Profile: Sarah Kemp, director of finance at the Royal Opera House

‘The Royal Opera House exists to
produce extraordinary opera and ballet. That’s how the Covent Garden-based
company describes its essence in its 2006 annual review. But it is only thanks
to sound financial governance and strategic planning ‘into perpetuity’ that this
goal can be reached. Sarah Kemp, the organisation’s director of finance and
business affairs, works to ensure that this responsibility is fulfilled every
morning she goes into work.

Watching an opera or ballet at Covent Garden is enchanting, witnessing Darcey
Bussell, Carlos Acosta or Placido Domingo perform a privilege. It sits with Kemp
to ensure the Opera House brings these cultural icons to the stage. Without
rigorous – and sometimes dispassionate – financial planning, cultural events
often fail to reach an audience.

Kemp’s name does not appear in programme notes or press reviews, but that
makes her no less important than the Bussells and Acostas to the
Royal Opera House. You
could say that Kemp, by keeping the books in order, allows the magic to happen.

Kemp is a confessed opera and ballet addict. She comes from a musical family
and is in love with dance and music. For her, working at the Royal Opera House
is so much more than a job. It is an all-consuming passion.

‘It is a great privilege to work for this organisation. It is a world-class
organisation and my colleagues are world-class people. It is a privilege because
of the beauty and the value of the art form. I love the opera and ballet and I
am passionate about it. To be successful here you have to have some passion for
what you do and I do have that passion,’ Kemp says.

Don’t mistake Kemp for a naïve, star-struck fan, though. She has an
impressive business pedigree and is as knowledgeable of compliance, management
and tax as she is of the principal dancers of the Royal Ballet or the Royal Oper
a’s guest artists.

Musical bent

Kemp has a strong background in music and media. She has worked as managing
director of Explore International, a National Geographic Television and Film
subsidiary, finance director and general manager at music publishers Boosey
& Hawkes plc and as managing director of Hulton Getty Picture Collection.

Her expertise in music publishing and content management was one of the major
factors that persuaded the Royal Opera House to appoint Kemp after her
predecessor Anne Bulford moved on to Channel 4.

The organisation, a charity, is in excellent financial shape. It has broken
even for seven years in a row – an all-too-rare achievement for an artistic
organisation – and for every pound of the £24.9m subsidy it received from the
Arts Council England it generated

The Royal Opera House, however, puts 70% of its budget back into frontline
performance and education programmes.

Add in the significant amount of cash required to maintain the magnificent
structure at Covent Garden and it soon becomes clear that the pressure is
continually on to increase revenue, so that there is more resource available to
the artists.

Kemp sees her expertise in content and rights management as one of the tools
the Royal Opera House can use to continue growing income and investing in stage

‘I am quite experienced in rights and what we do with rights. This is an
artistic organisation but we do create content. One of my roles is to identify
good areas to exploit that content, whilst remaining sensitive to the quality of
the art at the same time. This summer we actually produced a series of heritage
CDs and we are looking at how to build our digital presence, which is a major
project for us,’ she says.

Yet Kemp’s role involves so much more than simply generating revenues. The
Royal Opera House is a far more complex organisation than the average plc, its
aims are far more diverse and elusive than generating profit and creating value
for shareholders.

Every strategy to generate profit has to be tempered by what impact it will
have on the quality of performance. Every plan to invest in a new production has
to take into account the balance between new work and classical repertory.
Ticket pricing has to strike a balance between increasing income and ensuring
that opera and ballet remain accessible and reach more people.

Kemp grapples with these different requirements on a daily basis, and is
constantly working to ensure that every part of the Royal Opera House receives
what it needs without breaking the budget.

Drivers and dynamics

‘This organisation is an artistic organisation, so its primary driver is not
a commercial one. This is a very complex organisation, with a number of
different drivers and dynamics within it. There are a number of different
stakeholder bases, so the complexity is quite significant. In many ways it is
more significant than I found it to be in a plc world. In the plc world you tend
to have very clear strategic objectives, whereas in the Royal Opera House there
are multiple objectives,’ Kemp says.

Kemp is responsible for what are, in essence, seven completely different
businesses. The Royal Opera, the Royal Ballet, ROH2 (a programme promoting new
work), the orchestra, education, the development team and the operations unit.
These are all separate entities with their own needs, incentives and character.

Throw in Kemp’s responsibilities to blue chip corporate supporters such as
BP, Coutts, Legal & General, and JP Morgan, her obligations to audiences and
the reporting requirements of the Charity Commission and the complexity of
Kemp’s job becomes very apparent.

It is a complexity that she thrives on, however: ‘The variety of the
different functions of different disciplines is incredibly challenging. There
are different communities with different needs at different times. I really
enjoy the complexity of the different drivers, the different stakeholder bases
and the different tensions that exist and how to manage that,’ Kemp says.

Kemp says the multifaceted character of the
Royal Opera House means that she places
a high premium on teamwork to ensure that the finances are in order.

She says the structure of the finance team, which has a financial controller
for each major area, is crucial to facilitate the necessary cooperation. ‘The
financial controllers have a direct line to their central companies and a dotted
line to me. That is really important. It is the way we put finance into the
heart of the activities themselves.

‘Finance is something that is far too important to be left to the
accountants. It has to be a shared responsibility throughout the organisation.
We have a primary responsibility to create as much value as possible from the
money we receive and the money that we raise. Teamwork right across the opera
house is essential,’ she says.

Scrutinising performance

The compliance burden is an issue that has mainly been explored from the
perspective of finance directors of listed companies. But increased scrutiny
hasn’t been limited to the private sector. FDs working for charities,
particularly charities involved in the performing arts, have recently been at
the centre of their fair share of high profile accounting and tax-related

The Bournemouth Symphony Orchestra recently lost a VAT case, where it was
blocked from selling VAT-free tickets as it had a paid executive on its board
and was thus not a voluntary organisation. The Royal Philharmonic Orchestra,
meanwhile, has also endured periods of financial difficulty as it was forced to
the brink of closing down before long serving FD Richard Huxtable stepped in to
revamp the finances.

Kemp hasn’t had to fight any tax cases or conduct a financial rescue mission.
She is keen to keep things this way, which is why compliance with reporting and
tax requirements is one of her main priorities.

‘We are a charity and because we receive so much from public funding,
transparency and attention to the numbers is absolutely crucial. It is an
interesting comparison with a plc world. We need to be absolutely compliant with
the financial regulations, but that sits in hand with an understanding of what
is going on underneath the numbers and what is going on with costs and revenue,’
Kemp says.

One of the major challenges facing Kemp in this area is financial planning
and revenue recognition. The Royal Opera House takes bookings up to seven months
in advance, which requires thorough planning.

‘We have to have robust modelling that allows us to look far ahead and make
good judgement calls. I think the whole business planning part – the way we link
the scheduling with the financial modelling – is key, as well as how we actually
report to the Charity
and how we report for compliance purposes,’ Kemp says.

Read an interview with Richard Huxtable

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