London Youth Symphony Case free essay sample

LONDON YOUTH SYMPHONY Colette Southam prepared this case under the supervision of Professor Craig Dunbar solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail [emailprotected] uwo. ca. Copyright  © 2005, Ivey Management Services Version: (A) 2009-10-04 On Sunday April 4, 2004, Daina Janitis, board president of the London Youth Symphony (LYS), sat in her home office and typed: I’ve been around the LYS for nearly a dozen years — eight before I launched my own young musicians into the adult world and the last four as president. We will write a custom essay sample on London Youth Symphony Case or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page I have been wearied each year by all the same discussions with the board of directors, â€Å"Can people join if they can’t pay? † â€Å"Do we punish non-attendees? † and â€Å"Are we going to go bankrupt? † Fortunately, today, the last question is not an issue — thank goodness. Instead, the question â€Å"Do we have a bank account but no orchestra? † has surfaced instead. LONDON YOUTH SYMPHONY BACKGROUND The LYS was a not-for-profit organization with a volunteer board of directors. It was founded in 1961 with the support of the Junior Women’s Committee of the London Symphony Orchestra Association with Derek Stannard serving as the first conductor. Not simply recreation for young players, LYS provided the region’s best young musicians with a challenging symphonic orchestra experience. Many of the more than 2,000 LYS alumni went on to have careers as music educators, soloists and musicians in professional orchestras and ensembles while others who pursued non-musical career paths continued their life-long commitments to music through membership with community orchestras throughout Canada. The LYS experience exposed advanced orchestral instrumentalists to a level of repertoire and ensemble playing that could not be duplicated by any school orchestra or through private study alone. Membership in the LYS was open to musicians between the ages of 13 and 23 from London and the surrounding area and was contingent on a successful audition with the orchestra’s conductor and music director since 2002, Len Ingrao. Conductor of the Waterloo Chamber Players and the London Community Orchestra, the former LYS assistant conductor stepped into the role of LYS conductor upon the death of long-time LYS conductor Stan Kopac. The LYS Young Strings (YS) program was an outreach program of the LYS and was open to violin, viola, cello and double bass players between the ages of eight and 15 with Page 2 9B05N009 the recommendation of their school or private music teacher. YS was conceived approximately 20 years ago by London string music educator, Steven Wolsley as a ‘feeder group’ to provide LYS with needed string players. During the weekly full LYS rehearsals, Maestro Ingrao guided the players in musicianship, orchestral playing technique and discipline worthy of the finest and most committed young musicians in the area. According to the musicians, the orchestra gave them a very challenging classical and contemporary repertoire. A recent LYS alumnus who moved on to attend a prestigious private music conservatory recounted how her classmates complained about the difficulty of one of their orchestral pieces. She told them to stop whining and that she played the piece when she was a teenager in her youth symphony. LYS musicians also benefited from regular sectional rehearsals with coaches from Orchestra London and the Don Wright Faculty of Music at the University of Western Ontario. According to Maestro Ingrao, â€Å"It’s too easy to believe that a conductor can or should be able to do everything and forget that the instrumental specialists are the ones who impart the requisite technical advice. † LYS performed three major symphonic concerts per year, featuring a young soloist selected from within the ranks of the orchestra or a young guest artist. A first-time patron at a recent concert was overheard saying, â€Å"I didn’t expect it to sound like a professional orchestra, but when I closed my eyes during the concert, it sure didn’t sound like kids. † LYS also performed at concerts with other groups such as the London Community Orchestra (LCO) and choirs from neighboring community churches. The LYS, through outreach concerts and the 2002 tour in Austria and Italy, has put London on the youth orchestra map. FINANCIAL POSITION On August 31, 2001, the LYS bank account balance was $10,044 (see Exhibit 1). Based on projected expenditures, it seemed inevitable that this balance would be depleted during the fall 2001 season. Additionally, bingo revenues had been an important source of income for LYS and 3C Bingo, the hall that held their licences, was undergoing financial difficulties throughout 2001 so its own future was uncertain. 1 The board decided in June 2001, that LYS could no longer afford $10,000 annually to have a paid manager. Over the next two years, the board president, Daina Janitis, and treasurer, Abigail Butt, carried out the majority of the manager’s duties. In October 2002, LYS was accepted at the Bingo Castle and Bingo Palace so that bingo revenues began to flow again. With Butt’s tight fiscal restraint, by August 31, 2003, LYS was in a healthy financial situation again with $41,664 in the general account (see Exhibit 1). Revenues Registered under the federal Charities Act, LYS had no share capital and paid no income tax. According to the income statement, LYS had four different revenue streams: fundraising, tuition fees, grants and sponsorships and concert proceeds (see Exhibit 2). In 2004, fundraising revenue, almost exclusively due to bingos, amounted to $9,309. The city’s ban on smoking in all public places was expected to decrease future bingo revenues by 20 per cent since neighboring municipalities still allowed smoking in bingo halls, as did the nearby casino. Bingos were a key source of funding for not-for-profit organizations in Ontario. Managed by the Ontario Lottery and Gaming Commission, the reporting and record-keeping requirements were stringent. Until 2001, an LYS family had managed the organization’s bingos, but when that family’s 1 3C went out of business in September 2001. Page 3 9B05N009 musician graduated from LYS, this task fell to the board treasurer. Each LYS member family was required to participate at three bingos per year, while YS families were not currently required to participate. Ideally, each bingo required 10 to 12 volunteers (musicians over age 16 or parents) to run smoothly, and had to include a board member who signed the bingo licence application and a few others who were trained in the calculation of prizes or other aspects of the bingo process. However, without a formal process for tracking LYS family volunteering, bingos were running with as few as six people. Other fundraisers were much less lucrative. Sales of poinsettias and bamboo plants in 2002 brought in revenue of $6,579, but the associated costs amounted to $5,545. â€Å"Retail† types of fundraisers were unpopular with the parents who were already saturated with chocolates, cheese and plants to sell for their children’s schools and extracurricular organizations. Many parents opted to purchase the plants as gifts rather than allow their children to sell yet another item to family, friends and their co-workers. Management of these smaller fundraisers also placed an additional burden on the board members, who ran the fundraisers in the absence of a fundraising committee. On the other hand, the returns associated with the Cabaret Night fundraiser in 2000 were more appealing. The single-night event brought in $2,276 with associated costs of only $623. Additionally, the Cabaret experience was fun for the musicians, entertaining for family and friends, and it increased the orchestra’s exposure in the city. Tuition fees brought in $17,069 in 2004. Current tuition is $325 for LYS and $145 for YS (see Exhibit 3). YS tuition had increased by $10 to $145 since 2001. In 2004, LYS tuition had returned to $325 after being raised to $425 for the 2003 season. A decrease in paid enrolment from 50 to 28 musicians accompanied the increase in tuition. Note that there is a discrepancy between the number of musicians that paid to enrol and the number of musicians listed in the concert programs. According to the program notes, there were 35 LYS musicians in 2003, while only 25 paid tuition. There was no formal plan in place to forgive tuition for musicians who were unable to pay due to financial hardship. This was a source of dissention on the board, with some members believing that inability to pay the tuition should not prevent any qualified musician from belonging. YS enrolment did not appear to have an elastic demand and the numbers were expected to remain constant. Grants and sponsorships were an important source of revenue for LYS. Trillium Foundation Grants provided one-time grants that could be used to purchase instruments and music while The London Arts Council (LAC) had been an ongoing source of operating funds. LAC was: dedicated to enhancing the quality of life and the creative vitality of London by nurturing awareness of, involvement in, and commitment to, excellence of all levels of Arts and Culture — through programs and services that provide informational, educational, consulting and networking opportunities to Londoners, visitors, and the arts community. 2 In 2001 and 2002, LYS had received LAC’s third largest grants ($14,000 and $15,000, respectively). This grant had been gradually reduced and, in 2004, LYS received $7,000, which was the eighth largest grant. In 2004, the third largest grant awarded was for $12,750. LAC required audited financial statements for any grants in excess of $10,000, and if LYS had its statements audited, it would likely receive at least $12,000 from LAC. Janitis had recently discovered that corporate sponsorships were a lucrative source of revenue. For the 2004 season, Great West Life and TD Canada Trust each sponsored a concert for $2,500. Concert sponsors received a thank-you plaque, acknowledgement on the front page of the program, and six 2 www. londonarts. org/goals. htm Page 4 9B05N009 complimentary tickets to their concert. Janitis believed that LYS needed to increase the benefits associated with corporate sponsorship in the form of a more public recognition of the sponsor’s goodwill. She wanted to ensure future sponsorship as well as attract a sponsor for the third concert. Smaller corporate sponsors received an advertisement in the program notes. Without a paid manager, the time-consuming responsibility for attracting corporate sponsors and writing grants fell to Janitis, the board president. Performance proceeds had fallen off recently as lower enrolment resulted in fewer tickets being bought by family and friends. Some musicians did not have any family or friends attend, and generally, the musicians played to fewer than 100 patrons. Playing to an empty church hurt morale as the musicians spent months preparing the pieces. A board member proposed that having each member sell six tickets per concert would easily solve this problem. Ticket prices were $10 for adults and $6 for students or seniors, with the audience generally being 75 per cent adults. Saturday afternoons were not ideal times to schedule concerts, but Wortley Baptist Church was obviously unavailable on Sundays. Expenses Most LYS expenses (see Exhibit 2) were fixed costs that did not increase with the number of musicians. An honorarium of $1,044 per month was paid to the LYS conductor. The two YS conductors each received $75 per session with approximately 30 sessions per year. The music librarian was paid $1,000 annually. Prior to June 2001, the manager was paid $10,000 per year. Sectional coaches were paid $50 per session. The conductor preferred to have two sectionals per group (first violin, second violin, cello, double bass, winds, brass and percussion) prior to each concert. In 2003, Janitis proposed to the board that she would be willing to serve as the paid manager for $500 per month. The treasurer advised that LYS could not afford this service, and since financial statements did not exist and the board was not aware of the bank account balance, the motion was defeated, although there was unanimous support for having Janitis serve as a paid manager if LYS could afford it. Performance proceeds did not cover associated performance expenses. Annual hall rental at Wortley Baptist Church was $2,850 in 2004, up from $2,275 in 2003. Shortages of certain instrumentalists necessary to give the orchestra balance were alleviated by hiring young musicians at $50 to $100 per concert. Exhibit 4 details the numbers of extra musicians hired and the instruments where shortages existed since 2001. Most of the hirings in 2004 became necessary when a paid LYS performance was scheduled during the Kiwanis Festival. Many LYS players were unavailable due to competitions. This paid performance resulted in inconvenience to the families, an expense of $675 in 2004 to hire additional musicians to fill in for missing players, and a $400 fee for use of the out-of-town facility. The actual LYS reception expense has been understated. A reception in the church basement followed each LYS concert to which each family was required to bring a tray of baked goods. The level of compliance to this request varied with some families bringing in huge offerings and others repeatedly ignoring the request. The musicians had a pizza supper prior to each concert as the dress rehearsals occurred during dinner hours. Other concert expenses were not expected to increase. Instrument costs were covered by Trillium Foundation funds, and no new purchases were planned. Fundraising expenses were determined by the individual undertaking, but bingo licence fees would be increased to $90 per bingo session (with 10 sessions anticipated), and bingo expenses were fixed and were not expected to drop with decreased revenues. Uniform expenses were expected to amount to $1,200 annually for each of LYS and YS. The large cost in the most recent year was due to the discount purchase of a two-year supply of sweatshirts for LYS. Insurance was expected to increase by three per cent annually. General and administrative expenses had increased considerably, but these were expected to Page 5 9B05N009 decrease. Telephone costs were expected to amount to $40 per month. Several phone bills had gone unpaid, and the organization received a letter threatening to cut off service. As a result, a large expense in the previous year was generated in the form of a $500 pre-payment of the next year’s bills. The website design and software costs were one-time expenditures. A current board member was an information technology (IT) director who offered space on his company’s server, free of charge. A large advertisement in the Kiwanis Festival brochure cost $200 annually and targeted the appropriate audience. Music expenses and annual dues and licences were expected to remain constant. There had been no payment to an accountant since 2002, but it would cost $500 to have the statements audited and taxes filed for 2005. The cost of music, annual dues and licences, photocopying, office supplies, postage and post office box rental were not expected to change. It was hoped that bank charges would be offset by the interest that would be earned if the surplus bank balance were invested in a guaranteed investment certificate (GIC). BOARD OF DIRECTORS As a not-for-profit organization, LYS had a volunteer board that tended to be composed of dedicated parents and educators (see Exhibit 5). Although, historically, the role of the board was to make strategic decisions, since June 1, 2001, LYS no longer employed a paid manager. Therefore, daily operations of the symphony were divided among the board members. The contribution of these unpaid volunteers was substantial, and board members were inclined to help in order to keep the orchestra viable for London’s young musicians. There were no existing guidelines dictating board composition, term length or any formal method for recruitment. Historical records were kept in several cardboard boxes in the treasurer’s garage. Federal not-for-profit organizations are regulated under Part II of the Canada Corporations Act (C. C. A. ). In general, the duties of the directors and officers of not-for-profits were similar to those that applied in a commercial context. Board members were required to exercise due care and to serve as fiduciaries that act in the best interests of the organization. Because of the non-compensated nature of their positions, board members of not-for-profit organizations were held to a less stringent standard of care than board members of for-profit companies but still had the duty to conserve and protect the organization’s assets. LYS carried comprehensive liability insurance for its directors and officers. ENROLMENT At least part of the large drop in enrolment from 50 in 2001/2002 to 28 in 2002/2003 might have been attributable to the increase in tuition fees by $100. Even with the reinstatement of tuition to the former level of $325, the 2004 enrolment of 32 musicians was low. The youth symphonies in Ontario all had enrolment issues in 2004 due to the double cohort. Many of the musicians played with their youth orchestras while they attended high school, and the elimination of Grade 13 reduced numbers provincewide and was expected to continue to affect numbers. Even with the declining numbers, at the 2004 auditions, LYS had more qualified flutes and clarinets than were required, a shortage of bassoons, oboes and strings, and no trombones or violas. These shortages resulted in having to hire extra musicians for concerts and limited the repertoire that could be chosen for the concerts. The low numbers also ruled out the possibility of a European tour, which was a prime motivator for membership. With a population of more than 300,000, London was the 10th largest city in Canada and had the third largest Kiwanis Music Festival in Canada with over 3,000 entries. Given the large number of young musicians in the city, the board often puzzled over the causes for the low enrolment. Competition and Page 6 9B05N009 substitutes for the LYS experience, existed in: the London Community Orchestra (LCO), high school and university bands and orchestras, private music teachers, and the Forest City Talent Education Centre. The LCO was composed of musicians of all ages (from age 14 and up, but had a large contingent of retired people) and from all walks of life. LCO was also directed by Len Ingrao, LYS’s conductor. LCO charged student (high school, university or college) members only $100 annually. LCO had the benefit of practising and performing in the same venue. They practised Tuesday evenings and performed four annual concerts on Sunday afternoons at the Aeolian Hall. Annual rent at Aeolian Hall was $2,400 — less than what LYS was paying at Wortley Baptist Church. Although the hall could benefit from a facelift, the acoustics were warm and considered by some to be the finest in the city. There were rumors that Clark Bryan, a renowned concert pianist, was considering purchasing the Aeolian Hall with the intention of restoring it to its former grandeur, when it was known as the jewel of East London. No renter was using the hall on Saturday afternoons, and it also had the benefit of being an actual performance hall with a box office and facilities to run a concession booth, which could bring in at least $150 per concert and would remove the obligation for families to provide baked goods for the post-concert reception. High school and university bands and orchestras were also direct competitors to LYS. The local high schools required students enroled in their music courses to play in one or more of their school’s bands, orchestras or ensembles. These groups practised before school, charged no tuition fee, and did not require parents to attend bingos or provide baked goods for receptions. Janitis frequently sent all high school music teachers several mailings with posters and audition information, and yet very few musicians were referred by their high school music teachers who were devoted to further developing their own school music program. The University of Western Ontario University Orchestra rehearsed on Thursday prior to LYS rehearsals. This meant that some musicians came late to LYS rehearsals and played for six hours on Thursday evenings. Many of the university students played with LYS during high school or were friends with current LYS members. Tuition fees were prohibitive for some university students living away from home. Private music teachers should serve as complements rather than substitutes for the LYS, but according to Len Ingrao, The bottom line is that we no longer have the wide base of teachers who sent us string players in the past. Most of those teachers are now associated with Forest City (FC) Talent Education which has 100+ students in its program and continues to expand yearly. We need access to those 100+ players to survive. It is as simple as that. Suzuki music programs started children as young as three playing stringed instruments. Strong parental commitment was demanded, and these children progressed quickly to advanced repertoire. Most youth symphonies in North America relied heavily on Suzuki programs such as FC to feed the string sections, which were the dominant component of the orchestra (see Exhibit 6). Whenever FC was discussed at LYS board meetings, emotions ran high. Some members emphatically stated that there was a difference of philosophy between LYS and FC, with FC aimed primarily towards the soloistic education of string players. However, the FC program also included abundant chamber music (string trios, quartets and quintets) as well as several string orchestras including Primus, the senior string orchestra initiated by the musicians themselves. The second major objection to an association with FC was that LYS would lose its autonomy and would become â€Å"sucked into† the school. The major benefits for the FC students were that LYS would expose them to full orchestral pieces (beyond just strings) under the Page 7 9B05N009 direction of a professional conductor, and would allow them to participate in international youth orchestra activities. During informal discussions with the FC school, it was suggested that the reason FC string players do not join LYS was that, â€Å"given the number of extra-curricular activities high school students now contend with, the musicians could not devote yet another evening during an already busy week. † The FC students practised on Saturday mornings so moving the LYS rehearsals to Saturday afternoons might facilitate more members joining LYS as well. 3 Although tuition costs were not cited as a deterrent for joining LYS, FC families already paid thousands of dollars each year for private lessons, participation in FC ensembles, accompanists and registration for competitions. Although one of its stated missions was to provide LYS with string players, LYS Young Strings had never been a major provider of players, with two to three players each year being the average carry-over. Many LYS-YS students were recommended by their elementary school’s music program and many had never taken private lessons. A minimum level of Royal Conservatory Grade 7 was required of LYS string players, and that level could not be attained without regular private lessons. The LYS-YS directors (one a board member) were current or former school music teachers who believed that the LYS-YS was an enriching experience for these young players and did not want to be considered a ‘feeder’ program to LYS. There was very little integration of LYS-YS with LYS, and there was no active program to recruit LYS-YS players into private lessons and or to LYS concerts. Some board members believed that LYS should sever connections unless the LYS-YS conductors were willing to accept the mission statement. Additionally, it was discovered that LYS’s phone message system had close to 100 messages, some of them very old and some inquiring about auditions. The phone was physically located at a board member’s house, with the voice mail system accessible by code, but the message retriever had not realized that the voice mail box was sub-divided. Due to communication issues on the board, no one had responded to these calls. LYS did not currently maintain a membership database, but relied on paper records maintained by various board members. The conductor would notify the board and musicians about shortages and anticipated shortages in specific instruments, but no records were maintained about orchestra composition. Janitis also pointed out that she had no contact information for the private music teachers who were the primary source for musicians. In an attempt to recruit more musicians, Janitis sent all high school music teachers regular newsletters about the opportunities LYS could offer their musicians. To date, only one musician had been referred by a high school music teacher. CURRENT SITUATION With more than $40,000 in the bank, Janitis realized that the healthy bank account cushion could cover all operating expenses for a year, even if no tuition were charged. She recognized that, with several board members retiring, LYS had the opportunity to conduct some financial experiments. The season’s goal was to design a strategy that would increase LYS enrolment to at least 40 members and double attendance at concerts. Improved communication within the board and with the musicians and families was also a priority, as was increasing visibility in the community. LYS could afford an operating deficiency in 2005, but would like to maintain a minimum bank account balance of $30,000 and break even in 2006.