACE SUCCESS
Musingplaces can be successful rather than simply survive and never more so than when they add value to living in a community and the places where people live. How is that value measured?
Euphemistically, one way to measure success is to count the proverbial “bums on seats” and invoke the metrics and then calculate the cost per bum.
If it is the case that the more you spend, or the more you do, the more the numbers remain the same, then it is clear that value is not being delivered. Here a cost centre can only survive if its ‘funding agencies’ decide to look away for whatever reason.
However, how can it realistically be expected that they will continue to look away? What is being put at risk by relying upon them doing so? If value, on the evidence, is not being delivered, how long can the agencies afford to look away and claim accountability is delivered upon?
If musingplaces, as cost centres, are not delivering appropriate dividends, and the dividends, or the lack of them, are assessed externally and independently as adequate, then the case for their continued unsustainability grows.
Accordingly, then it would seem that there are just two propositions in prospect:
- Close the operation down and reinvest in some alternative ‘value delivering’ project; or
- Reconfigure the operation in ways that value delivery is more likely to be delivered.
WHAT MIGHT AN ALTERNATIVE LOOK LIKE?
If the operation were imagined as a ‘value centre’ there would need to be a paradigm shift. The resulting metrics, as likely as not, would be required to demonstrate that the alternative was delivering more for less. By extension, this implies that new knowledge, and new skill sets, will need to be acquired – and change embraced with some enthusiasm.
This is unlikely to be welcomed by those comfortably entrenched in a cost centre paradigm informed by the MICAWBERprinciple. Value won, rather than ‘profit earned’, may turn out to be more difficult to assess via metrics. However, the levels of income generated under an ENTERPRISEarchetype may well provide the justifying metrics to some extent.
THE SEARCH FOR SUSTAINABILITY
If in the search for a sustainable business/operational model for a museum you look at musingplaces in an international context there is surprising evidence that they can be sustainable. Internationally their sustainability is very often already reflected in their aspirations and programmes. It might be imagined as being rare but it seems not. If you consider financial sustainability, then a topical issue in austere times is the competition for limited resources.
Likewise, trying to find innovative ways of working better and at a reduced cost is nearly always the focus. One solution on offer for musingplaces is to "become a social enterprise". However, many museums have already learned that they need to be and are already operating a social cum community enterprise business model – and many are doing it really well. How and why?
WHAT IS SOCIAL ENTERPRISE?
An old definition of social enterprise was based on the notion that a social enterprise was a socially beneficial organisation that derived in excess of 70% of its income from trading. If this is applied to the charitable/voluntary sector it excludes them and denies them access to the large funding pools and support available to 'social enterprises' if it is rigidly applied.
However, “social enterprise” needs an accurate definition that works in practice and that is not forever changing. It was always a political minefield and the debate lingers on even if it is around a much looser definition. The social enterprise idea is not new.
Basically social enterprises are operations that engage in commercial activities in ways in which they are able to deliver social, environmental, educational or cultural outcomes. The profits, the income generated, is used to increase the level of value the operation can deliver rather than be retained for the personal gain of those who are employed in the enterprise.
HOW CAN A MUSEUM BE A SOCIAL ENTERPRISE?
The evidence is that musingplaces have demonstrated an impressive collection of income streams and cost saving measures that most 'not-for-profit organisations' can only dream of.
Museums deliver on:
- Government contracts and research grants;
- They generate income from retail outlets and cafes;
- They deliver educational programmes;
- They derive income from image loans and the associated research;
- They offer beneficial memberships;
- They hire out facilities; plus
- They facilitate film and documentary shoots; and
- Often, they have become expert and enterprising fundraisers for a diversity of projects.
When museums have a strategic and strong sense of why they exist – their purpose for being – they can deliver on the above. Increasingly, museums can adapt, typically out of necessity, to create activities and income streams that match their raison detre and aims as well as complying with the core values of their publicly stated purpose for being.
The ‘social capital’ that is generated via their work and the social benefit they deliver epitomises financial, social and environmental sustainability.
Many musingplaces embrace sustainability in its wider context by working with local supply chains and developing proactive environmental practices that parallel their strong ethical culture. They are typically ideal driven by, and are exemplars for other local enterprises – sometimes in partnership with them.
Altogether this adds value to the operation and the communities that support them.
All this is complex product development and social enterprise brand management at its best.
It is clear that museum business/enterprise models are characterised by:
- The type of innovation they are engaged with;
- Their diversity and strength that in turn ensures financial sustainability; and
- The effective social responsibility they epitomise.
People no longer trust banks, they have lost faith in hollow commercial brands and they are tiring of shallow poor quality public services. Increasingly, there is a gap that is opening up between people's time and money and what they reasonably and rightly expect in return.
When musingplaces operate as social cum community enterprises ‘consumer frustration’ tends to diminish. Musingplaces are where we expect people to find quality and a depth of experience. They should be places where people are encouraged, respected and challenged.
The musingplace experience is to do with well being, tranquillity and enrichment. Potentially they are enterprises that offer value for money and/or a return on investment. Public affection towards museums can be an extraordinary business phenomenon and one that increasingly few businesses in other sectors enjoy with their customers.
The musingplace business cum enterprise model is increasingly based upon sustainability. Similarly, it is a model that is often a classic exemplar of the success early adoption of the community cum social enterprise model can deliver. Interestingly, as cultural institutions, museums are among the earliest pioneers of the enterprise model as the alternative to the cost centre based on the MICAWBERprinciple as they reimagined themselves as something other than an 'arm of government' and as being accountable to governments' constituencies.
Indeed, it is feasible that among musingplace products and services they might well be offering 'social enterprise business advice' within their range of products and services.
LOOKING AHEAD
If musingplaces learn the language of community based social enterprise they can:
- Enter the debate surrounding sustainability from the high ground;
- Access the support offered to social enterprises; and
- Address business and planning questions more effectively.
Musingplace managements need not be alarmed at unfamiliar terms. Very often they are the names for activities or models that musingplaces are already implementing and embracing – and increasingly out of necessity.
