The Cultural Investment ROI (Part Two)

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Cultural Investment ROI

Last month I introduced the concept of the cultural investment ROI, not as something we’re able to calculate and celebrate, but rather as something our clients ask for that we’ve been largely unable to give them. We can do some economic impact analysis and tell some stories about all the wonderful things that cultural investment can do for communities based on what’s happened in other communities, but we don’t have a comprehensive or accurate tool to guide cultural investments.

I’ve taken the position that we need to develop a model that shows how different types and levels of investment in the cultural sector deliver specific benefits and impacts over time. We know what the inputs are: investing in facilities, technical assistance, public art programs, grants to organizations and artists, facilities and districts. We are getting better at identifying the particular outputs that might come from these investments: enhanced quality of life, companies and workers moving to the community, higher graduation rates, lower crime, more visitors, improved longevity.

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But here are the challenges:

  1. How do we establish causality between inputs and outputs? If there is an increase in downtown economic activity two years after the opening of a new facility, how much of that increase can we attribute to that facility — versus all the other things going on, from regional economic expansion to that new Starbucks around the corner?
  2. Recognizing that sets of inputs lead to sets of outputs, can we still isolate the relative impacts of particular investment choices?
  3. Can we be precise enough to know which investments at what level over a particular period of time respond to the specific goals of that community?
  4. How do we reconcile the fact that no two communities are alike in terms of what cultural investment opportunities exist at a point in time. One community might have a strong dance community for whom improved facilities drive cultural tourism while another community’s greatest asset is an underused historic theater that might catalyze downtown revitalization.

Now that we know what we’re up against, let’s think practically about how to build such a model. The starting point is that we have to build relationships between inputs and outputs based on historical data that we can collect at the community level. The good news is that we now live in the time of “big data”; we have the ability to collect massive amounts of information in order to build predictive models.

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I would propose two elements to this project. The first would isolate the impacts of specific investments across many communities. There are cultural economists, academics and researchers now working in many communities to develop and prove relationships between cultural inputs and community outputs. Here are several examples:

The work here is to establish specific input/output relationships that have been observed (and, more important, measured) in various communities. There are hundreds of papers out there from which we can hopefully extract data on very specific arts impacts.

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[pullquote align=”right” cite=”” link=”” color=”” class=”” size=””]It will take a village to build this model.[/pullquote]The second element would look at a set of impacts within a specific community. I’m wondering if we can find a relatively closed system in which all inputs and outputs can be measured towards the creation of a larger model. My friend Jerry Yoshitomi has suggested Yellowknife (the capital of the Northwest Territories of Canada) as our prototypical community for this exercise. Of course I love this suggestion — I’ve always wanted to go to Yellowknife — but it does make sense as a relatively isolated, small yet mature community with a thriving arts scene. So off we must go to capture reams of information on every possible input and output to a level that allows us to build a community-wide model based on a set of measured and credible relationships.

I’m hoping that the act of puzzling through this challenge and proposing an approach may encourage others with more skill and experience as cultural economists to come forward with their better ideas. And there’s no question that it will take a village to build this model. But I do believe strongly that we need to develop these quantitative models in order to defend and encourage investment in the arts for the benefit of communities. And as much as we all love stories about positive impacts, it is ultimately data we need. As the saying goes: “You can only move what you can measure.”

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Duncan Webb
Duncan M. Webb, President of Webb Management Services, Inc., has been a management consultant for the development and operation of performing arts facilities for 25 years. Mr. Webb entered the theatre profession as a lovesick maiden in Gilbert and Sullivan’s Patience in 1969. Since then, he has completed degrees in economics and business; worked in international banking; produced commercial, industrial and experimental theatre; and has been teaching for New York University’s graduate program in performing arts administration since 1990. He worked for Theatre Projects Consultants from 1989 to 1995 and founded Webb Management Services in 1997. That practice has completed over 300 feasibility studies, business plans and strategic plans for facilities, organizations and districts. Mr. Webb is also the author of Running Theaters: Best Practices for Managers and Leaders, published by Allworth Press in 2005. He lives in New York City with his wife and two children.