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Symphony donors question giving amid contract dispute

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The ailing Indianapolis Symphony Orchestra intends to dig itself out of its financial problems in part by stepping up annual donations about 40 percent.

rop-iso-03-15col.jpg ISO musician Mike Heartt distributes union information on Monument Circle. (IBJ file photo)

But many of the longtime donors who would be tapped for such an effort say they feel conflicted about future contributions as they await word on whether the symphony will scale back to part time.

“I don’t think they’ve been good stewards with what they had to get to this point. That’s my one criticism,” said Richard Wood, a former CEO of Eli Lilly and Co. who is one of the ISO’s biggest donors. “Obviously, [the endowment has] deteriorated every year, and they didn’t do anything about it.”

The ISO’s endowment—which has shrunk to about $80 million—has been at the center of ongoing disagreements between executives and musicians in their contract negotiations.

Management canceled the first four weeks of concerts this season after locking out musicians on Sept. 8. Negotiators failed to reach an agreement on new contracts by the Sept. 2 expiration of 2009 agreements.

ISO’s board and management are seeking deep cuts in order to wean the organization off a business model they say relies too heavily on pulling money from the already-struggling endowment. Musicians have responded by saying the changes would “ruin” the ISO.

Thornburgh Thornburgh

Besides cutting the payroll to cauterize its financial wounds, ISO leaders want to bring in another $2.5 million a year in donations, board Chairman John Thornburgh told IBJ in an Aug. 31 interview. The ISO’s annual donations now average $6.5 million.

The more aggressive fundraising effort would rely on reaching out to donors such as Wood, who gave at least $50,000 last year but said he does not recall the exact figure.

Wood, who ran Eli Lilly from 1973 to 1991, said it was too early to know if or how changes at the ISO would affect his contributions in the future.

But the business model needs to change—and musicians need to be on board with it—for the organization to show donors it’s being responsible with their money, he said.

“Obviously, they have a financial problem, which has been growing and growing and growing,” he said.

iso-pies.gif“There’ve been no evident attempts at doing something major to stop the bleeding. They do have some nice resources, but [they’re] not up to the level for them to keep operating as they have been.”

Conflicting messages

Indianapolis-based fundraising consultant Robert Swaney said the ISO could have a tough sell with donors because the group will need to express two potentially conflicting messages.

The first message, for the cost-conscious donors: The new business model is sustainable, but will require big budget cuts.

The second message, for the program-focused donors: The performances will remain high-quality, which requires a lot of money.

Contributors interviewed by IBJ reflected that dichotomy.

Donor and former board member Mike Alley, who is chairman of Patriot Investments LLC in Indianapolis, said he fully intends to keep backing the orchestra.

Managers are making tough decisions, Alley said. And while he sympathized with the musicians, he believes the organization is handling his money responsibly.

“Sometimes we make a decision that doesn’t turn out to be ideal,” said Alley, who gave between $1,500 and $2,499 last year but declined to say the specific amount.

“But I don’t think there’s been a trend of any kind of malfeasance or anything along those lines. I think they’ve managed to navigate through some very difficult circumstances.”

Peggy Cranfill, who gave between $2,500 and $4,999 last year, said the symphony needs to sustain artistic quality to remain strong.

“I feel it’s unconscionable what’s happening, to tell you the truth,” Cranfill said. “I don’t want to be critical of any one party … but whoever’s driving the process, I feel it’s possible they’ve lost sight of the larger picture.”

Swaney said one of the biggest challenges for the ISO will be rebuilding the trust of the broader community.

“Up until just a couple of months ago, they were saying publicly that everything was OK,” he said. “To do that and go, ‘OK, things are not OK,’ it takes a while for the public, and particularly the donors, to understand that.”

Financial challenges deepen

Internal Revenue Service filings show a plunge in the ISO’s finances.

The Indianapolis Symphony Orchestra Foundation, a separate entity that manages the ISO’s endowment, saw its assets tumble from $120 million to $94 million during the fiscal year that ended Aug. 31, 2009.

About $80 million of the assets at the close of that year was the endowment. It recovered to $89 million by August 2011. But the ISO drew $11.4 million from it in the latest fiscal year. Even after accounting for investment gains, it had slipped back to $80 million as of Aug. 31, Thornburgh said.

The 13-percent draw rate is much too high, ISO’s management and board believe, considering that consultants recommend drawing as little as 5 percent.

Simon Crookall, who abruptly resigned as CEO in February, launched a $100 million fundraising campaign in 2010 to restore the foundation’s coffers and maintain the orchestra’s full-time status.

The ISO raised less than $13 million by this July, even with prominent co-chairmen, Indianapolis Colts owner Jim Irsay and Indiana Pacers owner Herb Simon.

The organization launched the campaign despite consultants’ warnings that it was not the proper approach, Thornburgh acknowledged.

“I think in 2012, you can look back in hindsight and say, ‘I think it will be a few more years’” before the economy will recover enough to support a massive capital campaign, he told IBJ in the August interview.

The better approach, consultants said, was to pull in more donations and grants annually instead of a one-time rush. That would create a strong financial base for the institution, which would evoke more confidence from donors.

That is the strategy the ISO intends to pursue now.

ISO spokeswoman Jessica Di Santo declined to elaborate on the amplified fundraising effort, saying it is in the planning stages. She declined to make management available, saying they were tied up in contract negotiations.

Several board members contacted by IBJ declined to comment and referred questions to Di Santo.

Getting donors to give

The ISO will need to figure out which group of donors to tap for the new fundraising effort to succeed, said Swaney, a former ISO employee who founded Robert Swaney Consulting LLC.

There are two basic choices: a few big donors or a lot of small ones.

“If you just say, ‘We want a lot of people coming to concerts and giving lots of money,’ that’s a different approach than saying, ‘We need 15 or 20 people who will do extraordinary things for the institution over the next few years,’” Swaney said.

Tim Seiler, director of The Fund Raising School at The Center on Philanthropy at Indiana University, noted there is potential in “high-net-worth households.” The demographic, 71 percent of which donate to charities every year, includes households with incomes of at least $200,000 or total assets of at least $1 million.

No. 3 on their donation lists is the arts, behind human services and education.

“I think it’s pretty typical of an organization, if they’re trying to realize significant increases in their giving, they will work on what are called ‘major gifts,’” Seiler said.

One thing Swaney said could light up the ISO’s fundraising efforts would be a single, prominent donor contributing a massive sum.

“It’s got to be more than somebody who can just throw money at the problem,” he said. “It’s got to be somebody who feels very passionately about the city and the components about what makes the city great and somebody who’s got that kind of credibility.”

It needs to be someone already connected to the philanthropic or arts communities, as opposed to someone merely with celebrity status, Swaney added.

“There’s just much more leverage with someone who says, ‘I care about this; this is something I spend time with,’” he said.

Questions abound

Donors interviewed by IBJ have lots of questions about the ISO’s future.

But amid their mixed bag of reactions to the looming changes, one message was clear—they want to keep the orchestra around.

The public has shown its support for the musicians.

More than 800 people snagged all the available tickets—another 100 took overflow seats—within a few days for a free concert the musicians performed Sept. 22.

That momentum could carry over into more donations if fundraisers figure out how to capitalize on it, Swaney said.

The Detroit Symphony Orchestra saw that sort of success after its musicians went on strike in 2011. Donations that year dropped, then surged after concerts resumed.

However, Swaney, who consults for the Detroit symphony, warned that the group was in different circumstances than Indianapolis’ orchestra.

“The Detroit symphony has been viewed as financially struggling for many, many years,” he said. “So there was time and opportunity to cultivate many different relationships. The ISO has been viewed as such a financially sound organization for so long that this is shocking to people.”•

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  • One more thing.
    And I probably should add inconspicuously HOSTILE board of directors. They're trying their best to keep their hostility out of the press - to the point that the Indy Star is openly removing comments supportive of the musicians from their website – but there are just too many people being derided and insulted by the likes of Thornburgh and his "quorum" of, what is it, 4 do-bees? for them to get away with it and for their draconian tactics NOT to be brought to light. Mr. Thornrburgh and Ms. Groth - quit while you're behind. The musicians have given you a proposal that affords you an honorable place to retreat to. Go away and let the adults fix this thing.
  • National agenda
    Atlanta. Chicago. St. Paul. Minneapolis. New York. Baltimore. Indianapolis. This is going on to some level at all of these well-regarded orchestras. This isn't a coincidence...it's just that in Indianapolis - with no management in place and a myopic and self aggrandizing board of directors – we're dealing with a level of incompetence that is beyond comprehension. There needs to be a board coup like in 1971...from there, there needs to be a short-term deal that allows the ISO to seat a competent management team that would be actually qualified to negotiate a long-term deal. A water-company exec and a mergers and acquisitions lawyer, with no comprehension of the value of a major symphony to a wannabe city like Indianapolis, simply should not be the stewards of the ISO in the short term and certainly not in the long term. It's an easy answer. Thorburgh and Groth need to get over themselves...and we need to get over them much like we would a virus. Short term deal. Play. Negotiate with the real management when it is put in place. End of story and I've not heard one rational reason why this can't happen by Wednesday.
  • Agenda
    It seems to me that whoever is running the board has an agenda that the public is not aware of. It also appears to me that part of this agends is to destroy the ISO as it now operates. What is this agenda and who benefits from the destruction of the ISO? As I said last week, "there is something going on here and you don't know what it is, do you Mr. Jones?"
    • Boo Hoo.
      In a recent general board meeting, an at large board member openly questioned the tactics and the strategy and the legitimacy of the demands being placed on the musicians by interim management and the small faction of the board of directors that is pushing this agenda. That board member was told: "When you're done with your boo hoo story, you may sit down." Sounds like a Romney 47% comment to me. This board has no intention of negotiating in good faith, never has. This, to me, reflects abject disrespect of the sane opinions - in the majority - that oppose what the board and interim, short-term ISO management are trying to foist on the symphony. It's obvious their numbers don't add up. It's obvious they're on some other agenda - and whether that is to protect themselves from further recriminations if they're forced to admit their shortcomings and the total mismanagement of this symphony for the last 8 years or so, who knows? Maybe it's just that Thornburgh is one of those dumpy little mousy bald guys who is trying to get back at the world for his own personal misfortunes and shortcomings. Whatever the reason, its' not a funding problem (the symphony can operate for 6 years with the funds and budgets they have in hand). So what is the play? Because there is no rational reason that makes sense for this symphony NOT to be playing right now. There was a board shakeup in 1971 that ended a work stoppage. Maybe that's what needs to happen here...and John Thornburgh needs to finish his own boo hoo story and sit down. Or simply go away entirely. Incidentally, I've never met John Thornburgh...he may be a strapping linebacker type. But something tells me that the way he's handling things, that's not the case. He made this personal. He's now got to live with it. Boo Hoo.
    • Bring in the adviser!
      If the business model truly does need to be changed then I am in complete agreement with Mr. Wood- it needs to be something that both the musicians and management agree on. The problem is that it's difficult to have much faith or trust in the ability of this inexperienced interim team to either diagnose the problems or fix them. Some people even suspect that the ISO's finances are not nearly as bad as management's selective reading of the books would have us believe. The answer to all of this is, of course, quite obvious. The musicians have proposed bringing in an experienced outside adviser who has a proven track record of turning troubled arts organizations around. They obviously trust him. If he comes, looks at the books and comes to the conclusion that these painful cuts are truly needed then I strongly suspect that the musicians and the local arts community would have a much easier time accepting them. In our daily lives, all of us recognize the value of experience, competency and a proven track record. If a water company executive tells me that in her opinion my aging car isn't worth repairing, I'll politely listen to her opinion but I'd definitely not act on it until after I talk to a qualified car repairman. That's just common sense. So why on earth has the management team refused to bring in this well respected adviser? It seems like such an obvious move that I am genuinely bewildered as to why they have not made it. Are they worried that his experienced eye will see that things are not as dire as they claim?
    • MANAGEMENT IS THE PROBLEM
      What is not being adequately addressed here is the fact that the people being looked to to manage the turnaround – the ISO board and the current short-term interim management – ARE the problem. DiSanto said that management couldn't be made available for this article...but the reason is there IS no management. There is no fundraising director. There is no marketing director. And the interim CEO (former CFO for the symphony and water company executive) has, indeed, been negotiating. My question is why? She is not the long term steward of this orchestra. She won't - or at least shouldn't - be the CEO in 6 months, so what on earth is she doing as part of negotiating a long-term solution to a problem whose core is her office? They're effectively looking at a wheel whose bearings are shot and saying that the tire needs to be replaced. While there appears to be no impropriety with the way the endowment has been stewarded, there ARE board members who have spoken out as to the soundness of the investments made with endowment dollars over the years. Add to that the fact that the marketing has been abysmal since the departure of Maestro Leppard ($-off promotions will put butts in seats short term, but it won't foster long-term attendance or revenues and having Yo Yo Ma "Zing Our Strings" doesn't exactly convey the symphony experience to a symphony crowd). And then add to THAT the fact that what capital campaigns were enacted were ham-handed - again handled poorly from the top – and I don't see where you can draw the conclusion that the problem is that the lowest paid musicians of any symphony orchestra in America, who have already made concessions of $7 million since 2003, who have already effectively not had salary increases since 2003, are making too much money and playing too many "boring" classical concerts. The bean counters keep saying the model doesn't work. Fact is, the model worked here for nearly 100 years. It's recent bad management that hasn't worked. You're not going to bolster investor confidence and investor support with this current management and current board. You might get a few like-minded bean counters who similarly don't understand the situation to be swayed by numbers that actually don't smell right, but anyone with a little imagination, some business acumen and an abacus can tell you that there is plenty in the coffers to extend the current musician's deal short-term while the ISO solves the REAL problem at hand...and that's the management and the very small faction of the ISO board that's driving this silliness. You want your donors to believe in their symphony? You can't ruin the ONLY thing that's RIGHT about this symphony orchestra. Let them play.

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