Holly Sidford on Capitalization, Courage, and Changing a Broken System

In this interview, Holly Sidford of Helicon Collaborative and I talk about how our field’s approach to change capital needs a system-oriented response, and what we need to do about it.

hollysidford
Holly Sidford.

Over the past month, we’ve been exploring the topic of change capital to explore how we can build a capital structure to invest in organizational transformation and thrive in the long-term.

To more deeply understand the concepts and practice of change capital, I spoke with Holly Sidford, who is one of the leading thinkers about change capital in the arts field, having worked with Nonprofit Finance Fund and their Leading for the Future initiative and authored several key studies and opinion pieces about the topic.

In this interview, I dive a bit deeper with Holly to explore the definition of change capital, what it means for the arts and culture field, and its value as a practice for arts organizations as they work towards developing adaptive capacity and staying sustainable.

Karina Mangu-Ward: Let’s start at the beginning: What does change capital really mean?

Holly Sidford: I think what NFF means by “change capital” is a change in the business model that will enable the organization to sustain itself successfully over time.

From reading through EmcArts’ materials, I think there’s a difference between the way EmcArts uses the term change capital and the way NFF uses it. You’re thinking about change capital as money that propels a project or innovation in an organization that precipitates larger organizational change.

KMW: What do you see as the difference between a change in business model and an organizational change?

HS: Well, the biggest box is the organization. The business model is one component of the organization: how you get and spend financial resources to sustain yourself overtime.

KMW: I think that makes sense. So you see the organization as the whole and the business model is a part of the whole.

HS: Yes, absolutely. It’s a pretty important part, though. It’s the fuel. Clara Miller [founder of NFF] used to say the balance sheet is destiny. If you have no reserves, you don’t have saving to do things that are risky.

KMW: Money is always hard for organizations to get their hands on. I think change capital is especially hard. Why is that?

HS: I think there are lots of different reasons for that, but I think one of the fundamental reasons is the focus in the arts sector on projects. Too many organizations are thinking almost on a quarterly basis. “What’s our next project? What’s our next project? What’s our next project?” Not “What’s the arc of our organizational development? Where do we want to be five years from now? What’s the capacity that we need in order to be there?” They’ve been conditioned to think in one-year, project-oriented segments not in long-term multiyear organizational development terms.

KMW: It’s a reinforcing loop, right? Foundations funds projects, so organizations plan in terms of projects.

HS: That’s exactly right. Grantmakers in the Arts has been working on trying to raise this issue in the funding community. They’re thinking about this as an ecosystem issue. If only a couple of funders in a given community start to absorb and act on the principles of capitalization and everybody else doesn’t, then no progress is going to be made.

There are many funders who look at organizations’ balance sheets and if they have too much cash, then they don’t fund them. The other thing that happens is that some funders rush in to save organizations that are in peril but often don’t sufficiently reward others who are practicing strong capitalization principles. There’s change in thinking that has to happen within those arts organizations and within funders, too.

KMW: I completely agree that this is an ecosystem issue and it needs a system-oriented response. What do you think that actually look like?

HS: I actually think change happens in localities. It’s a big national, maybe even international problem. It’s a systems problem. But change is going to happen community by community. I really applaud GIA for going at this on a regional basis, doing their workshops in different places. We’ve just done a review of that work.

I also think that arts organizations need to be brave and step up and talk to their funders about these issues and ask for the money that they need long term. They may be denied it again and again but that shouldn’t prevent them from actually talking about the issues.

KMW: Is change capital right for every organization? What did you learn from you work on the Leading for the Future initiative?

HS: Change capital is for the most sophisticated and healthiest organizations. It’s not appropriate for organizations that are financially fragile or deeply in debt. Those organizations need to build up their short-term liquidity with working capital and operating reserves (also known as savings). Change capital is for organizations that have staff and board that are knowledgeable about finances. It requires strong and stable leadership and a spirit of collaboration and teamwork. In Leading for the Future, the organizations that were the most deeply siloed by function within the organization didn’t do as well as the ones who really took on the capitalization effort as a team.

KMW: What were the other keys learnings from the Leading for the Future initiative, in your view?

HS: One: Change takes time. It doesn’t happen overnight. It doesn’t all come in a blinding flash. Two: it is a conversation between the organization and their investors, their funders, both institutional and individual. It can’t just be an internal conversation if it’s going to be meaningful and if it’s going to precipitate real change. The “tip sheet” that NFF recently published does a good job of capturing the most important elements of capitalization for both cultural organizations and funders.

KMW: And finally, we’ve been talking a lot about money – how does this conversation intertwine with larger conversations about the value, impact and artistic work of the organization?

HS: I think this is really relevant. Strong capitalization provides organizations with artistic freedom and the ability to take risks and experiment. Poorly capitalized organizations compromise their ability to achieve their dreams and make the greatest impact.

I think we have developed an unfortunate divide between art and finances in our minds, and in many cases in our organizations. We think the artistry happens in one room and the finances in the other. But we’re in the same house! We have to break these silos down and see the intertwined nature of these two functions much more clearly.

A successful capitalization strategy is one that makes the organization more successful in terms of its programming, in terms of its artistry, in terms of its impact on its community and its goals. I just can’t underscore that enough.

KMW: Thank you, Holly!

Holly made a great suggestion to speak to some of the organizations that participated in NFF’s Leading the Future program. I hope to connect with some of them in the next few months, so stay tuned for additional perspectives on what change capital looks like in practice.

This interview has been condensed and edited.

Learn more

During September, I also spoke with Rebecca Thomas (until recently a Vice President at Nonprofit Finance Fund and the architect of their Leading for the Future program) and Jesse Ehrensaft-Hawley (of Global Action Project, an organization that invested in a change capital process and with whom Holly worked on their process). I encourage you to read my interviews with them about their perspectives on the definition and practices of change capital.

About
Karina Mangu-Ward is the Director of Strategic Initiatives at EmcArts.