The art of the turnaround

This time last year things were looking pretty bad for Watershed’s bottom line. Covid had taken its toll, audiences were still down, public funding was at a standstill and the cost of everything was going up. We began the year with a deficit budget and were looking at losing over £250,000.  
 
Thankfully our reserves had been topped up by the Cultural Recovery Fund, so these losses were temporarily manageable, but not sustainable. Things had to change.  
 
We began work with our board and staff on profitability, turning to a culture sector classic Michael M. Kaiser’s The Art of the Turnaround for inspiration. We found a text full of wisdom, but also somewhat outdated.  
 
Kaiser begins with ten rules for success which include restructuring the board to boost philanthropy, focusing on large donors and only using positive messaging. These are at odds with Watershed’s focus on inclusion, togetherness and authenticity. But just discussing the rules gave us confidence to follow our instincts and this year we will close our books closer to £150,000 in profit.  

Guiding principles

There is still work to do, and success isn’t only down to us. There were external factors at play, and we couldn’t have done it without our audience’s support and loyalty. But we want to share our ‘rules’ – or guiding principles – that have informed Watershed’s approach to the turnaround.

1.    You can’t save your way to health

This is one of Kaiser’s rules and remains true and vital. The pandemic followed years of underinvestment in the sector. We had made all the cuts and savings that could be made. We needed ambition and vision to navigate uncertainty and build momentum. So, we invested in award-winning toilets and announced the launch of Undershed – a new immersive gallery. 

Careful investment gives people something to get excited about, builds new opportunities for income development and creates a buzz.  

2.    Centre your values

It is tempting to cut back on work that doesn’t immediately contribute to the bottom line – like inclusion, access or climate work. This is a terrible idea. Values are what makes an organisation distinctive, they bring in new audiences and make the future possible. So, during the hardest of times, we became an accredited Real Living Wage employer, a vital part of running an inclusive organisation. 

Kaiser encourages organisations to single mindedly share good news, but being honest is one of Watershed’s values. When we shared that times were hard, our audiences helped out with messages of love and with financial support.  

3.    Think in three horizons

In challenging times, it’s easy to get stuck in an operational, fire-fighting mindset and to forget about tending to the future. Kaiser says leaders must have a plan; we would add that the plan needs three horizons. 

We have worked with International Future Forum’s Three horizons model for years and find it useful to guide conversations about the future towards meaningful action. The framework acts as a map, helping us work out where we are, where we want to be and how to get there. It helps build common language and vision and to avoid a ‘business as usual’ mindset. Thinking in three horizons has helped us develop Watershed Wild and Generous and given us a future-orientated vision to share with audiences, alongside the challenges of short term sustainability.  

Continues…

A queer-centred launched party for a screening of Barbie was a great success. Photo: Charlie Williams

4.    Focus on increasing profit not just revenue

When you need to increase audience numbers, it’s tempting to give things away, but you can end up giving discounts to people who would be happy to pay full price. So, we took an intentional approach to increasing margins. A cross-organisational working group empowered staff to come up with ways to achieve our aims. 

One was getting people to spend more money on snacks and drinks in the cinema. We had been selling bagged popcorn, but it was displayed as if we didn’t want to sell it – partly because cinephiles don’t love the sound of rustling. But popcorn is synonymous with the cinematic experience and a potent signifier for new audiences.

A thorough analysis of its potential profit by our Front of House Manager resulted in the purchase of a popcorn machine, taking our profit margin from 70% on bought-in bags to 90% on boxes, of which we sold 5,500 which contributed c.£15,000 to the bottom line.  

5.    Test out ideas

Taking an experimental approach to business development is vital but you need to know if it’s successful and to stop if it’s not. Screening Barbie might have seemed a no-brainer for most cinemas, but it was unusual for Watershed, as such commercial films are well served by multiplexes AND cost some 20% more to screen. Our hypothesis was that Barbie would increase trade during quiet summer months, bring in new audiences and increase the sales of cocktails. A queer-centred launch party with love song karaoke was an added bonus. 

The Barbie experiment was a great success. We attracted BBC Points West to cover the launch raising our profile and attracting 46% of bookers new to Watershed. It provided a brilliant kickstart for our cocktail menu, which went on to generate over £45,000 in the year.

A more permanent pivot to the commercial mainstream cinema would not give us the margins we need and would reduce audience choice. Instead, the experiment gave us the confidence to think about ‘eventising’ more of our core programme. We went on to produce an immersive Rocky Horror Show, Stop Making Sense the Gig Edition and we have some special events planned for the forthcoming Love Lies Bleeding.     

Watershed doesn’t have all the answers. Due to inflation, we’re back to deficit this financial year, but we probably won’t go bust as long as we stay focused, keep communicating and do what we think is right.   
 
What rules or guiding principles would you add to these? 

Clare Reddington is Chief Executive Officer at Watershed.
 watershed.co.uk/
@wshed | @clarered

Clare will be speaking about these guiding principles and the realities of leading a digitally confident cultural organisation at the Digital Works Conference at Leeds City Museum on 24 -25 April 2024. You can get tickets here.