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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
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 ?