The Ceo Of Culture Inc.

By ALEX PRUD''HOMME

In 1988 New York City's Solomon R. Guggenheim Museum was in trouble. Money was tight; the museum's famous Frank Lloyd Wright-designed building was falling apart; exhibitions were uninspired; donors were losing interest. Enter Thomas Krens, armed with a degree in nonprofit management from Yale. As the Guggenheim's new director, he offered the board of trustees a stark choice: Preserve funds and run the museum conservatively, or attack. "If you want a vital institution," he said, "change has to take place on so many fronts that it's likely to be bewildering."

That turned out to be an understatement. Today the museum has projects going in New York, Massachusetts, Italy, Austria and Spain, and a Guggenheim exhibit has just wound up a four-month tour of Australia. Using aggressive financial and marketing strategies normally applied to commercial enterprises, Krens, 45, may be reinventing the way museums do business -- and in the process creating the art world's first multinational. He is the most outspoken and controversial of a growing number of museum directors who are fusing hard- edged business acumen with classic connoisseurship.

"He's really a visionary," says Arthur Levitt Jr., former head of the American Stock Exchange and a Guggenheim board member. "But he's breaking some eggs in the art community." Krens' business-school jargon and management style offend many in the traditionally genteel, nonprofit world of museums. Says Hilton Kramer, editor of the New Criterion, a monthly arts review: "Krens has so far proven himself to be a complete disaster. His conception of a museum is all about expansion. He's a perfect example of what happens to a major cultural institution when it is given over to a bureaucrat."

After a 20-year boom in the museum business, the costs of acquiring, insuring, transporting and storing art are spiraling beyond the means of many institutions. As tax breaks that encouraged the rich to donate to museums are eliminated in the U.S. (roughly 80% of all the objects in American museums are gifts), corporate and individual contributions are drying up. Public funding for art is shrinking dramatically. According to the American Association of Museums, as many as 29 states are contemplating reductions of 50% or more in art funding. And the recession has dampened Americans' interest in visiting museums, buying gift-shop tchotchkes and becoming members.

Krens' solution is a three-pronged attack that traditionalists consider radical:

% Construction and Financing.

The museum's spiral-shaped building on Fifth Avenue will reopen in May after two years of restoration and expansion. The $48 million project will increase exhibition space by two-thirds, even though critics charge that a new, 10- story annex designed by Gwathmey & Siegel detracts from the Wright building's architecture. At the same time, the Guggenheim will unveil a fully funded $5.5 million exhibition and office space in New York's SoHo district, designed by Arata Isozaki. To help pay for the flagship expansion -- and additional storage facilities -- the Guggenheim floated $54.9 million in tax- exempt bonds in 1989. Other museums issue bonds to finance projects, but typically use their endowments as collateral. The Guggenheim has an endowment of only $30 million and its loans are secured with a letter of credit from the Swiss Bank Corp.

De-accessioning.

In May 1990 the Guggenheim auctioned three paintings from its extraordinary collection of 19th and 20th century art -- a Kandinsky, a Chagall and a Modigliani. The purpose was to raise $30 million for a deal to acquire more than 300 pieces of American Minimal art owned by Italian collector Count Giuseppe Panza di Biumo. It was the first step in Krens' plan to become a world-class presence in postwar art. Although such sell-offs -- "de- accessioning," in museum jargon -- are not unprecedented, cognoscenti complained that Krens was callously treating masterpieces as "assets." Maybe so. But each of the paintings went for more than 40% above Sotheby's highest estimate, bringing in $47.3 million. Krens insists that he does not have a policy of de-accessioning and sold only to obtain the Panza collection.

Franchising.

Because of space limitations, the Guggenheim can show only about 3% of its 6,000 works at any one time. To air out its collection and raise the museum's profile, Krens hopes to create what amounts to Guggenheim franchises. While the Whitney Museum of American Art has branches around New York and Connecticut, the Guggenheim is the first museum to think of opening international satellites.

Critics mock Krens for creating a "McGuggenheim" chain and contend that constant travel will endanger fragile art. But the museum insists that every precaution is taken to ensure quality. Krens argues that overhead would be kept to a minimum by planning exhibitions years in advance and lining up international companies as sponsors. The key element is that host governments would bear the cost of building and operating the franchises, benefiting from the cachet (and tourist dollars) generated by the visiting collection.

In the U.S., Krens has been involved in planning an $87 million satellite museum in North Adams, Mass. If the long-delayed project gains enough financial backing -- most importantly from the state -- the Guggenheim would operate its new art outpost much as it has the Peggy Guggenheim Collection, housed in a neo-Palladian palazzo on Venice's Grand Canal since 1979. And Krens is making moves in Europe. In December representatives from Bilbao signed an agreement for a $100 million Spanish Guggenheim to be designed by architect Frank Gehry. In 1989 Salzburg proposed an $80 million Austrian branch to be built inside a mountain. But many in Salzburg -- resentful of the huge cost and what they see as Krens' imperious ways -- oppose the project. In Paris, meanwhile, three of Peggy's grandchildren are threatening to sue the Guggenheim over the way the Venetian palazzo is run. "Krens has robbed the museum of all its originality and personality," says one of the Guggenheim grandchildren, art dealer Sandro Rumney. "He's just a businessman." Replies Krens: "We believe we've been faithful to what Peggy wanted in every way."

"What cost success?" wonders a museum director. "He's very smart and ambitious, but how many projects can you do and keep your focus?" Krens is unapologetic. "My colleagues know what I'm doing, and it makes them apprehensive," he says. "Are we becoming a tough institution? I'd be a little bit concerned if I were not on this side of the picture. I believe, culturally speaking, that we're going to blow people's minds."

Other young directors are watching Krens carefully to see how his initiatives fare. Says Ned Rifkin, 42, the new director of Atlanta's High Museum: "If Krens succeeds, we can truly say there is a new way to foster and nourish these institutions that are the lifeblood of our country." If not, Krens may be remembered for little more than reaping the whirlwind of his aggressive tactics.

With reporting by Alexandra Tuttle/Paris