978-1259732782 Case 19 Part 2

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Case 19 Teaching Note The Green Music Center at Sonoma State University

6. Evaluate the GMC’s current and prospective financial statements provided in the case.

Based on your analysis, what are some alternative means of providing funding support for

the GMC? What are the pros and cons of each alternative?

Students should be directed to Case Appendix A, which contains eight year pro forma financial statements

for them to examine and evaluate long term financing plans based on four scenarios, all of which include the

expiration of the MasterCard Sponsorship in 2019. Table 2 summarizes the alternatives.

TABLE 2. Funding Alternatives for the Green Music Center at Sonoma State University

Scenario #1 • Current Programming and Fundraising levels remain unchanged

Scenario #2 • The University does not contribute any additional funding

• Annual Giving and Sponsorships increase by 20% annually

• Foundations and Grants increase 10% annually

• Creation of a $2 million endowment which will grow by 2%, and distribute 4% of market

value annually

Scenario #1

Scenario #1 shows the current fundraising and programming levels, and assumes there will be no change to

either the level of activity on the production or fundraising side.

Scenario #2

Scenario #2 would mean that SSU offers no additional financial support and all new fundraising must come

from external sources. There are several development goals that must be attained in order to make this option

to be viable. First, Annual Giving, and Sponsorships must both increase by 20% every year. Additionally,

Pros:

nBy completely funding operations externally, the Green Music Center will be afforded the opportunity

to redefine itself and its mission.

Case 19 Teaching Note The Green Music Center at Sonoma State University

nIn this sense it will also be eased of the burden of further integrating academic involvement into

performances.

Cons:

GMC Development staff.

nIt leads to a chicken and egg situation in which they will need to hire more staff to raise funds aggressively,

ultimately increasing the amount they will need to fund to cover their increased staffing costs.

nThere is the ultimate question of whether these fundraising levels are even possible with the current

demographics of Sonoma County.

Scenario #3

In Scenario #3 the activities of the Green Music Center are reduced to only those that are intended to benefit

Pros:

nContrary to Scenario #2, absorption of fiscal responsibility would grant SSU complete control over

programmatic and academic decisions.

nAdditionally, since there would be no community-oriented programming, the overall cost of operations

would decrease dramatically.

• As the case mentioned, the new FTES added to capacity by the construction of the GMC will yield

over $12 million in new revenue.

Cons:

nBy cutting off communication with the larger Sonoma County community, SSU will be isolating itself

in a time when it needs to be formulating strategic partnerships.

Case 19 Teaching Note The Green Music Center at Sonoma State University

nLimiting the number and variety of shows produced may ultimately counter the University’s mission, as

it will no longer be providing the breadth of experiences and diversity than it had previously provided.

Scenario # 4

Under Scenario #4 the GMC and SSU form a greater partnership in the funding model. GMC continues

to raise funds externally with a projected annual increase of 5% in Annual Giving, Sponsorships, and

Pros:

nThe GMC Development Office will have more modest fundraising expectations, which they may be

able to exceed.

nBoth organizations will be able to realize the goals outlined in their missions, as they will be able to

provide programming to both the campus and Sonoma County communities, and provide an educational

component.

Cons:

• In any year, but especially during a budget cut, the new President would probably face opposition

from other governance bodies—faculty representatives on the Academic Senate and student

representatives on the Associated Students Senate—as to why resources are used to support the

GMC when they are also needed elsewhere.

nThe incoming University President, Dr. Sakaki, must then be prepared to explain and defend the mutual

benefits created by a partnership between Sonoma State University and the Green Music Center.

Case 19 Teaching Note The Green Music Center at Sonoma State University

7. If you were the incoming University President, would you choose to financially support the

Green Music Center, and if so, to what extent?

Our recommendation to incoming president, Dr. Judy Sakaki, would be to fully embrace the educational

potential and financially support the operations of the Green Music Center.

nIn the joint funding scenario presented in this case (Scenario #4) Sonoma State University backfills the

funding need that is not provided through other revenue sources in amounts ranging from $889,898 to

$1,136,279.

It would be fiscally irresponsible for Dr. Sakaki to agree to sign a blank check on an annual basis in order

to support the Center.

nWhat would be more prudent would be for Dr. Sakaki to determine a specific level of support, and

provide it through salary and benefits.

• For example, if she determined SSU’s contribution would be $1 million, then $1 million of the

$1.77 million in salary and benefits would be absorbed by the university.

The integration of the Center into the University would only be complete if there was a renewed focus on

aligning the missions of the two organizations. The common theme is a focus on education and community.

Wrapping Up The Class

The factors in a company’s — or not-for-profit organization’s — environment that have the biggest strategy-

shaping impact typically pertain to the company’s immediate industry and competitive environment.

nThe six principal components of the macro-environment are political, economic, sociocultural,

technological, environmental (concerning the natural environment), and legal/regulatory.

nSome drivers of change are unique and specific to a particular industry situation, but most drivers of

industry and competitive change fall into one of the following categories:

• shifts in buyer demographics

Case 19 Teaching Note The Green Music Center at Sonoma State University

• technological change and manufacturing process innovation; product innovation; entry or exit of

major firms

• regulatory influences and government policy changes

• changing societal concerns, attitudes, and lifestyles.

nThe real payoff of driving-forces analysis is to help managers understand what strategy changes are

needed to prepare for the impacts of the driving forces.

nThe most powerful and widely used conceptual tool for diagnosing the principal competitive pressures

in a market is the five forces framework, which holds that competitive pressures on companies within

an industry come from five sources

• evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or

weak

• determine whether the collective impact of the five competitive forces is conducive to earning

attractive profits in the industry..

In the case of the GMC, the combination of unfavorable environmental drivers with an inherently unattractive

Case 19 Teaching Note The Green Music Center at Sonoma State University

Epilogue

At the end of FY 15/16 on June 30, 2016, the Board of Advisors dues were decreased to $20k/person, with a

preferred $50k give in an effort to appeal to a wider base of donors.

On July 1, 2016, Dr. Judy Sakaki became Sonoma State University’s 7th President.

* * *

On August 26, 2016, President Judy K. Sakaki was welcomed with a standing ovation in Weill Hall at Sonoma

State University’s Green Music Center Monday morning at her first ever Sonoma State Convocation, and that

was even before she delighted the audience with her commitment to making Sonoma State a more student-

centered, inclusive and academically excellent university.

“I am listening and learning every single day,” said Sakaki. “I have been since day one here on campus.”

She said her first seven weeks on campus have been spent, in large part, getting to know the Sonoma State

community. “I started with meetings, individual appointments, and department visits,” she said. “There is

incredible wisdom and experience on campus. Leadership, for me, is a collaborative process.”

She also introduced a permanent Associate Vice President and Chief of Staff, Bill Kidder, J.D., who served most

recently as Associate Vice Chancellor/Chief Compliance Officer and also Assistant Provost at UC Riverside.

Nearly $45,000 in tickets have been reserved for academic classes at Sonoma State for performances at the

Green Music Center, including Pat Metheny, the Folger Consort with Derek Jacobi, Jazz at Lincoln Center, Zakir

Hussain, Itzhak Perlman, the Shanghai Acrobats and many others. “The Green Music Center exists, first and

“It’s letting people access a different way of thinking and experiencing as part of their liberal arts education,”

says Horstein.

Case 19 Teaching Note The Green Music Center at Sonoma State University

One performance in Schroeder Hall was specifically arranged for the Arts Integration program. On November

13, German electronic music group Aggressive Loop Productions plays live accompaniment to the 1927 German

silent film “Berlin – Symphony of a Great City.” More than 60 percent of the tickets in the 240-seat recital hall

are already reserved for classes of students studying German, music technology, and modern languages and

literatures.

1,000-student total.

* * *

On September 30, 2016, J.D. Morris, writing in the local Press Democrat, reported:

Sonoma State University President Judy Sakaki has scrapped high-profile plans for a 10,000-seat outdoor

pavilion project at the campus’ Green Music Center, a move she framed as a bid to save money better spent on

Sakaki, who took over as president of the Rohnert Park campus in July, called the move “the most important,

difficult decision I’ve made since I assumed the presidency.”

“The concern was, as we look at what our students need — what the campus needs — in terms of focusing on

student success and improving our graduation rate, and making sure that, academically, we have the faculty that

Groundwork on the area, near Petaluma Hill Boulevard, had begun but was halted. Recently, crews have begun

restoring the area as an open lawn.

MasterCard pledged $6 million for the project, but Sakaki said that money would not have come until after the

facility was built and the university would still be responsible for operating costs.

Case 19 Teaching Note The Green Music Center at Sonoma State University

call. She described her decision-making process as “really thorough and consultative.”

Armiñana could not be reached Thursday and Friday for comment. One of his top officials, Larry Furukawa-

Schlereth, the recently departed vice president of administration and finance, voiced disappointment the project