Case Application

Framing a Good Decision

The Irames aren't just around the artwork anymore at the Museum oI Modern Art (MoMA) in New York City.
As the museum began a major remodeling and expansion construction project, the wisdom oI that decision was
raising questions.
MoMA, a not-Ior-proIit educational institution, is supported by admission and membership Iees, sales oI
publications and services, and oI course, contributions Irom wealthy donors. It was Iounded in 1929 by
three private citizens who were determined to make modern
and contemporary art available to the public. MoMA was the
Iirst museum to devote its art program and collection entirely
to the modern movement. And the quality and diversity oI the
museum's current collection oIIers visitors a unique and
unparalleled overview oI modern and contemporary art.
Early in the 1990s, museum director Glenn Lowry and
museum trustees decided that MoMA should not be "a shrine
to the twentieth century but rather a vital, Iorward-looking
institution committed to the art oI the present as well as to the
great achievements oI the modern tradition." With this
guiding philosophy, the decision was made to expand the
museum's Iacilities and radically alter its exhibit space. Their
rationale was that the museum needed more and better-designed space to accommodate its various existing
Iunctions as well as new and diIIerent space to meet the challenges oI the Iuture and to better articulate its
programs devoted to education about and celebration oI modern art.
To accomplish these loIty goals, MoMA's decision makers directed that the planned expansion and renovation
result in a building that would showcase the best oI modern art in the most compelling way possible, respect the
work oI a diverse proIessional staII, and make judicious use oI the institution's resources, both in the long run
and in day-to-day operations. They wanted a building that would be both an example oI great architecture and a
great museum as well. With the completion oI the new space in late 2004 or early 2005, they hoped to attract a
million more visitors, or 2.5 million total, annually. FulIilling this dream wouldn't be easy.
Since the decision to expand was made in the early 1990s, costs oI everything Irom real estate to construction
have skyrocketed. (Costs Ior the entire project are estimated at $650 million.) Since MoMA's endowment is
relatively small (a mere $387 million as compared to the Metropolitan Museum oI Art's endowment oI more than
$1 billion), managers have had to look Ior alternatives. One decision they made was to pursue a Ior-proIit joint

The Museum oI Modern Art (MOMA), New York City.
business venturea Web site selling everything Irom coIIee cups to Iurniturewith the Tate Gallery in London.
Some people Ielt that the move demeaned the integrity oI the museum and created controversy among staIIers,
an allegation that MoMA oIIicials, oI course, denied. And then there's MoMA's relationship with its "trustees"
individuals who donate large sums oI money and are "rewarded" with a seat on the prestigious museum board.
To Iund the expansion, museum oIIicials have sought contributions Irom current and potential trustees, a
common practice Ior not-Ior-proIit organizations during a major Iund-raising campaign. Despite the concerns,
MoMA does have a solid Iinancial history and had a budget surplus Ior Iive years in the last years oI the 1990s.
However, wealthy donors will be paying oII their pledges Ior years and iI the museum needs additional cash Ior
any reason, it's not going to have many places to turn.
The construction project itselI has turned out to be more complicated than originally planned. When the project
was Iirst proposed, its cost was a modest $200 million Ior about 30 percent more space, and the museum itselI
was expected to remain open throughout the entire process (estimated to be about 18 months). However, initial
blueprints were quickly shoved aside Ior more aggressive plans. The architectural design by inIluential Japanese
architect Yoshio Taniguchi increases the museum space by 50 percent and is slated to take 48 months to
complete. Rather than staying open throughout the process, managers decided to temporarily transIer a major
portion oI the museum's operations to a Iormer Swingline stapler Iactory in Queens. Being in a section oI the city
not considered as glamorous as its midtown location, attendance (and revenues) could suIIer, and aIter
completion, there's no guarantee that the new Iacility will attract the hoped-Ior additional visitors.
Concerns about the viability oI the proposed project led MoMA's managers to cut some costs$50 million Irom
the architects' budget and by using lesser-quality construction materials. However, Director Lowry says that
MoMA is not taking on too much with this expansion. His goal unapologetically remains, "To be the No. 1
modern museum in the world."
":estions
1. What types oI problems and decisions do you see MoMA managers dealing with in this story? Explain
your choices.
2. Explain how each oI the Iollowing might have been used in the decisions that had to be made in
pursuing the museum expansion: (a) perIectly rational decision making, (b) boundedly rational decision
making, (c) intuition.
3. Would you characterize the conditions surrounding MoMA's expansion decision as conditions oI
certainty, risk, or uncertainty? Explain your choice.
4. Is escalation oI commitment evident in this situation? Explain. What can you learn about decision
making Irom this situation?
Source. InIormation Irom MoMA's Web site, August 28, 2000; Costello, D.. "Museum of Modern Arts
Ambitious Expansion Plan Faces Trouble", Wall Street Journal, June 7, 2000, pp. B1.