Charity Finance Directors’ Group

Understanding strategy in times of austerity

Sally O’NeillFinance DirectorRoyal Opera House

Aim of presentation

• To give you an understanding of:

• How the cuts in public subsidy have affected the arts

• How the Royal Opera House has built and then adjusted its strategy in the light of these cuts

Royal Opera House – facts and figures

• Established 1950• Core permanent staff of over 1,000• Turnover £106m• ..of which Arts Council grant £26m (and

falling !)• Generate nearly £3 for every £1 of grant• 312 performances to an audience of

658,000• 50% of tickets £50 or below• Tickets start at £4

Royal Opera House – facts and figures

• Reduced price/ticket subsidy schemes• Big Screens• Cinemas• Broadcast• Creative Partnerships• Mid-scale support• Public Benefit• International context

Funded Arts sector in England

• Arts Council invests £350m across 840 organisations

• Budget cut by 27% by 2015• Over 100 organisations may lose

their funding• ROH largest recipient while smallest

proportion of its income

RFOs 10/11 Grants

2010/11 grant% of top

9% of total Art form

1 Royal Opera House 28,437 21% 8%Combined Arts

2 South Bank Centre 20,804 15% 6%Combined Arts

3 Royal National Theatre 19,740 15% 6% Theatre

4 English National Opera 18,436 14% 5% Music

5Royal Shakespeare Company 16,010 12% 5% Theatre

    103,427 76% 29%  

6 Opera North 9,915 7% 3% Music

7 Birmingham Royal Ballet 8,203 6% 2% Dance

8 English National Ballet 6,896 5% 2% Music

9 Welsh National Opera 6,795 5% 2% Music

Top 9 135,236 100% 38%

Rest of portfolio 217,672

352,908

Strategy – what’s that then ?

• Several versions• Different dates• Different audiences• No measurement• Clear organisation goals ?• High risk of non-alignment• Increasingly difficult to balance

budgets

Implementing strategic direction

Common organisational behaviour

Introduction of strategy

Delivering strategy

Resistance to change

Redefining a strategy for a

rapidly changing world

Process started early 2010

• Scene setting • External facilitator• Size of Executive team• Regular meetings• Small core team• Iterative process• Board input

Where we were in 2007

Where we were by 2008

Key implications• Global economy seems to have recovered but challenges

and uncertainties remain, most notably commodity prices and unrest in Middle East

• UK faces huge challenges with consumers under serious pressure from spending cuts. Restaurants and hotels and recreation and culture the two most affected areas of ‘everyday’ spending

• Hence, continued focus on ‘practical’ drivers like thrift, simplicity and more straightforward experiences likely to continue

• Consumers still have some discretion but need new offers/incentives to engage

• Technology one area with opportunities for both engaging new audiences, adding new revenue streams and fulfilling broader civic/educational responsibilities

Process started early 2010

• Scene setting • External facilitator• Size of Executive team• Regular meetings• Small core team• Iterative process• Board input

The ResultWe want the Royal Opera House to be a

world class organization which • responds to the context in which we

operate;• puts artistic excellence and creative risk

taking at the heart of everything we do; • is increasingly mindful of our audiences; • represents good value for the UK taxpayer

and the investment of all our stakeholders; • is closely inter-connected with our peers

and the wider artistic community.

Our aim is to enrich people’s lives through opera, ballet and dance.

Our ambition is to be the best in the world.In all our activities, we strive to realize the

following values:• Creativity• Passion for what we do• Respect for one another and for diversity• Open-mindedness and innovation• Accountability and openness to feedback• Collaboration• Honesty, reliability and trustworthiness• Commitment to sustainability

Arts Council bid process

• Four year spending review• 1st year – equal pain for all (11/12)

• “Transition” year: 7% cash cut

• 2nd to 4th year bid process (12/13 to 14/15):• 2 stages

• Open to all

• Once in a generation opportunity

• 3,000 words

The Bid Process

ACE five 10-year goals:1. Talent and artistic excellence are thriving

and celebrated2. More people experience and are inspired

by the arts3. The arts are sustainable, resilient and

innovative4. The arts leadership and workforce are

diverse and highly skilled5. Every child and young person has the

opportunity to experience the richness of the arts

The Bid Process

Two stage process1. Assessment of application against

the ACE 5 goals• 3,000 words

2. Achieving a “balanced” portfolio:• Proper range of art forms

• Different sizes and strengths

• Geographical spread

ROH’s approach

• Strategy already outlined • 3,000 words → Rigour to the

process• Facing cuts → addressed non-

alignment risk !

• Revisited, refined, researched

• Distilled previous work to some key messages

ROH key messages

• Aim to be the best in the world• One of the key London institutions• World class performers• Best creative talent• Quality and variety of productions• Value for the tax payer• Cost effective• Leadership role• Accepting our responsibility to take a

fair share of the reduction in funding

Responding responsibly to cuts

• What is a “fair” cut ?• For DCMS 15%• Museums and galleries• Arts Council hit harder – 30% - and

front loaded• “Real” vs “Cash”• HMT inflation forecasts !• Risk of penalising success

Where is the tipping point ?

• 15% phased over four years• Situation already painful• Reduction beyond this risks long term

damage• If artistic quality diminishes, audiences

disappear, donors lose confidence• Virtuous circle broken and ability to

play our part in the sector is undermined

• Risk taking discouraged

Take one year: 11/12 season

• Season planned several years ago• British richness leading up to Olympics• Difficult decision to cut new

productions• Unprecedented 23 La Traviatas• Make a virtue out of a crisis• Dame Monica Mason’s last season• Inflation, VAT, NIC, low interest rates• Income and cost control

So…..how did we all do ?

• ROH passed stage 1 with flying colours• Stage 2: All the big national companies

were cut by the same amount to help achieve the balanced portfolio

• Further cash cut in 12/13 of 4%• Total cash cut over 4 years of £10m• 206 organisations lost their funding• 110 organisations awarded funding for

the first time• Funded portfolio reduced from 849 to

695

….and what does this mean for ROH ?• Front loading a further cash cut of 4%

in 12/13• Opera plans and contracted

commitments to 2016• Unpalatable changes to the repertoire• Vital to get support of artistic directors• Further rounds of cost cutting• Stretched – not stressed – income

targets

Am

ou

nt

of

Gra

nt

(£M

s)

Comparison of ACE Grant Received against ROH Bid by ACE Financial Year

….is there any upside ?• Process was very unifying of the Exec

team• Purpose and value to our strategy work• 360 degree approach• Should help differentiate core from

discretionary• General media coverage very balanced• Good support for Arts Council – seen to

have done a good job in very difficult circumstances

• Personally – Young Vic and Battersea Arts Centre

THANK YOU

ANY QUESTIONS ?