Strategic Analysis of the Merger of Utah Opera and Utah Symphony
Financial and leadership strengths and weaknesses of the Utah Symphony. There are almost no financial strengths that can be claimed for the Symphony. The only one that is evident in Exhibit 3 is that performance revenues are projected to increase by 18% for the succeeding year, 2002. Weaknesses are more evident and significant as outline in the following section. The most significant weakness is that the expenses are almost equal to the revenues. This breakeven situation means the symphony has no cushion against any period of low earnings. A second weakness is that the projected surplus is projected to fall to just 0.02% of revenue. The implication is that without intervention, the entity is headed for bankruptcy. The third financial weakness is that the entity operates on fixed contracts with guaranteed salaries. This gives the entity weak flexibility to manage wage levels. Fourthly, the negotiated future salary increments in an uncertain environment create an inflexible financial burden. The final weakness is that the Symphony does not own the facilities within which it holds local performances and houses its administrative offices. The first strength is that the symphony is a long-established entity and the leaders have maintained a strong and stable organizational culture. The second strength is that the leaders, from Abravanel to Lockhart, created a vision for expansion to global status. This global outlook allows the entity to target diverse audiences; benefiting from prosperous regions when there is local downturn. The third strength is that the leaders have created a repetition for promoting the livelihood of the start. The fourth leadership strength is their depth of knowledge and experience of the symphony business. Lockhart is reported to have concluded more than 600 performances. This experience can be exploited for future development and diversification. The first leadership weakness is that the executive is split; both the CEO and the music director reporting directly to the Chairman of the board. This non-unitary executive structure can breed discord internal conflict and struggles for relative power can result in poorer overall vision and operations. A second leadership weakness is the over-emphasis on standing up for the musicians and promoting unionism. When management need to, necessarily, vary the contractual arrangements the unionized employees may become obstinate. The third leadership weakness is that the position of CEO is vacant and there is no one at the level to contribute executive operational input. Lockhart is of similar level but is technical and not administrative in experience and outlook. This is observation is buoyed by his remark that one negative aspect of the merger is that it had not been done before
Key steps Anne should take to address Utah Symphony weaknesses Anne will need to have a twin strategy to reduce costs while increasing revenues. This could involve engaging the staff and generating ideas for reducing waste. She needs to increasing performances abroad so as to tap into more buoyant markets to counter the falling local activity. This step would also address the second weakness, concerning falling surpluses, by widening the gap between expenditures and revenues. She also needs to address the inflexible burden of the fixed term contracts by engaging the union to achieve a pay-for-performance compensation structure. Finally, she will need to increase the asset base, including ownership of administrative and performance infrastructure so as to reduce rental payments to the County. With respect to leadership weaknesses, one step Anne must take is to ensure that she achieves a unitary command structure, through persuasion so as not to alienate Lockhart. A unitary command structure will be necessary so that decision-making is unequivocal, which will be necessary during the implementation of the merger and turnaround. The second step that Anne will need to take is to de-emphasize unionism in the organization. She can do this by promoting equity rather than equality and rights, in such a way that employees see a direct link between work and pay. The third step she should take is to ensure that executive positions in the new structure are filled; and not have a situation such as the vacant post of president and CEO in the current organizational structure.
Financial and leadership strengths and weaknesses of the Utah Opera before the merger. A key financial strength of the Opera is that it has a healthy surplus for the year 2001, 12% of revenues, compared to the Symphony’s 0.9%. Secondly, the projected surplus is expected to be maintained at approximately the same level. Thirdly, the Opera has and maintains an endowment fund, standing at $5 million in 2002. . Fourthly, the Opera has a strong asset base, including studio, land, and costume inventory. Finally, the Opera maintains a flexible hiring policy, steering away from onerous fixed contracts. One key financial weakness in the Opera operations is that a significant part of its revenues come from the item termed other, in Exhibit 3, and the note (c) to the exhibit states that this segment of revenue can vary significantly from year to year. This volatility is a weakness as it can produce a sudden income deficit. Finally, the Opera is focuses at the local and regional market, which means it is susceptible to the national economic patterns; without resort to foreign markets. Opera has strong leadership with a reputation for results; a key leadership strength. The second strength is that the organization has unitary command at the top with the General Director at the pinnacle of executive management. Thirdly, the leadership has maintained a professional stance which has not patronized the staff, through unionism. The Opera does not appear to have many leadership weaknesses, but one that can be pointed out is its reliance on Ewers’ personal character and charisma, which might lead to future friction with direct reports as a result of autocracy.
Key steps Anne should take to address Utah Opera weaknesses Anne will need to diversify the sources of financing for the Opera unit so as to reduce reliance on miscellaneous earnings, principally hiring out of materials, as cited in note (c) to Exhibit 3. Alternatively, she could strengthen this source by formalizing it and making it more aggressive such as forming a few of the staff into a hiring unit, with revenue targets and pay for performance. Anne will also need to add an international expansion initiative to her plans so that the weakness of being local is addressed. A key step in addressing the leadership weaknesses noted is that Ewers will need to put effort into team building and integration, so that she does not become the key operational player. Specifically she will need to create, train and maintain a unit that complements her fund-raising activities so that the weakness noted is converted into a corporate strength.
Utah Symphony scorecard analysis The vision of the Symphony focuses on the whole world as its ultimate target platform; and aims to be rated at that level. The case notes that the Symphony does, in fact perform abroad. Therefore its vision is largely being accomplished. The business model reflects a subsistence culture, by emphasizing the need to maintain a specific number of musicians on a permanent basis. This inward-looking model is somewhat at variance with an entity aiming to be outward-looking and global in perspective. The financial goal, as stated, is adequate because it addresses the financial weakness of poor profitability, but the critical success factor is not aligned to the tenets of a for-profit organization. The critical success factor should be stated as sufficient profitability for the entity, not to keep ticket prices the same, which may be better suited to the customer perspective of the scorecard. The customer perspective goal is adequate but the critical success factor should be the delivery of satisfactory performance to the audience. The hiring of top talent may be a necessary tactical move but it does not align with the goal or the measure; both of which are aligned correctly with each other. The three components of the internal process perspective are correct and aligned as they address the weakness of having inflexible remuneration obligations in a volatile revenue market. The learning and growth perspective is largely catered for because it addresses the weaknesses but it does not leverage the strengths. The goal ought to also include a specific expansion of international performances; to fully support the vision. The measure should also reflect this by including a stated measure for capturing of new audiences. Utah Opera scorecard analysis The Opera has a local and regional outlook and that is reflected by its vision which is limited to the national arena. This local-view culture appears rooted in its history as a one-man idea with the aim of promoting interest in opera among local artists. The business model which emphasizes creation and maintenance of endowment funds is reflected in the health finances and stability. The financial goal as stated is not adequate in that it should include profitability, based on the critical success factor of income, not over-emphasizing fundraising. Additionally, the measure should be stated numerically in the form of a profitability percentage. The customer perspective of the scorecard is adequate but can be improved by making the statements more specific statements. The goal could be to maintain a certain ranking position such as top 10 percent of opera rankings. The measure could also be improved to include the percentage occupancy of venues for Opera performances, such as 95% seat uptake, as opposed to the diffuse measure “near sold-out”. The internal process perspective leverages the flexible hiring strength and addresses the revenue stability weakness noted. The learning and growth perspective does not fully address growth in that it is not aggressive on expansion. The goal ought to include the capturing of new audiences in new locations and the creation of new repertoires. The attendant measure would include the tracking of percentage growth.
Proposed merged company scorecard based on the specified strategic goals. According to Kaplan, & Norton (1996), it is important for goals to be adequately measurable so that there is no ambiguity on assessing whether a target has been achieved or not. The following scorecard is proposed for the merged company.
Vision and business model The vision of the merged company is to be ranked among the top ten Opera/Symphony organizations in the world within five years. The business will be based on the delivery of impeccable performances to its audiences and to generate sustainable growth in profits from the through high productivity, teamwork, fair employment opportunities and equitable rewards for its employees. Financial • Strategic goal: To achieve financial stability and growth. • Critical success factor: Maintain profitable balance between costs and revenue for all activities. • Measure: Achieve 20% annual profitability and maintain endowments of at least $5 million.
Customer
• Strategic goal: Be ranked in the top ten worldwide with high seat uptakes. • Critical success factor: Delivering high quality performances consistently. • Measure: Customer surveys with target ranking in top ten and occupancy at least 95%.
Internal Process • Strategic goal: Maintain motivational but flexible and responsive internal relationships. • Critical success factor: Creation of flexible pay-for-performance contracts for all employees. • Measure: Employee performance scores of 85% or more.
Learning and Growth • Strategic goal: Maintain current audiences and capture new ones, particularly abroad. • Critical success factor: Having a successful marketing campaign that advertises different symphonies to younger audience • Measure: Audience growth percentage of at least 15% annually with 10% being international.

Strengths and weaknesses of the proposed merged company The first key inherent strength of the merged company is that it will have diversity of offering both opera and symphony performances. The second strength is that it will leverage the existing international exposure of the symphony unit. Thirdly, the combined unit will be able to utilize the existing assets, from the opera unit, such as land, studios. The fourth strength is that the financial goal of the merged unit will be boosted immediately through the healthy surplus and endowment funds from the opera unit. Fifthly, the combined customer base will be larger, and careful cross-marketing of the offerings will generate part of the targeted growth in both financial terms and audience capture. Sixthly, the merging of will start to address the learning and growth portion of the scorecard through internal skills exchange. Internal cross-recruitment and opportunities also become possible. The key weakness of the merged company is that the symphony unit will initially create a drag, financially, because of its negligible surplus and inflexible contracts with the musicians. Secondly, the opera unit does not yet have international exposure and therefore the customer goal of top 10 world ranking means that additional effort to expose the opera to international audiences. The third weakness is that the internal process aspect requiring flexibility is hampered by the strong unionism in the symphony unit and the circumspect attitude of the music director, Keith Lockhart. Finally, the learning and growth part of the scorecard is hampered by the strong cultural differences, with the symphony unit having a somewhat militant culture.
Key highly probable issues during the merger process and recommended mitigation
Finance
The very weak liquidity of the symphony unit is likely to strain the finances of the merged company because it is the surplus of the opera unit that will now have to be utilized for the benefit of the new entity. Additionally, the demand for salary payment, and projected increments, is from the same symphony’s musicians with no finances to meet the obligations. The mitigating steps which the new executive has to take is to make the contract re-negotiation a key part of the merger discussion. The musicians need to be convinced that if they remain inflexible the symphony would collapse eventually, but if they relent then there is a future in which, over time, their earnings could grow with equity through pay for performance.

Human resources The most probable human resources issue that could arise is the intransigence from the unionized musicians. They are likely to sense strength in their numbers and the leverage they hold by threatening disruption of the symphony performances. The key mitigating tactic would be motivation and persuasion, rather than confrontation. Careful enunciation of the survival benefits to the symphony could convince the musicians that it is them who are being thrown a life-line from the opera and therefore concessions ought to come from them. Over time, the unionism could weaken through pay-for-performance because that approach individualizes work and benefits; which weakens the groupthink mentality of unionists.
Customer satisfaction The key issue that may arise from this area is that the traditional audiences may become disaffected, at least initially, by feeling that the two entities have sold out and lost identity. Both Carolyn Abravanel and Leslie Peterson have already sown the seeds of dissent in the community. Their opinion has weight because both are intimately related to the founders of the two entities. The first key mitigating step is to share the balanced scorecard with employees of the merged unit, and to explain obligations and benefits, as suggested by Schermerhorn (2012). This step is necessary so that each employee becomes a champion for the initiative. External dissenters then find little traction when they try to detract from the benefits of the merger. The second mitigating step is to engage the community, and convince these powerful to become proponents for their sake and the sake of the legacy of their loved ones. The new executive would need to make emotional appeal the centerpiece of a concerted public relations maneuver, to win support.
References
Kaplan, R. S., & Norton, D. (1996). The Balanced Scorecard: Turning Strategy into Action. Boston, MA: Harvard Business School.
Schermerhorn, J. R. (2012). Exploring management (3rd ed.). Hoboken, N. J.: Wiley.