Lesson 2: Understand the organization as a whole, not just an event in isolation.

Penumbra Theatre in St. Paul has a long and storied history as one of the preeminent African American performing arts organizations in the United States. It has been an incubator for a tight-knit company of actors who for decades have honed a sharp, incisive aesthetic led by Artistic Director Lou Bellamy, was at one time a home for the great playwright August Wilson, and has served as a beacon for the Black Arts movement.

In a vibrant and sometimes crowded Twin Cities arts scene, Penumbra has been a mainstay for the clarity of this vision as well as the consistent quality of its productions. Working in an intimate theater in the Hallie Q. Brown Community Center, Penumbra has been unique in forging a home literally in the heart of its community and delivering an experience on the national level with Actors Equity performers and a long run of critical acclaim.

ARTISTIC EXCELLENCE IN A DIFFICULT FUNDING CLIMATE

Penumbra also has a history of financial turbulence and gaps in funding, which contributed to a major financial crisis in its 2011-12 season; the response required major shifts in operations and stabilizing its capital structure in order for it to move forward during a shift in organizational leadership while retaining its crucial mission.

“It was kind of a perfect storm, coming off the Recession. The funding community had slowly tightened their belts,” says Sarah Bellamy, who has transitioned into the Penumbra artistic leadership founded by her father. “We had started seeing individual donors giving less, then the funding community—$20,000 instead of 30, $10,000 instead of 20. Soon we were short on projected income.”

Ironically, Penumbra’s artistic excellence led to the next factor in its financial crisis. Its acclaimed musical based on the life of Nat “King” Cole, I Wish You Love, traveled to Washington D.C., to the Kennedy Center, and then toured to Hartford, Connecticut. The medium-sized company’s resources became stretched perilously thin in an effort to make the most of this sudden spike in visibility, and attention was diverted away from keeping a close watch on financial operations back home.

By the end of the 2012 fiscal year, the Penumbra staff and board were acutely aware that a very large deficit had created conditions that couldn’t be temporarily bridged (as had sometimes been the case during its four decades of continuous operations). The board and staff leadership made a decision that startled the community, putting the performance schedule on total hiatus (while maintaining educational programs) and launching a public campaign to garner contributions to close the deficit and keep the theater open. Parallel to these efforts was an organizational shift in close consultation with NAF.

“NAF was very clear that they needed to be in a position to advocate for us,” says Sarah Bellamy, “which meant that we had to do due diligence on our end.”

Penumbra made the tough choice to lay off three staff members, furloughing others, and eliminating a prized new-play development program. It was a harrowing moment internally, and there were moments when it was up for questioning whether efforts would pay off or if the theater would be shuttered. During this time, NAF also served as an advocate with the Penumbra Board of Directors, shoring up confidence as well as openness in evaluating operating capital and capital growth.

“We worked with NAF to create more transparent and more perceptive financial tools,” says Sarah Bellamy. “We needed to be more nimble to be able to take our financial temperature. After what we had gone through, we understood that we needed our operating buffer to be a lot bigger. We were a little too close to the quick. A lot of what happens in an arts organization is a gamble, but when there are too many things you’re not sure about, that’s when you’ve lost your footing.”

Penumbra also took the step of closing its off-site scene shop, which had been envisioned as a revenue generator but which had proved costly in terms of overhead and fixed costs, as well as creating a distraction from core mission. Large productions with commensurately large overhead also needed to be evaluated. NAF worked closely with management to simplify cash flow projections in order to guide management priorities and short- and long-term decision-making. While previous annual budgets at times had relied on funding expectations with inexact levels of detail, a high value was placed on specificity in capital commitments.

A large degree of the re-invigoration that followed was due to these clear strategic initiatives, restoring funders’ and the board’s confidence, as well as the power of Penumbra’s position in the artistic community locally and nationally. While the Twin Cities could scarcely imagine its arts scene without Penumbra, that by no means assured its survival—and it will require continued diligence moving forward into the company’s fifth decade.

SHARED RESPONSIBILITY FOR CHANGE

In April of 2015, Shannon Brunette joined Penumbra as Managing Director after more than a decade in New York working in arts nonprofits and philanthropy with a focus on arts and social justice. She describes a national scene in which organizations that are culturally specific operate with chronic shortfalls in funding. Throughout its history, Penumbra has been prone to major shifts in philanthropy and giving—a fact that is hard-wired into its management strategy and structure at this point.

“Part of what makes the partnership with NAF so strong is that its team is willing to advise and go beyond writing loan checks,” Brunette says. “NAF is breaking those boundaries about numbers and statistics, and is supporting the arts in a unique way.”

NAF’s advisory role with Penumbra emphasized capitalization and its business model, while taking into account the external factors that were inherent in its mission. Penumbra leadership also cites NAF’s customized financial training for nonprofit organizations as an indispensable resource. Moving into its 40th anniversary season, the company has tightened its focus and strategy. They’ve led successful fundraising efforts and used crisis as an opportunity for building relationships. A degree of artistic risk is built into founder Lou Bellamy’s vision, but the company requires a new level of stability to weather changing times. Ultimately, it was the strength of the long-term relationship between NAF and Penumbra that made necessary conversations possible.

“NAF was very clear: Here’s where you messed up, and here’s where you need to strategize to get to a point at which you’re not hemorrhaging,” Sarah Bellamy says. “It was a stepladder plan to fiscal health. There were mistakes made in choices, but hindsight is 20/20. Ultimately it was, ‘Are we going to do this or are we going to close?’ Once we made that decision, NAF was right there with us.”

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PHOTO CREDIT: ALLEN WEEKS