CASE STUDY: MILWAUKEE ART MUSEUM

I was headhunted to become Director and CEO of the Milwaukee Art Museum early in 2002 and was there for six years.

The Situation

The Milwaukee Art Museum had recently completed a spectacular addition, designed by Santiago Calatrava, his first building in the US, transformative in impact and size. The scheme gave the Museum a prominent front door, which had previously been lacking; provided 10,500 square feet of flexible temporary exhibition space, an auditorium, a restaurant, underground car parking, and a large reception atrium; and freed up areas for display of the collection in the old building. A formal garden designed by the late Dan Kiley complemented the new building. Citizens of Milwaukee love the awe-inspiring building. It is popularly known as “the Calatrava.” It put the Museum on the map; it put Milwaukee on the map.

But what had once been proposed as a project to cost $40 million ended up costing $130 million. Fund-raising had topped out at $100 million, of which much was still in pledges, leaving bank debt at $45 million. While most of the overrun was caused by board decisions to increase the scope of works, the Museum got a reputation in a fiscally conservative city as being irresponsible. The Museum had told donors that it was making a last call for funds – more than once. Decisions at the Museum were made by a small clique, and trustees felt they were being castigated for sins not of their making.

The project had exhausted senior management, many of whom left within a year of the opening.

Solutions

  1. The strategy was to make the repayment of debt the number one priority of the board. But to that end it was necessary first to create a strong management team and put on a program to raise the artistic profile of the Museum to match the expectations created by the Calatrava. Once the artistic and management credibility of the Museum had been restored, I felt we could then go back to donors for a truly final last time. With an operating budget of $12 million, there was no way the Museum could save its way out of debt. It had to be vital and ambitious but still operate within a balanced budget.
  2. My first hire was a CFO whose competence and ability to communicate had the 35 bankers eating out of her hand at the monthly meetings; after a few months they moved to quarterly meetings. She provided the board for the first time with comprehensive and comprehensible management accounts; and at each meeting trustees were shown debt reduction progress on a “Debtometer.”
  3. As Director, I made myself visible and the Museum accessible. I was an advocate for all the arts, which are unusually strong in Milwaukee for a city of its size, but which were undervalued by political and civic leaders. Entry charges to the public areas of the Calatrava were abolished. A ban on allowing other institutions to hold fund-raising events in the Museum was lifted. I fought and won a public battle with a powerful city figure who wanted to put up a third-rate building close to the Calatrava.
  4. After a year, one of the financial pillars of Milwaukee agreed to head up the fund-raising to pay off the debt. We told potential donors that no one would have to pay up on their pledges until the sum of $25 million had been pledged in aggregate, to assuage fears of any donor of giving money that would not completely solve the problem. This was achieved in two years. And then one of the trustees led a challenge for the remaining $5 million. By the end of 2006 the Museum was debt free.

Once it was clear that survival was ensured, the Museum engaged in a strategic planning process. The main conclusion pointed up the need to increase the endowment.

Lessons