Tuesday, March 9, 2004

On growth and death

Two articles in the latest Fortune Small Business magazine offer a few nuggets of wisdom for the arts manager, and one truly disturbing business model. The wisdom nuggets come from this article on managing growth in a small business, extolling the decision not to grow.

It seems that several small business leaders have discovered that slow growth or no growth actually prove to be better for business, especially as the economy starts to tick up a bit. Fighting the natural impulse to judge success by increasing volume, customers, or sales, these businesspeople have found some real benefit (and real profit) in keeping things steady:

We confess that at first we thought 'slow-growth advocate' was a new term for 'loser' -- someone who can't cut it in a hypercompetitive business climate. But closer examination reveals that many of these iconoclasts reap benefits that are often at odds with an all-growth-all-the-time mentality -- higher quality, a more manageable and pleasant workplace, and greater profitability....'I run my company with this saying: Volume is vanity, and profit is sanity,' says Brad Skelton, 36, managing director of Skelton Tomkinson....

One case in point is Sharon Anderson Wright, CEO of Half Price Books, who launches all her new stores with cash on hand rather than with debt, and won't open any store without a seasoned manager to take the reins. Beyond the cash flow benefits, this strategy also reinforces the reasons customers choose to shop there:

Besides promoting only from within to fill managerial positions, she offers health insurance, in-depth training, and profit sharing to full-timers. 'Our cash cow is our repeat customers,' she says. 'The last thing we want to do is to grow too fast and become impersonal.'

Why the lecture on smart growth? Because arts organizations so often find themselves in the same trap of equating success with increasing size. Foundations encourage new programs over overhead and existing programs; individual donors and corporate funders like to see the same. Even within the organization, marketing or development directors are evaluated based on their increases of sales or contributions over last year.

The problem is that almost all of these new sources of revenue cover variable costs rather than total costs, leaving arts organizations with more and more to do with the same fixed infrastructure (building space, administrative staff, office equipment). Instead of profit taking a beating, it's their core mission that falters as resources stretch thin, and staff stress and burnout grow faster than the revenues. All arts organizations, regardless of size, are small businesses. There's a lot to learn from the smarter managers in the bunch.

The 'truly disturbing business model' comes in another story in the same issue, focusing on two brothers seeking to reframe the funeral and memorial business. One of their products, Lifestories, is a multimedia scrapbook of the deceased that's available at media kiosks near the burial site, as well as on-line. It's not the multimedia memories that are disturbing (that's the stuff of art, after all), it's the commodification of the process. Says the article:

Lifestories is the crux of the plan for a continual -- and continually profitable -- relationship with clients. Indeed, the brothers' ambitions stretch beyond death care and reach for a place where memory and technology combine. They want to be the digital custodians of their clients' narratives, voices, and images, and they want to do it on a grand scale. 'I want us to become something like the J. Crew catalog,' Brent says -- the mass-marketers of human memory.

In a chilling combination of Madison Avenue and Mozart's Requiem, that last sentence is likely to fester in my brain for a long, long time.

posted on Tuesday, March 9, 2004 | permalink