Analysis, Withdrawn

From Minneapolis, Minnesota, the flash – apparently official – Michael Henson’s sanity died at 5pm Central Standard Time yesterday.

*takes off glasses in a dignified Cronkite-ian manner*

Yeah, the MOA suddenly decided to withdraw from financial and organizational analysis yesterday afternoon because, after months of discussion, the board couldn’t stomach the proposed terms. From this MPR article…

Orchestra President Michael Henson says the orchestra board decided to move forward on its own when the musicians insisted the scope of the analysis extend beyond simple finances.

“And unfortunately we began to see those parameters expand to include an examination of our artistic decision-making process and the quality and effectiveness of the board,” Henson said this afternoon. The board decided to move on with an analysis on narrower terms.

However musicians say management has stepped out of line. They say management and musicians had agreed to a framework for the study. Then the players say management wanted the following language inserted in the agreement. “It is understood that this financial analysis/review is not intended nor will it encompass subjective matters such as the artistic quality of the music director or the musicians, the comparative quality of other orchestras, programming decisions, performance of management or staff, or board quality/competency.”

The musicians objected to this language, and said so.

Tim Zavadil, chair of the Musicians Negotiating committee says the examining the artistic decisions, board performance and making the comparisons with other orchestras is what makes this an analysis as opposed to an audit.

He says the musicians were under the impression they were still talking about how to do the analysis and he was flabbergasted to hear management has decided to go ahead on its own instead of together with the musicians.

“That would be the best way to go, to do it jointly,” Zavadil said this afternoon. “I am sure if we did one they would say well that’s just one that the musicians did on their own. I don’t know what our response will be if they release this information.”

Okay, so here’s what I don’t get, and why I’m making the call that Mr. Henson’s sanity is dead. If management can’t agree with the musicians on terms for analysis, then why not pull out of analysis altogether? What’s the point of a unilateral analysis? Unilateral analysis won’t placate musicians. It won’t placate lawmakers. It won’t placate the public. It won’t placate board members. If anything, I’d think it might piss the board off, because they were told for months that an analysis was unnecessary: a “frolic and detour,” in the immortal words of Doug Kelley. So how are they justifying it now? The only reason I can think of is that Mr. Henson wants another wedge to insert between the board and the musicians (“look, ladies and gentlemen of the board, we did an audit and a financial analysis, and they still won’t work with us!”). But there’s such a thing as the law of diminishing returns, and there already are dozens of wedge issues. Would one more really be worth all the money they’re sinking into the analysis? Especially since the state is conducting its own audit, too? And let’s be blunt: how much further can the relationship between the board and the musicians deteriorate? What would be the use of using this issue as a wedge? – unless there are rumbles of rebellion happening behind the scenes, and some board members are pushing for the MOA to do their own analysis? But that’s a stretch. I’m racking my brains and I honestly have no explanation for what is going on here. So help me out here, clever readers: what purpose could a unilateral analysis, as opposed to a withdrawal from analysis, serve Mr. Henson? I sincerely hope I’m suffering from an acute lack of imagination, and that there’s a sensible explanation somewhere.

I think we should visit the SOTL Archives (TM) and see what the MOA has said about financial analysis in the past. Just for fun.

In response to the Union’s call for an independent audit of the Minnesota Orchestra’s finances, the MOA Negotiating Committee declined the request, citing unnecessary delay and duplication of efforts as the Orchestral Association undertakes an annual independent audit and shares its audited results publicly each December. – MOA press release, 25 September 2012

It’s as transparent as you can be, and we have done that every year, and those numbers are public. The musicians have them. If they want to do a forward-thinking analysis, the first place they’d go would be to a certified financial statement or tax returns. Those are sort of the gold standard documents in financial analysis… We have opened our books up totally. We don’t need to take another frolic and detour into something that won’t help any. – Doug Kelley, 30 November 2012

Our volunteer Board members will continue to do everything possible to remove any barrier the musicians say is standing in the way of them making a serious counterproposal that helps to address our Orchestra’s $6 million operating deficit… The Board has been eager to move forward with a joint independent financial review since we agreed to this course in January… We aim to come to a common understanding with the musicians over the significant financial challenges facing the Minnesota Orchestra, so that we can negotiate a sustainable settlement that protects the Minnesota Orchestra for the future. We hope to do this as expediently as possible in order to prevent further concert cancellations. - Minnesota Orchestral Association email blast, 1 April 2013

Well that’s awkward.

Another question: why not allow for a review that analyzes board competency or artistry of musicians or staff performance? Why are such things off-limits? It’s almost as if Mr. Henson is terrified that if anyone came in from outside the MOA bubble, he or his methods might be judged……….?

And here’s another weird thing: the musicians have been saying since November that they wanted a review that encompassed these “subjective” things. Unless he is very slow, there’s absolutely no way that Mr. Henson should have been surprised at “parameters” expanding to include “subjective” matters. These are the musicians’ words from November:

The audits that the MOA refers to are based exclusively upon the historical financial statements provided by the Association to the auditor. These reports cover statements of changes in net assets, operating activities and cash flows. In other words, an audit focuses solely on limited areas of past performance.

Audits do not cover an institution’s viability, stability, business plan, strategic plan, the quality of its management, comparative performance, or present and future prospects. A joint, independent financial analysis would review all of these things, and would assess current and future trends, opportunities and risks.

I’m not sure how much clearer you could get than this. If after reading that, Mr. Henson didn’t know that was what the musicians wanted, well… I don’t really know what to say about that. The incompetency speaks for itself.

I also think it’s worth mentioning one more thing… Six days before this announcement was made, Michael Henson was interviewed for MinnPost, where he said, “We hope very much that we can announce successfully the financial analysis this week.” As I wrote on Facebook, either he had a good idea the withdrawal was coming and chose to mislead MinnPost – or he withdrew from four months of discussion on a flighty whim – or he’s unquestioningly doing (or being forced to do) the bidding of someone else. Not sure which one of those ideas I loath the most.

Transcription of Feb 12 Hearing, Part 5

And here’s a rather fascinating coda to what went on after the main body of the testimony… Mr. Henson was actually called back from the audience to answer a few questions from lawmakers. This concluding portion of the hearing can be heard starting at approximately 1:35:00 in this mp3.

Rep. Phyllis Kahn was the chair. Other representatives who spoke include Anna Wills (R), Jean Wagenius, John Ward (DFL), Leon Lillie (DFL), Dean Urdahl (R), and Mike Freiberg (DFL). This meeting occurred on 12 February 2013 in front of the Legacy Committee of the Minnesota House of Representatives.

***

PK: Thank you, all. Are there any quick questions for Committee members? And again, we’ll…Rep. Wills…again, we will be continuing this discussion; I don’t want to stop it here, but…

Michael Henson’s February 12 Testimony in Seven Minutes

Before I continue with my transcriptions, I wanted to share a video with you that I made yesterday…

“Michael Henson’s February 12 Testimony in Seven Minutes.”

Transcription of Feb 12 Hearing, Part 1

Minnesota Orchestra CEO Michael Henson appeared in front of the Legacy Committee of the Minnesota House of Representatives the afternoon of 13 February 2013. The audio of this hearing can be heard here. The section having to do with the Minnesota Orchestra and St. Paul Chamber Orchestra begins at 42:45.

The legislators who spoke at the hearing were Rep. and Committee Chair Phyllis Kahn, Rep. Mary Murphy, Rep. Dean Urdahl, Rep. Alice Hausman, and Rep. Mike Freiberg.

***

PK: The next issue which has been brought to my attention from a lot of people and have also been brought to us I think – I hope to other members of the committee, too – is the, um, public comment on Legacy funds and perhaps general funds. This is – you know, we talk vaguely about the arts at some point, but this is also specific public problem that seems to be before us at this time, which is the issue of the Minnesota Orchestra and the St. Paul Chamber Orchestra. And I wanted to – and you know, whenever I talk to someone I realize that I know much less about this than I think I know, from reading in the newspaper, reading newspaper articles and reading people’s, um, comments to me. So again, hopefully this is the start of our conversation on this to see if there’s some role – the state, as I’ve pointed out, is a very large donor to some of these organizations and see what our role can be as that donor. So. Going to start now with the first person for comment is Michael Henson, who’s the President and CEO of the Minnesota Orchestral Association. Mr. Henson? Thank you. And you need to say who you are for the tape. Thanks.

MH: Um. Madame Chair, and Representatives. I’m Michael Henson, the President and CEO of the Minnesota Orchestra. Thank you very much and I very much welcome the opportunity to address you and answer any questions you have today.

what

More proof that the MOA knows who I am…

The MPR article – in which I and my blog got more space than Michael Henson – is now listed in Industry News.

Um. Why is management even obliquely promoting this blog? Is this a sign that the Industry News page is starting to post others’ viewpoints? What’s next? A link to SOTL? Is this a shift in strategy, or just a dumb mistake?

I don’t get this, at all, but I guess it wouldn’t be the first time I don’t get the logic behind the MOA’s PR tactics. So, um, thanks for the shout-out, MOA. If you want to…you know…actually contact me…………feel free. I’ve got a shiny Facebook page now through which you can do that.

A Michael Henson Retrospective

A few days ago, I took a trip through the 2010 Minnesota Orchestra e-tour site. That’s the place where I found the “winning” article from Gig Magazine, where the Minnesota Orchestra was described ”as a beacon institution among the bad [economic] news.” Not long after I blogged about that article, it mysteriously vanished from the Orchestra’s website. Luckily, a reader had told me to take screenshots, and so I posted those. We’re going on seven weeks now, and management has yet to address the disappearance.

Anyway! During my recent return trip to the e-tour site, I found some more quotations that I feel compelled to share with you now. They’re from an interview that Minnesota Orchestra CEO Michael Henson gave to Classical Music Magazine in August 2010 called “Flying the flag.” I’m not even going to bother with the cache. Here’s a direct link. When that’s taken down, here are the screenshots. Click for bigger images.

Mr. Henson is speaking…

“We’re being fiscally prudent, looking at how we plan the short term at the same time as being mindful of the medium and long term.”

“The current Sommerfest series is being well attended and the orchestra came in on budget for the 2009/10 season.”

In the 2008-2009 fiscal year, the Minnesota Orchestral Association, or MOA, says their operating draw percentage was 10.7%; in 2009-2010, the orchestra says the operating draw percentage was 11.4%. (I say “says” because guest blogger and local nonprofit professional Mary Schaefle reports that the numbers released to the public don’t match the MOA’s tax returns, and so far, we have not received clarification from the MOA on this point.) As Jon Campbell, the chair of the MOA board of directors, and Richard Davis, the immediate past chair, put it, ”In Minnesota, we were able to deliver balanced budgets through large, unsustainable endowment fund draws and ‘bridge-the-gap’ fundraising.” Which – and correct me if I’m wrong about this – is bad. But according to August 2010 Michael Henson, unsustainable endowment fund draws and “bridge-the-gap” fundraising are also….fiscally prudent, and being mindful of the short and medium and long term. Or something.

Although there has been a slight decline in recent audience numbers, it has not been enough for alarm bells to sound.

But… I thought national trends indicate a need for change…

(From the Strategic Plan)

So I guess there’s a need for change, but there hasn’t been enough change for alarm bells to sound? Or in other words, there’s no need for changes that require a significant departure from the traditions of the past?

(From the Open Letter)

Clarification would be very cool right about now.

“We’ve done a very good job in terms of maintaining audiences and indeed the audiences have really shown that even if we’re in a tough economy, people still want to come out and hear a great orchestra.”

In the fiscal year lasting from 2009-2010 (the year Mr. Henson had just finished as he gave this interview), overall attendance dropped by 7%, from 270,000 to 250,000. Is this “a very good job in terms of maintaining audiences”? I suppose if you get convoluted about it, and if most other American orchestras saw their attendances plummet by 10% or 15% that year (and I don’t know if they did), you could make that case. Otherwise…I dunno. Please forgive me if I’m not completely convinced. I’d love to hear more of the subtleties of the argument, and more figures to back the argument up. If Mr. Henson ever sits down with a reporter like Matt Peiken from MNuet, these remarks could form the basis of a fascinating and productive discussion. (Mr. Peiken has asked to interview Mr. Henson; Mr. Henson has not yet accepted the invitation. Maybe he will now.)

(And yes, I’m aware that a big chunk of that attendance drop can be ascribed to the fact there were 9% fewer concerts in the 2009-2010 season, as Mary has explained here. But Mr. Henson wasn’t talking about revenue here; he was just talking about audience maintenance.)

At the time Henson was appointed to the Minnesota Orchestra, he was quoted as saying he believed orchestras were in a golden period. That, he says, is still the case.

A visual representation of our era

Yes, apparently we are in a…golden period. Pretty fricking depressing Golden Period, if you ask me, but…OK.

 “At the moment we are getting some great artistic performances from major orchestras in America. The real challenge is looking at the long term future. It’s critical that the art remains central to our mission and critical that we continue to act in a fiscally prudent way. This orchestra’s been in existence for well over a hundred years and our job and duty is to make sure it’s thriving for the next hundred.”

What?

I agree with Michael Henson about something?

Yay!

This warrants a celebration.

OK, celebration over.

Now. Remember, at the exact same time that he was saying all of these things…”golden period”, “people still want to come out and hear a great orchestra”, “we’re being fiscally prudent, looking at how we plan the short term at the same time as being mindful of the medium and long term”…Mr. Henson was, behind closed doors, not only approving endowment draw rates of over ten percent, but Strategically Planning the Strategic Plan that would culminate in 20-40% pay cuts for musicians, prominently highlight how “stressed” orchestras are, and produce a drastically altered mission statement that can be interpreted as the MOA having no interest in supporting orchestral music at all. By management’s very own admission, the Strategic Planning began in the spring of 2010: months before these sentences were ever uttered to Classical Music Magazine (or, for that matter, Gig Magazine).

So, to sum, as he was giving these rosy interviews to the international press, behind closed doors, Mr. Henson was saying (formatting mine for emphasis):

• “the status quo can no longer be preserved” (from the Open Letter)
• “…this is a journey that began several years ago, when the Board of Directors of the Minnesota Orchestra recognized that the organization could no longer survive based on optimistic economic assumptions and the hope of limitless benefactor generosity” (from the Open Letter)
• “…the reality is that over the past three years we met regularly with our musicians and others with a stake in our future to share the clarity of our financial challenges“… (from the Open Letter)
• “Board and management have been communicating the financial position of the Orchestra with musicians for three years.” (from the Misrepresentation vs. Reality chart)
• “As part of the strategic planning process, the board openly shared the Orchestra’s financial situation with musicians in a series of meetings spanning three years.” (from the Misrepresentation vs. Reality chart)
• Would you like me to keep going? Because I could keep going. But alas, I have pity for this dead horse.

So.

What are you feeling right about now? Personally, I’m suffering from a bad case of confusion, and the only thing that has a chance to cure it is a long, long hours-long sit-down chat with Mr. Henson himself.

Here are some more quotes that struck me as odd as I was paging through old newspaper articles. Lots of interesting ones…although, awkwardly, none of them are as damaging as what is actually still on the Minnesota Orchestra’s own website.

Terms of his [Henson's] contract were not disclosed. According to public documents, [Tony] Woodcock, his [Henson's] predecessor, earned an annual salary of about $300,000. – Pioneer Press, 22 September 2007 [According to public documents, Mr. Henson's salary in the 2010-2011 fiscal year was $360,283; total compensation was $389,861. We are currently waiting on numbers from the 2011-2012 fiscal year. Since I don't have a paid account with Goldstar, I have no access to the 990s that would go into the details of Mr. Woodcock's compensation.]

 

Henson believes the hall’s finest characteristics must be preserved. He has visited the new Guthrie Theater, MacPhail Center and the Walker Art Center and came away concluding that while all three make distinct visual statements, it is what happens inside the building that matters most.

“There is no point in having a great building without having great art inside it,” he said. – Star Tribune, 24 February 2008

 

The Minnesota Orchestra has raised $24 million toward its $40 million Hall renovation. Michael Henson, president and CEO, told the Orchestra’s annual meeting Wednesday that $10 million was raised in September alone. In other financial highlights, the Orchestra balanced its budget for the third consecutive year even as total attendance declined, and ticket revenue rose 4.4 percent…

“We must balance artistic initiative with fiscal responsibility,” Henson told the noon luncheon in downtown Minneapolis. “We’re quite pleased with these results in a challenging year.” - Star Tribune, 9 December 2009. [In the 2008-2009 fiscal year, the year Mr. Henson is referring to here, the MOA states the endowment draw rate was at 10.7%, over double what they now say is "sustainable" and responsible.]

 

Michael Henson, Minnesota Orchestra CEO and president, hinted Monday that the organization’s renovation of Orchestra Hall might be expanded. Henson’s optimism came after Gov. Tim Pawlenty included $14 million for the project in the state bonding bill. Coupled with private and corporate fundraising of $24 million, the orchestra has now raised $38 million toward a plan that was announced last summer at $40 million.

“You recall that the project was downsized from $90 million,” Henson said, referring to a previous plan announced in 2007. “If we can generate more money through our fundraising, then it would make sense to grow the project, but it’s too early to say that, and we’ve made a priority to be fiscally responsible.”…

It is no secret that the orchestra has been pleased with its fundraising. Last June, when Toronto architects Kuwabara Payne McKenna Blumberg Architects (KPMB) were chosen to spearhead the renovation, pledges for $14 million had been secured. That grew to $24 million by last December’s annual meeting. An organization’s ability to raise private capital helps its chances in the legislature. Henson said he was pleased that “the governor has shown confidence in this project. It’s a very good day for the orchestra.”

KPBM was expected to deliver sketches last December, but that likely was delayed to see whether fundraising might be robust enough to expand the project.  - Star Tribune, 15 March 2010

 

A gift of $5 million from Target has pushed the Minnesota Orchestra past a $40 million fundraising goal for its Orchestra Hall building project. With the Target donation, the orchestra has raised $43 million to expand and refurbish the 1974 hall’s lobby and surrounding terraces.

Target’s is the campaign’s largest corporate gift. The state of Minnesota contributed $14 million through state bonding, and one individual gave $5 million, according to Michael Henson, the orchestra’s president and CEO.

At the same time, the organization announced that the building project is part of an even larger fundraising effort it calls the Building for the Future Campaign. That initiative has raised $82 million toward a $100 million goal and has been talked about only within the orchestra and the philanthropic community. The campaign includes $40 million for the building project, $30 million for the orchestra’s endowment and $30 million to support artistic and education programs.

However, Henson said, within that framework it’s possible that more money could be dedicated to the renovation.

The $40 million was a “focused budget,” he said. “By passing that amount, we’re not going to increase the scope of the project, but we will increase the quality of finishes and other aspects that give us additional value.” – Star Tribune, 15 June 2010

????

So, um.

Wow.

But those weren’t the only articles I read. Over the course of a lazy afternoon, I carefully studied a couple dozen in which Mr. Henson discusses his work in Minnesota. In none of them was there any hint of an impending apocalypse, or even a “market reset.” True, there were articles about cutbacks in staff after the Great Recession began, and occasional mentions of a “difficult economic climate“, but just about everybody suffered staff cutbacks after the Great Recession began, and of course we all knew we were in a “difficult economic climate.”

Here. Don’t take my word for it; check out Highbeam or EBSCO yourself. The search term you want to use is “Michael Henson” orchestra. Leave any interesting links I may have overlooked in the comment section, especially if they prove me wrong. Because I’d love to be proven wrong. Go ahead. Make a fool of me.

I eagerly await Mr. Henson’s (and Mr. Campbell’s, and Mr. Davis’s) clarifications.

…………………..Because they’d better clarify.

Here’s a final observation from Mr. Henson from August 2010:

“These are much bigger organizations than British orchestras. That requires the right sort of skills and anybody contemplating coming here has got to have the right skill set. But there are some fantastic opportunities in America.”

…

Indeed.

So. What have we learned?

Assuming the MOA wants to support an orchestra (and at this point, I’m not convinced they do; they can get back to me on that one when they change their mission statement back to include the word “orchestra”), we’re going to keep circling round and round until we agree on the answer to one simple question:

Can you sustain – nay, heighten – the artistry of an orchestra while also cutting its budget by twenty percent over the course of one season? Can you pay twenty percent less for a product and still get a better product? (Especially when you can’t outsource the assembly of said product to China?) Do you believe that an orchestra that pays roughly half as much as the best orchestras in this country – that consists of demoralized dejected players seeking work elsewhere – that has no seniority pay - that has a management team reviled by musicians and music-lovers across the world (and I’m not exaggerating when I say that)…do you believe that such an orchestra will ever become a professional destination for world-class players? (Especially if – sigh; when – Osmo leaves in 2015?) I say no. (Robert Levine, a member of the Board of Directors of the League of American Orchestras, also says no.) (Arts consultant Drew McManus has also expressed doubts.) I maintain that no matter what Mr. Henson says, easily walkable geography does not a desirable location make.

If you don’t have the money to sustain an orchestra’s quality, should you level with your public and say they can’t support the quality of ensemble they’ve grown accustomed to unless they pony up tons more cash and quickly, or should you promise your patrons the moon in the cynical hope they won’t notice when your orchestra starts to decline? As a patron, what kind of management do you want to have in charge? People who are level with you about the challenges ahead, or people who consistently sidestep the truth over a period of years?

Hopefully we all agree: eventually we’ll reach a tipping point. Obviously we can’t buy a world-class orchestra for, say, $0 a year. So somewhere along that sliding scale between $32 million and $26 million and $0, we’ll lose our “world-class” quality. So where is the Minnesota Orchestra’s tipping point? Is it at $30 million? $28 million? $25 million? $10 million? If we’re going to cut twenty percent, then what keeps us from cutting, say, thirty percent? Forty percent? Fifty percent? After all, that would give us more money to invest in the endowment. It would protect us against another major recession and give us more money to use on educational programs. How about we cut ninety percent? Ninety-five? Ninety-nine? How about the musicians pay us to have the chance to play in a world-class orchestra? All right; now I’m being hyperbolic. But hopefully you understand the broader point I’m trying to drive home here. Where is that tipping point? How close to the bone can we shave without seeing a marked decrease in quality (and an accompanying decrease in financial support)? Do we know? If so, how do we know? And why was the community never given a chance to discuss this? Because we’re not dumb. We could have helped you solve the problem, you know. It’s our orchestra, and we deserve to have a say in its future.

The only way I can reconcile Mr. Henson’s words (without labeling him a self-serving cynic who specializes in painfully inept incompetence) is to assume he honestly believes that a world-class orchestra – (in a golden age of orchestras) – will thrive artistically – (and therefore, financially) – after he brutally gouges the salary and working conditions of his musicians, and misleads and then infuriates his devoted public. Personally, I find that idea to be roughly as realistic as the idea of an obese man flying around the world to deliver toys to every good boy and girl on the face of the earth, and so do many experts in the field. The idea may be comforting at first glance, but in practice, it’s unworkable. But for whatever reason, a lot of people on the board appear to agree with Mr. Henson.

So what do you think? What I think isn’t important. It’s what you, the patrons, think that really matters. (Or, at the least, what should really matter.)

As always, the comment section is open.

Lame

I’m just going to leave this here. It speaks for itself. From the Star Tribune…

Thursday’s cancellations will have consequences beyond the orchestra.

The Minneapolis Convention Center had projected income of $274,000 from the fall and holiday orchestra seasons, said spokeswoman Kirsten Montag. And the Minnesota Chorale, which had been scheduled for dates with the orchestra in October, November and December, will lose nearly all of its earned income for the fiscal year, said executive director Bob Peskin.

“We’ll have to make up the lost income with further expense cuts and increased donations,” Peskin said.

Orchestra president and CEO Michael Henson said the December dates — which include classical, jazz and presentations in addition to the holiday fare — were projected to make up 19.3 percent of annual ticket revenue. However, the net impact is a wash because the orchestra won’t have to pay rent at the Convention Center or musician salaries and benefits.

Minnesota Orchestra Lockout Concert Announcement

The Musicians of the Minnesota Orchestra are now selling tickets for their lockout concert at the Minneapolis Convention Center on October 18 at 7:30pm. The program will consist of the Dvorak cello concerto with Tony Ross soloing (……his last time doing so with the orchestra? wouldn’t surprise me) and Shostakovich’s fifth symphony.

You can buy tickets here. They range in price from $15 to $40.

This promises to be one of the most unique shows in the orchestra’s 110-year history. So you should really come. Because we don’t know when we’ll hear the Minnesota Orchestra again. Or how much of the Minnesota Orchestra will still be the Minnesota Orchestra by the time this is all over.

A visual representation of how I’m feeling right now

Anyway. Yesterday I made reservations at a hotel near the convention center. Would any SOTL readers want to think about getting together briefly before the show? I don’t know where yet, or even if it would be feasible, but it would be interesting to get a head count of who would be interested in such a thing. If you want, I can email you at the address you use to comment here and we can try to arrange something. Otherwise we’ll try to say hi at intermission.

Love to my readers.

xx

Amusing search queries that people have used to find this blog

I’ll have some stuff to say later tonight or tomorrow morning, but I just wanted to let y’all know that business is booming here at SOTL with tons of Minnesota Orchestra patrons wanting to know what exactly the f*** happened today.

To provide a little lighthearted reading in the midst of the apocalypse, here’s a list of amusing terms that readers have used to find this site. I’ll feature the best ones every day, so if you want to send a coded anonymous message to management, feel free! Just use a search term that will get you to this site, click on a link, and voila (or should I say, viola?). If it’s amusing enough it will be posted here. Have fun!

• mn orchestra fiasco
• minnesota orchestra michael henson compensation
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• fire michael henson
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• how long has richard davis been on the minnesota orchestra board of directos
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Is Minnesota Orchestra management lying to us?: Part II: Michael Henson Edition

When I read the latest Star Tribune article on the Minnesota Orchestra crisis, one quote in particular struck me as being so patently absurd, and so directly opposed to everything that had come before it, I felt like I’d wandered into a new upside-down dimension. Either Michael Henson is going off the rails, or I’m becoming dangerously entrenched and reading much too deeply into a couple of sentences, and I’m not sure which it is. If you could convince me I’m crazy, I’d appreciate it. Thanks.

Here’s the portion of the article that made me feel as though a Rod Serling sighting was imminent:

Michael Henson, president and CEO of the orchestra, said on Friday that no immediate financial crisis exists, but he likened the investment funds that help fund each season to a retirement account.

“You can’t spend 90 percent of it in the first four years of retirement,” Henson said. “You need to make it last.”

He indicated the orchestra would like to draw no more than 5 percent annually from the funds; the draw rate has averaged nearly 10 percent over the past 10 years, he said.

…

Before I begin, I’m going to assume that Henson was quoted accurately, and that his words weren’t manipulated or misrepresented in any way. We should hear within the next couple of days if he objects as to how his comments were portrayed.

With that assumption out of the way, let’s try to unpack this “no immediate crisis” remark.

First, I’d like to say a few words on the nature of crisis.

If you are on track to spend ninety percent of your income in your first four years of retirement, then you are in IMMEDIATE CRISIS.

If you’ve staked the long-term fiscal health of your organization on overly “optimistic economic assumptions and the hope of limitless benefactor generosity,” then you are in IMMEDIATE CRISIS.

If you say on your website that “if the Orchestra continues to operate at its current rate of spending, our endowment will be depleted by 2018“, you are not only in IMMEDIATE CRISIS, you’ve been in IMMEDIATE CRISIS for years.

If your only hope of creating a “fiscally responsible” organization means cutting musicians’ pay somewhere between 25-50%, then you are in IMMEDIATE CRISIS.

If you knew you wouldn’t be able to work for the next few years, and knew your only income would be your life savings, and you knew you’d run out of that savings by 2018, then you would be in IMMEDIATE CRISIS.

If you knew that all American resources would, at the current rate of spending, be depleted by 2018, then newsflash: we would all be in one hell of an IMMEDIATE CRISIS.

Call this what it is:

AN. IMMEDIATE. CRISIS.

Financial crises don’t start when your checks start bouncing. Crises start when you make the calculations and realize that all resources will be depleted by a particular point in time (say, 2018) if you don’t make major unprecedented changes (“significant departure[s] from the traditions of the past,” according to management) that run the risk of changing the face of your organization. The risk of such a thing happening is, in and of itself, a crisis. A huge one. Period.

I’m racking my brains and I can only come up with three explanations for this bizarre statement. Leave a note in the comments if you can think of another.

1) The orchestra is truly IN IMMEDIATE CRISIS!!!ZOMG111!!!1!ELEVENTY!!!1!…but Michael Henson either A) lied or B) accidentally said it isn’t. That means that Michael Henson is either A) a liar or B) incompetent.

2) The orchestra is not in immediate crisis, and management is misrepresenting what’s actually in the endowment in order to get a sharply concessionary contract.

3) Henson didn’t actually use those exact words, and didn’t mean to insinuate that the Orchestra isn’t in crisis right now, but he made a statement that led Graydon Royce to feel comfortable risking his and his paper’s reputation by interpreting it in that way. I have no reason not to trust Mr. Royce. (And like I said, we’ll see in the next few days if any statements emerge from Henson disputing how his remarks were interpreted…) If this is true, then that means Michael Henson is communicating poorly at a moment in time when he needs to communicating with crystal clarity. It also suggests that he hasn’t thought enough about how to explain the Orchestra’s problems coherently and persuasively. If you need unprecedented concessions from your musicians because if you don’t get them, the organization as you know it will no longer be able to “survive”…then for God’s sake, run with that. Yes, Campbell and Davis made some pretty damaging PR mistakes within the last few weeks, and that sucks. But Campbell and Davis have s*** to do. Those guys were probably sneaking a five-minute phone call into the Star Tribune in between eating caviar, approving billion dollar mergers, and telephoning Tim Pawlenty to ask if he’d be interested in being CEO of the Financial Services Roundtable (where Davis is a director, FYI). But this is Henson’s full-time job. For which he is being paid $400,000+ this year alone. He should be fully capable of handling a simple newspaper interview without mucking up his message.

Some additional questions…

If there isn’t an immediate crisis, why tamper with working conditions? How much would the changes in working conditions save the orchestra? Have they run the calculations on that? Why haven’t they made those calculations publicly available with their proposed contract? They’ve got an awesome shiny website with which to disseminate such information…

Also: why not agree to an independent financial analysis?

I’d like to take a moment to discuss the current musicians’ contract, which management is saying doomed all prospects of fiscal sustainability. This shamefully irresponsible contract was signed in October 2007, according to this Playbill article. Michael Henson came aboard in September 2007, so I’m not sure if he had any say in negotiating or ratifying that.

But even if he didn’t, dude was super-proud of how things were going financially at the Minnesota Orchestra as late as July 2010…almost three years into that irresponsible five-year contract. In retrospect, this is a hilarious article to read. [Edit 10/15: This article has since been removed from the Minnesota Orchestra website. Feel free to draw your own conclusions as to what that means. There has been no explanation so far. You can take a peek at the screenshots I took here.] For a bit of perspective, let’s remember that the much ballyhooed Strategic Plan was published in November 2011. In the introduction we read that “the ideas in this plan have been developed, tested, and honed over the last 18 months.” So that means management started working on the ideas contained within the Strategic Plan in the spring of 2010. Insinuation: they were seeing “significant financial issues and unsustainable fiscal practices the organization must resolve to ensure a sound future” before the spring of 2010. (This meshes with the claims of the Open Letter, which claims, “This is a journey that began several years ago, when the Board of Directors of the Minnesota Orchestra recognized that the organization could no longer survive [my bold] based on optimistic economic assumptions and the hope of limitless benefactor generosity.”) So, having established that, I’d like to let Michael Henson from July of 2010 say a few things. Remember that during this time, he had not only been seeing “significant financial issues and unsustainable fiscal practices” within his orchestra for at least the last few months, if not the last couple of years, he was also, behind closed doors, writing a plan to address those financial issues and unsustainable fiscal practices.

Take it away, Michael Henson of July 2010!

The former Bournemouth Symphony head is strategising his way through the recession - and winning. [my bold]

“There’s no single strategy to beating the downturn,” Michael Henson asserts. “There has to be a whole series of strategies to maintain a focused approach. The priority is continuing the excellence in the artistic work.” With orchestras across the US hard hit by the recession – and management strategies the number-one talking point at the League of American Orchestras’ conference in June - the Minnesota Orchestra stands out as a beacon institution among the bad news. It’s planning a European tour in August (its second in two years), expanding its online content and starting a large-scale renovation project at its home venue – having recently announced the end of a highly successful fundraising scheme. “I would say the support we get from the community is unique,” Henson boasts.

“Minnesotans are highly educated and committed to education,” he goes on, “and with a community this size – around 5m people in the region – we have a wide range of arts organisations, and a collective desire from individuals and corporations to support them.” In 2008-09, contributions accounted for 44 per cent of the orchestra’s $32.5m income. “On top of that, we’ve made some concessions at various points, there’ve been some layoffs and pay cuts in administration,” Henson notes; in August 2009, he took a seven per cent pay cut himself [heh], while Osmo Vänskä, music director since 2003, took 10 per cent [the organization's fiscal leader took a smaller pay-cut percentage-wise than the music director? classy]. At the same time, Henson negotiated modifications to the musicians’ contract, resulting in around $4.2m in cost savings up to 2012 – mostly through salary and pension reductions, and a wage freeze in FY2010. The orchestra currently numbers 95 contracted players, with six positions open; delaying filling those positions could save up to $1.8m in the long term. [Why are these concessions not mentioned on management's website? Have they slipped Henson's mind? Pity, because he seemed awfully proud of them in 2010...]

…

The orchestra announced in June 2009 that it had raised $14m of its $40m goal for the renovations. One year later, thanks to a last-minute $5m donation from the Target department store chain, it announced it was up to $43m. “The extra will mean we have enough to do it right – to improve chair Y as well as chair X,” says Henson. It also bodes well for the orchestra’s more long-term fundraising programme, “Building for the Future”, which aims to supplement its endowment by $30m, and provide a further $30m for artistic and educational endeavours. Including the renovation funding, the campaign has raised $82m of its $100m target. “Even though we’re in a recession, we have to keep up the commitment to the long-term vision,” Henson continues. ”The board agreed to take the risk on this.”

…

This year, Minnesota will be the only US orchestra represented at the Proms, a fact with added significance for Henson. “We have already made six live broadcasts this season on the BBC,” he notes (another echo of his Bournemouth days). “Our appearances at the Proms, the world’s greatest music festival, have grown from our close relationship with the BBC and will contribute to the process of increasing our visibility.” Its 2010 tour will also take it to the Edinburgh Festival and the Concertgebouw Amsterdam. “We have to keep up our international presence,” Henson says, indicating again his multi-stranded approach to building up the orchestra’s standing. “It’s all about keeping the key priorities in mind.”

This does not sound like a man (or a board) who has been seeing “significant financial issues and unsustainable fiscal practices” for months or years. Nor does it sound like a man (or a board) who is thinking very deeply about those significant financial issues and unsustainable fiscal practices and writing a Strategic Guide of how to address them. And this surely does not sound like a man (or a board) who is anticipating the necessity of a sharply concessionary contract – a “significant departure[s] from the traditions of the past” – a mere two years later, in September 2012. So of course one has to wonder: was Michael Henson being disingenuous to this reporter, or is he being disingenuous to us now?

In case you were thinking this was just a bad interview…may I present to you the Michael Henson of December 2009…

Henson says the last fiscal year was also one of artistic success for the orchestra both at home and abroad.

“We are quietly pleased with the results,” he said. “We are in control of a difficult situation and I think we are looking forward to the future with a similar amount of control, mindful of the economy we face.”

He says the coming year will continue to present economic challenges but he is confident the orchestra is keeping a careful handle on the situation.

That’s nice. But if you were drawing out of the endowment at an average of 10% during this time, then you were (by the parameters you set forth in the Star Tribune yesterday!) not in control of a difficult situation. You were not keeping a careful handle on it, and you had no right to be pleased – quietly or otherwise – with how things were going. Yes, I know that when non-profits are struggling, there is a reluctance to admit how bad things are for fear of scaring away donors and fostering death-spirals. But if things are bad, and you sugarcoat them, when the chickens come home to roost, you can’t treat the public like clueless idiots for asking why your tune has changed. You can’t be in a house, smelling smoke, feeling heat, and hearing smoke alarms, while simultaneously telling people you’re totally in control of any fire that may be forming on the property…and then, when the flames start coming out the windows, scold the public - who wasn’t even in your damn house - by saying, “Guys, I’ve been talking about this raging inferno for years. Help me put it out!”

Of course that leads me to wonder: maybe the fire wasn’t actually burning yet?

Here’s another article from December 2008:

As was the case last year, the orchestra drew only 6 percent from its endowment to help address the budget. The $191 million endowment was down 11 percent because of stock-market performance. The board is allowed to draw up to 7 percent, but spokeswoman Gwen Pappas said the organization has been very firm about avoiding that method.

Okay, so… Based on that 2008 article, let’s try to figure out what’s been happening with the endowment draw rate. I’m using an average of 7% for pre-2007 years, even though Ms. Pappas said the organization had been avoiding that percentage, and it may well have been lower…

2002 – 7% or less

2003 – 7% or less

2004 – 7% or less

2005 – 7% or less

2006 – 7% or less

2007 – 6%

2008 – 6%

I obviously don’t have all the numbers, but based on the ones I do, I don’t think it’s particularly outrageous to assume that, if Henson’s “ten percent over the past ten years” statement is actually true, then in 2009, 2010, and 2011, the board must have increased the draw rate to an annual average percentage of 17%+. This seems frankly unbelievable, especially since Richard Davis went on record in December 2010 as saying, “This was a season characterized by disciplined budget management and significant expense cuts, which kept our operations stable in an unpredictable environment.” I don’t know if anyone would call a 17% annual draw “disciplined budget management” (especially not the Richard Davis of 2012), but…okay. I’d be curious to know what all happened in 2009 that necessitated such a dramatic climb in the draw rate. Yes, the crashing economy no doubt had a lot to do with it…but does that explain all of it? (Or, is Michael Henson lying about the draw rate?)

Also, since the post-2009 draw rates were clearly such dramatic outliers, regardless of exact percentages, why didn’t Henson say something like “over the last three years, our draw has increased to an average of 17%+, but before the recession began, it was no higher than 7%”? Were ulterior motives at play? Did he want to make it look like the huge draws were an indication of systemic failure, rather than merely a result of the recession? (This meshes with management’s insinuation that problems have been in place “for many years.”) Did he want to keep the public from placing the blame on him? Did he just pull that number out of nowhere, forgetting that a quick Google search is all it takes to check his statements against Star Tribune articles?

[Important Edit 10/29: More information on draw rates here.]

And why isn’t Henson willing to clearly discuss everything that happened in his tenure, positive or negative? It smacks of a rather desperate insecurity. He was proud to say in December 2009 that he was in control of a difficult situation, and that he was pleased with how things were going. In July 2010 the Minnesota Orchestra felt comfortable posting an article on their website saying, “The former Bournemouth Symphony head is strategising his way through the recession - and winning.” Implication: management thought they were strategising their way through the recession, and winning. But now we’re being told that, “Whoops; our bad; we didn’t actually mean ‘winning’; we meant ‘veering ever-closer toward an inevitable fiscal Armageddon.’” Then why didn’t you tell us then???

Binds like this don’t happen overnight. If the Orchestra’s only options truly are to deplete their endowment by 2018 or impose 25-50% wage cuts, there is an immediate crisis, no matter what Mr. Henson says. Obviously someone, somewhere, screwed up. Badly. And even if part of the blame rests on the musicians’ 2007-12 contract, not all of it lies there. If the problems really were this serious back in July of 2010, and December of 2009, and December of 2008, then Michael Henson knew about them. And he had a duty to say something. Or at least email whoever was in charge of the website and say, “Guys, you might want to take down that ‘Michael Henson is winning’ article…it will come back to bite us in the a** in 2012 when we’re forced to reveal how hopelessly f***ed we are…”

Michael Henson is either misrepresenting the facts now, or he was misrepresenting the facts then. Period.

(Also, I have a funny little factoid for y’all: when you Google “Michael Henson Minnesota Orchestra”, my Hundred Questions are on the first page. So every time Michael Henson does a Google search on himself and his employer, he’s going to be reminded of me. Aww.)

Like I said, convince me I’m crazy. Please. Because this just seems too wild to be true. As always, the comments section is open to everybody.

Update, 9/26.According to the musicians’ blog, at their most recent negotiating meeting, the musicians asked management questions about “inconsistencies found within the Board and Management’s financial information.” I’m assuming at least some of those questions were similar in nature to the ones asked above…? “The meeting proceeded with an assurance from the Board and Management that the Musicians would receive answers to these questions later…” Interesting. Feel free to speculate as to what that means… If I hear or read anything from management addressing what I wrote above, I’ll add it to this entry. If you hear anything, post it below.