Tuesday, October 28, 2008

From the trenches: It's Ok to Say You Don't Know

First off, an apology for not writing much lately. However, since I am a practitioner and not an academic, my days have been filled with trying to address the worsening economic reality, rather than writing about it. These are the days that make me wish sometimes I was in academia, because studying this phenomenon would be really interesting.

If you are like me, and like many of my colleagues, you have been hearing one question a lot lately, probably from board members and executive staff: how is the economy going to affect our sales for the rest of the season, and how do we adjust to anticipate for the impact?

I am proud of the Arena Stage board and senior staff for taking significant steps to prepare for the impact of the market crash, but if you are in a position where you are ultimately responsible for providing accurate sales projections and models like I am, it is one hell of a task. When asked earlier this week by several members of the executive committee of our board how bad it is going to get, I responded with only three words -- I don't know. They were the only three words that I thought I could deliver with integrity and honesty.

I have been running models everyday for the past four weeks. I have extensively studied the impact of the 1987 market crash and the crash post 9/11 to find some sort of path to guide me. But I ultimately decided that there is no precedent that I could find in Arena Stage's 58 year history that could accurately guide me. Which leaves me in a place where I have to "go with my gut." I hate that. I am a math and science guy in an artistic world (I have minors in mathematics and physics). I have been trained over and over again to go with scientific models because one's gut is unreliable. And here I am with nothing in our history to guide me.

So I felt that the executive staff of the company and the board needs to know that I will work day and night to get us to a place where we have what I feel to be the most reliable model that reflects the impact of the market crash, but it will be my best guess. Even though this makes me uncomfortable, I am reassured by knowing that as this is my area of expertise, I believe my projections will be the most accurate.

That being said, at the end of the day, when asked what is the impact of what Alan Greenspan calls the "worst economic crisis he has seen" (and the man is 82 years old), I feel that the only honest answer any of us can say is -- I don't know. If you believe that this is a once in a lifetime economic failure as I do, then no one has seen the impact of a market failure of this size since my grandparents generation during the Great Depression.

Morale of post: in reporting to executive staff and board, do your due diligence, prepare conservative sales models and projections, and don't be afraid to admit what you don't know.

From Michael Kaiser's ArtsManager Blog: "None of us running arts organizations in the United States has experienced this level of economic meltdown. The experiences we had in more recent financial downturns do not prepare us adequately for what is happening now. And the full impact of the financial crisis has yet to be felt in many cities. I know I need to make changes to the operations of the Kennedy Center, I simply do not know how much to change and over what time frame. "