Financial Strengths and Weaknesses of the Utah Symphony Before the Merger
The financial state of the Utah Opera before the merger was grim. It was understood by the symphony’s chairman of the board, Scott Parker, that the situation was getting worse. This was aggravated by the downturn of the economy and the event of 9/11. However, even before the economic downturn and 9/11, the symphony was very close to a deficit situation (Delong & Ager, 2005). Scott Parker assumed the chairmanship to try to mitigate the situation.
The average endowment or contributions for a Group II orchestra like the Utah Symphony is $8.8 million in FY 2001-2002. The endowment for the symphony is considered in the top end within its group. To be able to accumulate more than the average Group II orchestra is a financial strength. In January 2002, the total endowment for the Utah Symphony was $10 million. At the same time that the symphony is above the average orchestra within its group, it is also spending substantially. Artistic costs constitute the major expense category of expense for the orchestra (see Table 1). The symphony does not own its facilities. The building that houses the offices and the Abravanel Hall where the symphony performs are owned by the county. Most of the symphony’s cash (+90%) is allocated to orchestra and development (fund-raising) staff salaries, benefits, and payroll taxes. The orchestra musicians are unionized with annual salaries of $50,000 to $85,000. This is considered “too high given the size and status of the symphony” (Delong & Ager, 2005). Having a higher salary is advantageous in attracting quality musicians but this also becomes a financial weakness. Since the orchestra musicians are covered by a collective bargaining agreement, wages cannot be adjusted. Their salaries are set in collective bargaining agreements signed by both labor and management representatives. Per collective agreement the symphony is to receive wage increase of 12.9% in 2002 and 6.8% in 2004. From a quick observation, the orchestra musicians’ salary seems to be increasing more rapidly than those of a for-profit organization. The economic difficulties being faced by the symphony orchestra is not reflected in the collectively bargained wage increases. The existence of collective bargaining in a not-for-profit organization causes a financial weakness for an organization like the Utah Symphony.
The cash balance for FY 2000-2001 was $116,308 and the expected balance at the end of FY 2001-2002 is $2,042 (see Table 1). This is a financial weakness. Even with its above average endowment amount, Scott Parker acknowledged that the symphony has been unsuccessful with its capital campaign (Delong & Ager, 2005). The symphony relies on the annual ZAP (zoo, arts, and parks) contributions which is not guaranteed to carry on.

Table 1: Utah Symphony Operating Statement | HistoricalFY 2000-2001 | ProjectedFY 2001-2002 | Revenues and Contributions | | | Performance Revenues | 3,836,513 | 4,516,308 | Government Grants | 3,124,999 | 2,904,312 | Contributions | 4,460,268 | 5,080,040 | Investment Income | 817,505 | 910,013 | Guild Income | 155,434 | 110,001 | Other | 3,829 | 243,000 | Total | 12,398,548 | 13,763,674 | Expenses | | | Program | 10,447,382 | 3,337,968 | Management & General | 670,832 | 612,705 | Fund-raising | 1,164,026 | 217,702 | Other | N/A | 474,672 | Total | 12,282,240 | 13,761,631 | Surplus/Deficit | 116,308 | 2,042 |

Performance revenues earned by individual symphony orchestras ranged from 23 to 77 percent of their performance expenditures in 2000 (Flanagan 2008). In a nutshell, the symphony orchestra must make up for the negative profits. It must attract significant non-performance revenues in order to survive.
Symphony orchestras receive grant support from various levels of government. However, government grants have been declining. Government support of the arts in general has always been difficult. Many politicians are heeding to their constituents who are infuriated by the type of “art” that their tax money are supporting. Many people view subsidies for performing arts such as the opera and symphony as support for the snobbish upper end of the income distribution. Governmental and public standpoints regarding the support of arts in the United States differ greatly from that of Canada and Europe, where governments provide primary support for the arts. The main government support for symphony orchestras and other performing arts here in the US emanates indirectly through tax expenditures.
In summary, the current financial strength of the Utah Symphony is the above average endowment that it receives from various contributors. However, this current financial strength is not guaranteed to endure. There is projected increase in revenue for FY 2001-2002 but at the same time, there is a projected increase in expenses. A very obvious financial weakness is its expenses compounded by: * High salaries set by collective agreement. * Agreed upon wage increases that do not consider the financial status of the organization.
Recommendations
Anne Ewers must provide a persuasive strategy to ensure that the financial crisis of the Utah Symphony is a priority prior, during, and following the merger. Anne Ewers has a praiseworthy track record with regards to stabilizing the financial situations of performing arts organizations. During her term as general director of the Boston Lyric Opera, she retired a $450,000 debt that she inherited from her predecessor. Furthermore, she built an endowment fund and increased the number of productions from one to three. She had proven herself with the Utah Opera by increasing its annual budget from $1.5 million to $5 million. She is known to be energetic, enthusiastic, and capable. (Delong & Ager, 2005). Her financial shrewdness is an attractive selling point to present her strategy.
Customarily, symphony orchestras in the United States rely on three standard sources of income: * Performance revenues * Private philanthropy: private donations, pledges, and corporate givings * Government grants * Investment income
Currently, the Utah Symphony earns income from concert performance revenues. Anne Ewers should ensure that performance revenues exceeded performance expenditures. A strategy is to expand the performance income by supplementing it with sales of symphony recordings. Such recordings should be downloadable into iPads, MP3s, etc. Recordings should be available through the symphony website, Amazon, iTunes store, etc. This is also an access-based strategic positioning that will serve a subset of fans who cannot attend symphony performances due to time and location. She can also expand the portfolio of concerts, such as those offered by other orchestras. The potential is now quite broad. In addition to regular season concerts, the symphony orchestra should expand or diversify into doing special concerts such as pops, summer, and educational. Recently, many “cross-over” classical works have become popular and successful. It has become a hit with younger audiences. The “cross-over” can be popular music arranged for an orchestra. This “gross-over” genre is what younger generation wants. This is a needs-based strategic positioning, which will be trying to meet the needs of a particular group of patrons in a target community. This can also get them enthusiastic about symphony orchestra music. This should be an uncomplicated transition since the music director, Keith Lockhart, is also the principal conductor for the Boston Pops orchestra. All of these may not be the “quick fix” to the symphony’s financial crisis for it may take time to implement such programs but a start prior to the merger can set the stage of what will transpire post-merger.
The toughest for Anne Ewers to deal with prior and immediately after the merger is the high and increasing symphony musicians’ salary. This is going to be a sensitive issue that will require patience and good communication style. The issue of union salary should not become a point of discussion prior to the merger for it may cause an internal discord. The public needs to see a united organization to support the merger. However, when the time to renegotiate union compensation, it is necessary for everyone to understand that the symphony operates on a shoestring. It is not practical for the union to be seeking increased compensation for their members whose salaries are higher than that of other symphony members elsewhere. The long-term solution is for symphony leadership, board, and employees to convince funders that the organization requires essential and sustainable funding in order to deliver their annual programs. In the short-term, Anne Ewers need to ensure that the interests of merged organization are served by having knowledgeable, skilled negotiators on her side of the table.
The merged organization will be dependent on external funders. Many of these funders are patient and understanding, and will not care about the management of the organization. However, there are funders who will support an organization with specific conditions. These contributors may have a mandate to be concerned about the organization’s image, and they may not be sympathetic to the assertions that the symphony needs established, steady, and organized musicians. The symphony employees need to understand the challenges in managing an organization based on the different concerns, schedules, and agenda of financial supporters. The unionized employees need to understand that the organization’s ability to invest in its musicians can be compromised by funding provisions. To ensure that the symphony musicians understand the organization’s budget-setting process, Anne Ewers need to engage the staff in this process. This is a step towards understanding the larger strategic planning and decision-making process. Anne Ewers and the negotiators from both sides of the table must have a strong personal relationship with employees. This can smooth-out possible bumps on the road to negotiating a collective agreement when the time comes. It is beneficial to have negotiators from both sides who are experienced, understands the process, and the laws and are committed to finding win-win solutions.
The ability of the organization to communicate effectively depends on the shared knowledge of information. Employees, particularly the union leaders, need to know and understand the funding situation. They should be informed by management, particularly Anne Ewers. Good employee and union relations require communication and investment in relationship-building which can result to developing a shared commitment to the organization’s mission.
The board of directors and Anne Ewers’ job is to overcome the financial vulnerability of the merged organization in order to provide performing arts to the community. The merged performing arts organization has to work hard to increase private donations and other means of fund-raising to offset a decline in government support. One strategy is to expand the private contribution base is to attract more patrons and develop future audiences. According to DiMaggio and Mukhtar (2004), a National Endowment for the Arts survey found that classical concerts attendance by college students declined by 30% between 1982 and 2002. The population with a college education are the most likely to be drawn to performing arts events. Anne Ewers can also implement a strategy to use smaller chamber and ensemble groups from within the orchestra. This is a variety-based strategic positioning: diversifying the offerings of the symphony with a subset of products. The production of these concerts will generate performance expenses for artistic personnel, concert production, marketing, and administration but in the long run should be able to generate additional performance revenues.
Reducing Expenses
In order to ensure the continued feasibility of funding sources during the merger, it is important that Anne Ewers need to increase the confidence of corporate grantors, private donors, and members, by clearly proving responsible management of symphony funds. Not-for-profit organizations such as the Utah Symphony may receive tax-deductible contributions from individuals, businesses, and foundations. However in order to obtain these contributions, symphony orchestras must also incur fundraising costs (see Table 1). First strategy is for Anne Ewers to provide stakeholders her plans of reducing the expenses through less duplication and streamlining efforts. Combination of efforts with those of the opera will eliminate redundant work. Decrease expenses incurred for fundraising is by combining the fundraising efforts of both the symphony and opera. There is always competition between the different performing arts organizations for contributed support. The merger, having both under one administration, will eliminate this competition between the symphony and the opera. Since the contributions will benefit both, there will be no rivalry that will benefit one but comes at the expense of the other performing arts organization in the same area. One way to decrease fund-raising expenses is to maximize volunteer resources to execute fund-raising activities. An operational effectiveness for Anne Ewers to increase contributions should be established upon a higher level of engagement with the fans and supporters from the community through memberships, attendance, and philanthropy. This is an opportunity for the symphony and opera to broaden and deepen their relationships throughout the community.
Anne Ewers can also take advantage the use the internet to decrease cost. For example, performance recordings, audio and video, can be digitized and available online. These recordings can be purchased and downloadable or available for listening and viewing for paying members.
Anne Ewers might be able to drive corporate funding of Utah Symphony and Opera to new levels if the merger will be endorsed by prominent business partners. The merger will eliminate the predicament of corporation choosing which of the performing arts to support or which will have funding priority. Another strategy for reducing cost is to pursue corporate sponsorship. An example is getting corporate sponsors promote the event. Many companies like to be involved with non-profit organizations in order to have visibility at upcoming performing arts event. This is also a double strategy. Companies that are more engaged are more likely to continue their support of the performing arts efforts in the future.
Anne Ewers should emphasize that one the merger’s strategy is to increase the financial efficiencies of both organizations, which is an important objective of the merger. In his Report to the Mellon Foundation, Flanagan (2008) reported that most orchestras now have policies that permit annual draws in the moving range of 5.0% to 7.0% of the market value of the endowment. This is up from a 4.0% to 5.5% spending policy for non-profit organizations in the late 1960’s. However, higher endowment draws to cover immediate expenses will threaten the use of endowment to provide long-term financial stability. While this moving range does achieve equalizing in the variability of the amount available for spending, there is a possibility of spending more that is practical especially if the endowment values are rising. The symphony orchestra has to increase investment income to help with the financial crisis. Investment income may be derived from investments interest, sale of securities, and income from the endowment. The symphony should strive for long-term growth investment that would exceed the total expenses and inflation while keeping volatility within acceptable confines.
Anne Ewers need to develop solid budgets and remain in control of them. One of the biggest challenges that a not-for-profit organization faces is solid budget planning and management. Careful administration of both operating expenses and cash flow are essential, not only for meeting not-for-profit organization compliance, but also for demonstrating the efficient use of resources to secure future funding. The symphony must pay close attention to whether it has enough cash reserves to continue to provide music to the community. One of the best ways to preserve the financial integrity of the symphony is to avoid budgeting surprises that would need justification to the board of directors and donors. Since the symphony relies on donors that do not expect to receive a product, cash flow can be extremely hard to predict. There is no exchange of money for goods. However, the symphony must continually demonstrate its stewardship of donated resources. The symphony budget should undergo more than just a mid-year budget review. The review can be formal or informal to assess status against the budget. In the current economic slump, Anne Ewers needs to implement periodic review or more continual forecasts than were required in the past.
Leadership Strengths and Weaknesses of the Utah Symphony Before the Merger
The leadership strength of the Utah Symphony is the division of the artistic and administrative or business management. The President/CEO is responsible for operational administration that included finance, marketing, communications, personnel, and development. The Music Director is responsible for the musicians, associate conductors, guest conductors, artistic administrator, and educational programs coordinator. The separation of responsibilities ensures that both leaderships will be able to concentrate on their distinct responsibilities and guide their groups to achieving their goals. The symphony organizational chart shows partnering with regards to personnel, stage, auditions, ticket services, and library (Delong & Ager, 2005). This separation is advantageous for the Music Director, Keith Lockhart. As he indicated, he is not involved in the negotiation of musician contracts (Delong & Ager, 2005). This disconnects him from the intensity of union negotiations and the uncomfortable situation that the process can bring about.
A weakness of the symphony leadership is the recent announcement of the President/CEO that he will be leaving at the end of February 2002 which is prior to the scheduled voting of the merger on July 8, 2001 (Delong & Ager, 2005). This will leave the administrative part of the symphony without a leader until the merger. Leadership transition is a significant challenge that the symphony board will face. Their predicament will be whether to hire a replacement until the merger or not replace the CEO at all until the new merged organization is in effect. The management of this predicament will reveal much about the board and the organization. It is not only the absence of a leader that the board will have to face but they need to maintain relationships with stakeholders, represent the symphony in the best possible light, and maintain or increase stakeholders’ confidence in the board’s leadership capacity.
Resignation of a leader can bring about change management issues such as communication breakdown, lack of knowledge transfer, and lack of senior management or board support.
Recommendations
Since the resignation of the symphony CEO is already a public knowledge (Delong & Ager, 2005), as apparent with the comments made by Scott Parker, the chairman of the board for the Utah Symphony, and the appointment of Anne Ewers as the CEO of the merged organization, Anne Ewers needs to persuade the symphony board to prepare a communication plan in coordination with the outgoing CEO. The communication will include the following: * Confirmation that of the out-going CEO’s resignation and the effective date. * Gratitude for the out-going CEO’s leadership and a summary of organizational achievements during the CEO’s tenure. * Appointment of an interim leader or the distribution of responsibilities until the finalization of the merger.
Even if Anne Ewers is not yet the official leader of both organizations, it is still in her best interest that a proper transition of knowledge, responsibilities, outstanding tasks and projects, and deliverables be conducted. Since she is not the CEO yet, these transitions should be conducted with the interim leader, the board, or the assigned responsible people. A similar transition should also occur once Anne Ewers becomes the CEO of the merged organization. This is to ensure the proper transfer of knowledge.
The key to this transition is properly handling communication with symphony employees, supporters, fans, and the public. A strategy needs to be discussed and agreed to by all parties (the board, the out-going CEO, the interim leader, and management) in the transaction. The transition plan needs to be effectively communicated internally and externally to project a sense of stability and positive perspective. Influencing employee attitudes is not easy during changes. The symphony board and leadership should hold open discussions during which staff members learn about upcoming changes and how the process will be initiated. An engaged leadership, one that stresses personal relationships and inspires the staff, has also been shown to cut down on pessimism about organizational changes.
The out-going CEO should be able to discuss with his/her replacement(s) the operating styles of the board, histories and expectations of board members, as well as his/her direct reports, other stakeholders (backers, patrons, donors, etc.
Financial Strengths and Weaknesses of the Utah Opera Before the Merger
The financial strengths of the Utah Opera include its being debt-free, being able to retain surplus fund at the end of fiscal years (see Table 2), its tangible assets (2.9 acres of land, production studios, costumes, sets, etc.), increasing endowment fund, and successful fund-raising efforts. Anne Ewers is very instrumental in rebounding and strengthening the financial condition of the opera. She managed to retire a $450,000 debt she inherited and is effective in her fund-raising endeavors (Delong & Ager, 2005).
The financial weakness of the Utah Opera is that, as it is with the Utah Symphony, the reliability of its income streams are affected by economic downturn. It relies mainly on endowment for financial resources. Government grants and support of performing arts have been declining. Private contributions received by the opera rely significantly to the general state of the economy. As with any not-for-profit organization, a decrease in giving is experienced during recessions and increase in giving during economic expansions. Private donations, government support, and investment income fluctuate with the economic conditions; however private contributions are more responsive to the swings in the state of the economy. Even with Anne Ewers’ ability to appeal to donors, response will be dependent on the availability of cash in people’s pocketbooks. As it is with the symphony, the opera’s attendance and ticket sales are affected by recession. The opera is a luxury that many people can do without.
Table 2: Utah Opera Operating Statement | HistoricalFY 2000-2001 | ProjectedFY 2001-2002 | Revenues and Contributions | | | Performance Revenues | 1,028,177 | 733,900 | Government Grants | 977,322 | 958,882 | Contributions | 2,189,987 | 2,843,941 | Investment Income | 177,730 | 183,327 | Guild Income | 40,000 | 30,000 | Other | 327,900 | 365,999 | Total | 4,741,206 | 5,116,049 | Expenses | | | Program | 3,017,069 | 3,337,968 | Management & General | 583,358 | 612,705 | Fund-raising | 210,031 | 217,702 | Other | 348,339 | 474,672 | Total | 4,158,797 | 4,643,047 | Surplus/Deficit | 582,409 | 473,002 |

Recommendations
The opera is currently maintaining good financial status but it should not wait until the wolf is at the door to start reacting. The likelihood of receiving funds from revenue source is not guaranteed. To ensure the availability of income prior to the merger is for Anne Ewers to revisit the priorities of the opera. * Identification of priorities. Consider how spending cuts will impact priorities. * Identification of non-essential programs or projects. Consider which expenses can be reduced, eliminated or postponed. * Reallocation of funds from non-essentials to fund priorities or maintained as reserves * Different approaches that will avert spending * New income opportunities
Recessions impose severe constraints on expenses and cash availability, and unfortunately, the sliding economy will have a far greater impact in coming years. It is very important for the opera to be prudent and responsible moving forward. The opera should plan cost-cutting measures prior to the merger in response to economic downturn. This may have to include furloughs and modification of contracts. In the context of the global economic crisis, the opera will have to consider taking certain measures to get costs under control. This is an immediate remedial action to ensure that the opera financial status remains capable until the completion of the merger. Anne Ewers needs to bring with her a financially solid organization to the merger. This will strengthen her
To enhance the donor base, the opera should also plan on widening the audience base. Many people sometimes do not realize that they like opera until they are exposed to one. The Utah Opera needs to reach out to the masses, to try to attract younger audiences, and to appeal to a modern population. This method is currently used by the Dallas Opera. It simulcasts its performances at the Cowboys Stadium where non-opera goers can reserve seating for free. The San Francisco Opera also did a simulcast at AT&T Park, home of the SF Giants. For best seating, online registration was required. Open seating was on first-come, first serve basis. The online registration provided the opera leads for membership and fund-raising efforts.
Anne Ewers need to assess the opera’s policies and procedures to determine if these allow the fundraising program to run as efficiently and effectively as possible. There should be policies and procedures that deal with donor acknowledgement, donor recognition, accountability, and stewardship. Since proven effective, Anne Ewers should document her fund-raising strategies. These are the strategies of getting the financial support and the reasons. Included are the tactical plans or the tools she will employ to get to goal.
Anne Ewers is bringing to the merger her credibility based on her record of increasing financial support. This may be reflected also in the opera’s staff and board’s involvement in successfully raising resources through fundraising over the past and have developed and adopted a sustained culture for fundraising. The addition of the symphony under Anne Ewers leadership is an opportunity to include a good assortment of fundraising tactics. She will be able to terminate ideas that end up not working, and try to make up for the fund-raising elsewhere. Also, having to consolidate programs and their operations will achieve economies of scale and standardization of processes.
Leadership Strengths and Weaknesses of the Utah Opera Before the Merger
Leadership strength of the Utah Opera is Anne Ewers. She is known for her successful fund-raising efforts, her ability to grow financial budget, and eradicating debt. She has remarkable reputation in the opera community nationwide for directing operas and being as a stage director. As the upcoming CEO of the merged organization, she is thinking of a well-thought-out plan of merging the two organizations. This shows her organizational commitment. Other leadership strength of the opera is its organizational structure. There seems to be a great deal of delegated authority. This structure may correlate with Anne Ewers’ style of leadership. As the General Director, Anne Ewers is responsible for a Director of Operations, who in turn, is responsible for the different directors and managers who are responsible for the different functions within the organization: finance, marketing, development resource, education and communications, production, artistic team, and music administration. There seems to be a line drawn between management and leadership of the opera. This organizational structure seems to imply that she is more concerned with leadership while the various directors and managers are concerned with management. This is in tune with Bennis’ (1994) assertion that management is about doing things right, while leadership deals with a leader doing the right thing. This type of organization frees Anne Ewers from the routine operations and will be able work more on key projects and strategies, such as the merger.
A leadership weakness of the opera is the resignation of Leslie Peterson as Director of Operations due to the proposed merger. This may send a wrong message to the rest of the staff, as well as the public that there is dissension within the organization leadership. Sloan (1990) wrote that the circumstances of ever-changing markets, products, and services are capable of breaking any organization if that organization is not prepared for change. Change is inevitable. It can happen when an organization decide on new insights or strategies as a result for seeking improvements and results of experiences, feedbacks, and explorations. Change will then affect every aspect of operation as well as the strategic function and structure of the organization. According to Kanter (1992), organizational change is ‘‘the shift in behavior of the whole organization, to one degree or another.” Supporting this thought, Czerniawska (2005) recognized that change necessitates the dismantling or restructuring of organizational structures, hierarchies, culture, and strategies to facilitate new flexible working patterns, as well as to accommodate potential problems arising from resistance to change.
Recommendations
Although change is an inevitable process of any organization, it will provoke resistance from the people, mainly in terms of salaries, contracts, working conditions, anxiety, fear of the unknown, and issues arising from managing such change in organizations. It is unfortunate that the Director of Operations, Leslie Peterson, resigned prior to having her concerns addressed by Anne Ewers and the board. There is nothing to be done with her departure but Anne Ewers needs to ensure that whatever consequences transpired as a result of the departure will be curtailed.
Anne Ewers leadership style is basically responsible for the financial achievements of the Utah Opera. Her leadership style should be able to influence the opera people to get things done through this phase of the merger, and doing it willingly. Her role as a leader is to create followers, and to continue to do the things that need to be done and to bring about the necessary changes. It is her responsibility as a leader is to bring about the merger in a way that is receptive to the needs of all stakeholders. Armstrong (2009) states that, “leadership is the process of inspiring people to do their best to achieve a desired result. It can also be defined as the ability to persuade others willingly to behave differently.” Leadership is basically about directing people’s activities to achieve organizational goals and visions in a manner that motivates, inspires, influences, and mobilizes.
Anne Ewers needs to manage the change in order for the performing arts to continue serving the community. In the view of Armstrong (2009), “change management is defined as the process of achieving the smooth implementation of change by planning and introducing it systematically, taking into account the likelihood of it being resisted.” Anne Ewers will have to make the effort in order to achieve less resistance regarding the implementation of the change.
Scorecards
Financial
The financial scorecards of both organizations have similar activities and approach and with different objectives in mind. The opera is geared to increasing reserve fund while the symphony is focused on increasing its profitability. To achieve its goal, the symphony is focusing on fundraising to maintain its ticket prices while the opera is focusing on additional funds and having endowment realized. The scorecards reflect their financial status, as well as their strengths and weaknesses. The symphony’s financial scorecard seemed to be concentrated on freeing itself from financial difficulty while the opera is focused on increasing funds set aside for special use. The opera seems to have a better fund development planning process that helps define their capacity and capability to raise money. As cuts in government funds occur, it will drive both organizations to redouble their efforts to seek private donations.
As seen on Table 1, the symphony’s incoming cash is almost equal the expenses that it is incurring with very small amount of surplus at the end of the fiscal year. The symphony’s operating statement reveals that it relies heavily on annual contributions to cover its expenses. This also reveals their financial strength of being able to collect endowment above the national average; however, this is also a great disadvantage or weakness that will cause a grave financial position if for any reason the contributors will not be able to fulfill their pledges. This dilemma is probably noted by the symphony leadership creating the Financial strategic goal of its scorecard in hopes to resolve this weakness. The increase in contributions become even more important as the organization fulfills its contract to increase musicians’ salary in the next few years. This must had been identified by the symphony leadership and established the Internal strategic goal of reducing expenses which critical success factor is being able to renegotiate musicians’ contracts. The symphony seems to be basing its spending on what the organization needs and what may be received as contributions. It is somewhat risky to add up all the expenses to carry out objectives and not considering how much of the potential revenue is actually reliable, such as the anticipated ticket sales or grants from foundations. However, the symphony seems to recognize how much profitability it needs to increase for subsequent years, which is about .0008% to .0040% of its 2000 - 2001 expenses. This is a challenging situation for the symphony since the agreed upon musicians’ salary increases by 12.9% in 2002 and by 6.8% in 2003. The symphony’s expenses will not be covered confidently in the next few years. The effectiveness of the organization’s donor-building program is not known nor mentioned, but it may not be as effective as the opera’s. Even with the consideration of economic factor and based on capacity and capability, this goal seems to be very conservative. The symphony needs to step up its efforts to reach potential donors and try to show donors how much of a difference their giving will make when contributions were hard to come by.
The scorecard reflects the financial strength of symphony and thus point towards its great vision of becoming a world-class symphony. Increasing its profitability to become one of the ranking orchestra among the foremost in the world manifests the symphony’s culture. The vision seems to indicate that that the symphony leadership is visionary. Having Scott Parker as President of the Board an entrepreneur, innovator, and visionary, truly reflects this culture. If the symphony is compared to for-profit company, it can be said that it is a competitor going for external positioning. Its vision of ranking among the world’s best seems to be very ambitious (even though it is not clear how one can become “world-class” - not the same as a Tier 1 orchestra). The scorecard reflects their financial strength but the financial weakness was not considered. It so happened that the symphony’s strength is also its Achilles tendon. This should be addressed in the scorecard. If everything goes according to plan, there is a strong possibility that the symphony will achieve its goal. However, with the economic downturn, there is strong likelihood that fund-raising efforts will not deliver the much needed goal of $116,000 to $500,000 a year. The symphony should not rely on fund-raising alone as the only element to reach their goal. There should be alternative ways of ensuring profitability. The symphony’s financial weaknesses due to high musicians’ salary and the anticipated raises should have been included in the financial scorecard. The salaries and raises do not reflect the economic status of the organization or even the nation. The symphony is poised to lose a great deal of support due to the economic downturn and the government pull-back on grants, yet the musicians will still maintain their high salaries and still expect their raises. In a business standpoint, this does not make sense. It cannot be assumed that the value driver for the culture is commitment. It is rather a “forced commitment” since the salaries and raises are set by a contractual agreement. However, the value drivers for having a contractual agreement were probably consistency and uniformity of salaries. The renegotiation or adjustment of employee salary should be included in the symphony’s financial scorecard.
Even with the opera’s strength is its ability to receive funding from various contributors its weakness is also the reliability of its income streams from contributions. To be able to keep the organization afloat in the event of some unforeseen circumstances that may disrupt the flow of cash into the organization. Without adequate surplus, the opera may not have enough working capital in the short run. As seen on Table 2, the opera seems to be retaining at least .009% to .012% of its total revenues and contributions. The opera is accurate with implementing its goal to increase its reserve fund. This thinking shows that the opera is able to balance its cash inflows and cash outflows. The opera’s financial culture is about stability and control, and it is being managed by a leader known for a culture of efficiency. The opera is now in the stage of considering the “what if” scenarios: contributors stopping support, asset repair, disaster affecting assets, etc. The magnitude of having a reserve fund cannot be overstated. A surplus in the form of cash reserves can help the organization continue to fulfill its goal to provide operatic shows to the community. Reserve fund is not only for the short-term “rainy days” but also for the long-run. The money may be designated for specific projects and improvements in the future. The opera is not only concerned about its immediate existence but it is also ensuring continuity. It is not apparent on the scorecard if there is a target amount that should be put in reserve, examples: a flat sum, a percentage of the annual budget, six months of expenses, or one year revenue. However, the opera may be poised to put any surplus amount in the reserve fund.
The opera’s vision to become a nationally renowned opera house is feasible on the financial viewpoint. As discussed above, the opera is currently enjoying a balanced budget with a bit of surplus. The financial scorecard reflects its financial strength. Since the opera is now debt-free, it practical that it should aim to accumulate reserves. This also addresses its financial weakness, the reliance on contributions, donations, grants, and endowment. As discussed earlier, these fund streams may dry-out due to economic downturn. Since the opera is not much ahead on with its financial aspect, it is also necessary that that, Plan B, an alternative way of increasing funds, should be considered. Its current surplus is not enough to provide one year of operation at this time. However, the scorecard definitely reflects the leadership strength of the opera, especially that of Anne Ewers. She may have ways of conducting fund-raising efforts that are effective. The critical success factor for the Financial strategic goal scorecard: raising additional funds and having endowments realized is her specialty as seen in her previous successes with the financial matters of her previous and current organizations.
The Financial strategic goal seems to reflect an efficient and controlled culture of the opera with capable processes and currently effective. The business model to improve the quality of the performances and increase the endowment funds is leading to realize its vision of becoming a nationally renowned opera house. The goal of becoming financially stable with increasing reserve fund indicates that the opera wants to maintain control, stability, performance (increased reserve funds), and efficient operations are the goals which are indicative of a hierarchy culture. At this time, leadership seems to aspire for the opera’s financial security as they engage in the long-rage planning of making the opera nationally renowned. The symphony on the other hand has this aspiration of becoming a world-class orchestra with full-time musicians under contract producing high quality concert however lacking the funding support it needs to fulfill its ambitions. This reveals that on financial matters the symphony’s culture seems to emphasize on prestige. Reputation and success seemed to be a major concern, which indicates a market culture. It is not clear if the world-class target is long-term focus of achieving a measurable goal or method of achieving stability.
Customer
The symphony’s strategic goal of having world-class performances can be seen with the hiring of conductor Keith Lockhart of the Boston Pops, who also conducted major orchestras in the US, Canada, and Singapore. His hiring is one success factor accomplished. One result can be reflected by the selection of the symphony to perform during the 2002 Winter Olympic Games. Of course, the privilege may have given them due to the location of the Winter Olympics, but it was a great honor that the Olympic committee did not select another symphony orchestra instead. This strategic goal may be expressing the symphony’s vision, which hinges on a culture of reputation. This is a good strategy when trying to attract quality talents. If so, management needs to maximize the symphony’s reputation as a fundamental part of its corporate culture and value system. Reputation is not only having a reputable conductor but includes having musicians cognizant of how each of them affects the symphony’s reputation on a performance or even daily basis. Reputation must be central to the symphony’s identity, not merely clever image publicizing and cunning public relations strategies.
The symphony’s critical success factor of hiring top quality talent again displays a culture of reputation and success. Image is very essential in the symphony’s culture. With regards to the hiring of other top quality talents, it was not disclosed what was the collective bargaining agreement (CBA) in the firing, hiring, or replacement of musicians. For the musicians, rules and procedures govern the behavior and possibly the culture of the department. Most union employees cannot be fired without "just cause" in contrast to non-union workers who are generally employed at will and can be fired for any reason. For this matter, the definition of “just cause” is important. Rules and procedures are important in the culture dealing with the musicians. Everything is governed by rules and procedures. The function of the department relies on rules and procedures. Dealing with the musicians relies on rules and procedures. Is not performing to the expectations of the conductor considered “just cause?” Another matter that is important in the CBA is whether it authorizes the conductor to fire someone due to “just cause” or still requires the approval of the union. This is a difficult strategic goal to accomplish if the person, conductor, the one who recognizes the talent of each musician, is not at liberty to decide who goes or stays.
Attracting quality talents is a results-driven culture. The measure for this goal is receiving feedback from exiting patrons. Of course, the implication is quality talents produces quality shows and quality shows brings in compliments and reputation. The symphony may be able to attract quality talent with their higher and increasing compensation plan, which is good in the short-term but can become problematic in the long run. Once the coffers are empty, quality talent finds employment elsewhere. This probability should have been addressed in the customer scorecard. At this time, the symphony is barely breaking even financially at the end of each fiscal year. As considered several times in this document, an alternative ways of increasing finances should be considered. Cost-cutting efforts should be improved.
The symphony’s strategic goal of being attuned to their desires for world-class performances and the success factor of hiring top-quality talents indicate that the symphony leaders are risk-takers culturally. This risk-taking is also due to the desire to be standing along with the world finest. Risk-taking culture is embraced to achieve the culture of repute. They seem to strive to be on the forefront. The symphony is not satisfied just being the best in the Rocky Mountain region. It has to be one of the best in the world. Success to the symphony means gaining accolade is important, as exhibited in the scorecard measure of receiving feedbacks from exiting patrons. It is results-driven, which indicates a market culture. The symphony leadership strength can thrive in this goal. Having a leader dedicated to the artistic productions of the symphony and not entangled with operational affairs will ensure that the symphony productions are of the highest quality. However, becoming a world-class symphony indicates an adhocracy culture. It is innovating and visionary but somehow lack the aspiration to acquire resources by other or new methods. The symphony is anticipating its current needs driven by a desire to be world-class but does not establish continuous improvement or find creative solutions to increase financial stability.
The opera’s strategic goal of having regionally and nationally acclaimed opera performances is realistic and sensible. Maintaining a good regional opera while reaching for national acclamation is the best way to augment status. The opera has been commented as “good… but it had not reached the status of the symphony” (Delong & Ager, 2005). This is in line with the chairman of the opera board statement: “another concern was that even though the opera could become a tier-one arts organization through the merger, the opera will lose its identity” (Delong & Ager, 2005). This statement also illustrates the culture of the opera, particularly its management. The opera would prefer to become a nationally renowned arts organization by having solid reputations for regional and national excellence rather than by its association with the symphony. Becoming a nationally renowned arts organization is aligned with the opera’s financial goal. The opera’s customer success factor of excelling in quality performances indicates a results-driven organization with a goal having sold-out or near sold-out performances. The ultimate goal is national excellence. Similar with the symphony orchestra’s pursuit of becoming world-reknown, the opera’s main objective is to be placed among the top operas in the country. This implies a market culture. This culture is evened out with its financial hierarchy culture. Its pursuit of excellence depends on its financial stability, which reflects the culture and strength of its leadership, especially that of Anne Ewers. This scorecard does not reflect the identified leadership weakness and it is not necessary for it to do so. The identified leadership weakness is the resignation of its director of operations. The resignation is due to the merger, which this leader did not wish to understand or had anything to do with it. If this is the reason behind the exit, it is better to let the employee go as there is very less remaining to do with. Of course an unexpected resignation will cause some disruption, even for a well-oiled operation. With the opera leadership’s culture of striving to be good coordinators and maintaining a smooth-running organization, it is conceivable that any required damage control has been implemented.
Internal Process
Having flexibility in decreasing expenses due to fundraising gaps is a very valid strategy for the symphony. However, with about 90% of the symphony fund is shared out to development (fund-raising), staff salaries, benefits, and payroll taxes; this can be a challenging objective. These expenses are unavoidable. The symphony must pay the musicians, offer staff benefits, and pay payroll taxes. There is a possibility of decreasing or eliminating fund-raising expenses by using other avenues but there is nothing to support that the symphony had considered any. Staff salary is expected to increase by 12.9% in 2002 and by 6.8% in 2003 as agreed in the CBA. The success factor for this strategy is to be able to renegotiate musician contract. Staff salary will be a sensitive topic for the symphony to mention as part of decreasing expenses. A reduction in salary will also mean a reduction in work dues generated for the union. The musicians’ union is already wary about the purpose of the merger. The musicians believed that this is a maneuver by management to renegotiate the terms of the CBA (Delong & Ager, 2005). To protect their interests, the union organized an ad hoc committee and presented a set of guiding principles to the merger committee.
The symphony’s internal strategic goal of having flexibility in decreasing expenses due to fundraising gaps indicates a desire for process control, which is a hierarchy culture. The success factor is to renegotiate musicians’ contract. If the board and management can pull it off, it is the quickest way to decrease spending. The board and management want to maintain a smooth-running and efficient organization which is also an indicative of a hierarchy culture. They have the responsibility, ultimately, for the success and failure of the organization. The specifics or line items of the potential renegotiation are not revealed but the symphony leadership seems to have recognized the expenses that need to be adjusted. There are three factors that could be adjusted to make the orchestra sustainable: season length, salaries and benefits. With the current spending, it is questionable whether the symphony has enough funds to sustain a healthy 52-week season. It is not clear if the organization’s financial weaknesses were identified for the creation of this goal. The difficulties with financial contributions may be the greatest factor, but the musicians’ salaries and raises contribute to the financial predicament of the organization. Therefore, symphony leadership will have to convince the musicians’ union that the agreement is too expensive. The orchestra musicians need to understand the reality of the situation and work with the board to come to some sort of solution other than the cancellation of the season and bankruptcy filing. The vision of the symphony to be a world-class orchestra is driving this culture of control. The control is beginning internally trying to sustain eighty-three full-time musicians under contract to provide high-quality concert. To the symphony, success means a world-class orchestra providing the audience with high-quality performance. The culture is totally external focus or dependent what it believes is important to the outside of the organization. The strength of the symphony is beneficial to this goal. While the board and the operational part of the symphony is deliberating with the Union concerning the musicians’ salary, the artistic part can still focus on symphony productions. As long as the negotiations are going smoothly, the rehearsals and shows should not be disturbed. The relationship of Keith Lockhart and the musicians indicates a clan culture. The musicians look up to him and rely on him to look after their interests. This culture is also advantageous to this goal. The weakness identified, symphony CEO resigning, should not be a concern. The board may have to lead the negotiation for the organization
A benefit of this objective is becoming a selling point for members to support the merger. One merit of the merger is for the symphony to be able to combine its fund-raising efforts with the opera. Having Anne Ewers as CEO, who is also the leadership strength of the symphony, is also a benefit. She is proficient in looking for new ways to raise funds, marketing, reaching out in the community and beyond, and known to improve the financial status of an organization. The issue of renegotiating employee contract will be a role for the new leader whether it will be a merged organization or not. This role will be the reality check for the organization and it is not going to be a popular role.
The opera’s strategy to maintaining financial stability is in line with its financial strategy to increase reserve funds. This is indicative of a control culture. Financial stability also support the second part of its internal process strategic goal: attracting top talent. The opera leadership recognizes that good compensation plan is a helpful strategy when trying to attract quality talents. The best talents cannot be attracted by low salaries. People must make great personal sacrifices to work in the nonprofit sector but people must be able to survive, raise family, and finance their kids’ education, all with great frugality, but without sacrificing a comfortable life. This seems to indicate a strong concern for people, which is a clan culture but given the goal, it is more of a control or stability. This goal to a certain degree addresses its financial weakness of relying on donations, grants, and endowment for support. Increasing reserve funds ensure that the opera will be able to operate to some extent if there is a slowdown on donations and pledges.
The opera’s vision is also to become a nationally renowned opera house. The long-term focus is reputation, which is a market culture. Attracting selected or choice performers means improving productivity, creating external partnerships, and enhancing the quality and desirability of productions. The value driver is, of course, profitability. This also reflects the leadership strength of Anne Ewers. She is a hard-driver and a producer. Many successes have been attributed to her in both the financial and production aspects of the opera. The availability of funds can make the opera competitive when trying to attract a performer that will bring in the crowds and whom the audience will love. The opera is trying to improve processes to efficiently turn resources into quality shows that will satisfy their audience and supporters. From its focus on stability and control, the opera is suited to achieve its vision. The identified leadership weakness will not have a significant effect with regards to internal processes. There may be some feelings of uncertainties with the employees but the well-defined structure of the organization will enable the different departments to continue operations without much disruptions.
Learning and Growth
The symphony leadership is prudent in recognizing that a wider variety of symphony offerings will appeal to a more varied audience. As discussed earlier in the recommendation section to improve the symphony’s financial status, the symphony needs to start appealing to younger audiences and unlocked their taste of the arts. In addition to what was discussed, the symphony may have to try to using a touring symphony to perform at state venues and create an education program and reaching out to younger generations who do not relate to symphony music. The symphony can perform as ensembles and soloists at schools, universities, and community centers statewide. People who do not normally like symphony music will not go to the symphony hall, the orchestra needs to bring symphony music to these people. The symphony must help meet future demands for arts organization by reaching out to younger crowds, students, and those who are yet to discover their appreciation for symphony orchestra music. However, this idea may have to be approved by the musicians union and be included in the CBA.
This strategic goal seems to convey that the symphony leadership has recognized that spending so much time surviving is not the way for the symphony. This is a leadership strength that was not recognized in the section discussing the strengths and weaknesses of the symphony leadership. When survival is the main concern for an organization, it will lose sight of the future. This may have been driven by reputation and success. If so, this is a reflection of Scott Parker’s leadership culture. He is an entrepreneur, innovator, and a visionary. Their goal of including a wider variety of symphonies offered to appeal to a more varied audience is a creative way of acquiring new resources. Having a successful marketing campaign that advertises different symphonies to younger audiences is an emphasis on long-term growth. This is an innovative approach that may improve ticket sales. The leadership weakness identified will not have an impact on this goal. The hierarchical organization has a director of marketing who will handle the marketing campaign and the role of the CEO can be taken over by someone from the board for the interim or if necessary. However, the financial weakness of the symphony may inhibit this goal. Orchestra musicians are unionized. Salaries, type of work, and amount of work are negotiated and set in a contract that is often inflexible. Adding new type of music in the yearly repertoire may require additional salary, practice time, and work for the musicians. This will require a renegotiation of contract. Again, the musicians may believe that a change in the repertoire is a ploy to renegotiate their contract, especially salary. This can become a sensitive issue.
For an opera the size of the Utah Opera and the population of the community, the strategic goal of ensuring production of high-quality performances of five a year is practical. High-quality performances will earn the opera a reputation for excellence as it fulfills its vision of becoming a nationally renowned opera. Culturally, it is goal-oriented, and there is a vision for repute and success.
Measuring endowment fund growth and increased ticket sales as the critical success factor reveals that the opera leadership is balanced about creating great programs and funding of the organization. The opera’s mission to raise money by enhancing the opera’s profile with high-quality performances which can be a potential for excitement and resulting to higher ticket sales indicates a culture focused on goal, reputation, and success which is a market culture. This goal supports the opera’s leadership strength of Anne Ewers. The identified leadership weakness will not influence this factor. As previously stated, the organizational structure of the organization will allow continuance of operations without a great deal of disruptions. This goal also supports its financial strength by maintaining a debt-free organization and working to increase the endowment fund. Having capital need covered by revenue from ticket sales also reflects a culture of stability and control. The opera seems to be also interested in finding the balance between earned revenue (ticket sales) and donations (endowment) as reflected in its success factor, which will counterbalance the financial weakness of the organization.
There is no indication of perceived leadership deficit in both the opera and symphony cultures. Other cultural factors seemed to be satisfactory such as the longevity of board leadership or executive directors, rate of turnover of music directors, and other key factors driving both organizational cultures. Some other factors are not clear such as the role of the different operations and support, the relationship with the unions, etc. The merger seems to be the first organizational approach in a long time. There was no information whether the practices of both organizations are robust. Except for comments coming from celebrated supporters of both organizations, there were no external factors affecting the internal practices of both organizations.
There was not a lot of information concerning contributed support to both organizations that would provide some influences into the culture. It was not clear if any of the organizations developed a model for predicting realistic contributed revenue goals and potential donors on the basis of population, number of high-income households, and percentage of total non-profit contributed revenue within Utah. It was not clear whether subscribers are also donors or whether there are donors that do not attend concerts or operatic shows. There was no data to indicate whether there are donors that their only concern is to have a thriving orchestra or opera in the community. The actual experience of the orchestra and opera regarding endowment in the past years were not provided and the effects of economic conditions to endowment values were only speculations.
Balanced Scorecard for the Merged Organization * Vision: To be an exemplar of success and a premiere cultural force in the country. * Business Model: To embrace a philosophy of partnership and mutual responsibility. Set financial goals with a realistic view of revenue capabilities, and adopt a financial structure that even out economic fluctuations, as the organization provides a broad range of cultural experience beyond the resident theatres.
Financial
* Strategic Goal: Produce revenues sufficient to cover expenses and provide reserves for the future. * Critical Success Factor: Implementation of diverse funding methods. * Measure: Breaking even budget and adequate reserves.
Customer
* Strategic Goal: Develop and promote diverse offerings. * Critical Success Factor: Being able to bring the opera and symphony to the people. Connect opera and symphony to new generations of audience. * Measure: Increasing ticket sales and achieve growth in opera and symphony attendance.
Internal Process * Strategic Goal: Post-merger integration and alignment of processes, strategies, vision, and values. * Critical Success Factor: Post-merger common value and vision creation and implementation of necessary process changes or re-designed for the effective implementation of strategies. * Measure: Common value is defined, compatibility of visions, and acting from values and vision.
Learning and Growth * Strategic Goal: Better use of resources (people, funds, skills, support, etc.). * Critical Success Factor: Creation of guidelines for allocating resources. * Measure: Consistent success of projects and productions.
Strengths and Weaknesses of the Proposed Merged Company
Internal Strengths and Weaknesses of the Merged Company
The greatest weakness of the merger, or any merger, is the negative impacts that come along with it. Mergers are often times seen as times of chaos, fear, uncertainty, disruption, constraint, and dehumanization. Attempting to merge two organizations with distinct values and beliefs could result in a cultural collision that threatens the success of an otherwise strategically compatible merger. The process is never easy and can cause for much pain and the outcome is costly. The fear and uncertainty can provoke the loss of knowledge capital through turnover of key employees during a merger. There can be a feeling of ill treatment at the hands of those responsible for the merger. Whether it is true or not, employees will find ways of safeguarding themselves. It can be by quitting or as the symphony musicians did, provide their own provisos for the merger. When one organization is considered the upper hand or the “home team”, people from the other side will deem themselves expendable. This can cause the interactions that make the organization work break down and fall apart. Another negative impact is for people to stop caring. The organization that they care about will no longer exist and the interest in making processes better is null. There will be no motivation to share the operational confidences that mold their organization and the manner or discipline for success. The negative impacts are not the circumstances under which synergistic growth is likely to occur.
Fortunately, the negative impacts of a merger can be avoided. The merger can become an opportunity for employees to learn and have a chance to provide input for improvement. For the merger to avoid negative impacts it must be handled holistically. The merging organizations should have shared conceptualizing or visioning activities. This is an opportunity for leadership staff to meet new people, gain understanding about the merging organizations, and learn new perspectives. This also will provide ideas concerning post-merger activities such as the integration and alignment of processes, creation of values, and implementation of strategies. Based on the strengths and weaknesses of each organization, the strengths of each will be able to protect the other’s weaknesses.
A possible weakness is the challenges involved in integrating these two organizational cultures into one healthy and productive organization. Rallying for support can be challenging. There can be a concern for potential loss of identity. The internal process strategy of post-merger integration and alignment of processes, strategies, and values will be a fundamental endeavor to ensure the success of the merged organization. Ironically, a post-merger integration situation can be the perfect opportunity to develop these capabilities in existing staff. We have known many people, from unionized workers to senior executives, who, when they were treated fairly and with respect, have designed themselves out of jobs for the good of their firms. By empowering employees as decision-makers during the merger, management can ensure that the merger has powerful, participating contributors. By focusing on aligning performance management, incentives, and other systems with the organization’s carefully constructed vision and core values, the merger team can create a path of least resistance toward the desired results.
A weakness for the merger will be the integration of two cultures, different strategies, and different values. The visions and missions may be similar but different approaches. The strength is both have the same targets, whether that would be the audience, members, supporters, or donors. They provide similar product: classical performances. A strength resulting from the merger is it would allow for more collaborative programming opportunities, increased infrastructural ease through a single board of directors, and central office, and an increase in community usage that could boost revenues. The prospect of joining forces with one or more compatible organizations can be a promising option for fulfilling their missions more effectively. To address the weakness brought in by the negative impact of the merger is the reason for inclusion of Internal Process strategic goal. Post-merger integration and alignment of processes, strategies, vision, and values are essential to resolve internal issues and provide an opportunity to establish a “best of both worlds” processes, vision, values, and culture. The strength of the merged organization is the experience of both organizations with regards to processes, vision, values, and culture. The new organization can also form teams to figure out how to integrate their respective structures, systems, and cultures to establish a new one. Additional strength of the merger is that early on, employees will be learning how to work together.
Another weakness of the merger with regards to internal matters is one of the merging cultures might be so strong that employees may just blindly conform to it. The internal process goal is to encourage the development of a common vision and values. Common is defined as “mutual” or “shared.” The cultural values should be aligned with the new organization’s environment rather than having the stronger or dominant culture suppressing the other.
The Learning and Growth goal to better use of resources (people, funds, skills, support, etc.) includes employee involvement in redesigning processes will give them the chance to innovate and show their capabilities. For the non-artistic employees, changes in organizational structure and design may require expansions in job function or level of responsibility. For those on the artistic side may mean more exposure and moving closer to fulfilling some of their aspirations for their career. If the employees of the merging organizations have hands-on involvement with the merger, they will have a long-term identify with the new organization and its purpose and potential. They will have a feeling of ownership for being responsible for making the new organization a success. This can be an inspiration for others to work with them in bringing the organization’s potential into being. At every level in these successful mergers, there are people who are willing to let go of their own limiting beliefs to grow, learn, and improve – who understand their own impact, and work to use it more effectively.
Another internal strength of the merger is the opera and the orchestra has similar structure and cultures. Both share similar business philosophies, similar values, and similar target audience (clients). Both organizations have complementary strengths and weaknesses. As it is when seeking a life partner, people try to find that person that compliments who they are; the good, the bad, and maybe even the ugly. If a husband and wife are exactly the same, there is no value that they would bring to each other. The same is true with this merger. The identified strengths and weaknesses of the opera and the strengths and weaknesses of the orchestra produces advantages that they will not otherwise have should they remain separate.
Even if financially a merger makes sense and leadership like each other, combining organizational cultures that have different values can be a recipe for a merger disaster. The Internal Process strategic goal to integrate and align processes, strategies, vision, and values may not be too difficult to conduct, but still needs to be accomplished.
Financial Strength and Weaknesses of the Merged Organization
The boards of the symphony and opera took great foresight, courage, and leadership to engage in the complex due diligence process and pursue a common vision, the preservation of performing arts in Utah. This is a financial strength of the merger. The boards have the prudence to plan for the future success of the symphony and opera by creating a single management structure and business operating unit. The organizational structure of the merged organization was not published but it would be crucial to preserve and promote the integrity and identity of each of the performing arts group while seeking new opportunities for artistic partnership. The boards seem to understand that a stronger governing structure and maximization of administration and planning could also facilitate artistic collaboration. The merging of non-profit organizations dates back to the 1980s (Singer and Yankey, 1991) therefore this is not a completely new phenomenon. Mergers between symphony and opera organizations have been rare and it is ever rarer that a merger was successful (Delong & Ager, 2005).
It makes sense that the Utah Symphony which is currently struggling to survive, and the Utah Opera which is currently looking for ways to strengthen itself, should consider combining with another or other compatible organization. Being located in the same area, these organizations will have a better chance of solidification by pooling their financial, technical, and community resources. This merger may improve their survival through a reduction in competition for limited resources, better efficiencies, and enhanced performance capacity.
The Financial strategic goal to produce revenues sufficient to cover expenses and provide reserves for the future will augment the financial status of the merger. The success factor is the implementation of diverse funding methods. From a financial standpoint, the merged organization needs to continue to increase revenue expressed in various means: endowment, government funding, private contributions, ticket sales, investment income, etc. The success of the merger on fundraising will depend on the new organization’s vision, appropriate leadership, persuasive case for support, dedicated donors and fans, and the ability to deliver great performances. Another strength is the merger providing opportunities such as enhanced capacity for fundraising and less competition for resources from people to support the two former (and similar organizations). A weakness for the merger will the financial cost involved while the committee, leadership, union, etc. are attempting to reach consensus. Some of the issues that need to be resolved are: the purpose and programs of the merged organization, the structure of the organization; and issues such as staffing, (re)location, and division of funding for the different programs or productions. This can be done with those involved committing to attending meetings until the adoption of a blueprint for the organization’s future.
The measure for the financial goal may be a weakness in the first few years of the merger. It may be hard to break even in the budget and have adequate reserves. A financial weakness will be the time, effort, and financial resources it will take for the new organization to reach operational stability. The first year may show cost increases due to lay-offs with vacation pay-out and severance package but such expenses can be compensated with savings in the long-term. In the long-run this merger weakness can turn into strength as personnel cost savings will be more substantial. A merged organization will require only one CEO. Other support functions can also be merged and redundant positions can be eliminated, i.e., finance, education, librarian, IT, HR, etc. The merger can also result in increased efficiency and savings in non-personnel costs. An example is in space rental and other overhead. The opera owns its facilities while the symphony rents from the county. The merger will eliminate at least the rental of administrative offices. A new strength is the symphony and opera will no longer compete for new members, source of revenue, and programs and activities. Combining fund-raising efforts will prompt creativity and innovation, and expand capacity.
Critical success factor for the Learning and Growth strategic goal is the creation of guidelines for allocating resources. This goal is intended to balance out the weakness of possibly overspending during the merger, integration process, and the first year of the newly merged organization. The new organization needs to review its program priorities. Having program priorities will ensure that the new organization acknowledge the importance of reassuring their primary funders that the merger would not result in the elimination of productions as expected by patrons and subscribed members. As the measure for the strategic goal requires, the merged organization will aim for consistent success of projects and productions.
The Customer strategic goal of the new organization is strength, also an opportunity to develop and promote diverse offerings to the public. This is also a financial strength, able to widen the audience base and at the same time increasing the opportunity to boost ticket sales and reach out to other pastures for donations. The opera and symphony are offered or targeted to a certain group of the public, the elite, and such group is becoming scarcer as the economy is trending low and the group’s population is aging out, and that the next generation is lagging in interest. The success factor is to be able to bring the opera and symphony to the people and connect opera and symphony to new generations of audience. There is a weakness in this approach, however. The tenured patrons and the elitist may balk at such opportunity. They may believe that this strategy is “cheapening” the cultural quality of the symphony or the opera. McClatchey (2000) told a story of a distinguished composer of wonderful orchestral works and some operas that is constantly short of funds. One day, he decided to write a new opera with a comic and accessible libretto, designed to attract all levels of the public. His work even premiered in a theater known for attracting a broad mix of patrons especially those of low income levels. This is Mozart's The Magic Flute, which remains one of the most frequently performed operas in the world. It was composed as a singspiel (a sung play) and was considered "lower” or accessible because it was performed in German, instead of Italian. The irony, of course, is that the Magic Flute is now considered a "high" operatic repertoire yet it was composed with the intention to attract more of the lower classes of society.
The merged organization itself is a financial strength. Since it is becoming difficult to find enough resources to strengthen every nonprofit to the same degree and funding multiple nonprofits to serve a similar clientele in the same locale, merger is a strategy of choice simply because it is an effective way of achieving greater productivity, efficiency, and sustainability. If this merger is conducted properly and with care, the symphony and the opera will do a better job together as a merged organization than they did as separate entities. Organizations merge to enhance each other’s strengths and to reduce the effect of each other’s weaknesses. In the process of combining two separate entities as one, overhead can be reduced, efficiencies are created, and profits/fund-raising is maximized.
Leadership Strengths and Weaknesses
There are different areas to be addressed in planning and executing the strategies geared to the post-merger integration and revenue generation: the role of the board and leadership staff, the new profile as an organization, human resources, and expenditures. Considering the leadership of the merging organization reveals strength in the diversity of the leadership styles or culture: Anne Ewers is a strong overall organizational leader, Keith Lockhart is committed to artistic quality and employees trust him, Scott Parker is a visionary, etc. Strength of the merger is the open-mindedness of the leaders to build consensus on the type of audience that they should aspire to develop. The ideal new audience would be young, multi-ethnic, and fully representative of the broader community. Reaching out to them will open the community to new cultural experiences. This can lead to a new ways of gaining support for the opera and orchestra, particularly with ticket sales, subscription sales, enthusiastic word of mouth promotion, and other meaningful financial contributions. The Customer strategic goal from the new organization’s scorecard, develop and promote diverse offerings is building on the open-minded and diverse strengths of its leadership team.
A possible leadership weakness is the lack of time to communicate or lack of communication during this busy time of merger activities. Leadership, including the board, can get caught up with the legal, technical, and financial aspects of the merger that employees can be overlooked. It is important that board members and leadership communicate to staff about the new organization in a consistent and accurate manner. The board and leadership staff should use the merger announcements as tools for building donor confidence by indicating the benefits, such as new production opportunities, outreach programs, and resource strengths. Diverse leadership styles may be needed to cope with the different response to changes, brought on by the merger. The autocratic style of leadership is reasonable if the organizations being merged are in turmoil and need to be changed immediately. However, in this situation, this style of leadership could be counter-productive.
Like any organization, a merged one needs knowledgeable people. Leadership needs to be more than just the business initiator of the merger. They also need to be interested on how employees see the merger. They must be open to innovative ideas and solutions, especially from employees. Leadership needs the skills of employees to analyze problems and challenges and identify best practices. This is a part of the Learning and Growth strategic goal, better use of people and skills. This is crucial to achieve rapid progress through a wider community of committed people. The more employees they have who can understand the reasons for the merger, the faster and smoother will be the transition to a new merged organization. Leadership and employees need to be team players, coaches, coordinators, and communicators.
Probable Issues During the Merger
Finance
1. Cost increases due to lay-offs with vacation pay-out and severance package.
This is inevitable and it should not be a surprise when it happens. The best thing is for the merged organization to anticipate cost increase. Appropriately forecasting the cost during the merger phase will assist in determining the appropriate financial strategy to implement. Many factors, including organizational forecasting and operational budgets and planning will assist in determining the merged organization’s anticipated cost increase. Having an idea of the organization structure of the merged organization will determine the appropriate workforce changes occur. It should be understood by employees that the lay-offs are due to redundant or no longer needed positions rather that lay-offs due to cost-cutting efforts. However, leadership and the board should be candid about the impact of the economic climate to the organization and there is no margin to maintain redundant employees. It should be made clear that any employee from the merging organizations can apply for any new positions posted by the merged organization.
Human Resources 1. Since the CEO will be coming from the opera organization, it may be understood that the “upper hand” is on the opera side. Hence it can be understood that the opera is assimilating the symphony. Generally, if a merger or acquisition occurs, the acquiring organization (opera) succeeds all the
The selection of Anne Ewers as the CEO was due to the confidence that Scott Peterson has on her to set the tone, direction, and behavior of the merged organization. There are also other complex variables that impacted the selection, such her business savvy and leadership experience. There may be also the intellectual, social, and psychological factors that she possesses. Human Resources should play an early and important role in the merger. There are many key decisions that can influence the success of the merger which HR can guide and influence. The selection of the CEO should be an issue that the board will communicate to the staff, patrons, donors, and the public. The reasons for the choice and the confidence of the board in Anne Ewers should be reflected in their communications. Not having HR’s involvement in elucidating the board’s reason for the CEO choice to employees will lessen any risks associated with the selection of CEO. Moving forward, Anne Ewers should first and foremost focus on key tasks such as creating a new organizational structure, managing the change process, retaining and motivating key employees, communicating with the diverse stakeholders (Schuler and Jackson, 2001). She should work on improving the internal operational environment to create a positive relationship with previous and inherited employees. 2. Resistance from the employees in terms of salaries, contracts, working conditions, anxiety, fear of the unknown, and issues arising from managing such change in organizations.
Lack of communication with employees will result in assumptions and rumors that feed into fears and anxieties. To alleviate resistance, the board and leadership must show their respect of the cultural values of both organizations. A sensible approach is to begin defining the core values of the merged organization, realign the strategic objectives, and clearly communicate these to all employees. An important factor requirement is to involve people from both organizations with representatives from functional areas and levels. The involvement of employees from all areas will help them see how the newly merged organization would really work. This is real evidence that will support leadership and board communications to employees. An ultimate factor to make this authentic is for the leadership to use positive reinforcements through strategic employee recognition in bringing the new core values and strategic goals to life. The board and leadership should focus on positive messaging, even if the news is a set-back or negative. They should emphasize their commitment to the merger and the merged organization and the urgency of the matter. These are importance to gain participation and advocacy. 3. Employees resigning during the merger.
It is unavoidable that there will be voluntary resignations of employees during a merger. Even a merger that has the best intentions in the world can lose value when too many employees in both organizations get nervous about what is it to be like post-merger. HR needs to help identify key employees and develop an appropriate retention strategy to ensure they will remain engaged and become part of the new organization. One of the most effective methods to encourage employees to stay and get to know the quality of the newly merged organization is by offering employees a retention bonus that will be paid after the employees stay for one year after the merger. However, considering the financial situation of the new organization, leadership should use other suitable solutions. One solution is for leadership to be constantly connected to their staff. Regular communications will ease up tension. If people do not know anything, the will fill in the blanks. Leadership should provide communication concerning status of the merger: advancements, set-backs, or whether positive or negative. Honesty is the best policy for this matter. If the staff will discover any untruth provided by the board or leadership, everything becomes questionable. 4. Staffing (administration and support) of the new organization.
The merger committee needs to identify the required positions in the new organization. The committee needs to cautiously plan what sort of staff the merged organization might need to fulfill its mission and to administer its programs. It includes how these positions will be filled, and who among the current employees on either side are qualified. The merger committee will have to discuss the strengths and weaknesses of the existing staff. Leadership staff should make clear to employees that if current positions are offered within the post-merger organization, current employees be offered such position. If there is a redundancy, it will be offered to employee who best fit the requirements. Old staff will be given the first shot at any new positions if they express interest. Their qualifications will be reviewed and a decision will be made whether to offer them the job before such a position is advertised outside of the post-merger organization. Leadership needs to consider objectively the best way to balance treating the old staff fairly when adding new staff that might be more skilled than individuals who are presently employed. To be able to integrate employees, HR needs to understand the employee population: their departments, their job function, current compensation and benefits, and how all of these will fit into the newly merged organization. 5. Difficulties in reconciling the differences in wage scales and benefits.
Compensation and benefits for staff is challenging for merging organizations due to differences in compensation levels, compensation methods, and benefits packages. It is crucial for staff retention that the merging firms combine the varying systems into one without people feeling like they came out losers. The merging organizations must address potential compensation and benefits problems. Salary may not be the most important factors in a not-for-profit employee satisfaction, but should not be ignored. If employees underpaid, they will look for other employment options. The merged organization’s approach to equity will be very important as the compensation program it will implement. The newly merged organization should establish a compensation program that is comparable to other similar organizations (external equity) in terms of design of their compensation structures. Rather than following one of the merging organization’s compensation structure the emphasis on external equity allows the merged organization to develop compensation structures and programs that are competitive with other performing arts companies. This will also minimize any perception of inequality if the compensation plan will adopted from one of the merging organizations. 6. Not truly a human resource issue but with regards to board membership, there can be an issue on how directors should be nominated and selected. There might be contention on the ratio of representation. A majority of the members may come from the opera side or vice versa, and if these members have voting rights, the allocation of resources will weigh out heavily for one side.
Committee members should establish several general principles that detail how the new organization board should be structured. While the merged organization is just starting, it may be prudent if there will be an equal number of board members from both sides. However, in the future, it may not matter as long as long as a well-functioning board with various backgrounds is functioning. This is critical to continual growth and success of the merged organization. Generally, the most effective boards are comprised of individuals with diverse perspectives, experiences, and expertise. This enables the board to provide viewpoints with broad-mindedness and depth. While opposing points of view are exceptionally important, they should be also managed so that internal conflicts over roles, strategies, compensation, or accountabilities do not heighten into subtle or evident conflict, which will compromise the entire organization.
Customer Satisfaction 1. Patrons and members feeling disconnected with the process.
The board and leadership should seek the involvement of advocates and funders in the process. Their involvement will not be an active participation in the merger process but by providing feedbacks on matters that may concern customers and stakeholders. Feedbacks from the community, members, patrons, and funders should be an integral component of the merger effort. It should be an inclusive process, to make sure that the board and leadership are not just steamrolling over anyone's interests. Leadership and the board should listen to these stakeholders, understand their concerns and note their questions, and then create a communication plan tailored to their needs. This communication plan will address their concerns and provide a positive reinforcement for the merger. 2. Customer dissatisfaction due to the opera and symphony being unable to deliver performances due to the time and work the merger requires.
A merger work is a full-time job for all those involved. For a merger to be effective and successful, many resources will be dedicated to the merger process. As with the employees, the board and leadership should stay in front of fans and donors, and tell their story regularly. Communicate. The fans, patrons, and donors need to understand some of the dynamics and complexities of the merger. Customers need to understand that this merger is being executed in extremely tight timeframes in order for the opera and symphony to be able to be back on track and provide their fans with their outstanding productions. Awareness will foster trust and confidence with customers.

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