Museums Have Visitors, Not Customers And Serve Communities Not Markets; Well not the markets of market analysts anyway
Being business-like means understanding visitors and building supportive but challenging relationships within the museum and outside, not focus on tight cost control, something Peter Drucker once said was the only distinguishing feature of business. Museums may need to be business-like, but as Gerard Vaughan of the National Gallery of Victoria said recently, they are not businesses!(1)
To understand the best of museums, one should look to the San Francisco Museum of Modern Art, Tate Modern, the Natural History Museum in London, the Metropolitan Museum in New York, the National Museum of the American Indian or the Monterey Bay Aquarium and forprofits as identified by people like Jim Collins, not attend to the mantras of failed enterprises whose CEO’s have been forced out with large severance packages.
Market analysts likewise, relying on little data about actual reasons for investor or business behaviour or understanding of the dynamics of individual businesses, have mostly failed to identify the reasons for major changes in the fortunes of companies and markets. The advocates of market economics are driven mostly by ideology, not evidence!
In the last 40 or so years much of the business world and many governments, particularly in developed western countries, have adopted market (or “rational”) economics and corporatism. Market mechanisms, according to this approach, should be allowed to determine production and pricing and government should stay out of the way of entrepreneurial business ventures. The focus is on the short term because the emphasis is efficiency as assessed by return on investment reflected in stock price as spruiked by stock market analysists. Rather than seeking new products and markets and quality service, the market oriented business seeks increase in the wealth of shareholders. (To varying extents, Nordic and some other European countries have been less prepared to adopt the market economic model (2). Those countries also have more equitable societies and the benefits of lower crime rates and many other features which follow from relative equality.)
In adopting this philosophy governments have also sought efficiencies, reduced the size of “˜bureaucracies’, promised increased accountability and, as have business entities, promoted transparency. Many services, once free, have been reconfigured as delivering private benefits and priced accordingly. Government trading operations and utilities have been sold off or corporatized. Fixed term contracts and performance pay have been introduced for senior staff.
Accumulating debt to fund infrastructure has been eschewed, the view being that leaving future generations with a debt burden being criticised is irresponsible. Both operational and capital costs therefore have been restricted because both have to come from operating revenue. Accounting standards have been unified within countries and, lately, internationally “˜to improve transparency’, and applied to museums and public entities. But balance sheets have only become more complex, partly through accrual accounting and changes in the way assets are treated, potential income from their deployment rather than their resale or replacement value being counted. In Australia, but not elsewhere, financial valuation of non tradeable assets like land under roads (and also heritage collections) has been demanded.
In other words, the view has been taken that government entities and nonprofits must be run like a business. The only problem is a management problem and therefore every organisation just needs managers: this is the central tenet of managerialism. The requirements are to set goals, measure achievement, work smarter, make decisions quicker, develop strategy and identify performance indicators. The dominance of this thinking in some quarters is illustrated by one museum director in Australia who observed in the early 1990s, “the financial pages of the newspaper are more important reading for museum directors than Museum News” and “business plans are more important than strategic plans”(3) .
The same philosophy has flowed to museums supported even minimally by government. They are expected to generate more of their own income, to be responsive to the market ““ which in the case of museums and like enterprises – means audience development, merchandising and a host of other commercial activities: executives are expected to understand balance sheets. Though claiming to be less interventionist, governments have sometimes curtailed funding for programs at enterprises like scientific research establishments, universities and museums, unless they would lead to more revenue.
The evidence from careful studies of organizations does not support this market-driven model of business. The most successful enterprises, government and non-government, commercial and nonprofit alike, focus first on the long term future ““ the strategy – in their delivery of unique products and services which are valued by customers and audiences. These enterprises recognise that being business-like means understanding customers and building supportive but challenging relationships within the enterprise. In other words, in talking of business models we must be clear that there is no one model: the one being criticised is that which is subjugated to the unbridled demands of the market.
Organizations are made up of people and the success of the enterprise depends on how people behave. Leadership develops a culture which influences how staff behave and what values they subscribe to. This is true whether the organization is a nonprofit or commercial one, involved in transport or retailing, marketing or research and development, whether it is a library or an orchestra or a museum. Museums (and libraries and botanic gardens) are unique in their possession of collections and the presentation of them. But they are similar to other organizations in all other respects.
It is doubtful whether many museum executives are able to be sufficiently discerning in managing in this restricted financial environment. The complications of universal accounting standards and the dominance of Government Treasury departments, often deter executives not well trained in accounting from inquiring too much into the information they are given about budgets and financial projections and investments. However, much of the real work in this area is not of an accounting nature but simple mathematics relating to patterns of cash flow and historical events easily gleaned from past years. Though the past does not predict the future unless we ignore it, there are seeming inevitabilities to the month by month patterns of events which influence trends and patterns. A principal requirement of an executive is to think. Another is to question.
Much of the history of “man’s affairs” turns on misunderstandings, on ignorance and on what is made of ambiguity or “a policy pursued despite contemporary arguments to the contrary”, captured by Barbara W. Tuchman in, “The March of Folly”. In “The Piano Tuner“, Daniel Mason’s outstanding first novel, Edgar Drake is sent by the British Foreign Office to Burma in 1886 to tune an Erard piano which an important military officer, Surgeon General Carroll who was at “the front line” of the attempt to annex the Shan States (part of what is now Burma), had somehow obtained. Drake becomes involved in the affairs of the doctor but when serious conflict with local peoples breaks out he is forced to take the dangerous journey with the piano back towards Rangoon. On the way, he is captured and later shot because he is suspected, with Carroll, of collaborating with the Russians who also had designs on Burma. Carroll is accused of having been involved in espionage with the famous Russian chemist Dmitri Mendeleyev (1834-1907).
If Dr Carroll had been corresponding with Mendeleyev it was [probably] about aspects of the natural environment in the valley in which he was living, just as he was with biologists in England and France. Edgar Drake was arrested on ridiculous charges based on untested supposition grounded in ignorance. Events which had no relationship were connected to each other and more sensible – and relatively innocent – explanations never considered.
In an outstanding lecture to the Lowy Institute in Sydney in November last Lord Robert May of Oxford, former Chief Science Advisor to the British Prime Minister and President of the Royal Society of London , opened his address by quoting Regis DeBray’s “Revolution in the Revolution” (itself “having a memorable opening paragraph”), “We are never completely contemporaneous with our present. History advances in disguise; it appears on stage wearing the mask of the preceding scene, and we tend to lose the meaning of the play” … The blame, of course, is not history’s, but lies in our vision, encumbered with memory and images learned in the past. We see the past superimposed on the present, even when the present is a revolution.”
1,The basis of market economics, that people behave in a rational manner to maximise their utility, has been vigorously objected to by many people including Nobel Prize-winners like Amartya Sen (see “The Way to Reason” by Alan Ryan New York Review of Books 50(19), 2003).
2, Many business advocates highlight the economies of Britain and the USA but in fact the interventionist economies of Nordic countries with their substantial investment in early childhood and later education and social support are more competitive.
3, Margaret Coaldrake speaking on International Museums Day 1993 in Sydney: the text is published in Museum Matters (Museums Association of Australia (NSW Branch) 1(1), 5-8. In 2005 some half dozen museum directors were asked, in a seminar, to identify the most important problem they had recently dealt with and the most difficult: not one answer mentioned museum visitors. The issues identified were political, bureaucratic and financial.