The Dance Centre had, over the past 23 years, developed a reputation for excellence across Australia as well as in the Perth dance community. The exam results achieved by its students were second to none. Many of its students had gone on to tertiary studies, majoring in dance. Others had progressed to dance administration with other organisations.
The school was located in one of Perth’s “blue ribbon” suburbs. It catered for students as young as four, through to young adults. Typically, students stayed with the school for 12 years, leaving when they finished high school.
The school had a high repeat rate between generations. Mothers who had been students were now sending their daughters there. There were 150 students at the school and eight teachers. Five boys attended the school. There were two classes each afternoon from 4pm to 7pm, as well as all day Saturday.
The emphasis at the school was on contemporary styles of jazz and modern dance, but it also had a strong classical school. Spanish dance was also taught.
The success of the school was based on the effort, passion and philosophy of the two owners, June Summers and Barbara Jones. June and Barbara lived for the dance school. They had created a unique non-competitive and nurturing environment that encouraged participation in a range of dance styles. From an early age students were encouraged to develop their own choreography. The owners felt that all students should have classical ballet training to improve their performance of contemporary dance styles.
June and Barbara ran several classes at a loss, as they felt that it was important to give children the opportunity to progress through various stages of dance, even if the class numbers were not financially viable. They did not want financial issues to stand in the way of the progress of the children at the school.
June was a highly respected artistic director. She was involved in the Perth dance scene at all levels, from youth to classical ballet. She was on the board of a number of high-profile dance organisations.
The school was successful by way of reputation, but it was not very profitable. However, although the financial returns were meagre, the success in terms of contribution to the lives of children in the area, to dance in Western Australia, and to the community as a whole, were enormous.
A storm brews
The school had been renting a hall at less than market rates on a monthly basis for 11 years. The landlord finally informed June and Barbara in December that he wanted the venue back from the beginning of the next year. Then, Barbara accepted a prestigious position with a youth dance company in Sydney. It was time to sell the school.
The owners tried to find a buyer who would run the school according to the same philosophy. The problem with the venue, combined with the low financial returns, deterred interest.
The owners therefore announced, just before the annual concert, that they were going to close the school down.
The announcement came as a blow to students and parents. A group of concerned parents decided that they would not let this part of their family die. Emotions were running high, and it was felt that action needed to be taken quickly before parents started to enrol their children at other schools. It was important to maintain enrolment numbers to keep the school open.
The parent group put in place actions to convert the school to a not-for-profit organisation.
Negotiations were successfully completed with June and Barbara to take over the respected name, the enrolment list and the tangible assets of the school. In addition, in a matter of days, the landlord agreed to give them a six-month lease on the venue.
The dance school now had a venue, and the teachers agreed to stay. All it needed now was money for expenses and enrolments.
This is when things started to get a bit sticky. The interim board for the not-for-profit Dance Centre consisted of people from the dance community and from the business community. It soon became apparent that there were two schools of thought on how to run it. The interim board consisted of the principal teacher, Fran Peters, two people who had long associations with the school and who also ran non-competitive not-for-profit youth dance centres: Lyn Marks and Janice Overman. There was a marketing consultant, Greg Smith, a strategic planning consultant, Jillian Andrews, and a successful businessman, Michael Owens. The chairwoman, Michelle Donnelly, was an architect and the mother of two girls at the school. In theory, this combination of dance and business experience was ideal for taking the school forward.
The first meeting
“We need to run this school as a business”, said the marketing consultant Greg Smith. “We need to have money in the bank so that we buy our own venue.”
“I agree,” said Jillian. “We can do this by raising the fees and stop running the classes that are not making a profit. We could even increase the size of the school by introducing rap; that might even attract more boys. The school has the reputation and is well known, even at tertiary level. We should leverage the reputation. I think that we can turn this into a very profitable operation.”
“Just hold on,” said Lyn. “You don’t seem to understand the not-for-profit environment. The role of organisations like this is to make a contribution to the community. We are always running on empty when it comes to funds. No dance school owns its own building. We will, at best, make a small surplus with the help of government funding.”
“That is the problem,” said Jillian. “As long as dance schools think like that, they will be poor. We need to change the way we think about this school. Precisely because we no longer have people with the commitment and passion that June and Barbara had, we have to start using marketing and commercial principles; if we don’t, the school will die.”
Janice interjected: “You commercial people think you can turn this school into a business. The Dance Centre has developed its reputation over 23 years based on a very special philosophy. By trying to run it like any other business, you will destroy that philosophy. We might make a profit, but it will kill the Dance Centre. If a big fat profit was to be made, don’t you think June and Barbara would have made it?
“And,” she added, “if we change the way we operate, I will resign as principal teacher; and be sure that other teachers will follow me.”
Michelle, the chairwoman, was astonished. Just a few weeks ago, the parent body was united by the need to keep the school alive. But here she was, chairing a committee that threatened to tear itself apart at its first meeting. Everyone wanted to keep the school alive, but they seemed to be light years apart on how to achieve it.
What should Michelle do to bring the board back on the track of keeping the school open? Is there an inherent conflict between the philosophy of this not-for-profit school and running it as a business? What action would you take to secure its future by means of marketing, people and financial management?
Case study prepared by George Aveling, a marketing and research consultant. George is an active consultant for the clients of the Australian Institute of Management in Perth.
Brett Williamson is the chief executive officer of Surf Life Saving Queensland. The association is the state’s largest volunteer-based community-service organisation and is highly regarded nationally and internationally for its quality lifesaving and education services, and for its management systems. Brett is a Fellow of the Australian Institute of Management.
The Dance Centre, despite its current problems, has a great many positive things going for it, and should not fail. Although the co-owners, June and Barbara, have been remiss in not securing a long-term lease on suitable premises, the Dance Centre’s is in the strong and enviable position of being able to build on the substantial strengths of a long and proud history: a strong reputation, sound enrolments and that special factor that keeps many not-for-profit organisations going passion.
A Shared Vision
The composition of the interim board looks promising on paper. There is a good mixture of practical dance experience and planning, marketing and business skills. However, as with any new grouping of people, Michelle as chairwoman will need to build a team with a shared vision and commitment for the Dance Centre and all it stands for. In this case, it seems that the hard work has been done in this regard, as there is overwhelming support from everyone on the board to making sure the Dance Centre continues to provide quality dance experiences, personal development and enjoyment for the students viably of course.
After agreeing to the vision, the board should then develop a business plan in consultation with students, teachers, parents and other stakeholders. This process in itself will provide a good opportunity for all board members to gain a better understanding of the Dance Centre’s operations, and of each other’s strengths Through this business-planning process, board members Lyn, Janice and Fran will probably realise that the Dance Centre’s long-term success (and indeed survival) will mean adopting sound business-management processes. At the same time, marketer Greg and strategic planning consultant Jillian may come to appreciate that there may be far more important things to achieve in the short term than owning real estate. One hopes the board as a team will come to appreciate that adopting a sound business-management approach to running the Dance Centre will in fact enhance its traditions and reputation in the long term.
The Bottom Line:
The bottom line is that the centre will not be able to continue to offer the special opportunities it is respected for if it is not commercially viable. Further, the board would not be fulfilling its moral or legal obligations if the centre were not viable.
There are many important issues to analyse in developing the business plan. The board needs to understand the dance industry and how the Dance Centre should operate. It should analyse the centre’s enrolment trends over the years to ascertain where students are coming from and, just as importantly, where they are not coming from, so that the most cost-effective advertising programs are carried out. The aim should be to secure strong enrolments from established areas and to increase enrolments from other areas. Input from past students and parents would be useful in this process.
Parallel to this, the board needs to research the trends in dance to ensure that the most appropriate dance range is made available to existing and prospective students.
The board should not lose sight of the special philosophies of the centre, and should offer appropriate developmental programs, and even packages of two or more dance styles, including classical, in the curriculum. The teachers should be selected for their skills and empathy for the centre’s philosophies, and be intimately involved in developing the curriculum.
Start-up cashflow could be enhanced by offering incentives for prepayment of fees, family discounts and the like. Flexible payment schedules could be offered to those who want to pay by the month, or at other regular intervals. Also, incentives (for example, discounts, rebates or free lessons) could be offered to existing students who introduce new enrolments.
The board could also investigate ways of increasing revenue from special events such as dance shows and concerts, and special dance workshops for schools or other groups.
The development of the centre’s business plan, linked with budgets, should be an exciting opportunity for involving everyone. With the common ownership of a well-researched and developed plan, issues such as whether the Dance Centre could (or should) own its own premises, and whether it should subsidise some lessons, are put into perspective.
The Dance Centre has great potential.
Judith Watson is a business-strategy consultant based in Melbourne. She provides strategic advice to profit and not-for-profit organisations. She is currently completing a human-resources management series on measurement of HR and knowledge capital. She is joint author of the book Consumer Behavior, published by Prentice Hall Australia, 1997.
The shift in focus by not-for-profit organisations to become more business oriented is no surprise to community-based organisations as they contend with reduced funding in an increasingly competitive market.
At state level, some governments are actively facilitating “partnering” relationships between the private sector and schools to inject well-needed financial and other resources into cash-strapped schools.
High-profile organisations such as the Salvation Army and SIDS Foundation with its “red nose day” appeal have taken on a range of business principles to remain viable in servicing their respective target markets as well as produce a respected provider of social services.
The dilemma faced by the dance school is one all too familiar with small not-for-profit concerns. The dance school has filled a much-needed role to service its target group. In a particular socio-demographic area, the effect of external changes have forced the organisation to change. The driving challenge is a strategic one for the interim board to be able to agree on the signposts, and which direction to take for the long-term survival of the school.
This process requires strong leadership and a team approach to decision-making. A variety of factors need to be addressed to assist Michelle as chairwoman to facilitate effective outcomes.
Establishment of Vision, Values and Goals
A key to the process is some external party to facilitate a vision and values process that takes all parties objectively through the type of organisation they want to see in the short, medium and long term. This would include broad strategic goals and objectives.
Both business and non-business oriented board members need to be educated in the merits of how not-for-profit organisations can still create a surplus, and how retained funds can add value to the services and programs offered.
Participants need to be taken through a SWOT analysis and other strategic exercises to find the potential strengths and opportunities as well as weaknesses and threats and how opportunities could be exploited on business-management principles.
Board Members Roles and Relationships
The board must agree on a charter, and specific roles and responsibilities should be assigned based on interest and expertise.
Jillian has offered a pragmatic and short-term solution to non-viable classes: stop running them. But she has not considered the possible effect on how customers view the school. However, market segments could turn around a loss-making venture.
The financial issues are to:
- Develop a turnaround from a surplus through developing a series of projected financial statements and budgets for the next 12 months.
- Review the structures and conduct sensitivity analysis.
- Examine volume levels.
- Negotiate potential partnership agreements to reduce infrastructure costs.
- Include in-kind assistance.
- Investigate funding based on existing and new programs.
- Improve cashflow through a revised debt-management system.
- Introduce incentives: 12-month vouchers, for example.
The business had grown by offering its core programs to a specific market. Given its brand name and reputation for excellence this suggests that there may be market potential yet untapped. An analysis of market-size potential would aid in identifying existing numbers of students and the potential number that could be serviced.
Various strategies should be considered:
- The establishment of a fund-raising or sponsorship group.
- The development of a marketing plan.
- A review of programs and classes and identification of new classes.
- Research into areas for future demand and growth (niche opportunities).
- A review of how the centre’s profile has been marketed and how to further extend its profile.
- An examination of special incentives for students with low disposable income.
One of the great challenges facing organisations like the dance school is how to grow these businesses and develop an effective succession plan, even if the organisation is relatively small.
Inevitably, when the owners or managers choose an alternative career path or sell the business, decisions have to be made as to who are the likely future owners or managers.
A business that relies on two key people to drive it can be exposed to potential opportunities as well as problems. However, clearly in this case, the perceived lack of planning for succession as well as general business planning are areas that need to be examined in the future.
In order to maintain its reputation, the Dance Centre will need to ensure that it can attract and maintain quality teachers and personnel to promote a professional attitude. This will need to be dealt with by an HR specialist.