Change Is Bad: When Leaders Flee Big and Stressful Capital Projects

Whenever we look at the perils of expensive capital projects, it's generally through the prism of financial risk. A new nine-figure construction project is, by definition, an inherently risky undertaking because of all those zeros. Planners fail to acknowledge significant downstream maintenance costs and end up trapped in a perpetual fundraising vortex.

But what about non-financial risks? For an example of how human capital risk can complicate an already precarious project, we turn to New York, where a "much-anticipated, long-delayed cultural mega-project" (according to the Times) recently hit a significant bump in the road.

The mega-project in question is the gut renovation of David Geffen Hall, the New York Philharmonic's home at Lincoln Center. And the bump in the road is the departure of the orchestra's president, Matthew VanBesien. He announced he would step down in the spring, becoming—and I'm quoting the Times here—"the latest official to leave the project, which is expected to cost at least $500 million, at a delicate moment when the hall is being designed and fundraising is underway."

A little over a year ago, I looked at the explosion of mega-projects in New York City in a post titled "Will NYC's Arts Organizations' Collective Multi-Billion-Dollar Gamble Pay Off?" The consensus was "probably," because organizations in the Big Apple (or so the theory went) had a home field advantage thanks to its mega-wealthy residents. Donors will step up when needed in a city where new riches are flowing more heavily than ever. 

And yet the last 12 months didn't exactly go according to plan. The Metropolitan Museum of Art said it was delaying its plans to build a new $600 million wing so it can get its finances in order. (It also failed to secure a transformative lead gift.) And last year, Carnegie Hall extended a drive to raise $125 million after it fell short of its initial goal.

All of which brings me back to the human element at play, here. A recent post contemplating the dynamics of mega-projects floated the somewhat cynical theory that directors hatch such plans because it's good for the resume. Recent comments by Michael Govan, the director behind the Los Angeles County Museum of Art's $600 million capital campaign, seem to lend credence to this theory. "The point of this project is to make my successor feel that this is the prestigious job," he said.

And yet, here is VanBesien handing over the reigns of a prestigious gig while the project, which was jump-started in 2015 with a $100 million gift from David Geffen, remains in limbo. It only proves one thing. To paraphrase the marketing geniuses behind the New York Lottery: Hey, you never know.

Well, actually, sometimes you do know. A risk management consultant will tell you that planners need to explore anything and everything that can go wrong with a project. Some risks are clearly unanticipated (e.g. a lightning strike). Others, however, are forming on the horizon. For orchestras, one foreseeable risk that can undermine a mega-project is labor unrest. It's hard to justify an expensive capital project after giving musicians a pay increase or raise money when your ensemble goes on strike. 

Another risk involves human capital and the burgeoning demand for accomplished arts professionals in places not named New York City, Los Angeles, Chicago, Miami, etc. Recent gifts in the space—particularly in the museum sector—suggest it's a buyer's market thanks to the huge amount of wealth that has accumulated in "flyover country." As a result, professionals like Mr. VanBesien, despite presiding over an esteemed big city institutions like the New York Philharmonic, have no qualms with packing their bags and heading for the rolling hills of, say, Ann Arbor.

Indeed, VanBesien will leave to become the president of the University Musical Society of the University of Michigan. That gig sounds like a stroll in the park compared to haggling with donors, unions and contractors in the Big Apple. 

VanBesien's decision to step down before his contract is up in 2018 leaves the Philharmonic with vacancies in its top managerial and artistic ranks as it prepares to face its biggest challenge in decades. According to the Times, the turnover at the orchestra is "staggering," which—in a case of a classic journalistic understatement—"threatens to make the planning process more chaotic, and give potential donors pause."

Reached by email, by the Times, David Geffen declined to comment.