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Re-envisioning success in the cultural sectorJohn H. Falka; Lynn D. Dierkingaa Oregon State University, Corvallis, Oregon, USA

To cite this Article Falk, John H. and Dierking, Lynn D.(2008) 'Re-envisioning success in the cultural sector', CulturalTrends, 17: 4, 233 246

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Re-envisioning success in the cultural sectorJohn H. Falk and Lynn D. Dierking

Oregon State University, Corvallis, Oregon, USA

Although the criteria for determining success as a cultural institution at the beginning of thetwenty-first century are still evolving, there are a few universals that are emerging. Successfulcultural organizations serve the specific needs of audiences while maximizing the flexibilityand ingenuity of their relationships, both inside and outside the organization, all within thecontext of the economic, social and political realities in which they exist. Success should not

be limited to a single set of outcomes, but requires excellence in three basic areas: (1) Support

of the Public Good, which includes accomplishing ones cultural/aesthetic mission, but alsobeing a good community citizen; (2) Organizational Investment, including building andnurturing staff; supporting a climate and culture for creativity, innovation, collaboration andresearch and development; and (3) Financial Stability, including building organizational valueand, when possible, generating annual financial surpluses that can be used to further supportinstitutional learning and the public good. The authors propose a model for defining andmeasuring institutional success using metrics of value and cost across each of these three areas.

Keywords: museums; accountability; cultural organization; measuring success; evaluation;metrics

IntroductionIn everything museums do, they must remember the cornerstone on which the whole enterprise rests:to make a positive difference in the quality of peoples lives. Museums that do that matter theymatter a great deal. (Weil, 2002, p. 73)

Cultural institutions come in many shapes and sizes, yet a generation ago it would have been

possible to ask a group of professionals working in the cultural sector to list the most successful

institutions and describe why they deserved to be on the list. Although individual professionals

would likely have quibbled over which institution should make the short list and in which order,

they would likely have gravitated towards a list that included institutions such as the British

Museum, the Louvre and the New York Philharmonic. In addition, the characteristics or criteria

used to select them would have primarily focused on size, longevity and worth, e.g., the numberof objects in the collection and the age and worth of the collections.

However, in the twenty-first century it is not as obvious who would be on the list or why.

Although larger, more venerable organizations might still be selected, it is possible that they

would not. Vying for the top would be smaller organizations, including some of diminutive size,

e.g., with minimal, if any collections, and some that have only existed for a few years. We

would actually postulate that a comparable group of cultural professionals today would find

such a task extremely daunting. For example, in the United States, the Institute of Museum and

Library Services (IMLS), the federal agency that supports the museum and library assets of the

cultural sector, annually gives awards for museum excellence. Their guidelines (IMLS, 2005) state:

Cultural Trends

Vol. 17, No. 4, December 2008, 233246

Corresponding author. Email: [email protected]

ISSN 0954-8963 print/ISSN 1469-3690 online

# 2008 Taylor & Francis

DOI: 10.1080/09548960802615372

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The principal criterion for selection is the museums commitment to public service through exemplaryand innovative programs and community partnerships. Nominations should describe the institutionsgoal in serving its community, the target population served, the community partnerships and effortsundertaken to achieve the goal, the outcome of these efforts during the last two to three years, and

projections for future efforts in this area. Achievements that might be highlighted include program-ming that demonstrates how the institution has attracted new audiences; innovative programmingthat addresses current educational, social, economic, or environmental issues; and positive effectsof the institutions collaboration with other organizations in the community.

Not much in these guidelines relates to the size, history or worth of an institutions collections!

Surviving, let alone thriving in the twenty-first century is a very challenging task for the cultural

sector, in large part because the rules of the game have changed. The institutions of today, many of

which were built (and flourished) in the Industrial Age, must consciously and deliberately develop

business models that make sense for the new Knowledge Age in which they find themselves.

Although there are organizations that seem to be faring well at the moment, success today is no

guarantee of success tomorrow. In order to make this transition, it is crucial to be clear about

what elements and activities will be critical components of a successful Knowledge Age culturalorganization. It is also important to understand how that elusive goal of success, can hopefully

be sustained. And ideally, it would be beneficial to understand what it would take to try to move the

whole cultural field forward, in other words, how individual members of the cultural sector can

contribute to the success of the entire sector? This article will provide a theoretical framework

for how cultural organizations could achieve this goal. We will focus on describing the elements

and activities critical to a successful cultural organization in the twenty-first century and discuss

how that success might be sustained and, most importantly, frame a strategy for comprehensively

assessing that success. One note, although we are mindful of the considerable debate and efforts

that have occurred in the U.K. and elsewhere in the world (e.g., Hewison, 2006; Holden, 2006),

our base of knowledge is centred within the US context. Rather than try to assert ourselves asexperts in areas where we are not, this article will be framed primarily from a US perspective.

Success in the Knowledge Age

Although the criteria for determining success as a cultural institution at the beginning of the

Knowledge Age are still evolving, there are a few universals that not surprisingly reflect

the increasing value placed on learning, creativity and personalization that are hallmarks of this

new age. Successful cultural organizations in this age maximize the flexibility, and ingenuity of

their relationships, both inside and outside the organization, all within the context of the economic,

social and political realities in which they exist. In addition, success is not limited to a single set of

outcomes, but requires excellence in three basic areas: (1) Support of the Public Good, which

includes accomplishing ones cultural/aesthetic mission, but also being a good communitycitizen; (2) Organizational Investment, including building and nurturing staff; supporting a

climate and culture for creativity, innovation, collaboration and research and development; and (3)

Financial Stability, including building organizational value and, when possible, generating annual

financial surpluses that can be used to further support institutional learning and the public good.1

Successful cultural organizations provide public value above and beyond meeting their mission

goals by creating and sustaining meaningful community relationships, foster dynamic workplaces

that support and develop staff by making long-term, as well as short-term, investments in the

organizations intellectual capital and monitor and improve the financial bottom line of the organ-

ization. An approach to achieving these goals is to focus on answering key questions in each ofthe three areas.

234 J. H. Falk and L. D. Dierking

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In the area of support of the public good, organizations must be clear about why their institution

exists and whom they are serving. In other words, each organization must specify who its publics

are and what specific needs (or wants) they are uniquely positioned to satisfy for each segment of

the public the organization hopes to serve. In particular, the organization should assess what assets

it brings to the table and what assets the public brings to the table. In the UK, considerable debate

in the UK has surrounded the issue of cultural value. Cultural value has been characterized as

having three dimensions: intrinsic value, instrumental value and institutional value (cf. Holden,

2006). We would suggest that all three of these dimensions are important components of what

we call public good.

Twenty-first century organizations are increasingly being expected to bring value to their com-

munity over and above what is specified in their mission. Whether an arts, history or science

organization, there is an expectation that as a good citizen contributions will also be made to

areas such as the environment or social welfare. Accordingly, forging and maintaining partner-

ships and collaborations with like-minded organizations in the community have become increas-

ingly common. Such collaborations allow individual organizations to significantly leverage theirimpact. As organizations increasingly strive to be responsive to more challenging social agendas,

partnerships and collaboration emerge as one of the more practical ways an institution can achieve

significant reach and impact.

In the area of organizational investment, institutions need to document the value of their current

human resources of staff, trustees, and supporters and then determine how they can nurture and

enrich these resources. In a similar way, each organization needs to valuate such resources as

intellectual property, collections, building, and brand and enter into a process for systematically

and annually enhancing these assets.

Finally, in the area of finances organizations need to determine what are the key products and

services their organization provides and determine how those products and services will befinancially sustained in both short and long term. Long-term sustainability requires the develop-

ment of coherent financial strategies, including the development of multiple revenue sources

delivered over diverse time-frames. Below we examine each of these success categories in

more detail.

Support of the public good

As highlighted in the opening quotation by Weil (2002), creating public value, that is, ensuring

that the public (or more likely publics) is better off than before as a result of your institutions

actions, are the hallmarks of what it means to be an effective cultural organization in the Knowl-

edge Age. Or as Weil (1999) also said, the goal of a cultural institution can no longer be to merely

be about something, whether that is art, history, music or dance; today a cultural institution must

also set as its goal to be for somebody. This transition must begin with the organizations mission

and be reflected in all of the organizations activities. A corollary of this focus on public value is

that for too long, cultural institutions have tried hard to be all things to all people. Trying to be all

things to all people is a strategy that is difficult to accomplish in todays complex and highly com-

petitive marketplace (Treacy & Wiersema, 1996). One of the important by-products of a focus on

specifying and measuring the goal of public value is that it invariably leads organizations to

accept the limitations of their capacity to impact the public and requires that they target specific

audiences in order to be strategic and optimize the impact that they can have.

Most cultural organizations argue that they exist to serve their community, that they are there tosupport civic engagement and build social capital, but many continue to focus on fairly traditional,

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institution-focused efforts (increase science education opportunities for underserved audiences,

preserve cultural treasures for generations to come, and so on). Many cultural institutions have

also been arrogant and thought of community needs in terms of the deficits of these communities,

rather than the assets the community brings to the table. For example, institutions have long orga-

nized their programming around efforts to help communities better understand classical music,

become science literate or learn to appreciate the value of contemporary art; all of these begin

with the assumption that these are qualities the public lacks. An alternative approach is one that

focuses on supporting and enhancing existing capabilities of the public. This asset-based approach

has proven to be quite successful in the area of community development (cf. Kretzman & Rans,

2005). Replacing historical deficit-based approaches in challenged communities with an approach

that attempted to discover and mobilize the layers of assets found in any community assets such

as the skills and resources of its individuals, the power of relationships in organizations throughout

the community, the assets represented by the array of institutions in the community, the physical

infrastructure of the community, the profile and dynamics of the local economy and the stories that

define the community resulted in significantly greater economic and social progress (Kretzman& Rans, 2005). In fact, relatively few cultural organizations have carefully thought through the

questions: Why would the public want to engage in the activities offered by the organization

and to what end? How will the community be better from their perspective as a result of this

engagement? The real questions a cultural institution needs to address are:

. What are the audiences that can best be served by the resources of the institution?

. How can these audiences best be targeted?

. And equally importantly, how will the organization begin from and build off the assets the

public itself brings to the experience?

Relatively few institutions have made the effort to actually seek out their communities to ask

them what it is they already have and what they might want, rather than need. Those that have

made this effort inevitably discover that the communitys wants often transcend the organiz-

ations traditional boundaries, moving into areas such as improving family and community

health or dealing with issues such as poverty or illiteracy.

The key is for cultural institutions to not only talk the talk about being part of a larger commu-

nity, but actually to walk the walk. For too long, cultural institutions have thought and behaved as

if they were isolated jewels, with inherent value based on their longevity, privilege or financial

worth. Museums, orchestras, theatres, and galleries are increasingly appreciating that they are

but one piece of a very complex community fabric, in fact, not just one fabric but a series of inter-

secting community fabrics communities of geography (e.g., national, state, and local), purpose

(e.g., education, social service, culture, entertainment), interest (e.g., art, history, science) and

commerce (e.g., tourism, education). Opportunities for collaboration exist within and between

each of these communities. For example, it is no longer sufficient to merely be a quality arts

organization; every cultural organization must also play its role in supporting public welfare,

equal opportunity and equal access, and even demonstrate that it is a good environmental

citizen. Cultural institutions are increasingly being held, and will continue to be held, specifically

accountable for how they perform in these areas of supporting public good. Arguably, achieving

this kind of community impact cannot be done individually; organizations can no longer sustain

their historic insularity and competitiveness. Only through partnerships and collaborations can

institution transcend the limitations of staff, buildings and even budgets in order to leveragetheir impact on the public good.


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Organizational investment

At the heart of every cultural organization are capital assets; those assets that allow the organiz-

ation to conduct its work. For many, these assets include the buildings in which they reside, for

others it also includes the collection they house and preserve, and for others it is the stage propsand costumes that allow them to stage the shows they perform. However in todays Knowledge

Age, the value of these assets pale in comparison to those of an organizations intellectual assets

(Thurow, 2003; Zuboff & Maxmin, 2002). Knowledge assets such as intellectual property, staff

knowledge and vision are at the heart of the new economy; an economy marked by the need for

increased adaptability, innovation and process speed, where knowledge represents a distinct

factor in all production processes and plays a dominant role in the book value-to-market value

ratios of companies (cf. Cortada, 1998).

Arguably, one of the most important assets for any cultural institution is its identity. Organiz-

ational identity, which includes both internal matters of vision and values and how the institution

presents itself to the outside world through its mission, products, and services, are of fundamental

importance to a cultural organization. In the business world, this notion of identity is referred to as

an institutions brand, what one stands for and how the institution communicates the core essence

of its being to the rest of the world. Defining an institutions identity is at the heart of branding,

and is a fundamental intellectual asset.

However, that is but one part of a cultural organizations assets. In the Knowledge Age, in

which ideas and creativity are major assets, the goal of every twenty-first century cultural insti-

tution leader has to be first and foremost to optimize the quality of the organizations personnel.

The problem is that it is becoming increasingly challenging to find good staff; so difficult that ever

greater time and energy needs to be devoted to retaining, rather than merely recruiting, good staff.

In the cultural sector, retention has as much, if not more to do with supporting and encouraging

intellectual curiosity and continuing education of staff as it has to do with salary and traditionalbenefit packages (Yigitcanlar, Baum & Horton, 2007).

The benefits of supporting the organizations staff go far beyond retention of individual

employees though. Teams not individuals are the fundamental learning and action unit of

todays organizations. As outlined by Senge (1990), building and sustaining the organization

as a learning organization significantly enhances the organizations capacity to perform sustained

quality work. Thus, facilitating as well as documenting, the enhancement of team activity and

development is instrumental to organizational health and growth.

However, these intellectual assets are not free. Investments must be made to create, foster and

sustain them. This is why every institution should try to ensure that its store of organizational

assets grows every year. To be successful, each organization must annually invest in and trackboth its physical and intellectual assets.

Finances

The two areas described above are fundamental to the success of a cultural organization in the

twenty-first century, but at least one additional measure of success is essential measures of

financial success. The boundaries that distinguish the non-profit and for-profit worlds are

quickly blurring. More and more for-profits are being judged by the traditional non-profit criteria

of social and environmental responsibility, while increasingly non-profits are being judged by

the traditional for-profit indicator of the financial bottom line. For years many people assumed

that being a non-profit meant that the organization did not need to make money, or in somecases should not make money. Today nothing could be further from the truth; even for

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government-funded organizations. Non-profit leadership is now held highly accountable for

developing and managing budgets, and there is an expectation that the director of a cultural

organization will keep the organization in the black. In the twenty-first century, a cultural organ-

izations financial status needs to be a major criterion of institutional success. In fact increasingly,

there is an expectation that a cultural organization should flourish financially so that surpluses can

be re-invested in fostering institutional learning and the support of the public good. Serious

business planning and prioritizing of the financial costs and benefits of an organizations many

activities is something that has only very recently become commonplace.

Historically, cultural organizations, particularly government funded organizations were content

to develop a budget every year and wait for their funder to allocate the necessary monies. In good

years pet projects and new initiatives were funded, in bad years these expansions were curtailed.

Increasingly, a good year is deemed to be a year when budgets remain stable a bad year is one with

major budget cuts. Recently, there have been few good years and the prospect for the near term

looks very bad indeed. As any ecologist will tell you, stability is best achieved by diversity (cf.

Holling, 1973; Tilman, Lehman, & Bristow, 1998). In other words, financial stability is morelikely to be achieved if funding sources are diverse. This means that the recent trend of govern-

ment-supported cultural organizations needing to supplement their funding from sources beyond

the government is not only a good idea but likely to become a necessity. Non-governmental

cultural organizations have for years understood the need for multiple funding sources, but the

temptation to become dependent upon a single major funder is always a temptation; a temptation

that good financial planning and strategizing suggests avoiding.

Measuring and sustaining success in the Knowledge Age

In addition to being able to address key aspects of success in the areas of public good, organiz-ational investment and financial stability, there is one other important expectation for success as a

cultural institution in the twenty-first century. It is not enough to say that the cultural institution

has achieved success in these areas; increasingly one must be able to demonstrate that success

was attained by collecting evidence-based data. Increasingly, cultural organizations are being

asked, in fact required, to assess and track progress in these three areas. Goals and benchmarks

in all three of these areas need to be attained for an organization to be judged successful, and

all need to be measured at least annually.

In the past it was sufficient for cultural institutions to use what proponents of outcomes-based

assessment call outputs as evidence of success that is, what they have or what they do with what

they have, for example the number of items in the collection, the size of the staff, opening a new

exhibition, or most commonly, the numbers of individuals served. Some or all of these types of

measures are likely to continue to be utilized and though these indirect measures of success are

still accepted in some circles as evidence of organizational success, those circles grow smaller

every day. Increasingly, only direct measures of success are acceptable; the specific outcomes

of an institutions activity. An outcome is what has actually been accomplished through what

you have done, that is, what participants can do, think or feel as a result of the interaction,

how your staff have been influenced and the impacts of financial success on your institution

(Dierking, 2007). Examples of outcomes include definable changes in the publics knowledge

and understanding, or evidence of a long-term commitment on their part to continue exploring

an idea after they leave your institution, measurable increases in the attitudes or productivity

of key staff and volunteers, and even outcomes attained through the mutually reinforcingprograms of two or three collaborating public education organizations. An example of an


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outcome might also be a 20% increase in the organizations endowment or a 15% increase in net

revenues from earned income. If one thinks about the broader outcomes of supporting the public

good in the areas of public welfare, well-being and the health of the community and planet, evi-

dence of impacts on the community in these areas would also need to be demonstrated. This

means being able to provide hard evidence for how you have measurably influenced the

quality of peoples lives those inside and those outside your organization (Falk & Sheppard,

2006). In the twenty-first century both the process and product of sustainability will be based

upon the metrics of impact. Success in this new century will require that cultural institutions

not only achieve excellence in each of the three areas described, it will require that they

achieve lasting, measurable excellence in each area.

The notion that cultural organizations should measure at least some of these types of outcomes

is not a new idea. In particular, the idea that cultural institutions should enhance the social good,

including facilitating social inclusion, cohesion and access (Lawley, 2003; Sandell, 2003) has

been discussed previously, as has the requirement that institutions document their contributions

to these areas (Hooper-Greenhill, 2004). In the UK this has become a serious issue for publiclyfunded organizations such as museums, galleries and archives, with funding tied to successful

evidence of impact (Selwood, 2001). Whether one agrees with their theoretical basis and the

way they are being implemented and tracked, the development of the Generic Learning Outcomes

(GLOs) in the UK represents a particularly notable example of efforts to define and measure

outcomes of cultural institutions on the public good (Kawashima, 1999; MLA, 2004, 2006;

Moussouri, 2002) and similar efforts are beginning to occur in the US, Australia and Canada

(e.g., Friedman, 2008).

What is important about what we propose is suggesting that organizational success be defined

as occurring along multiple dimensions; not just public good, but also internal measures of

enhance capacity and financial vitality. The approach we advocate using is based upon a tech-nique that has become popular in the for-profit sector and has begun to be experimented with

in the non-profit world as well the balanced scorecard approach. Although we do not fully

subscribe to the specifics of the balanced scorecard approach, we find that it provides a useful

conceptual foundation for what we propose.

The balanced scorecard approach has the advantage of being both an institutional assessment

tool and a strategic management technique. The approach was developed in the early 1990s by

Robert Kaplan and David Norton (1996) and the system was called the balanced scorecard

because it attempted to consider more than the traditional financial bottom line as the basis for

assessing an organizations success. According to its advocates, it enables organizations to

clarify their vision and strategy, as well as develop actions and provide feedback to continuously

improve strategic performance and results. Kaplan and Norton describe the innovation of the

balanced scorecard as follows:

The balanced scorecard retains traditional financial measures. But financial measures tell the story ofpast events, an adequate story for Industrial Age companies for which investments in long-term capa-bilities and customer relationships were not critical for success. These financial measures areinadequate, however, for guiding and evaluating the journey that [Knowledge] Age companiesmust make to create future value through investment in customers, suppliers, employees, processes,technology, and innovation. (1996, p. 5)

The traditional balanced scorecard involves viewing the organization from four perspectives:

(1) learning and growth; (2) business processes; (3) the customer; and (4) finances. Metrics are

created and data collected and analysed relative to each of these perspectives. We have takenthese ideas and reframed them utilizing the three areas of success described above. At the core

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of the model is our contention that organizational success can be defined as the measurable value

generated over time through socially, politically and economically sustainable practices across

the three specific domains of supporting public good, making organizational investments and

sustaining financial stability.2

A new approach to organizational assessment

Measuring all of these dimensions of institutional value is clearly a tall order, particularly if one is

trying to accommodate all the multiple facets and activities of an organization. In order to make

this a doable task requires some form of segmentation; a breaking down of the organization into

manageable bites. Historically, most institutions have analysed their institutional success as a

function of activity, e.g., education, collections, research, security etc. Unfortunately, this

approach often does not document the core of what an institution is trying to achieve since it

focuses on the means to an end; they are inputs and at best outputs, what the organization

does, not what it accomplishes! The bites need to be focused on accomplishments, onoutcomes! The other problem is that they are focused on the institution. Organizational value

needs to be measured from the users perspective; it needs to be segmented by the public

needs/wants which the organization is trying to satisfy.Thus, a better way to organizational success is to define each of the major audiences the organ-

ization serves; each audience defined by the specific and unique good that will be attained

through interactions with your institution. Historically, institutions have taken a one size fits

all approach that defines good as serving the public or attempting to meet the needs of all

the individuals served by the institution. When efforts have been made to define audience

segments, the categories have often been based upon demographics (e.g., majority vs. minority

users; children vs. adults), frequency of use (e.g., one time vs. regular users) or geography(e.g., local vs. out-of-town users). Although these approaches have some validity, arguably a

much more robust strategy is to begin with the audience and its needs/wants. What are the keyneeds/wants that the institution seeks to satisfy and what are the characteristics of the audiencesfor whom these interactions are intended? In this way, there is a direct correlation between the

value generated and the audience segment defined. And equally important, there is a direct corre-

lation between the institutional value generated and the institutional resources allocated to devel-

oping that value. To this end, we would suggest using a scheme similar to that developed by Falk

(Falk, 2006; Falk, Heimlich, & Bronnenkant, 2008) or Morris, Hargreaves, McIntyre (2004).

Once segmentation is completed, then the institution can:

. Define measures of achievement develop outcome metrics associated with satisfyingeach of the success categories (supporting public good, developing organizational assets

and generating and managing financial resources). It is important to note that:

W Institutions may want to weight some audience segments more highly than others, e.g.,

every institution serves core, active and peripheral audiences. An argument could be

made that the value of satisfying core audience needs should exceed the value of satisfy-

ing peripheral audience needs; if so, those core audience values should be more

heavily weighted.

W Institutions may even want to prioritize (weight) within these categories, so that, for

example, the needs of some core audiences are deemed to be more important than others.

. Determine the institutional assets required to accomplish the intended outcomes areassets expended or added to through this activity?


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. Develop indices of community value created by serving this audience (or not as the case

may be).

. Assess whether meeting the needs of this audience resulted in greater or lesser staff morale

and whether it afforded opportunities for professional growth and development.

. Track the revenues and expenses associated with the activities, services and products that

are designed to satisfy that segments specific needs/wants.

Taking all of this into account, organizational success can thus be measured by assessing the

sum of values created less the costs incurred by such efforts as a function of each audience

segment (AS) served.

Organizational Success S(ValueAS 2 CostAS)

Where both Value and Cost are defined as complex, three-dimensional variables:

Value (public satisfied and community improved) (learning organization capabilities enhanced

and organizational assets created) (income generated and reinvested into further activity)

Cost (audience and community dissatisfaction because needs/wants not met and public good notachieved) (internal morale expended and organizational assets depleted) (expenses including

both direct and a pro-rated share of the indirect/administrative costs)

Each of the values and costs will have a unique set of measures, but all values and costs

will need to be quantified in such a way that they can be arrayed along a single quantitative scale.

Make no mistake, defining and operationalizing an organizations values and costs will

involve a measure of subjectivity. Not everyone will agree with each of the definitions an organ-

ization develops, nor the objective basis for measuring their achievement. However, by defining

and operationalizing what constitutes a value and what constitutes a cost, the organization

makes explicit and available for public scrutiny its standards and values. Some examples ofhow we would begin to objectify each of the core dimensions of success framed within this

model follow.

Measuring public value

Cultural organizations first and foremost exist to accomplish some type of defined good for

some segment of the public; this good is typically articulated in the organizations mission

statement. Historically, organizations have used the challenges of measuring institutional

good as an excuse for not attempting to measure whether good has been achieved. Make no

mistake, determining an institutions impact is a non-trivial task. However, if an organization

can begin to articulate what that public value looks like then it is possible to begin to

frame a metric around it.

The place to begin this process is by asking what are these good things that will be accomplished

and who are the populations that are deriving benefit? Each organization needs to be able to articu-

late what are the actual outcomes generated for the populations served (bottom up) rather than by

defining some idealized notion of the good provided (top down). Determining whether or not

real needs have been met can best be assessed by the users not the provider. In other words, the

measure of impact will be some measure of actual changes in user populations. Also, since

different audiences have different needs, starting from users allows an institution to more

accurately define the multiple needs it hopes to satisfy. We recommend that each organization

begin by segmenting its audiences and defining for each segment a set of benchmarks of publicvalue they intend to support; public value based upon audience defined need.

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Value

Beginning from this set of benchmarks of public value for each audience segment determined by

empirical studies, the organization will measure the changes resulting from its activities. For

example, change in appreciation for classical music, change in understanding of the role of theartist in public discourse, or change in mental or physical health. In addition to these mission-

driven outcomes, every successful organization must influence public good within their commu-

nities by providing support to other organizations and enhancing the quality of life for all. For

example, public good is supported by being an economic engine, minimizing per capita environ-

mental impact, creating cultural opportunities, and/or serving as a safe, family-friendly commu-nity meeting space. All of these outcomes have a value and should be part of the arithmetic of

institutional success. Each institution should create a baseline valuation of its economic and

social community value. For example, in the process of providing value for a particular audience

was a partnership or collaboration with other organizations entered into? If so, how did the part-

nership/collaboration enhance the value of the other organization? Did the institution implementa new carpool policy that reduced the overall carbon emissions generated by the organization?

The value of this should be proportionately distributed across each audience segment.

Costs

Utilizing the same benchmarks as above, empirical studies will determine whether interactions

with the institution result in any negative changes or unintended consequences such as not accom-

plishing targeted outcomes or the development of negative attitudes by the public such as distrust

of cultural institutions. Utilizing the same baseline as above, it is also important to determine

whether the activities of the organization related to a specific audience segment diminished com-

munity value? For example, in order to better serve the needs of a particular segment the insti-

tution opted to focus more on local audiences than out-of-town tourists, resulting in a decline

in ancillary economic benefits such as hotel rooms and restaurant meals sold. Did the building

of a new wing result in the cutting down of 30 trees which were not replaced?

Organizational investment

No organization can exist for very long without its assets, whether tangible ones like buildings

and collections or intangible assets such as staff morale, intellectual capital or a strong brand.

In the twenty-first century the majority of the book value of most non-profits reside in their

intellectual property and brand (included within brand is the organizations reputation). Each

institution should create a baseline valuation of its assets. Tangible assets should be assigned a

value based upon the contribution they make to mission and public good. In other words, tangible

assets only have value to the non-profit to the extent that they directly support public value.

Value

Beginning from these value benchmarks, the institution will annually determine the increase in

value for each category of asset as a function of audience segment. In other words, in the

process of supporting public value for a particular segment were there increases in asset value

such as an expansion of intellectual capital, improvement in the institutions brand, additionsto the permanent collection or renovations of facilities.


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Institutions also create value by being good employers. Organizations create value for

themselves by supporting a creative, healthy and intellectually stimulating workplaces; one

that allows employees to grow and mature as professionals. Every activity of the organization

impacts the staff; these impacts are either positive or negative. Metrics which measure

these impacts should be standardized so that consistent measures can be generated. Value is

added if in the process of creating a program or service the creative capacity of the staff is

enhanced. For example, historically the skills and knowledge to conduct this program or

service only existed outside the organization, requiring the hiring of an outside consultant, but

now these capacities exist within the organization. Other increases in value could include

improved staff morale that results from feeling that their actions made a difference in the

world or that they work in an organization that cares about their growth and well-being. The

success of an organization is more than the sum of its individual employees; hence organizational

morale and collaboration are attributes that also need to be assessed.

Costs

Utilizing the same baseline valuations as above, for each audience segment, the institution can

determine whether activities over the past year led to any decreases in the institutions organiz-

ational assets such as intellectual capital (e.g., outright selling of copyright rather than entering

into a lease arrangement that allows for long-term retention of the asset), scandals or other

negative events that diminished public trust in the institution or diminished the institutions

brand, reductions or loans of tangible assets, or structural or physical problems with property

that require(d) replacement/fixing. Costs also need to be assessed for staff resources. A particularproject could have been a great success but came at the cost of a burned-out staff because of the

need to work 80 hours a week on end in order to complete the project on time and under budget.Staff capacity may have been created, but it required hours of training time, which was a cost.

Also, annually, there should be an assessment of staff turnover and the costs associated with

recruitment, hiring and retraining of new staff.

Measuring finances

Money matters. Although non-profits do not exist in order to generate money, without funds a

non-profit cannot exist for very long. Employees need to be paid, buildings need to be maintained

and it costs money to provide services to the public. Maintaining accurate and timely financial

record-keeping has always been a fundamental part of running a non-profit, but too often finances

are imperfectly tied to an organizations outcomes; typically what is tracked is how the organiz-

ation does its work rather than what it accomplishes by doing its work. Using accepted accounting

practices, the organization will annually determine, for each audience segment, all income and

expenses.

Value

In addition to traditional bottom-line measures, several additional metrics might be considered

in this category. Also potentially worthy of monitoring are measures of income source. Income

can come from any source contributions, grants, contracts, earned income or endowment

monitoring the source, strength and sustainability of various funding should be tracked annually.Creating a financial diversity index might also be something worth doing.

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Costs

All financial expenditures utilized in support of each audience segment should be documented

and reported. Costs include personnel costs, time spent in training and preparation, development

of resources, and marketing and promotion. In addition, a pro-rated share of all indirect costs,based upon the percent of direct costs allocated to the audience segment, should be assigned to

segment costs. Indirect costs include expenses related to administration, rent and utilities, main-

tenance and depreciation of physical assets.

Conclusions

Overall, this approach to organizational assessment will generate a holistic, annual measure of

institutional success. It will permit an organization to compare year by year the value it generates

as a function of cost. This system also should provide a diagnostic tool to analyse as a function of

audience segments, how and for whom the institution is being successful. Since not all activitieswill produce comparable public value, and some public value will require greater institutional

effort (i.e., cost) to accomplish, this tool should also provide costbenefit information on each

specific audience segment served. The key to successful monitoring of success is to be as specific

and concrete as possible. We believe this approach could provide a theoretical framework

for advancing both how, and ultimately why, cultural organizations do the work they do. Like

any assessment system, the value is in the validity and reliability of the metrics used. In the

short term we would emphasize validity over reliability, but in the longer term we think it

might be possible to create valid and reliable measures that would permit organizations to not

only track their individual performance over time, but allow for comparisons within and across

large parts of the cultural sector. Currently, the National Science Foundations InformalScience Education programme is trying to do this at least at the level of their specific funding pro-

gramme. They have developed a set of impact categories in which each funded project must ident-

ify at least 2 3 intended impacts and a project monitoring system to collect the resulting

outcomes of each project (Friedman, 2008). They hope to be able to use these data to analyse

the accomplishments of the programme, which currently funds exhibitions, community-based

efforts for families and youth and media-based efforts in free-choice learning institutions such

as museums, nature centres, public broadcasting organizations and zoos and aquariums. Of

course these efforts are only successful to the degree that there is follow-through and accountabil-

ity. For example, although the US Institute for Museum and Library Services has required project

staff for each funded project to develop a Logic Model and intended outcomes, there is little effort

to follow up and determine whether outcomes were actually attained and even to ensure that

evaluation is an integral part of these efforts.

However, the writing is on the wall and in the future cultural organizations will be required to

invest a greater share of their human and financial resources in assessment and on-going improve-

ment. In a recent book, Falk and Sheppard (2006) suggested that every cultural institution must

rethink how it does business if it wants to thrive in the radically altered marketplace of the twenty-

first century. The critical question is not what an organization can do to survive the next few years

of economic downturn, but how an organization can thrive long into the future, even during tough

economic times? How it can be better tomorrow than it was today? As business experts Collins

and Porras (1994, p. 185) found in their research, great companies institutionalize these questions

as a way of life, a habit of mind and action. The best organizations do not achieve greatnessbecause they are lucky, they work at it. Success, particularly in the rapidly changing world in


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which we now live, requires a continuous commitment to improvement and investment in the

future. There is no finish line, no point at which ultimate success is achieved.

We believe an important part of this changed sense of what constitutes success needs to include

a re-definition of not only what gets assessed, but how it is assessed and how real value and

costs are calculated. We believe that the model we have proposed in this article could help to

move the cultural community towards a more useful way to determine institutional success

and, even more importantly, create and sustain that success. There is no question that there

will be significant challenges in not only developing the metrics the model requires but also in

the time and resources that will be required in order to collect and analyse the data (Lev,

2001). Over time, as expertise develops both of these tasks will become more streamlined.

However, the high threshold for engagement in this process should not be deterrent. One need

only observe the turmoil that high stakes testing has had on the US public school sector to

appreciate that cultural institutions can either be proactive in defining for themselves how they

will define accountability or others outside the community will impose those criteria upon

them. We believe the model we have proposed provides a comprehensive pathway towards theformer course.

Notes

1. For additional elaboration on these ideas, see Falk and Sheppard (2006).2. The Balanced Scorecard approach waned in popularity in the business community in recent years

because of the return to an almost single-minded emphasis on the financial bottom line. In the wakeof the financial melt-down of 2008, we predict a return to concerns about other measures ofcorporate success beyond income. The result should be a reinvigoration of efforts in the for-profitsector to utilize approaches such as the Balanced Scorecard.

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