Because of a small market and union problems, the Sacramento Symphony went bust.
THE BUSINESS: Sacramento Symphony Association
PRIMARY CAUSE OF DEATH: Failed labor negotiations
SECONDARY CAUSE OF DEATH: Market too small to support growing organization
The California state capital was stunned at the death of the Sacramento Symphony, in January. The organization had been struggling for 10 years. But businesspeople, bankruptcy trustees, and union negotiators had headed a last-ditch effort to save the 76-position symphony. It didn't work.
Symphonic music in the United States earned $887 million in 1995 in ticket sales, donations, and government support. Most of that belongs to the few large, successful orchestras in cities like Boston and Detroit, operating with budgets of up to $100 million. Sacramento fell in with the majority of the country's 1,200 nonprofit, unionized symphonies, operating on income of $10 million or less.
The Sacramento Symphony Association was officially organized in 1948. By the mid-1970s, ticket sales paid musicians' salaries, and musicians belonged to the American Federation of Musicians union. In 1985, 88 musicians were playing a 36-week performance schedule. From 1982 to 1985 the symphony's excess earnings averaged roughly $100,000 a year, which went into its endowment fund.
But musicians wanted raises and more concert dates. Ticket sales were good, but the city lacked a strong corporate base for fund-raising.
Starting in 1986, losses ranged from $300,000 to $500,000 a year. Salaries, hall rental, and printing expenses were paid from the endowment, which finally ran dry in 1992. The symphony filed Chapter 11 that December. "A lot of people did a lot of work to keep this symphony going," says Walter Dahl, the bankruptcy lawyer. The symphony emerged from a reorganization in September 1993 with a three-year collective-bargaining agreement promising musicians ongoing salary increases and a longer season.
That's the financial nightmare director Lynn Osmond stepped into: a bankrupt organization with an unrealistic labor agreement in a lackluster market. Osmond, hired from the Buffalo Philharmonic, started cutting operational expenses. She instigated a management pay cut in 1994 and asked musicians to freeze their salaries, which accounted for 46% to 49% of total expenses (slightly less than the 52% industry average). They agreed for two years. But by 1996 the symphony was again broke. Unpaid premiums had left everyone without health-insurance coverage.
Miraculously, the symphony raised a pledge of $1 million from local businesspeople. That money would have retired all debt, but to get it, the board first needed to balance the budget. The board reopened contract negotiations and asked the musicians for a 25% salary cut. They voted it down 64 to 6. "You can't turn us into nonprofessionals," says Elizabeth Glattly, violinist and union steward.
In September, owing more than $1 million to 3,700 subscribers and creditors, the symphony filed for Chapter 7 bankruptcy. Bank loans secured by board members, staff, and Osmond were called in, to the tune of $80,000. The musicians scattered to other symphonies and teaching jobs. In January the city seized symphony assets, including instruments, office furniture, and the music library. "If we'd only had flexibility from the musicians," says Osmond, "we could have made it work."
Symphony executive directors are usually either businesspeople with little musical background or arts professionals without business experience. Either type will appreciate the wealth of information about music and business available from the American Symphony Orchestra League, or ASOL (1156 Fifteenth St. NW, Suite 800, Washington, DC 20005-1704; 202-776-0212). Particularly useful is The Orchestra Resource Notebook, a series of papers on management, taxes, and finances for symphony orchestras, each of which costs $25 for nonmembers.
As nonprofits, symphony orchestras face the typical problems of fund-raising, managing volunteer boards, and projecting accurate budgets. Books and audiotapes are available on those topics (and more) from Jossey-Bass (800-956-7739). Ask for the Jossey-Bass Nonprofit and Public Administration Catalog. It's free.
Bob Frey, CEO of Cin-Made, a for-profit manufacturer in Cincinnati, used open-book management to negotiate a tricky labor contract with his employees. He wrote about what he learned from his successes and failures in the September-October 1993 edition of The Harvard Business Review. Reprints of the popular story "Empowerment or Else" are available at $5 each ($10 minimum order) by calling 800-988-0886 or contacting HBR's Web site.
A book that wins good reviews for helping establish positive union relations is Beyond the Walls of Conflict: Mutual Gains Negotiating for Unions and Management, by David S. Weiss (Irwin Professional Publishers, 630-789-4000, 1996, $30).