ICSOM response to Mellon Foundation's study

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ICSOM Chair on the Flanagan Report

Bruce Ridge

In recent days, there has been a great deal of discussion regarding the release of a report by economist Robert J. Flanagan, commissioned by the Andrew W. Mellon Foundation, titled "The Economic Environment of American Symphony Orchestras." On behalf of the ICSOM Governing Board. I thought I would share some brief observations about the report and the work of Mellon as well as the oft-referred to "Elephant Task Force."

It seems that every few years or so a new report is commissioned and released about the Symphony Orchestra industry in America that suggests that orchestras are not sustainable, and they generally place the blame, at least partly if not occasionally entirely, on musician salaries. It is difficult to determine just when the industry became so committed to proving to its public that failure is inevitable, but the self-destructive pattern of behavior has been around for decades. A United Press International article from 1970 famously depicts the findings of the death sentence report of that era, titled "25 Symphonies Doomed to Die."

But still, no matter how deeply our industry is committed to publicizing its impending death, orchestras somehow manage to survive. In fact, in many places, they are thriving. This is due to the leadership of creative managers and active boards who are able to effectively demonstrate the relevance of the arts in their communities. It is a relatively simple formula: people will invest in things that serve the citizenry, and they won't invest in things that they are repeatedly told are unsustainable.

Three officers of ICSOM attended one meeting to discuss the Flanagan report, in July of 2007. At that meeting, we vociferously expressed our concerns with what we saw as faulty conclusions based on faulty data. But even more than the findings of the report, we were concerned that the release of the report would lead to yet another onslaught of press that would trumpet the end of the orchestra in America similar to what followed the publication of the 1990's version of this phenomenon, The Wolf Report.

All of these doomsday reports are filled with USA Today-like charts and graphs that serve to support the assertions of the text. However, the text is generally written in such a way that only the most ardent masochist would actually be able to plod through it all. The graphs, with their plummeting lines of revenues paired with their rising lines of musicians salaries, are welcome release from the numbing prose. I suspect that for many readers, their eyes are drawn to the illustrations as they beg for mercy.

Since the release of this report, some of our fears have been realized: There certainly has been a lot of coverage, both online and in some print media. But, to our relief, the report has been, frankly, ridiculed more often than not. Perhaps the most telling review came from Mr. Andrew Druckenbrod of the Pittsburgh Post-Gazette, who wrote "Duh!"

Inherent in Mr. Druckenbrod's "Duh!" is the fact there is some truth in Professor Flanagan's report. Mr. Druckenbrod goes on to say "Other conclusions are so obvious they are laughable."

We don't dispute that there is a need to analyze our field, but we believe that we are researching the wrong things. The "Elephant Task Force" acquired that sobriquet because it determined that there was a proverbial elephant in the room no one is discussing, that pachyderm being the economic situation of the symphony orchestra in America. We would suggest that the real elephant is still being ignored, even as it wrestles with the 800-pound gorilla and crushes the coffee table.

We must learn to effectively market our orchestras, promoting them as vital, and branding them as indispensable. In a world where other businesses that offer far less to the common good have mastered the art of promotion and the utilization of free media, orchestras remain, by and large, dramatically behind the times.

Where is the report that analyzes the great success stories? Why are we not studying the places where creative managers and musicians have led their orchestras to new heights of community service and artistic excellence? What other business uses the stories of its failures to build a model for the future?

We have seen it all before. We are seeing it again now.

Bankruptcy used as a fund raising tool. Ridiculous.

An orchestra with half the musicians will be the panacea for a lack of endowment. Absurd.

Put that on a glossy brochure: The Columbus Symphony: To Cure You We Must Kill You.

A fair criticism of what I have written here would be that I have not disputed the Flanagan report point by point. Frankly, I just don't have the time. There are musicians working to support their families that need our assistance, and there are underserved communities that need our ideas. I am very grateful to those who have taken on the task of pointing out specific concerns with the Professor's findings, and those observations are easily found online. In this brief essay, I have merely attempted to muse on the phenomenon of our industry's penchant for reports that promote such negative aspects of the field.

We have no doubt that the Mellon Foundation cares deeply about the preservation of our great art form, and about the community service we provide. We know that all involved are fine human beings, all trying to do what they think is right. But, we encourage them to reevaluate the process they are undertaking. Musicians are frequently invited into the room for these discussions, and those gestures are certainly appreciated. But every time we enter, we emerge with the knowledge that we have participated in a process that leads, seemingly inevitably, to a public reporting that we feel harms the field, or in other circumstances labels the salaries through which we feed our children "A Road Map to Extinction".

The Mellon Foundation, the Elephant Task Force, and the Flanagan Report all call for change in our industry. We agree. We must change. We must stop doing this to ourselves.

Bruce Ridge, chair
International Conference of Symphony and Opera Musicians (ICSOM)

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submitted by Brian Rood
Kansas City Symphony

Much has been written about Robert Flanagan's recently released report on orchestras, "The Economic Environment of American Symphony Orchestras", commissioned by the Mellon Foundation. My perspectives are not only those of an ICSOM Governing Board member but also of a member of the original Elephant Task Force (ETF), which I served on from 2003 to 2004.

Professor Flanagan's Report is troubling in several key areas.

One is the process used to choose Flanagan and the circumstances surrounding that choice. Another is the financial data used, which constitutes the very foundation of his research and, therefore, his conclusions. Also of great interest is the lack of attention paid to other expenses within orchestras' budgets. Flanagan chose to focus solely on musicians' salaries rather than any other workforce within our orchestras. One can only ask, "Why?" And, finally, what was the rush for this particular report over other worthy projects?

First, let's take a look at the process involved. Flanagan was commissioned by the Mellon Foundation to research orchestral economics in 2006, with support from the League of American Orchestras. (At that time, the League of American Orchestras, or the League, was still named the American Symphony Orchestra League.) The main focus was to study whether the deficits encountered by orchestras at the turn of the decade were structural or cyclical.

This very subject was one of the first discussed by the ETF in late 2003. The ETF was composed of Mellon Forum participants and included board presidents, executive directors, musicians and Mellon officers along with two consultants. One of the burning questions discussed was the structural/cyclical issue. Musicians on the ETF maintained that the deficits were cyclical-due, in no small part, to the horrific events of 9/11. Another view was that orchestras increased their expense budgets too greatly during the economic expansion of the 1990s and that revenues moving forward simply could not keep up. After a great deal of consternation the ETF decided to leave this question alone and to focus on looking forward rather than behind. As many know, the ETF delivered its presentation to the Mellon Orchestra Forum in 2004 and later to members of the ICSOM Governing Board. The presentation included further research and ideas on the four challenges or deficits originally described by
Jamie Ireland in his paper, "Caging the Elephant." The ETF presentation contained a future orchestral model that could potentially be both artistically fulfilling and economically viable. Included were perspectives on organizational culture and my personal favorite, community engagement. While many orchestras have made recent strides towards becoming more engaged with their communities there is great potential yet untapped. In my opinion, we should be spending more of our collective time and energy on further developing relationships within our communities.

Returning to the Flanagan Report, the ETF did discuss inviting an expert to review financial data in order to shed further light on the structural/cyclical question. Knowing that Ron Bauers had worked with many Mellon orchestras, musicians on the ETF naturally suggested that he be engaged. Others thought that Bauers may have appeared to be too "union friendly." However, anyone who knows Bauers knows that he is a numbers person. His interest is to help musicians and management alike understand an orchestra's true financial picture, whatever it may be.

After the 2004 presentations, the ETF lay dormant for many months. From 2005 to 2006 meetings were held that involved Mellon and League leadership as well as members of the ETF. Subsequently, Flanagan was commissioned to undertake this study. It appears they thought that Flanagan would stay on track as well as take an unbiased approach. What is interesting to me, though, is that the decision was made to engage someone who had considerably less experience with orchestral finances than Ron Bauers, who would have been ideally suited.

Much of the data used by Flanagan for his study was supplied by the League in terms of its OSRs, or Orchestra Statistical Reports. This data included attendance figures and financial information including musicians' salaries and benefits. It should come as no surprise that there continue to be perceived problems with the OSRs. In fact, following meetings between League and ICSOM leadership during the 2004 ICSOM Conference, the Collaborative Data Project (CDP) was created to help mitigate these problems.

Let's revisit a few of the issues with the OSRs. The numbers supplied to the League for the Flanagan Report were based primarily on management-generated internal reports and not audited financial returns. It is not a secret that musicians have been skeptical of these numbers for decades. To make matter worse musicians were routinely denied access to this information until just a couple of years ago. There were other bookkeeping and data entry problems that differed from orchestra to orchestra and, sometimes, within each orchestra, due to changes in the chief financial officer and/or executive director positions, different accounting methods and the impact of FASB regulations.

In any event, musicians have not had much faith in the OSRs, particularly as the contents were kept from musicians even during negotiations. These points were firmly articulated during the ETF discussions and later with League leadership. It is perplexing that Mellon and the League sanctioned a study based on the OSRs. If this study was so important then why was it not postponed long enough to allow the development and implementation of the CDP?

Representatives of the AFM, ICSOM and ROPA attended one meeting last July with representatives of Mellon, League, the ETF and Professor Flanagan. The preliminary draft we viewed included research on the dramatic rise of music director salaries, which far exceeded those of musicians. Interestingly, the final Flanagan report's primary focus on orchestral salaries was that of the musicians alone. A great deal of attention was paid to the development of musician salaries in this report and even more in Flanagan's January study, simply titled "Symphony Musicians and Symphony Orchestras." Where is the focus and research on staff and music director salaries and why was this not deemed important to a study on orchestral economics?

Why should there be so much concern about this one report, you ask? While I have just scratched the surface, there is still a ticking time bomb. Who will be the first management and/or board to use the Flanagan Report against their own musicians during negotiations? Why I am so skeptical? Well, this is exactly what happened four years ago. As you may recall, one board president erroneously credited the work of the original ETF as supportive of the position of his orchestra's board and management that the collective bargaining agreement with their musicians was a "Roadmap to Extinction." Henry Peyrebrune and I requested that Mellon Program Officer Catherine Maciarello set the record straight as to the true nature of the ETF's work. Thankfully, she did. In an open letter to Mellon Orchestra Forum Participants and shared by permission with the delegates at the 2004 ICSOM Conference, Catherine stated:

"The (Elephant) Task Force was never intended to conduct independent research or to present conclusions about the general state of the orchestra field. As you know from the presentation, complete data was collected and analyzed for only one orchestra, and much work still needs to be done to refine the model and to determine its applicability to other orchestras. At best, the model offers a tool that individual orchestras within the Forum might use to engage all constituents in a productive dialogue about the future. None of the Task Force materials should be considered definitive, nor should they be used publicly in any way, especially to defend a particular position."

Finally, due to the release of the Flanagan report, there is renewed debate as to the merits of engaging in cross-constituency work involving musicians. Many musicians feel "burned" by their participation. Others see only potential harm to musicians with no advantage to "being in the tent." As a Governing Board member and the chair of my local orchestra committee I have to field this question on an almost daily basis. Due to the issues raised here, my ability to lead others back into "the tent" has been seriously compromised by the report and the process that led up to its release.

My address as ICSOM President to the 2003 League Conference finished with the following words: "For our relationship to flourish, chances will need to be taken, continued trust will need to be earned, and respect will need to be given. Undoubtedly, there will be bumps along the road. How we deal with those bumps will tell us just how far we've come and how far we have yet to go."

My sincere hope is that this Report will prove to be just a "bump along the road." Borrowing from ICSOM Chairman Bruce Ridge's recent response, "We must stop doing this to ourselves." Are there no more productive ways to use our collective time, energy and resources? I will gladly be among the first to sign up for groups that focus on advocacy to counter the negative rhetoric that pervades our discussions all too often.

Brian Rood
ICSOM President
Kansas City Symphony Musicians' Committee Chair ETF Member, 2003-2004

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I think Brian raises some good issues.

Was Flanagan a good choice? Probably not. He was hired, after all, to look at the "structural/cyclic" issues. His webpage at the Stanford School of Business describes his interests as including "the economics of discrimination, labor union behavior, and the impact of national incomes policies and collective bargaining institutions on wages, inflation, and other measures of macroeconomic performance. Most of his research focuses on the effects of international differences in labor market institutions and practices on employment outcomes. His most recent book analyzes the effects of globalization on working conditions and labor rights around the world."

To me, that doesn't look at all like the right intellectual portfolio to look at "structural/cyclic issues." It does look like a really good background if one wants to focus on the cost of unionized labor within an industry.
But that wasn't supposed to be his charge.

So why was he chosen? Brian is better position than I am to address the role of the EFT in selecting Flanagan, although it appears from what he wrote that he, at least, had no role in that choice. I would like to know who did make that choice, and on what basis. My guess is that it was Mellon's decision. It is certainly possible that they picked him because someone knew him and suggested him, rather than because of a pre-existing intent to focus on labor costs. As the great English historian AJP Taylor once wrote, most of history can be explained by human blunders rather than perfectly executed decisions to do bad things. Knowing who was running the Mellon orchestra program at the time, I can easily believe that choosing Flanagan was simply sloppy staffwork.

Incidentally, I don't see that Ron Bauers would have been a good choice either. Ron is far too closely associated with the AFM to be able to produce a report that would have been credible to anyone else in the orchestra field. But there are a lot of economists out there, and I can't imagine that someone couldn't have been identified whose background was in precisely the structural/cyclic issues that Flanagan was supposed to address.

Much of the data used by Flanagan for his study was supplied by the
League in terms of its OSRs, or Orchestra Statistical Reports. This
data included attendance figures and financial information including
musicians' salaries and benefits. It should come as no surprise that
there continue to be perceived problems with the OSRs. In fact,
following meetings between League and ICSOM leadership during the 2004
ICSOM Conference, the Collaborative Data Project (CDP) was created to
help mitigate these problems.

Let's revisit a few of the issues with the OSRs. The numbers supplied to the League for the Flanagan Report were based primarily on management-generated internal reports and not audited financial returns. It is not a secret that musicians have been skeptical of these numbers for decades. To make matter worse musicians were routinely denied access to this information until just a couple of years ago.

There were other bookkeeping and data entry problems that differed from
orchestra to orchestra and, sometimes, within each orchestra, due to
changes in the chief financial officer and/or executive director
positions, different accounting methods and the impact of FASB
regulations.

In any event, musicians have not had much faith in the OSRs,
particularly as the contents were kept from musicians even during
negotiations.

These points were firmly articulated during the ETF discussions and
later with League leadership. It is perplexing that Mellon and the
League sanctioned a study based on the OSRs. If this study was so
important then why was it not postponed long enough to allow the
development and implementation of the CDP?

There are issues with the OSR. Many people, and not only musicians, have been skeptical of the precision and usefulness of this data; that's one reason the League agreed to launch the CDP and fund it.

Having said that, though, it's the only dataset available for our industry that can be used for any longitudinal economic study of the orchestra industry. Using data generated by the CDP would have been preferable. But it's not clear to me that there has ever been an intention to rework the past two or three decades of data into CDP-compliant data. Even if there was, that's clearly going to take a great deal of time. It's also true that the OSR data is likely a reasonably accurate presentation of what's happened in our industry over time, even if there are multiple imprecisions in data from a particular year and/or a particular orchestra.

The real problem with the data was the years that Flanagan used. He uses data from the 1987/88 season through the 2003/04 season. But, for a report intended to focus the extent to which orchestra finances are affected by economic cycles in the larger economic, these would appear to be bad endpoints. Even though he does apply corrections for economic cycles (in particular, local unemployment rates and stock prices) to the data from orchestras, it would have been better to have endpoints at similar points in the economic cycles.

Starting his analysis with data from a year in which the economy is expanding and ending with a year when the economy is just beginning to come out of recession seems likely to produce a tilt in the analysis, even after the corrections he applies. Had he started a few years earlier, when the economy was emerging from the recession of the early 1980s, or ended a year later, the uncorrected data would have provided trend data independent of the correction that he applied, which would have provided considerable redundancy to his analysis - and, as Henry Fogel pointed out on his blog, also would have provided a more positive long-term outlook.

Another problem is that the factors that Flanagan uses to correct for cyclical effects are not quite "on point." It may well be that unemployment rates are the best number to use for such corrections, but it seems to me that unemployment rates are more likely a proxy"for whatever it is about recessions that really affects attendance at orchestra concerts. The same may be true about stock prices and contributed income as well.

(continued below)

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... A great deal of attention was paid to the development of musician
salaries in this report and even more in Flanagan's January study,
simply titled "Symphony Musicians and Symphony Orchestras." Where is
the focus and research on staff and music director salaries and why was
this not deemed important to a study on orchestral economics?

Flanagan's report does point out that "A decline in the median share of artistic costs from 62 percent to 55 percent of total expenses was accompanied by modest increases in the median shares of other expenses." With regard to the music director issue, he also wrote that "There was no significant trend in payments to conductors in the full sample of orchestras, although payments to regular conductors in larger orchestras did appear to increase more rapidly than the pay of musicians in those orchestras."

But I don't know where he got this data; I don't believe that music director salaries are reported as a specific item in the OSRs. It's possible he got them from 990s, but that raises a whole other set of questions about comparability of data, as well as the fact that not all orchestras report MD salaries on their 990s, even though they're required to.

Finally, due to the release of the Flanagan report, there is renewed
debate as to the merits of engaging in cross-constituency work
involving musicians. Many musicians feel "burned" by their
participation. Others see only potential harm to musicians with no
advantage to "being in the tent." As a Governing Board member and the
chair of my local orchestra committee I have to field this question on
an almost daily basis. Due to the issues raised here, my ability to
lead others back into "the tent" has been seriously compromised by the
report and the process that led up to its release.

It's important to note that no one authorized Flanagan to release his report. In fact, there were efforts made to get him to change his mind about releasing it early and with very little notice even to Mellon.

My understanding is that there was supposed to be a meeting in May to develop a "framing document" what would essentially be Mellon's and EFT's response to what he wrote. Unfortunately, Flanagan was not really "commissioned" at all. He was paid to do research over which no one but him had any control regarding release and use.

This was really dumb. Most industries, when commissioning consultants' report, make sure that the commissioning party owns the report. That's what Mellon should have done as well.

But, from what I can tell, musician involvement has not only ensured that the Flanagan report was changed significantly from his first draft, but has also been extremely important in guiding the industry response. Musicians could have chosen to not "be in the tent." All that would have achieved is a worse report and an industry response that was far less dismissive.

The good news to date is that no major newspapers or other news outlets have shown any interest in Flanagan's work. That could change, of course.
But I believe that a major reason for that is that the report is far more balanced (and thus far less interesting to the media) than it would have been otherwise, as well as the industry's tepid and dismissive public response to date.

To me, those seem like very positive outcomes from "being in the tent." Another positive outcome would be a realization that such reports are simply not very useful to people trying to make orchestras work better - even if they're accurate reports, which this one isn't in far too many respects.

Robert Levine
Milwaukee Symphony