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Illustration by Steven Salerno
SB: How did you get involved with the Opera? Freedman: NYU Stern competes with 12 or 15 other business schools for the honor, and when you’re competing you have to find areas where you have distinctive advantage. Our major advantage is that we are located at the very heart of business for the entire world. A fundamental aspect of Stern’s strategy is to leverage this advantage. Former Dean George Daly teaches a course on leadership in which he brings in business leaders to discuss various aspects of leadership. One participant was Joseph Volpe, General Manager of the Met. Volpe is a legend in the world of opera. He worked his way up at the Met from carpenter, starting in 1964, and in 1990 become the General Manager of the leading cultural institution in the city. It’s such a typically American Horatio Alger story. Professor Daly invited me to a meeting with Mr. Volpe to see if we could find some way that we could cooperate more. It only took a few minutes for me to become convinced that writing a case on the Met would be a great opportunity to advance our New York strategy and would be an outstanding educational experience for our students. Mr. Volpe has such a distinctive leadership style that when we began to talk it just became clear to me that if we could put our students in contact with him, we would give them a really unique experience. SB: How precisely do you bring the Opera to Stern? Freedman: Actually, we take Stern to the Opera. The primary way of teaching management is through cases, and cases are literature. I thought we could bring it to life by bringing our students into contact with the institution itself. The idea was, all of our first-year students would do this case, which involves analyzing the effectiveness of the Metropolitan Opera and Mr. Volpe’s management methods. Students come to their own conclusions about the issues in the case. Then, they make suggestions for improvements. So far it is like every other case that students do in MBA programs. The difference is in what follows. The entire first year class then goes to the House at Lincoln Center. They get a guided tour that exposes them to the virtual city with about 3,000 employees that exists under the opera house that includes schools, production facilities, costume and wig making shops, set building, rehearsal halls, cafeterias, and so forth. They then see the dress rehearsal of an opera. This past year they saw the third act of Puccini’s Turandot – truly grand opera at its grandest. Afterwards they have an hour-and-a-half question and answer session with Mr. Volpe. They get an opportunity to give Mr. Volpe their suggestions and they get his frank reactions. Something like this can only be done on this scale in New York City. Students rate this as one of the outstanding experiences they have with Stern in their first year. SB: Are you an opera buff? Freedman: I’ve become much more interested in the Opera. But my interest really has more to do with management than with music. It’s not intuitively obvious, but the management problems in a large opera house are highly analogous to the problems faced in the most complex business organizations. SB: How so? Freedman: First of all, coordinating specialists. Opera companies are made up of highly specialized professionals including star singers, choruses, ballet dancers, orchestra members, and set designers. But for the opera to work, it has to seem absolutely, totally seamless. In other words, it should not look like a bunch of parts working together – rather, you should only resonate to the total experience. How do you get groups of people who are highly specialized to work together in a way that, from the customer point of view, the whole operation seems seamless? This is one of the most difficult problems faced by all senior business executives. Second, managing people, especially difficult people. Opera managers are known to have to handle very difficult personalities. In fact, business has picked up many opera terms that describes these difficult people – prima donna and diva are good examples. SB: How does the Met compare to a for-profit company as a business? Freedman: The Met’s budget is about $200 million. It receives virtually no government subsidies. And it’s probably four or five times bigger than the next biggest opera in the U.S. It has a product – just like many businesses. It must finance and sell its product like businesses. Sometimes unknowledgeable people dismiss the complexity of nonprofit organizations. Actually, they often have goals that are as complex and daunting as many businesses. The Met gets a large part of its revenues through fundraising. Out of the $200 million, the Met raises about $75 million per year, or about 40 percent. About 40 percent comes from ticket sales, another 10 percent comes from tours and other activities and less than 10 percent comes from its endowment. I use the analogy between the Met and NYU. NYU couldn’t function purely on tuition, and the Met can’t function purely on ticket sales. Their break-even point is selling about 90 percent of all available tickets, which they did in the late 1990s. But in the past two years sales have been down, and the Met has been losing money. That’s largely because of the recession, the attacks of September 11, and the ensuing decline in tourism to New York City. It faces the same kinds of problem that many businesses face in these difficult economic times. SB: Can’t they cut costs on the production side? Freedman: Met production costs an enormous amount of money. A new opera can cost $2 million to stage. But – and here’s the difference between the Met and European opera houses – they build the production to last 20 years. In Europe, they’ll build a production to last a couple of seasons. If you take a look at the level of detail and the quality of the costumes at the Metropolitan Opera, they’re extraordinary. Sure, they could do it cheaper. But it really represents an investment for 20 years. Besides, the quality is part of the spectacle. It’s part of the Met’s strategic positioning. They’re positioned at the absolute height of Grand Opera, and it’s done in a huge house with 4,000 people. It is hard to cut the cost of singers because contracts are signed four and five years in advance. Union contracts determine labor costs. Of course, they could cut costs by reducing rehearsal time, but obviously this would show by reducing the quality of the product. So short-term cost cutting is very difficult and long- term cost cutting would be dangerous because it would affect their strategic positioning. SB: It’s a competitive landscape for entertainment. And compared with movies or video games, Opera can appear expensive. Is the product priced optimally? Freedman: Of course, it’s a matter of opinion. I recently saw La Bohème on Broadway. It received generally excellent reviews. It had chintzy sets and singers of limited ability who had to be miked, and a very small orchestra. Any comparison with the Met would be absurd. For the same money you can get a prime orchestra seat at the Met and see Franco Zefferelli’s spectacular production with the world’s finest orchestras and most accomplished singers. Actually, the more you learn about it, the more you would realize how great the value is at the opera. In fact, you can still get a decent seat for $35! SB: How would you characterize Joseph Volpe as a CEO?
Freedman: The way I’d describe him is extraordinarily assertive and direct. He’s a tough guy from Brooklyn. And he’s honest. Like all great managers he is driven to excellence. He expects nothing but the best from his associates – and himself. Nevertheless, many find him to be intimidating. Personally, I believe he nurtures that image in order to control difficult situations. He cares a great deal about the people he works with which has led to enduring relationships. Many of the most prominent people in the opera world are close to him. Luciano Pavarotti, Placido Domingo, and Beverly Sills immediately come to mind. The fact that he came up the way he did gives him a lot of credibility. Let me give you an example. The Met hasn’t had a strike in 20 years, and strikes have been endemic in the world of the performing arts. And he has 17 unions. If he was just a tough guy I don’t think it would work. He’s really an extraordinarily unusual person. SB: Recently, The New York Times reported on the prospective merger of Carnegie Hall and the New York Philharmonic. Citigroup CEO Sandy Weill, who is Chairman of the Board at Carnegie Hall, talked about it like it was a bank deal. Is this an indication that high culture is becoming more of a business? Freedman: I think it speaks more to the makeup of the board. The board is primarily composed of businesspeople who appreciate the arts. But their perspective is that of business. It would be unusual to have a discussion with Sandy Weill about Carnegie Hall that wouldn’t be sprinkled with business aphorisms. More broadly, there have always been debates within all cultural institutions in the U.S. about art versus money. And sometimes that has led to very bitter strikes. Frequently, the two sides approach each other with stereotypical views. The orchestra sees the businesspeople as these industrial magnates who care nothing about art but are only interested in the bottom line. The businesspeople stereotype the people in the orchestra as children without any concern about costs. Managing this difference in perceptions is one of the main tasks in making a successful performing arts organization. SB: How does the opera case help bridge that perception gap? Freedman: We teach it by exposing students to the complex reality of the situation. We’re teaching our students to be able to see the world in a different and more complex way. I want them to see that organizations like the Met can not only do wonderful things, but sometimes they can be managed as well, or perhaps even better, than many business organizations. There’s been so much student interest in it that Volpe is actually teaching a mini-course in our entertainment, media and technology specialization titled “Managing in the Performing Arts.” Last year he hired two of our students as interns, and one is now working full-time at the Opera. SB: Are there any direct applications from opera to business? Freedman: I could treat this question as a joke – but I won’t entirely. Opera is life writ large. Hyperbole is the norm. Every component of human emotion and interaction is there to be seen, generally in exaggerated form. Conceptually, they can be lessons to businesspeople. However, the important application is the ennobling affect that art has on the human spirit. This makes us better people – and better people are better businesspeople. |
