Reference no: EM133209827
Assignment:
CASE: SOCIAL ENTERPRISE IN THE CREATIVE AND CULTURAL SECTOR - THE FORUM MUSIC CENTRE
Steven Pattinson
This illustrative case focuses on The Forum Music Centre, a creative and cultural sector social enterprise based in Darlington, UK, operated by Humantics Community Interest Company (CIC). The Forum is a venue for live music and provides a hub that offers training and courses to young people in Darlington through the Access to the Music programme. The case highlights that social enterprises in the creative and cultural sector require tailored support to build sustainable business models guided by a solid social responsibility and social purpose.
The creative and cultural sector
The creative and cultural sector includes a range of diverse industries, including film, media, visual art, theatre, dance, heritage, and even gallery and studio space, many of which operate as social enterprises. Organisations in this sector have several distinctive features discussed below.
Distinctive features of the creative and cultural sector
Although there are many examples of successful larger organisations, such as the National Museum Wales, Victoria and Albert Museum and National Galleries of Scotland, the creative and cultural sector is dominated by small companies. According to the Creative Industries Federation (Chung et al., 2018), the industry is worth £101.5bn GVA (Gross Value Added) and represents 11.8% of all businesses in the UK. The creative and cultural sector is a significant employer, with more than 2 million people working in the industry, equivalent to 1 in 11 jobs in the UK being in the creative economy. That is 700,000 more than in financial services and represents a significant contribution to the UK economy. However, work is often precarious, with 95% of creative and cultural industry businesses being micro-businesses employing fewer than ten people, with 35% of creative workers being self-employed (compared with 15% across the workforce). The Creative Industries Federation surveyed over 1,000 innovative enterprises to ask what 'growth' means to them, their ambitions for growth, and what holds them back from realising their ambitions. The report highlights several significant challenges in the sector:
Almost half (47%) of creative businesses selected lack of time to focus on growth as one of their main challenges, and one in five (19%) chose this as their most significant challenge.
Two-fifths (38%) of creative businesses selected lack of finance as one of their top challenges, with one in five (18%) claiming it is their principal challenge.
Two-thirds (65%) of grant-funded organisations selected lack of finance/funding as one of their main challenges to growth, while over half (56%) selected lack of time as one of their most critical challenges.
One in five (21%) creative businesses highlighted a lack of support and a lack of knowledge on where to find that support to grow as a critical challenge.
More than one in ten (13%) creative businesses identified a lack of business skills as a critical challenge. This is a particular issue for those on lower turnovers and freelancers.
The report's secondary research and case studies highlight the importance of providing support to the creative and cultural sector to help these organisations develop sustainable social enterprise business models that ensure their long-term success. In addition, social enterprise leaders in the creative and artistic industries often do not come from traditional business backgrounds. Smaller organisations, in particular, might lack the necessary financial expertise or leadership experience required to raise capital investment. One possible solution might be to bring in talent from mainstream businesses to offer support and mentoring to leaders of social enterprises in the creative and cultural sectors. For social enterprises operating in the creative and artistic sector funding issues are further complicated by a historical dependence on grant funding and other charitable donation models (Chung et al., 2018).
Social enterprise business models in the creative and cultural sector
A social enterprise is a business that trades in order to use its profits to tackle a range of social, cultural, community economic or environmental issues. Social enterprises are distinct from voluntary organizations and are outside of, but may have linkages with, the public sector. Social enterprises are situated within the 'social economy' which lies within the 'third sector' and can include community groups, mutual associations and registered charities. There are many examples of successful social enterprises in the creative and cultural sector. Tap the Table Theatre Company, for example, focuses on issues related to youth employment and has created a series of workshops and development programmes to help tackle these issues. These services are in demand by a range of organizations outside of the arts, e.g. businesses, councils and universities that provide a regular revenue stream. As the founder, Wayne Ingram explains in his blog:
It means that we don't have to rely on charitable donations or public funding in the way that charities and other arts companies do. In fact, we have found that a significant number of organizations are looking to solve issues that we are also looking to solve.
In Scotland, the CCSEN (Cultural and Creative Social Enterprise Network) provides opportunities for social enterprises in the sector to come together, share best practice, and provide peer support. Examples of successful social enterprises who are members of CCSEN include:
Hoda Productions - an innovative Edinburgh-based social enterprise with a musical and creative arts background. They specialize in fostering creativity, engaging young people, of all abilities and from all backgrounds, in the creative arts and educational activity using music and pictures. They generate income through workshops, film making and other productions.
Almond Valley Heritage Trust - a living museum with woods and fields extending for almost a mile. Mill Farm, with its traditional farm buildings and working watermill, is home to many farm animals and the daily programme of activities allows the visitor to get up close and personal. The museum houses displays and interactive exhibits that illustrate local history. Income generation is via paying visitors.
The Glad café - a café and music/arts venue in the south side of Glasgow, the heart of Scotland's most ethnically diverse community. It is a home for creative music of many kinds - indie, electronic, traditional, world, and provides a showcase space for up and coming musicians as well as more established acts. Income generation is via paying customers.
The following case study provides an example of how an organization in the creative and cultural sector has developed a successful social enterprise business model.
The Forum Music Centre
Humantics CIC operates The Forum Music Centre in Darlington. The Forum, which has been open to the public since 2003, was initially operated and funded by a private investor until January 2011 when Humantics CIC took over. Humantics was registered as a CIC (Community Interest Company, discussed later) in 2008 and is a company Limited by Guarantee. An acquisition investment from One North East was granted to purchase the assets from The Forum. That, along with a commercial loan from Darlington Borough Council, allowed Humantics CIC to operate The Forum as a social enterprise where profits are re-invested back into the business.
The Forum is much more than a live music venue - it offers training and courses to the youth of Darlington through the Access to Music programme. It has established itself as a Yamaha Music Point, which offers 7-11 year olds the opportunity to be taught how to play the guitar and drums on a Sunday. The Forum's mission statement outlines its social purpose:
The Forum is a social enterprise that aims to provide trusted environments with strong infrastructure and a vibrant atmosphere where people will be inspired and encouraged to engage with music and the arts through participation in a range of social, education, enterprise or entertainment activities. It operates a sustainable business model based on the provision of services, activities and events and is guided by a solid social responsibility and purpose.
It is considered a great asset to the Darlington area and a well-supported social arena and community hub. No one person or shareholder group owns Humantics - it is governed by a Board of directors. Neither The Forum nor Humantics CIC are subsidised by grant funding from the local government.
Social purpose of the enterprise
Humantics CIC develops cultural facilities and provides the infrastructure and support services so that Education, Enterprise, Community Engagement and Entertainment can co-exist and further develop their cultural offering within the community they serve. Humantics CIC is a social enterprise that took over the management and ownership of The Forum Music Centre in January 2011. It is governed by a Board of (mostly non-executive) Directors:
Allison Mckay, Chief Executive - Employed Manager of Humantics
Gordon Scott OBE - Government Advisor and Business Consultant (Non Exec)
Kathleen Matthews - Volunteer Group Manager (Non Exec)
Andy Lazenby - Commercial Engineering Project Manager and Chairman of the Friends of The Forum (Non Exec)
Being a CIC means Humantics is both 'Asset Locked' and 'Limited by Guarantee' rather than by shareholder. This is because a CIC is a particular type of limited company to benefit the community rather than private shareholders. A CIC is set up via the same way as a limited company, by registering it at Companies House. However, they differ from a traditional 'for-profit' limited company in that they:
include a 'community interest statement', explaining what the business plans to do
create an 'asset lock' - this is a legal promise stating that the company's assets will only be used for its social objectives, and setting limits to the money it can pay to shareholders
get the company approved by the community interest company regulator - any application will automatically be sent to them.
The 'Friends of The Forum' is a community and volunteer-based organization that helps steer The Forum, ensuring Humantics CIC meets the community's needs. They offer a range of volunteering opportunities such as events planning, cake bakes, events stewarding and social media marketing. The group also raise the much needed funds to purchase and upkeep equipment.
The Forum business model
Humantics CIC aim to deliver a sustainable business model that is commercially driven and therefore sensitive to market demands. However, as a social enterprise it is guided by a strong social responsibility and social purpose as Allison Mckay, CEO of Humantics CIC explains:
There will always be, and has always been a need for culture and music in our lives, it enriches us all in so many ways, many ways of which we are not even aware of. Humantics CIC recognizes the need for facilities such as The Forum within communities. A platform where new talent can develop and excel, where hobbies and livelihoods can evolve and most importantly, where all genres of people, regardless of age, race, and academic background, can learn, socialize, partake or simply enjoy Music and the Arts.
Humantics turned to Entrust and the Finance for Business North East Microloan Fund for help when they had a funding gap and were short of working capital. Entrust provides investment-readiness support for third-sector organizations, including social enterprises, that are looking at financial re-modelling, including accessing loan finance. The Finance for Business North East Microloan Fund supports the creation of new enterprises and the growth of existing micro and small businesses across the North East region. It aims to stimulate the creation of new business and secure jobs in the North East. Allison Mckay commented that they were in a position where they needed a quick injection of money to keep the business sustainable and these two organizations were able to see that The Forum could operate as a standalone business. Aiden Bell, Lending Executive at Entrust said:
Humantics CIC application was a great example of a third sector organization with a sustainable business model. We were happy to support The Forum through the process to allow them to maintain their position and to aid the delivery of training courses to the young people of Darlington.
Equally, the Finance for Business North East Microloan Fund, launched in summer 2011 to assist micro and small businesses, also provided an important lifeline to The Forum.
Current performance
Since Humantics was created in 2008 it has moved away from a reliance on grant funding towards a sustainable social enterprise business model. In 2015, the general trading of The Forum created about 90% of their income; approximately 10% comes in from donations and fundraising by the dedicated and hardworking volunteers of The Friends of The Forum. Any surpluses generated by The Forum are re-invested into enhancing and further developing the services it offers for the local and cultural community. On 18 March 2020, The Forum Music Studios announced it would close to the public until further notice due to the Coronavirus (Covid-19) pandemic. The temporary closure was in response to government advice and the safety of both customers and staff. Other updates are available on the website.
The Forum case study provides an excellent illustrative example of a successful social enterprise operating in the creative and cultural sector. However, it is also evident that there is a need to provide advice and support to help organisations in the industry develop sustainable social enterprise business models.
Questions
1. To what extent has The Forum's business model been successful in achieving its social purpose?
2. What strategies or options are open to social enterprises in the creative and cultural sector seeking sustainability in a post-COVID-19 economy?