Sample 1- Final Strategy Memo

OVERVIEW

Our group was asked by the Board of Harlem School of the Arts (HSA) to lead a project

to help the organization become more data driven.

Founded in 1965, HSA is one of New York City’s pioneering arts institutions. It has

served more than 50,000 students over the past 50 years. HSA is dedicated to

providing all children equal access to quality arts education and empowering them to

become the creative thinkers and innovative leaders of tomorrow. To fulfill this vision,

HSA enriches the lives of young people and their families through world-class training in

and exposure to the arts across multiple disciplines. Our data resources came from

HSA’s 990s from 2011 to 2016, and annual reports on the website. One of our group

members who has sat on the board of HSA since 2011, also gave us some first-hand

information.

Estimated 29% of HSA’s revenue came from the programs, while 66% was generated

by Contributions and Grants. (Chart 1) The new board initiated two fundraising events

(spring and fall gala) that brought major gifts and increased the revenue rapidly. (Chart

2) However, HSA’s expenses were also high so that the “Revenue Less Expenses”

column in 990s was a negative number in most fiscal years (Table 1). Based on this

information, our group decided to re-evaluate HSA’s governance, culture, and financial

performance, and provide suggestions to improve its overall revenue growth.

PROBLEM AND OPPORTUNITY SUMMARY

When conducting the SWOT Analysis, I focused on two dimensions,

Governance/Culture and Financial Situation, to identify HSA’s existing problems and

new opportunities to help them to become more data-driven.

As a well-known arts institution with over 50 years of history, HSA has a good reputation

in the New York City area. A new board was formed in 2011 to reinvigorate financial

sustainability when HSA went through a brief foreclosure. They approved a new social

media strategy and adopted a new registration system to increase online engagement

and improve the registration database. HSA has executed the capacity-building

strategic plan successfully with vigorous public support from the Harlem community,

City of New York, Ford Foundation, and other major stakeholders. Moreover, HSA has

diverse programs and provides 100% financial assistance to every disadvantaged child

who wants to study at HSA. A $6M endowment set up in 2012 by a donor has gained

investment returns gradually. All these factors ensure steady revenues for HSA. (Chart

2)

However, from its 990s and annual reports, I also identified that although HSA’s

revenue increased every year, it was nearly equal or even lower than the expenses in

most fiscal years. (Chart 3) Clearly, this is not a long-term sustainable situation.

Moreover, because of the need for financial assistance, Music, Theater, and Visual Arts

programs are in deficit. (Chart 5 & 6) And it showed in HSA’s annual report that the
need of financial assistance would increase to $1M and 25% of students would require

fully-underwritten tuition assistance by the end of 2017. Thus, it is critical to foresee the

gap between revenue and expenses in the near future.

Another critical issue is that HSA also lacks sufficient metrics and Key Performance

Indicators (KPIs) to guide its direction. For example, there is no re-evaluation of the

programs which are currently in deficit. HSA had never calculated the donor retention

rate or fundraising efficiency before. They have a social media strategy in hand, but

they didn’t measure the impact and the return on the advertising expense.

Last but not the least, although HSA wants to become a data-driven organization and

demonstrates some features of two important cultures – growth and change

(MacLaughlin, 2016), none of them are dominant at this stage. For example, the board

is not familiar with making data-informed decisions. There is only one staff member, the

Brand Manager and Graphic Designer, who is involved in both social media and data

work.

These problems motivated us to focus on exploring new opportunities to increase the

profit of programs, as well as contributions from various channels.

HSA has an ongoing initiative to rebrand its mission to become a cultural cornerstone of

the community where children, families and NYC neighbors can experience life-long

learning through the arts. Moreover, a new building is under construction and will be
completed in 2018. I believe that HSA should take these opportunities to build up a

dominant data-driven culture and apply a data-driven decision-making framework to

help improve its revenue. In this case, our goals are to change the old approach and

introduce a data-driven mindset and framework to help HSA move forward.

DATA DECISION-MAKING FRAMEWORK

Based on the division of work, I collaborated with my teammate to focus on the first

three steps of data-driven decision-making framework. Meanwhile, I made comments,

suggestions, and recommendations on the other parts and helped other group members

to figure out data resources and draw charts. I was also in charge of the format of the

whole slides.

FRAMEWORK MY CONTRIBUTIONS TO THE PROJECT

1. Identify the ● I gathered HSA’s background and information based on its

problem or 990s, annual reports on its website, and Q&A from a

opportunity teammate.

2. Gather ● I made a table to count up the key figures in the past five

Information fiscal years from 990s and drew several charts to analyze

HSA’s financial performance. (See Chart 1 ~ 3, Table 1)

3. Analyze the
● I collaborated to conduct the SWOT Analysis, and focused
Information
on “governance/culture” and “overall financial situation.”

4. Develop Our group proposed too many options at this part. I also
 Options suggested several recommendations based on the analysis of

data and made comments on our Google doc.

I proposed some metrics to evaluate different

5. Evaluate
recommendations and helped figure out data resources. I also
Alternatives
made the slides of this part besides the first three steps.

I suggested that HSA should separate financial assistance

6. Make a
from program expenses and create new financial aids or
Decision
scholarship funds to raise money.

Overall, we agreed that it was a good idea to take a sample

7. Act on the survey to educate the board how to use data to inform

Decision decision-making. However, there are other various ways we

should mention.

RECOMMENDATIONS AND DECISIONS REVIEW

Our group made several recommendations and decisions for the board of HSA.

According to the problems and opportunities I mentioned before, I want to revise and

propose the following four recommendations:

● Separate financial aids from program expenses and re-evaluate the programs in

light of both financial situation and impact by the end of Aug. 2017 (e.g. take a

survey). Besides financial metrics, calculate the student retention rate and the net

promoter score to measure the impact. The goal is to assess the programs

comprehensively.
 o Pros: Separating financial aids from program expenses and adding KPIs to

measure the impact can reflect the real performance of the programs. It would

help the board make the decision on whether putting the program on hiatus or

not.

o Cons: Some factors are hard to measure, but the board should take into

consideration when making decisions. For example, HSA invested in a new

gallery space which might need the visual art program although its performance

and overall score might not be good at this stage.

● Take the rebranding opportunity to focus on improving program options (e.g., adding

adult classes and membership programs). Establish two KPIs: 1) tracking the

increase rate of the number of new programs with a goal of 10%, and 2) using the

net profit margin to measure the performance of new programs with a goal of 20%

by the end of June 2018. (Benchmarking with the existing programs and similar

organizations).

o Pros: According to the program data at HSA and other similar organizations,

10% number increase of new programs and 20% net profit margin are attainable

and healthy. This action is a crucial step to fulfill rebranding and increase

revenue.

o Cons: Rebranding also has the risk of losing loyalty and tarnishing organization’s

mission and value. HSA should prudently assess its risk, conduct a

comprehensive survey before creating new programs, and use metrics to

measure results.
● Use data to identify new and under-utilized revenue sources and to leverage buy-in

from all staff in improving metrics used for fundraising. For example, use the data of

past fundraising events to calculate the donor retention rate and set a growth target

of FY2018. (Benchmarking: 29% First-year, 60% Multi-year, MacLaughlin, 2016)

o Pros: Data will help HSA to find new and under-utilized revenue sources (e.g. set

separated financial aids and scholarship funds to raise money). And Fundraising

KPIs are necessary to measure efficiency and engagement.

o Cons: Focusing on establishing fundraising metrics needs time and effort to

demonstrate the significant impact. In the long term, we can find a strong

correlation between these metrics and the revenue growth.

● Take advantage of rebranding to cultivate a dominant culture of change. It is a good

chance for HSA to try new things and take calculated risks to adapt to changing

conditions at this stage. (MacLaughlin, 2016) In order to offset its lack of data

experts, HSA can invest in an advanced fundraising system or find an external data

analytical vendor to help them analyze information and provide evaluation reports.

o Pros: It is absolutely critical for HSA to find a dominant culture to become a more

data-driven organization. Rebranding is an opportunity for change. And the new

system will help HSA save time and cost in the long term.

o Cons: It is a big task to cultivate a culture change. It is also necessary to form a

data policy to regulate the use of data both internally and externally.
Due to the length of the memo, I didn’t rank the Fall marketing campaign as the top 4

recommendations. But I agree that this action is important to increase engagement at

this stage. My suggestion would be to build an analytical model to measure the

correlation between the increase rate of online ad clicks and the growth rate of program

application.

LESSONS LEARNED

In my opinion, the most important reason caused the disconnection between the data

and the recommendations in our presentation was that our group members had a

different understanding of the organization. My teammate and I analyzed the

information and identified problems based on 990s and annual reports. But other

teammates made recommendations and decisions, they brought internal information as

insiders and made their subjective judgments. This might cause the “curse of

knowledge” in our group project. It is a good lesson for me because my organization is

now recruiting a consulting firm to help us evaluate our performance and figure out our

direction for the next ten years. I will try to avoid the information asymmetry issue

between us.

Another issue was that our scenario was too broad for us to handle. We came up too

many options in the presentation. It could be much easier and better if we only focused

on either improving program revenue or increasing fundraising contributions.

But overall speaking, it was a great experience to use data to inform decision-making. I

spent a whole day for the first time carefully analyzing an organization’s 990s and using

these figures to identify problems. It was also very interesting to see how HSA

interpreted the same data differently in its 990s and annual reports. When reflecting on

our presentation, I also learned that it was crucial to use a set of KPIs to measure both

the organization’s financial performance and its impact so that we can have a

comprehensive evaluation of its success at achieving its goals.

I want to end the memo by a key takeaway from this course. Getting better comes from

“artful application of data science.” (MacLaughlin, 2016, p. 59) The path is never easy,

but the challenge is worth overcoming.

Bibliography

Charity Navigator. (n.d.). Harlem School of the Arts. Retrieved from Charity Navigator:

https://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=9357

Harlem School of the Arts. (2010-2014). Annual Reports. Retrieved from HSA:

https://hsanyc.org/about/annual-report/

Harlem School of the Arts. (2011-2016). HSA's 990s. Retrieved from The Foundation

Directory: https://fconline-foundationcenter-

MacLaughlin, S. (2016). Data Driven Nonprofits. Saltire Press.

Table 1: HSA’s Key Figures from 990s
Chart 1: Revenue Breakdown (2015-2016)

Chart 2: Contributions & Grants Trend (2011-2016)

Chart 3: Revenue VS Expenses (2011-2016)

Chart 4: Net Profit by Program (2015-2016)

Chart 5: Breakdown of Expenses per Program (2015-2016)