A new report from the Australia Council for the Arts, the Institute of Community Directors (ICDA) and Our Community has shone the spotlight on arts governance in Australia.

Based on a survey of 153 leaders of not-for-profit organisation in the arts and cultural sector, the report builds on a three-year governance training program that saw Australia Council and ICDA engage with more than 1,100 board members and arts workers across Australia.

‘Our cultural and creative sectors are facing significant forces of change and evolution,’ the Australia Council’s Kevin du Preez writes. ‘It is no longer possible to rely on traditional business models, modes of operation or engagement.’

However, it appears that this call for new ways of doing things doesn’t extend to the governance model itself, or the legislative requirement that puts volunteers in charge of paid professionals. At best, this is an idiosyncratic pairing: one in which free access to insights, networks and energy can be an asset for organisations. But the conditions it creates are more often problematic, toxic or damaging. Even fatal.

Yet, the sector – and this report is no exception – seems stuck in a loop of continual improvement. Now more than ever, the harsh realities of organisational survival leave us necessarily more focused on making the best of the current model than thinking about how it could change. However, the organisations that will emerge in a post-coronavirus world will need to rebuild stronger foundations than ever before – including fit-for-purpose governance models that give them what they really need.

Small organisations, big impact

Most of the report’s respondents identified as ‘extra small’ (annual turnover below $50,000), ‘small’ (between $50,000-$250,000) or ‘medium’ organisations (between $250,000-$1 million). But their size of is disproportionate to their impact.

Australia’s small-to-medium (S2M) arts sector attracts larger (and faster growing) audiences than its better-funded counterpart, reaching 9.4 million people each year compared to the 3.3 million of the majors. This means S2M funding simply goes further, reaching more than double the audiences on less than half the funds.

Yet, S2Ms have fewer and less secure funding opportunities, and fewer resources to dedicate to making themselves sustainable. Subject to fewer rules and regulations, they also have less oversight of conceivably higher risks. Governance issues can often go unnoticed (and unaddressed) for long periods of times – if they’re addressed at all.

The entire sector has felt the impact of six consecutive years of federal funding cuts, as well as increasing competition for the funds and opportunities that remain. Not to mention the challenges presented by technology, the climate emergency, reducing arts education, and changing trends in engagement and audiences. The value and visibility of the sector was further diminished by the recent removal of ‘arts’ from several state and federal government portfolios.

Arguably, the sector was already at its most vulnerable even before the decimating impact of this year’s bushfires, the coronavirus, and Australia Council four-year funding announcements, all of which have sent shockwaves through an already-shrinking sector.

Individual artists, arts workers and S2Ms are particularly at risk within this context. But even our bigger institutions seem increasingly prone to self-combustion, with arts boards making headlines for bullying, bad behaviour, conflicts of interest, poor succession planning and questionable treatment of staff.

The bad news

Part of a broader ICDA governance study that aimed to ‘hold a mirror to the not-for-profit sector’, the report does a good job of outlining the key concerns of arts leaders. Before the coronavirus, it was funding, competition and decreasing volunteerism that caused most of our sector’s sleepless nights.

Its contents aren’t surprising. The research ‘validates our understanding of the current state of governance in the arts,’ which means 90 per cent of the report’s key findings paint a grim, depressing picture. If we scratch below the surface, that picture gets grimmer still.

1. Lack of board diversity

Most of the arts boards surveyed for the report said they had a good gender balance – though the 92 per cent made up of ‘at least 40 per cent women’ could arguably still have a majority of men.

Most said their boards were inclusive of community representatives (74 per cent) and older people (71 per cent) – but this claim could be achieved with a single member of those groups on board. Counting diversity in increments of one runs the risk of a tick-box approach to representation, narrows our understanding of the communities or identities an individual represents, and asks them (unfairly) to speak for a plurality of experience they can’t possibly embody on their own.

Just over a third of respondents said their boards had any culturally and linguistically diverse (36 per cent) or LGBTQI (34 per cent) representatives, and only a tiny cohort said they had board members aged under twenty-five (21 per cent), who identified as disabled (19 per cent) or as Aboriginal or Torres Strait Islanders (18 per cent). This monoculture of arts boards persists in spite of evidence that increasing board diversity can deliver a range of positive outcomes, from innovation and access to opportunities, to workforce well-being and improved financial performance.

We already have good data. We already have good research (such as the great Shifting the Balance report from Diversity Arts Australia). We have good local examples of community leadership transitions (such as Veronica Pardo’s departure from Arts Access Victoria, or my own from Arts Access Australia). And we have good international examples of best practice (such as Arts Council England’s recent announcement that its funded institutions must diversify or risk missing out). So why aren’t our arts boards being held to account?

2. Limited board introspection and review

Just 30 per cent of not-for-profit organisations said they had a formal process to review their own performance. Arts and cultural organisations were even less introspective, with only 20 per cent.

This goes some way to explaining the rampant poor practice we see across the sector. Boards in conflict. Boards causing problems. Boards that won’t stay in their lane. Boards that create more work than the benefits they return. Boards that can’t manage ineffective CEOs. Boards that fail to deliver or fail in their duty of care.

Who is governing the governors? How can we trust them if they cannot govern themselves?

3. Limited CEO oversight

The report notes that most boards (73 per cent) had recently reviewed the performance of their CEO – though ‘recently’ was defined as any time within the last two years, which is nothing like often enough.

More terrifying was the 23 per cent of boards who reported never doing so. Never! (Higher than the 16 per cent of not-for-profit organisations overall). That’s nearly a quarter of arts organisations who are negligent in their management and support of their CEOs – demonstrating an alarming lack of understanding of both a board’s fiduciary responsibilities and its duty of care to the people it employs.

When combined with boards’ reluctance to review themselves, this problem compounds further. The less reflective a board is about itself, the less likely it is to review its CEO. Bad boards create worse boards, and down and down we go.

4. Lack of effective inductions

Fewer than half of the board members surveyed reported getting a satisfactory induction when they joined their respective boards. At worst, this means that most of our sector’s governors are set up to fail from the start. At best, it means the majority of our board members are working with a framework they don’t fully understand.

5. Lack of governance and fundraising skills

30 per cent of respondents said they’d never had governance training. 40 per cent said they would benefit from governance training in some form. Again, we put our boards to work without giving them the skills that they need.

A larger group (66 per cent) said they would benefit from training on fundraising or grants. Given the current financial climate, this seems to be an obvious area for development. But the report only asked boards if they thought they would benefit, not whether they’d be interested (or willing) to be trained. In my governance consultancy, boards are more likely to get glassy eyed when asked involve themselves in fundraising, and edge towards resentful or even hostile when asked to ‘give, get or get out’.

The bigger issue we face as a sector, though, isn’t either the lack of governance training or the reluctance of boards to take part, but rather the imbalanced cost-benefit of our perpetual training cycle.

The majority (66 per cent) of board members have been in their roles for less than five years. We recruit them, we train them, and then they move on. We hope they use the skills we paid for on another not-for-profit board. We hope the skills those organisations paid for loop back to benefit our own. But the decrease in volunteerism, high instance of board burnout, and those who see board stints purely as CV building activities more often means this investment in learning doesn’t last.

6. Lack of tracking

16 per cent of respondents said their organisations don’t measure their success in any way (consistent with the not-for-profit sector as a whole). Again, this measure of failure is one that feeds upon itself, with those organisations that don’t review their board’s performance also less likely to monitor their success overall.

7. Arts and culture are doing it tougher

Even before COVID-19, arts organisations reported the highest percentage of those struggling financially (24 per cent) and the lowest in good financial health (44 per cent) when compared to other not-for-profits. 77 per cent of those who said they were in a ‘good’ place financially also includes those just breaking even.

8. Limited financial literacy

45 per cent of arts organisations said that just some, few or no one at all on the board had sufficient understanding of the organisation’s finances. This is, as the report states, already ‘a worrying result.’

The better news (or is it?)

The report’s final finding is subtitled ‘happy and productive’, and reveals that arts board members (94 per cent) reported enjoying their roles. Most of them (88 per cent) also said that they understood their responsibilities, and were happy with the amount of time they were required to invest (64 per cent).

However, by the report’s own acknowledgement, the majority of those board members have neither been properly inducted or trained. Nor have they taken the time to reflect on or improve their performance, skills or behaviour. In which case, how do they know what the responsibilities they’re so confident about really are? And how can they assess their effectiveness without input from those they affect?

Do things better differently

It’s easy to see why board underperformance and overreach continues to be a preoccupation for many organisations.

Most of the responding organisations (83 per cent) had fewer than ten employees (including full-time, part-time and casual staff). The median number of employees was three, with most of those identifying as women, non-binary or gender diverse (72 per cent). In most cases, then, the board outnumber the staff, with most boards (81 per cent) comprised of between five and ten members.

All of this highlights a number of different themes. The marvellous things our organisations achieve are made possible by small teams of dedicated, passionate (underpaid) arts workers – most of them women. Their already-stretched resources are being asked to stretch further. Our sector is overly dependent on the support of volunteers, who are often ill equipped to provide the support we really need. And the people who have traditionally filled those volunteer roles are becoming less inclined to do so over time.

A post-coronavirus arts sector will be one without resources to spare: either to support the perpetual cycle of governance training, or to address the damage that poor boards can leave in their wake.

Acknowledging that the sustainability of our arts organisations is vital to a creatively connected nation, the report aims to ‘shift the dial towards better governance’. But while its roadmap makes recommendations for boards wanting to boost their performance, it does so within the constraints of the current model: still spinning the cycle of training, technology, strategy, resources and tools.

However, the cause of board disfunction can too often be traced to the model itself. We are bound by legislation, of course, to meet set governance standards. But that legislation was made, and that legislation can be changed.

We need the tools that this report provides to be a step towards changing our governance culture, not merely validating it. The sector is in urgent need of an alternative.

We can start by asking the right questions. Instead of ‘how could you use this report as a benchmark?’ or ‘where do you need to make enhancements?’, what about ‘what could we make if we had the opportunity to start again?’ or ‘how are our arts funding and advocacy agencies supporting our sector to adapt?’

Or, to put it another way: how can we stop trying to make the best of a bad situation, and make something different instead?

Image by Holger Link