MUSEUMS & ART GALLERIES AS COST CENTRES

'The Bean Counter' John Bower – Manifestations various

Typically it is assumed that a public museum’s ‘purpose for being’ is NOT to make a profit – and sometimes not even to generate income. Rather museums are imagined as delivering other intangible ‘dividends’ relative to the ’investments’ made in them. 

Generally, a museum's purpose is to deliver a service under the aegis of a government (National, State, Local), an institution, a corporation, an organisation and in some cases philanthropic individuals. This is so albeit there are museums with purposes that are different to various degrees. 

However, by-and-large public museums and art galleries operate as cost centres as a division of a government department or a large organisation. There is no real expectation that the institution will (can?) generate income and thus the imperative is to contain costs. There is a kind of 'fear-of-losing culture' in play that is embodied in Dickens' Mr Micawber money view. Micawber paraphrased into 21st C, and a museum, he might say "annual budget $1million, annual expenditure $999,999,000, result happiness, annual expenditure $1,000,000,100 result misery".

There are other museums that are standalone not-for-profit ‘enterprises’ – often community enterprises. Their reasons for being are entirely different and will be discussed later.

The perceived advantages of cost centres are that:

• 'Governance' can direct management to set budget targets in accord with planned outcomes; Cost centres have visibility within an operation with prescribed purposes; 
• Planning can be done cost centre wise; 
• Is the availability of cost allocation methods; 
• Assessments of, the distribution of costs to other cost centres within an operation; 
• The concept enables the management to assess and measure the effectiveness of a centre.

Defining a 'Cost Centre' as a ‘department’ within an organisation that does not directly add to profit, but nonetheless costs the organisation money to operate is typical. Similarly, cost centres are very often seen as contributing to an operation's reason d’être indirectly, unlike a service centre or income generation centre, which contribute to the reason d’être directly and deliberately through their actions.

This type of ‘divisional expenditure’ is likely to be one of the first targets for ‘rationalisation’ because, superficially, a cost centre in the business world is seen as having a negative impact on the budgets available for other activities – not the least income generation. 

Typically a cost centre is a division within government, a business or an institution which is financed from: 

• A government’s taxation base, a business' earned income with funding devolved to institutions to allow them to operate; 
• The funding devolved to the institution from another ‘corporate entity’ or institution; 
• The profit margins thus adding to the cost of the organisation, but contributing to its overall profit indirectly. 

In business, typical cost centre examples would include research departments, marketing divisions, development centres and customer service branches. In a government context museums as cost centres might be seen as delivering intangible social or cultural ‘dividends’ that may in turn deliver other trickle down benefits – fiscal, social and/or cultural.

There are some significant advantages to thinking about classifying simple, straightforward divisions as cost centres. Since 'a cost' is tangible and consequently easy to measure, budgets are more easily controlled. The flow on from all this is in a museum or art gallery is that an operation's programs are finite and designed to be ‘contained’ and to deliver just as much as a visitor expects. 

That ultimately means that the typical visitor can be described in advance of their visit – someone with a set of anticipatable expectations. Sadly this sometimes means that 'the visitor' is seen in the context of being some kind of lowest common denominator.

That said, cost centres create incentives for managers to underfund their units in order to benefit themselves or some subsidiary ‘pet project’ – or to empire build. This underfunding may impact upon the operation/enterprise as a whole with results that are characteristically unmeasured. For example, reduced sales due to bad customer service experiences or poor service delivery or ineffective marketing that get lost in ‘big picture’ complexity. 

Because in business a cost centre has a negative impact on profits – at least on the surface – it is a likely target for rollbacks and redundancies when budgets are cut – and sometimes cut for reasons that defy logic and market imperatives. Operational decisions in a cost centre, for example, are typically driven by cost considerations. Investments in new equipment, technology and staff are often difficult to justify to profit seeking managements because indirect profitability is hard to translate to impacts upon the bottom-line – typically there are risks and subjective assessments involved. 

Business metrics are sometimes employed to quantify the benefits of a cost centre and relate costs and benefits to those of the organisation as a whole. In a museum, for example, metrics such as average visitation level and cost per visitor might be used in conjunction with other calculations to justify current, reduced or improved funding levels.

Imaging a museum or art gallery as a cost centre has both positive and negative implications. On the upside, it offers opportunities to develop programs and operational structures that are fully accountable to the constituency that underwrites the operation. In this context they are sustainable relative to a finite income and/or funding source(s). 

However there is a down side, and that is to do with the 'culture' the mindset generates. There are relatively few incentives to take risk to generate income – and sometimes poor rewards for doing so and putting in the extra effort. The notion of earning income is often an anathema or a foreign concept in the museum context. Money is sometimes quizzically imagined as falling from heaven or something of the like. This is not a notion that is all that likely to be found in 'the performing arts' for instance in that theatre companies', orchestras' and film companies' performance is typically measured by the 'bums on seats factor' and their level of earned income when public funding comes into play. 

Public patronage comes with political strings attached that are sometimes clear and visible and other times somewhere out of sight – there may even be political costs.

Looking to the future, it is likely that there will be a different world view 'on display' in regard to funding and running museums and art galleries. Audiences are likely to be reached in quite different ways and the boundaries between institutions are likely to become somewhat fuzzy. Current hierarchies, as likely as not, will be reconfigured. Relationships between institutions and the communities that support them, and networks of individuals, can be expected to be dynamic. Possibly more and more cooperative and collaborative relationships will emerge. Likewise, how cultures and their cultural production 'functions' is ever likely to be a great deal more different 10 years hence than 10 years in the past even if it is made in celebration of primordial cultural imperatives.

It can be expected that if an institution is to be culturally relevant it will need to change quite dramatically to meet the demands of new knowledge systems and shifting social imperatives. Museums and art galleries are likely to look a lot more like a publishing house, cum theatre, cum library, cum research institute, cum classroom and possibly more still. How these things meld into each other is an open question. How they will be funded is an another open question but 'crowd funding' is already changing cultural landscapes. In turn, that and emerging technologies may well change how institutions are governed and to whom they will be accountable and by what means.

Cost centre or otherwise, musingplaces need to operate strategically given the competitiveness of resource allocation, the complexities invested in institutions via their funding base and the increasing levels of accountability that comes with the funding. The need to argue the case for ongoing funding demands the same kinds of rationale as any business/operation not-for-profit or otherwise.

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