We have occupied a front-row seat for seeing the gap between boards that are well run and led and are boons to the organizations they serve, and those that are far less so. We have seen how public agencies and governance activists have sought to close that gap by insisting on tougher rules and tighter regulations. We believe, however, that much of the variance stems instead from a very different source: the human dynamics, social architecture, and leadership of the board itself.
 
We seek as a result to focus attention on building more engaged leadership in the boardroom, not just the executive suite. Governing boards should take more active leadership of the organization, whether a corporation, hospital, or museum, not just monitor its management. We expand the working concept of governance from one of arms-length oversight to trustee leadership of the most strategic decisions.
 
Rather than being concerned with whether trustees should serve staggered or limited terms, we worry more about whether the chair can help direct the board in guiding strategy, setting the ethical tone, and gauging risk in concert with the chief executive, and whether the trustees’ talent and collective chemistry make the board a substantive player at the table. This calls for a different kind of vigilance in the boardroom, a deeper kind of relationship between trustees and executives, and a new kind of leadership from both.
 
The emerging governance model is a result of forces not of its own making. In the private sector, increased regulation, ownership pressures, and governance reforms over the past decade have been intended to strengthen the board’s oversight function. Yet as boards have become better monitors, they have also become better leaders, delving into a host of other areas that had been delegated to top management in earlier times.
 
We believe that directors in the private sector and trustees in the non-profit community can and will more actively lead in the years ahead, and on balance we anticipate that this should fortify their organization’s success and performance. But that is not a given. Poorly handled, this new enablement can cause serious damage, resulting in fractured authority and dangerous meddling.
 
A New Model of Collaborative Leadership
 
In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffett lamented his multiple derelictions of duty as a director of some forty corporations over nearly two decades: “Too often I was silent when management made proposals that I judged to be counter to the interest of shareholders,” Buffett wrote. “In those cases, collegiality trumped independence [and a] certain social atmosphere presides in boardrooms where it becomes impolitic to challenge the chief executive.”
 
A decade later, biopharmaceutical Amgen Inc. CEO Kevin Sharer painted an almost opposite picture of the relationship between the governing body and corner office: “You’re a lion tamer and they’re the lions. Respect them, but if you let them eat you, they will. Working with the board is vital, complex, and beyond your prior experience—unlike anything you’ve done before. It is among the most complex human relationships, especially if you’re the chair, when you’re their boss, and they’re your boss. Get the relationship right, or it will hurt you.”
 
Allow for a little hyperbole on both sides—Warren Buffett was never that neglectful, and Kevin Sharer carried neither whip nor chair to keep his directors at bay. Still, the difference between the two observations illustrates a striking reconfiguration taking place in how boards operate and how directors and trustees work with top management: the emergence, in an extraordinarily short time, of the potential for boards to be a vital partner and new force in governance.
 
But note the qualifier—potential. This leadership capacity has yet to be fully exploited or even realized at many firms. Too often, directors and trustees remain one of the most valuable but least utilized of an organization’s assets. Smart, experienced, and dedicated men and women are ready to serve. They are sworn to protect and advance the enterprise, to ensure that it does what is best for customers, investors, donors, and visitors. Yet their wisdom and guidance are still too often closeted in the boardroom.
 
But the prevailing model is changing, and quickly. At organization after organization, boards and management have been embracing new practices that help define a more directive, more collaborative leadership of the enterprise. They are jointly taking charge of strategic choices, merger decisions, risk tolerance, ethical climate, and other functions that have traditionally been the province of management.

Boards That Monitor, Partner and Take Charge

A company, hospital, or museum’s executives are no less in the driver’s seat. But the way that they steer many organization is now markedly different—a shared or distributed leadership model that is better suited, in our view, for guiding enterprises that are facing more uncertain, more changing, and more complex markets.
 
Each board will want to fashion its own unique blend of the components of direct and collaborative leadership. “Boards should sit down” annually, urged Ford Motor Company’s lead director Irvine Hockaday, “and say, OK, what are we really doing here, what really is our role given the situation of this company at this time, what are we doing to incarnate that role, how are we going to function with the lead director, and what are our priorities?”
 
Finding the right balance among the board’s leadership components—knowing when to lead, when to partner, and when to stay out of the way—has become one of the premier tasks of the board’s leadership of any enterprise.

NOTE (October 12, 2017):
The Museum Trustee Association views its mission of enhancing the effectiveness of museum trustees as educational and collaborative. As a group of past and current museum board members, we do not see ourselves as a policy-setting organization but rather as a source of information to equip Museum Trustees as they implement field-wide best practices in all of their governance affairs. While the article above is intended to provide an opportunity for open dialogue, MTA firmly believes that in all matters of deaccessioning, the guidelines of the American Alliance of Museums set the industry-wide standard. For more information on field-wide best practices, we invite you to read “Questions and Answers about Selling Objects from the Collection”, published by AAM on September 23, 2017, and AAM’s 2016 White Paper entitled “Direct Care of Collections”.

Your board has committed hours to creating the ideal vision for your museum. Your leaders are bursting with new and exciting ideas for programs and initiatives. But then the inevitable question arises- how are you going to pay for it?

Fundraising is increasingly a major source of revenue for museums, and museum administrators are working hard to put the philanthropy of their communities to good use. Unfortunately, even with the best intentions, sometimes gifts fall through the cracks. No museum is immune to the occasional mistake while fundraising, but getting it right can make a tremendous difference in your year-end results.

Many museums have just closed their fiscal-year-end books, so MTA thought this would be a good opportunity to provide strategies to avoid traps as 2018 budgets begin.

In the article below, learn about common faux pas made by even the most successful museums, and discover strategies for recovering from these errors as well as tips for avoiding them altogether.

In a perfect world, every staff member would have the training, resources and time they need to independently and accurately solicit, record and acknowledge each gift to your museum. In reality, administrators are human and can make mistakes. As frustrating as these errors may be, misspelled names, solicitations to donors who have passed and acknowledgements to the wrong giving entity will all happen at some point. Gracious and expedient corrections can help to reassure donors that mistakes will not be repeated.

It is, however, better to avoid these administrative errors altogether. Development committee oversight and personalized solicitations from museum leaders can help. While institutional databases are now charged with the challenge of keeping track of donors, members of the Board can use their connections to keep records up-to-date. Nonetheless, it is important to invest in good donor management software to ensure that giving entities are kept distinct: individuals, donor-advised funds, corporations and foundations can be linked when merited. Good software enables easy access to records. Additionally, providing thorough staff training can ensure administrators are well versed in the proper acknowledgment protocols for each type of gift.

One more tip: I have found that reviewing each solicitation before signing it is a good way to keep track of the giving trends of my high-level donors. Reviewing these appeals can be an opportunity to catch changes that my staff may not know about before mailings are sent, and sometimes are a way for me to keep up-to-date too. Finally, I often add a personal handwritten message to each donor.

Maintaining positive relationships with your donors is one of the most rewarding ways to secure gifts for the future. Building and sustaining relationships with individuals and foundations can mean a great deal of hard work, but alienating these donors through inaction often comes at a heavy cost. That personal connection should start from the first solicitation and continue long after the first gift.

With the increase and improvement of databases and communication methods, donors receive hundreds of requests every year. Do your research; does the donor have a history of giving to arts & cultural organizations? (Click HERE to read more about prospect research). Many of these asks are unsolicited, meaning that a successful request must stand out from the crowd. It is better to cold-call someone than to inundate them with impersonal mailings and emails. Better yet, ask a board member with or without a connection to a giving entity to pick up the phone. In either scenario, invite the prospect to your museum to see programs first hand before making the ask.

Once the initial gift is secured, fundraisers cannot become complacent. The development staff and committee may wrongfully assume that a major donor will give their standard annual gift without a personal solicitation, which can risk alienating a supporter. It is important to consistently demonstrate to donors how much you value their relationship. Invite them on a behind the scenes tour of the museum or to a lecture. Again, personalize these annual appeals and pick-up the phone and say THANK YOU.

So the gift is secured. Your donor is excited about the museum’s mission and has made a multi-year pledge to support your latest project.

Then, the unthinkable happens. Maybe there is a leadership change, or a maintenance emergency. Maybe the program just wasn’t working. For whatever reason, the project is inevitably cancelled, and your relationship with that donor is put at risk.

It is often tempting to silence communications in times of uncertainty or crisis, but keeping quiet makes it increasingly likely that the donor will hear about the change from another source. A face-to-face meeting with the donor is the best approach here, and can provide reassurance at the solidity of the museum. No matter the cause of the change, appearing confident that the museum made the right decision, soliciting advice and feedback from the donor and being prepared with new ideas for use of their gift can reinforce faith in the museum leadership’s ability to achieve its mission.

A donor has offered your museum a part of their collection. Your curator supports the gift, but your conservator realizes that there will be significant expense to prepare the objects for display. Meanwhile, the donor is used to seeing the objects in their home, and sees his or her gift as ready for installation. Months pass, and the donor is disappointed not to see their collection on view. Rather than leave the donor feeling like their gift was inadequate or underappreciated, the museum could have been honest in creating a reasonable timetable for display within the Conservation Department’s existing budget, or asked for additional monetary support to conserve these objects.

We have all heard the maxim before: It isn’t definite until it’s in writing. I have heard from many museums with the following experience: the museum receives a verbal pledge from the donor, but fails to create a contract in writing. The donor passes away in the interim and the children have no record of the gift. Naturally, the best way to keep these situations from happening is to have the supporting data on hand. Unfortunately there isn’t much to be done without that signed agreement, though your museum may have an opportunity to build a relationship with a new generation of potential donors. Instead of mourning the loss of the gift, turn lemons into lemonade by showing the children their parent’s vision and passion.

The same rules apply when cultivating a new board member. Financial expectations need to be specifically addressed upfront during the cultivation process. Many successful museums share their Board Contract that enumerates these expectations with board candidates, so there is no misunderstanding down the road. With clear giving expectations, boards can avoid alienating their newest members at that crucial time.

Each new fiscal year presents new opportunities and challenges for museums across the Americas. Do you have any strategies for avoiding or recovering from Fundraising Faux Pas? Share them in the comment section below!

At your last board meeting, did you find yourself looking more at your cell phone than listening to the Executive Director? Did the Executive Committee report on the decisions made in advance of the meeting and leave no time for trustee conversation and questions? Did you feel like you could have just read the board packet and skipped the meeting?

Did you ask yourself, “Why am I on this Board?”

At MTA, one of our most frequently asked questions from both Directors and Board Members is “How can I successfully keep my Board Members engaged?” A well-run board meeting is the best chance to prove that you’re not wasting your board members time.
​
Here are 10 Tips culled from MTA members & forum panelists to help you hold successful board meetings that motivate members to come back again and again.

​Once a month can be too often to meet, wasting staff time and resources. However, meeting quarterly can be too little, leaving Board Members overwhelmed and forcing attendees to set aside sufficient hours to allow for necessary business as well as robust discussion and interaction. Your meeting schedule should suit the needs of your museum while still respecting the time of your volunteer Board.

​Board Packets should be sent to allow sufficient pre-read time. Consider purchasing board portal software for meeting notices, agendas & supporting corporate documents. Having the archived material at your fingertips allows for the meeting narrative to come alive.

 “Creating a diverse board is hard work,” according to David Ellis, former Director of the Museum of Science-Boston. Using a board matrix like the one created by The Museum Trustee Association helps boards manage this process. (Find MTA Templates Here)

Board members often have busy travel schedules and may not always be in town for your meeting. Ensure that your trustees have the option to attend via conference call at a minimum. Even better, try a video conferencing service for presentations so that participants are both seen and heard.

A Consent Agenda can be used for routine business such as committee reports, minutes and financial data. Doing so can save time and energy, giving you an opportunity to hold robust discussions.

One of the many reasons that people join boards is to meet, interact and make new friends.  “The Walters Art Museum has a social event following every board meeting. Some are board and staff oriented while others allow the board to interact with museum members and donors,” says trustee Peter Stockman. “These events have helped forge trusting relationships among board members and created a positive image of the board as conscientious stewards among our donors”

​Do you feel like you are spending too much time in the same conference room? A great way to shake things and bring Mission into your meeting is by holding the meeting at community partner’s headquarters.

Curators, Conservators, Educators, and Docents can share a Mission-related story. Budget time for a fundraising training session or conduct a pre- meeting survey to find a topic that suits your Board. Trustees today are doers and action-oriented. Allow plenty of time for goal setting and problem solving.

According to Boards that Lead, “Chief executives must run the corporation, but directors must also lead the corporation on the most crucial issues. Monitoring is still important. Governance matters. But the time has come for boards to rebalance their responsibilities. Directors need to know when to take charge, when to partner, and when to stay out of the way.”

​Micah Parzen, CEO of The Museum of Man in San Diego writes his board a weekly e-mail. “Mission Moment Mondays help to regularly remind the board of the Museum’s Why. They are a critical part of our process of creating an indelible through-line between our mission and the business of the institution.”

​There are many more strategies for keeping your museum Board Engaged. Have a success story? We want to hear from you! Please comment below.

How did you become involved in MTA?
 
"Andrew Camden, MTA Chairman Emeritus is one of my oldest friends and he introduced me to MTA. At that time I was just a collector of American Illustration who had a natural affinity for museums. I began as a Patron member and as Andrew had predicted, found I enjoyed the people involved and was especially impressed by the “behind the scenes” looks at both museums and private collections. By coming to MTA conferences I was getting opportunities that I could have never gotten any other way. Later, as I became a trustee myself, first on the Federal Reserve Fine Arts Advisory Panel and then on the board of the Norman Rockwell Museum I was invited to serve on the MTA Board."
 
Tell Us About Your Museum Board Service.
 
"I’ve been on the Fine Arts Advisory Panel of the Federal Reserve for almost 20 years now. My biggest challenge there came during my tenure as Panel Chair, when we were transitioning from our founding director to her successor. There was widespread concern about the future of the program, and it was all I could do to keep the board intact until the situation became clear. The program not only continued, but a successful search led to our finding Stephen Phillips who has led us to even greater heights.
For the last 6 or so years I’ve been on the Board of the Norman Rockwell Museum. I began there as a member of the National Advisory Council and was then asked to be on their Board. As a result of my collecting knowledge I serve as the Chair of the Museum’s Collection Committee."
 
What are some key responsibilities of a trustee?
 
"The key responsibilities of a trustee are to ensure the financial stability of the institution, and to put in place the right Director and policies to ensure that the mission of the Museum is successfully carried out. It is up to the Trustees to ensure that the museum is well-funded and run on a fiscally responsible basis and that strategic plans are in place to ensure the future well-being of the institution. Policies must be in place to protect the collections, staff and facilities. The Board Chair must work closely with the Director on all major decisions that affect the health and reputation of the Museum both now and into the future. And last but not least, the trustee must be a cheerleader for his/her museum, spreading the good word and garnering support whenever and wherever they can."
 
What are your goals for MTA as Board Chairman?
 
"My goals as MTA Chairman are to expand our membership and to continue to develop content to give our Museums the “best practices” governance information they need to have the most effective Board of Trustees possible. I would also like to see us continue to develop our relationship with the AAM until we become universally recognized throughout the field as the source of the most effective museum Trusteeship, which of course we are!"
 
Share an MTA Memory.
 
"I remember at one of the early conferences I attended in Washington DC I found myself at a dinner at the National Gallery of Art and Carter Brown, the then Director, was giving us a talk. Our group was the only one there, and I remember looking around thinking to myself what a very special opportunity this was. And this was simply the highlight of a day where we had viewed session after valuable session on the practical information that Museum trustees need to do their job effectively. That tradition of combining useful insights and special locations continues as we meet at both the New Orleans Museum of Art and the National World War II Museum this spring  and look forward to a reception at the relocated Barnes Museum in Philadelphia this fall."
 
What are some challenges currently facing the museum field?
 
"One of the biggest challenges museums face these days is the quickly evolving way people get their information. As more people live their lives through their screens, museums need to find a way to reach these people, first to bring them into the museum, and secondly to connect with them once they come through the door. We must stay up to date on social media, interactive exhibits and long distance learning opportunities. While nothing will ever surpass the firsthand experience of viewing a great work of art (or historic house or aquarium etc.)  up-close and personal, our new challenge will be convincing current generations of that fact, and finding alternative methods of information delivery when schedules or lifestyles won’t permit onsite visits."

Why should a museum leader attend the NOLA Forum (or any MTA Forum)? 
 
"The reason to attend an MTA forum is to hear from experienced long-time trustees on how to successfully navigate the difficulties museum boards face every single day. It is where Trustees from across the country come to discuss the problems they have faced and the solutions they have found while running our most important cultural institutions. This spring in New Orleans (besides our Board Chair/Director workshop) we are covering such topics as Investing, Capital Campaigns and Trustee Recruitment and training among other timely subjects. Then we tour some of the host city’s finest museums—in this case The New Orleans Museum of art and the National World War II Museum. And finally our Patrons round out their days sampling the finest cuisine the city has to offer and going behind the scenes into many of the privately held collections located in the area. There is not a more fulfilling way a dedicated museum trustee can spend his/her weekend."

In Part I of this two-part series, we explored how prospect research through wealth screening can give valuable insight into your museum’s constituent base. Special initiatives such as establishing a collection fund, renovating a museum gallery, building an addition or launching an endowment campaign are exciting opportunities that can only be achieved with careful planning and thoughtful preparation. This article will share several key strategies that are easy to implement that can take your contributed revenue to a new level.  While the following strategies will likely be implemented by the development staff, trustees are key to effective cultivation programs and  should play an important role to maximize donor cultivation potential.

Developing Customized Cultivation Plans
​
Ultimately, not all donors are equal. Some have more capacity than others and are your major donor prospects. Others may love your museum and its work but do not have the ability to give large gifts. Some constituents in your database know your museum well while others may have a cursory knowledge through attendance at occasional events.
 
The matrix below is a simple yet useful way to identify current donors who have the potential to become major donors. This exercise also is an effective way to share cultivation strategies and information with development staff, development committee members, board members, and other stakeholders who are in a position to assist.

​First, determine where individuals/families within your donor pool are within the matrix using donor data and anecdotal information regarding closeness to the museum.
 
Once this data is collected, it can be interpreted using the model below. In Figure 2, sample existing donors have been plotted, showing the typical cluster at the entry point of the giving group, the Low Current Gift/Low Affinity quadrant. Then, apply formal or informal wealth screening information to determine where donors could be – ideally, in a place where they are ready to make a major gift after increased knowledge of and affinity with your museum . The goal is to use this information to strategically move prospects to the High Gift/High Affinity quadrant through increased cultivation.
 
It is also important to recognize that some donors will stay where they are – either in the High Gift/Low Affinity quadrant because they contribute generously but your organization is not their top priority or in the Low Gift/Low Affinity quadrant because they have no further capacity.

The outcome of this exercise will show you who your top cluster of potential major donors are and give you an idea of what needs to happen to move them from where they are today to a place where they are ready to make a major gift. Take the time to understand who each of these donors is and what they like. Do they prefer Old Master paintings or Andy Warhol? Are they more interested in your museum’s Prehistoric artifacts or its planetarium? Make a concerted effort to get to know them through visiting at donor events, exhibition openings, inviting them to lunch, and so on. Do not ask for money during these interactions but rather make it all about understanding what they like about the museum and help them become more emotionally invested and involved.
 
Role of Board Committees
 
Most museums have a Development Committee as part of their board structure. And many organizations will state that, in some manner, every board member needs to participate in fundraising. This can be done in a variety of ways that can be relatively painless, even for that board member who absolutely will not ask anyone for money.
 
Using the Upgrade/Affinity chart above as an example, we can see that many current donors have the capacity to make larger investments and can be encouraged to do so by drawing them in closer to the organization. This is where board members come in. Development staff can ask their board members who in this prospect pool they know, and then work with individual board members on specific cultivation initiatives. Examples of how board members can assist include hosting small gatherings in their home to enable guests to meet a visiting artist or have a deeper conversation with a curator, or inviting a prospect to be their guest at an exhibit opening with dinner afterward. Peer to peer relationships are key to the solicitation of increased gifts, and board members can play a very important role in bringing the prospective donor closer to the organization and “teeing up” the gift request, even if they choose not to make the ask themselves.
 
The role of the Nominating Committee is another important element of successful fundraising strategies. Whenever ACG conducts an assessment of development operations or a campaign feasibility study, the desire for more board members with both capacity and influence is often articulated. Smart museums will think about this long before a major fundraising initiative is launched. The board, with influence from the development staff, is wise to think about possible board leadership that could enhance its fundraising reach: corporate leaders, potential major donors, and community leaders with spheres of influence are a few examples.
 
Again, valuable information can be gleaned from the wealth screening process. Identifying current patrons who have an affinity for the organization and a greater capacity than previously known are great candidates for board membership, as they already know your organization well and can be inspirational ambassadors.
 
It is important to keep in mind that the nominating process should be a thoughtful and ongoing endeavor. Taking a longer view of the future needs of the museum, particularly in the area of fundraising, will allow time for cultivation, which should increase the probability that a desirable board candidate will be ready to say yes to your invitation. It also allows for a “no, I cannot serve now” to have time to develop into a “yes, I am honored to join” at a later date – hopefully, just when you need them for your next big thing.
 
By using the tools found in this two-part series, your museum will be well on its way to completing a successful campaign.

Vice President Elisabeth B. Galley has more than 30 years of experience as a fundraising and development professional for nonprofit arts and culture organizations. First joining ACG in 1998 as a Senior Consultant, Ms. Galley worked with Tulsa Opera, Nevada Ballet Theatre, Mozart Classical Orchestra, REPRISE! Broadway’s Best, and the Carmel Bach Festival as Interim Development Director. She rejoined the firm in 2015 to open its Dallas office and expand the Revenue Enhancement practice area. Prior to joining ACG, Ms. Galley served as Chief Development Officer at the Perot Museum of Nature and Science, spearheading its $200 million campaign efforts. During her five-year tenure, Ms. Galley expanded the museum’s operating reserves by $26 million and doubled its contributed revenue to $4 million annually. For seven years, she served as Vice President of Development at the AT&T Performing Arts Center, working on the $335 million campaign to build the multi-venue complex. Ms. Galley was also Director of Development for the Colorado Springs Symphony where she was responsible for all components of the annual contributed income, including individual and corporate gifts, foundation and government grants, and special events. Ms. Galley holds a master of business administration with an emphasis in marketing and nonprofit administration from the University of Delaware. ​

Contact ACG for more information on how we can implement
wealth screening services at your organization.
(888) 234.4236
info@ArtsConsulting.com
​

Special initiatives such as establishing a collection fund, renovating a museum gallery, building an addition or launching an endowment campaign are exciting opportunities that can only be achieved with careful planning and thoughtful preparation. However, much can be done well in advance of a campaign launch – even before you know what that next big thing will be. In this two-part series, we explore practical strategies your museum can implement now to position the development team, executive leadership, and board for maximum future fundraising success:

• Understand the value of wealth screening to identify potential major donors,
• Develop customized cultivation plans for targeted prospects, and
• Understand the role of the board committees in campaign preparedness.

 
The Value of Wealth Screening
 
Many nonprofit organizations utilize wealth screening as an integral part of their donor prospect research.  As trustees, you may have had members of the development team or executive leadership present proposals to the board for approval of expenditures to conduct this type of research.  Here’s what you need to know in order to make an informed decision regarding investing in wealth screening services.
 
Ideal donors are those who have both an affinity for the museum and the financial capacity to make a significant gift. But how do you get beyond the usual suspects – those families that are the giving pillars of your community? One solution is to look more deeply into your museum’s database. Museums have members. These individuals are valued consumers and have displayed interest by attending exhibits and fundraisers and continuing to purchase  memberships year after year. They are primed and ready to be invited to support your museum in a deeper way. But how do you know who, when, and for how much to ask?
 
Decades ago, before internet research was part of everyday life, development professionals would gather the members of their development committee and review lists of potential donors by gathering information about friends of committee members. While parts of this practice are still valuable, research has come a long way. Today there are several companies that offer wealth screening services for nonprofits, including Donorscape, Wealth Engine, Target Analytics, and iWave. Although the specific information delivered may vary from company to company, the process is essentially the same. 
 
Services provided by these companies help museums electronically screen a large quantity of selected donor records, including lecture subscribers, members, gala ticket purchasers, or other connected individuals, against 14 of the most respected public information databases. When data is matched, the resulting information may report on the prospective donor’s financial position, community connections, board experience, property ownership, age, public and private company ownership and political contributions, among other data points. It also rates the prospect’s propensity to give and affinity for your museum to achieve a balance of connection, commitment, and capacity. This information can be used to determine potential sources of new or increased contributed income from individuals in the form of annual, capital, endowment, and planned gifts.
 
The returned information rates donors from top prospects who have a strong affinity for your museum and significant capacity to give down to those prospects who may love your work but cannot make a major gift. Development teams can use this information to:

• Determine the overall funding capability of your museum’s database.
• Identify a hierarchy of potential major donor prospects to cultivate for higher level gifts.
• Create robust portfolios for each development professional based on the donor prospect hierarchy information, as well as targeted portfolios for the Executive Director/CEO and selected board leadership.
• Develop personalized cultivation strategies and a moves management pipeline to acquire new major donors.
• Understand those donors who will remain core annual fund contributors but do not have the capacity for future major gifts and design appropriate relationship maintenance programs for that group.

 
Using wealth screening services, your development team will be able to segment the donor database to understand where to invest fundraising resources to yield the best results, regardless of the size of the museum’s development department. The costs for this service have become much more affordable in recent years and the return on investment is tremendous. By acquiring just one new major gift, this investment will pay for itself.
 
The information gleaned from wealth screening also helps to shape customized donor cultivation efforts and can inform decisions regarding the identification of ideal members to consider adding to your governing board. These concepts will be explored in Part II of this series next month.

Vice President Elisabeth B. Galley has more than 30 years of experience as a fundraising and development professional for nonprofit arts and culture organizations. First joining ACG in 1998 as a Senior Consultant, Ms. Galley worked with Tulsa Opera, Nevada Ballet Theatre, Mozart Classical Orchestra, REPRISE! Broadway’s Best, and the Carmel Bach Festival as Interim Development Director. She rejoined the firm in 2015 to open its Dallas office and expand the Revenue Enhancement practice area. Prior to joining ACG, Ms. Galley served as Chief Development Officer at the Perot Museum of Nature and Science, spearheading its $200 million campaign efforts. During her five-year tenure, Ms. Galley expanded the museum’s operating reserves by $26 million and doubled its contributed revenue to $4 million annually. For seven years, she served as Vice President of Development at the AT&T Performing Arts Center, working on the $335 million campaign to build the multi-venue complex. Ms. Galley was also Director of Development for the Colorado Springs Symphony where she was responsible for all components of the annual contributed income, including individual and corporate gifts, foundation and government grants, and special events. Ms. Galley holds a master of business administration with an emphasis in marketing and nonprofit administration from the University of Delaware.

Andrea spoke at MTA’s Forum in Cincinnati on October 28. When asked for her top takeaways, here were her recommendations:

When speaking on the topic of planning for the ultimate disposition of art collections, I offer the following top ten planning tips:
1. Do not leave the ultimate disposition of your collection to chance.  It is surprising how many collectors do not engage in this process and leave the ultimate disposition decisions to their family and advisors, most or all of whom do not have the intimate knowledge of their collection.

2. Use a competent and experienced advisory team. The team should include art experts; such as dealers, gallery owners, curators and restoration experts; risk management professionals; qualified appraisers; private bankers; and attorneys and accountants, all with experience in planning with art. Not only do they need to be on your advisory team, but they need to communicate with one another.

3. Do appropriate risk management. Engage an insurance expert who is specifically experienced with art. You may or may not purchase insurance, but do consider the security of your collection, from theft, fire, water, storm, or other casualties.

4. Prepare and maintain an inventory. This is true for all assets in the form of financial statements, but it is particularly true with respect to art and other collectibles. An inventory is critical to every stage of the planning process, and should be kept as current as possible.

5. Know the value of your collection. Insurance providers and lenders, if any, will require appraisals and periodic updates. Appraisals will be required for income, estate and gift tax purposes.  Even if not required, you should have your collection periodically valued, perhaps every three to five years, depending on how actively you are collecting and on what you are collecting.

6. Maintain records. As part of your inventory, maintain records of ownership and, as the value and significance of the collection grows, further evidence of provenance. This includes all contracts to purchase or sell, actual bills of sale, loan agreements with museums, and so on. Consider title insurance if you have doubts about the provenance of any piece you are considering for purchase.

7. Ask the big question. Involve your family. Do they share your passion for your art? If so, planning should focus on how to transition the art to them, whether that is now or later. If not, and there are other financial assets or you feel they are otherwise provided for, then explore your charitable options.

8. Consider liquidity. Art is by its very nature an illiquid asset.  It does not provide cash flow or income during life, and although it may be sold, that comes with a high tax cost, and perhaps not quickly enough to address estate liquidity needs.  Art lending may be an appropriate solution to address this lack of liquidity.

9. Consider charity. Given the expense of selling, and the opportunity cost of wealth transfer, the “charitable solution” is often the most tax efficient way to keep your collection intact.  And if the “charitable solution” is right for you, consider lifetime donations as this will entitle you to a federal income tax charitable deduction in addition to estate tax savings.  Most important, do not surprise the museum (or other charity), if you are leaving art to them. Not all museums will want your art. It may not fit their collection, or their storage vault. Talk to them now about your wishes, even if they are not carried out until later.

10. No surprises. Give your family, and your personal representative, clear direction on what your estate will include, and clear direction on what you want to happen. And while you are going through the planning process, make sure your advisors know the extent and value of your collection.
Trying as the planning process may seem, try to enjoy the process of planning for the disposition of your collection. It is certainly not as much fun as building the collection, but it is ultimately just as important.

Mr. Slugg has also served as an adjunct professor at Texas Christian University and Texas A&M College of Law.  He is a frequent speaker on tax and financial planning topics, especially as they relate to art and collectibles, and is frequently quoted in the Wall Street Journal, New York Times, Forbes, Barron’s and other business publications.  He is the author of the Handbook of Practical Planning for Art Collectors and Their Advisors, published by the American Bar Association’s Section of Real Property, Trust and Estate Law.

Mr. Slugg is admitted to practice law in Texas, is a member of the State Bar of Texas, the American, and Tarrant County Bar Associations, the Tax and Estate Planning Section of the Tarrant County Bar (Chair, 1999-2000), the Lone Star Chapter of the Partnership for Philanthropic Planning, and the College of the State Bar of Texas.  He currently serves as Co-chair of the American Bar Association’s Real Property Trust and Estate Law Art and Collectibles Committee, as well as several other leadership positions.  Mr. Slugg received his J.D. degree from the Ohio State University College of Law, and his undergraduate degree from Wittenberg University.

“Collectors aren’t sellers.” It’s long been a maxim that’s defined the philosophical relationship between a collector and their art. This motivation to acquire or commission great works of art has taken many forms since the advent of Renaissance patronage. For the royal courts, it was power and prestige; for the aristocracy, recreation and pleasure; for the great industrialists, cultural refinement; and for the avant-garde, social stratification. Only recently have collectors begun to acquire pictures with at least one eye judiciously fixed on the financial implications. Yet despite increasingly predictable media accounts of the financialization of art, collectors still tend to be quite nuanced in their drive to collect.
To better understand the nuanced and evolving relationship between collector and collection, a 2016 U.S. Trust study surveyed 684 wealthy individuals, 30 percent of whom had greater than $10 million in investable assets. The results revealed an interesting generational divide between more traditional collectors still driven by connoisseurship and aesthetic pleasure and next-gen collectors increasingly concerned with how art behaves as a capital asset.

Six Key Characteristics
We identified six key cultural characteristics of the new breed of collector, each carrying implications for art market and estate planning professionals.
1. An eye on investment: Perhaps because they grew up during one of the greatest art market expansions in history, younger collectors are significantly more financially driven in their collecting and are more likely to view collecting art as a way to build significant wealth. This will require their financial and estate planners to incorporate this asset class into financial modeling and to focus beyond basic estate planning specifically for this asset.
2. Heightened expectations: Younger collectors are less likely to view art as a risky investment and more likely to expect sustainable price appreciation in the future… likely because they haven’t experienced large down-cycles like the early 1990s pullback.
3. More commercially minded: Perhaps because of the rapid expansion of the secondary market, the ubiquity of art advisors and access to lower-cost digital sales channels, millennials are much more comfortable selling their art as they build their collections. The downside is that as transactions increase, so do taxes and transaction costs. As a result, tax and financial advisors will need to be engaged earlier to help mitigate the impact of federal and state taxes.
4. Art as loan collateral: Younger collectors are more willing to use their collection as loan collateral to take advantage of strategic investment opportunities. Though proceeds of art loans may be used to acquire more art, often proceeds are used to accomplish other personal or financial goals.
5. More socially engaged: Millennial and Gen X collectors are very socially engaged within the art world’s new globalized experience economy. Within this community, art collecting has become an important means for social and political advocacy on an international stage. Moving beyond the borders, though, presents additional regulatory issues which planners must be mindful of.
6. A philanthropic mindset: Younger collectors are more apt to gift their art to nonprofit entities, while older collectors are far more likely to gift their art to family.

Effect on Planning Professionals
Art (and other collectibles) are probably the most difficult assets to incorporate into an overall tax and financial plan. They’re by their very nature illiquid, don’t produce cash flow (absent a sale), but most of all, they’re among the most “emotional” assets that a collector owns. Collectors, at least traditionally, are more passionate about their art than they are about their stocks, bonds, real estate and perhaps even a family business. In short, art hasn’t historically been viewed as a financial asset.
As the U.S. Trust study suggests, this mindset may be changing for younger and newer collectors, who consider the financial and investment aspects of owning art much more so than in the past. For planners, this means that conversations about appropriate planning techniques and ownership structures need to take place earlier in the planning conversation. For example, an active collector, who will be both selling as well as buying, may wish to own their art through a family partnership or trust rather than outright. And although record keeping has always been important, it becomes even more important when the collector is viewing their art more as an investment than merely for its aesthetic value.
Both income taxes (federal and state) and transfer taxes become more important than ever, as younger collectors tend to conduct more transactions.
And as younger collectors focus more on this asset class, their advisors need also to broaden their knowledge of the rules unique to this area and to their clients’ increased activity.

Mr. Slugg has also served as an adjunct professor at Texas Christian University and Texas A&M College of Law.  He is a frequent speaker on tax and financial planning topics, especially as they relate to art and collectibles, and is frequently quoted in the Wall Street Journal, New York Times, Forbes, Barron’s and other business publications.  He is the author of the Handbook of Practical Planning for Art Collectors and Their Advisors, published by the American Bar Association’s Section of Real Property, Trust and Estate Law.
Mr. Slugg is admitted to practice law in Texas, is a member of the State Bar of Texas, the American, and Tarrant County Bar Associations, the Tax and Estate Planning Section of the Tarrant County Bar (Chair, 1999-2000), the Lone Star Chapter of the Partnership for Philanthropic Planning, and the College of the State Bar of Texas.  He currently serves as Co-chair of the American Bar Association’s Real Property Trust and Estate Law Art and Collectibles Committee, as well as several other leadership positions.  Mr. Slugg received his J.D. degree from the Ohio State University College of Law, and his undergraduate degree from Wittenberg University.