1. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 1 Management Models for Culture Communication Culture Communication for Management Models

2. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 2 The “Economics of Culture” is a discipline which only recently acquired attention all over the world in business and political economy. Still different scientists noticed its importance and the strong interrelation between its main components – economy and culture

3. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 3 John Maynard Keynes “Our experience demonstrated clearly that such activities cannot be accomplished if they depend on the only profit and financial success. The usage and the eventual distruction of the God-given talent which submits to the aim of profit is one of the worst crimes of modern capitalism. The public financing must regard also the expences (“improductive” ex-facte) but linked to the creation of the values outside the market (which for this reason cannot be appraised by the market in sense to assign them a price)” (“Art and the State”)

4. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 4 Adam Smith The production and the conservation of these goods not only cannot be regulated by the “invisible hand” because it needs the special cost supported by the State, but the quota of this cost must grow while the nation well-being grows. William Baumol:...the problem is not whether the theatre or the dance must be supported by the State but in what measure in must be realized.

5. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 5 Italian experience “the State considers the theatrical activity to be of relevant general interest because it is aimed to favour musical, cultural and social education of society” (Law n° 800 1967 art.1) In 1985 a Common Performance Fund (CPF) was instituted (Law n°163 1985). Its aim is to deliver a definite and organic sistemation to the financial interventions of the State in favour of the performing art.

6. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 6 In 1985-2008 the CPF reduced by 64,71%,

7. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 7 Public financing: partitioning criteria CPF 2008% Lyrical and Symphonical Foundations45,72 Music13,41 Dance2,03 Prose17,87 Circle1,48 Cinema19,31 Performance observatory0,14 Committees and Commissions0,04

8. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 8 The cost of personnel in performing art (2008) TheatreTotale Contribuits € Cost of Personnel € % Personnel Contribuits Comunale Bologna18.938.34917.938.90995% Maggio Musicale Fiorentino30.953.63927.779.00090% Carlo Felice Genova26.224.21019.398.00074% Scala Milano50.170.26964.702.000129% S. Carlo Napoli41.654.37923.685.54557% Massimo Palermo37.868.59927.317.51072% Opera di Roma52.556.46741.697.00079% Regio di Torino31.917.86022.654.48271% Verdi di Trieste20.921.63917.302.00083% Fenice di Venezia26.035.72719.690.00076% Arena di Verona23.266.60529.400.000126% S. Cecilia di Roma24.804.94021.842.90088% Lirico di Cagliari29.651.09317.395.00059% Petruzzelli di Bari6.300.0001.429.20023% TOTAL421.263.776352.231.54684%

9. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 9 USA: Change in Unresticted Net Assets (CUNA) 20042005200620072008 Earned Income3.282.0563.541.4983.666.8554.243.3463.936.890 Contributed income2.295.5932.923.2642.796.1852.766.1202.946.123 Total Income5.577.6496.464.7626.463.0407.009.4666.883.013 Payroll2.877.1283.128.3223.272.0613.481.1003.638.227 Other Expenses2.356.1482.634.3232.750.7743.028.9503.327.400 Total Expenses5.233.2765.762.6456.022.8356.510.0506.965.627 CUNA344.373702.117440.205499.416-82.614

10. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 10 In Russia In 2009 the financing of culture entities was equal to 114 mlrd rubles, but these funds were destinated majorly to the reconstruction of Bolshoi Theatre and the stage construction in Mariinski Theatre

11. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 11 Performing Art and Balanced Scorecard The importance of this instrument derives from: International crisis and the reduction of the public financing Optimization of the costs structure necessity

12. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 12 According to the data of World Bank Since June, 8 2007 till March, 9 2009 the financial losses on the stocks all over the world were equal to $ 31.000 miliards Overall GDP of USA, China, Japan and India

13. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 13 has been elaborated on the base of research results obtained by professors of Harvard School of Economics Robert Kaplan and David Norton in 1990. The research was conducted with the only aim: discover new ways of business efficiency increasing and business goals achieving. Balanced Scorecard

14. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 14 Norton and Kaplan based their research on the following hypothesis: by means of only financial indicators the management does not obtain sufficient information for right and timely decision making

15. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 15 In 1978 the difference between the balance- sheet and market value of american companies was equal to 5%, in 1998 - 72%. In Italy in 2005 the stock (S&P Mib) value of the enterprises was three times greater than their tangible assets value This hypothesis is founded

16. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 16 According to Fortune in 2007 Balanced Scorecard was used as the principal strategy implementation tool in 402 companies from Fortune-500 list: Coca-Cola, BP, General Electric, McDonalds, L'Oreal, BMW, Boeing, Samsung Electronics and others.

17. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 17 According to Balanced Scorecard approach The strategic development of the firm is analyzed under four interconnected aspects: Finance; Relations with clients; Internal processes; Innovations and personnel development

18. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 18 The main pricniple of Balanced Scorecard Which became the reason of high efficiency of this management technology is it is possible to manage only what you can measure 18

19. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 19 BALANCED SCORECARD 1.Operational volume (output) Public= number of spectators Production = number of performances Production = number of tickets Average repeating per ticket = numero di rappresentazioni/numero titoli 2.Economy (input and costs) Artistic costs impact= artistic costs / total costs Structure costs impact= structure costs / total costs Personnel costs impact= personnel costs / total costs Revenues partitioning = revenues per category / total revenues Covering with proper resources= proper resources / total costs Revenues per spectator= proper revenues / number of spectators Public contributes per spectator= public contributes / number of spectators 3.Efficiency Productivity of labour= number of performances / personnel Unitary cost per performance= total costs / number of performances Unitary cost per spectator= total costs / number of spectators 1.Operational volume (output) Public= number of spectators Production = number of performances Production = number of tickets Average repeating per ticket = numero di rappresentazioni/numero titoli 2.Economy (input and costs) Artistic costs impact= artistic costs / total costs Structure costs impact= structure costs / total costs Personnel costs impact= personnel costs / total costs Revenues partitioning = revenues per category / total revenues Covering with proper resources= proper resources / total costs Revenues per spectator= proper revenues / number of spectators Public contributes per spectator= public contributes / number of spectators 3.Efficiency Productivity of labour= number of performances / personnel Unitary cost per performance= total costs / number of performances Unitary cost per spectator= total costs / number of spectators

20. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 20 BALANCED SCORECARD (2) 4.Artistic dimension: success and quality Innovation= number of new performances Rehersal average time= number of days / number of tickets Filling grade= number of spectators / max number Frequency= number of performances / days Presences in subscription= number of entries in subscription Subscription impact= number entries in subscription / number of spectators Audience variation = spectators, subscriptions X / spectators, subscriptions X-1 5.Fund raising Revenues= Revenues from tickets / total revenues Public financing= Public contributes / total revenues Private financing= Private contributes / total revenues 4.Artistic dimension: success and quality Innovation= number of new performances Rehersal average time= number of days / number of tickets Filling grade= number of spectators / max number Frequency= number of performances / days Presences in subscription= number of entries in subscription Subscription impact= number entries in subscription / number of spectators Audience variation = spectators, subscriptions X / spectators, subscriptions X-1 5.Fund raising Revenues= Revenues from tickets / total revenues Public financing= Public contributes / total revenues Private financing= Private contributes / total revenues

21. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 21 Problems of BSC application in Russia: following the fashion Some companies announce enormous successes after BSC introduction – turnover increased by 35- 50% in 2 months. Certainly, such affirmations are nothing but PR, BSC is the strategy implementation system and it is impossible to expect such high operational benefits.

22. M. Cecchi, P. Malyzhenkov, HSE, Moscow, 7 April 2010 22 The majority of consultants work on the elaboration of BSC and not its implementation and the customer is not able to realize it by his own. the percentage of really implemented BSC projects in Russian companies is about 3% Source: Managers’ Society “Executive”, 2008 Problems of BSC application in Russia: elaboration and implementation gap