Godfrey Worsdale had mixed feelings when Arts Council England (ACE) announced the winners and losers under its new national portfolio system in March.

He is director of the Baltic centre for contemporary art in Gateshead, which will get nearly £3m in 2012-13 after becoming one of the organisations that replaced the previous regularly funded portfolio.

But he is also the chairman of the Visual Arts and Galleries Association (Vaga), which lost all its arts council funding. On balance, Worsdale thought ACE took a sensible approach to tackling a 14.9% cut to its grant-in-aid from government.

“Because of my roles at Vaga and Baltic I guess I can see both sides,” says Worsdale, who joined Baltic in 2008 from the Middlesbrough Institute of Modern Art (Mima).

“My feeling within the broader cultural sector is that the arts council did a very good job in quite tricky circumstances. I suppose the big question, given the uncertainties about the world economy, is whether this is part of the pain or all of the pain. It remains to be seen.”

Baltic itself is on the up, with its £3m award making it ACE’s highest-funded visual arts organisation. This year is particularly important as it is about to host the Turner Prize.

The exhibition opens on 21 October and it is the first time in 27 years that the prize will be shown at a non-Tate venue, and is only the second time the award has ventured outside London.

Worsdale says that the staging of the Turner Prize has built on what he describes as a “fulfilling and rewarding relationship with Tate”.

Baltic hosted an Anselm Kiefer show in 2010-11 that was part of Artist Rooms, the collection of modern and contemporary art jointly owned by Tate and the National Galleries of Scotland.

And in conjunction with Tate Connects, an initiative to develop partnerships between Tate and other UK galleries, Baltic opened an exhibition featuring Damien Hirst’s work Pharmacy in October 2009.

Baltic is now looking forward to an influx of visitors keen to see the work of this year’s Turner Prize nominees: Karla Black; Martin Boyce; Hilary Lloyd Man; and George Shaw. Worsdale says hosting the prize fits in well with the Baltic’s approach to audience engagement.

“It is such a well-recognised brand in contemporary art, so we know that it’s an exhibition that will get people talking, and people talking about contemporary art is very central to our activity.”

Worsdale also points out that the Turner Prize is a national award, so it makes perfect sense for it to move around the country, particularly since the regional contemporary art scene has changed dramatically over the past ten years, at least in terms of new galleries.

“If you look at the art landscape now in comparison with the mid-90s, London might have been lacking a Tate Modern, but the rest of the country was lacking a Nottingham Contemporary, a Mima, a Towner, a Turner Contemporary – the list goes on and on. We are a very, very different nation now.”

Baltic was one of the new generation of galleries that opened after 2000, boosted by a growing interest in contemporary art among the public and the lottery money that made new capital projects possible.

But progress for the £46m Baltic has not been as smooth as some of its peers. One of the main problems is that it has now had four directors since it opened in 2002.

The first director, Sune Nordgren from Sweden, left a year after the gallery opened. There were concerns over his control of the business side of the Baltic and the arts council questioned the adequacy of the organisation’s financial controls.

Nordgren’s successor, Stephen Snoddy, resigned after 11 months in the job. He was suspended after being arrested on an assault charge, which was proved unfounded, though he declined to return.

Next came Chicago-born Peter Doroshenko, who stayed for three years, but left not long after staff made allegations of victimisation and ineffective management.

Following this upheaval, Baltic’s trustees considered splitting the business and artistic roles of the director into two posts, but Worsdale was appointed to fulfil both functions.

“The organisation has always had huge potential, but I felt that Baltic’s achievements have been  overshadowed by slightly overblown, frenzied reactions to the different things that had gone on here,” says Worsdale. “What it needed was just to be able to steady down and do what it does well.”

But the problems at Baltic obviously needed more than just a steady as she goes approach, as Worsdale has made some pretty big changes.

He has repositioned the front-of-house attendant team under the management of the learning and engagement department, which affected more than half the employees in the organisation. He also restructured the senior management, taking a layer of directors out.

Lastly, he simplified the exhibition programme into three seasons a year in order to make it easier for visitors to understand.

In late 2009, Baltic also gained a new chairman, Peter Buchan, the chief executive of Newcastle-based Ryder Architecture. At the same time a new chief curator, Laurence Sillars, joined from Tate Liverpool.

Much of Worsdale’s experience in gallery management was gained while developing the £14.2m Mima gallery in Middlesbrough.

“In my first week I interviewed and appointed an architect and set out to produce a brief from absolute scratch, which was a fabulous experience,” says Worsdale, who is pleased with his legacy in Middlesbrough.

“It has been a tremendous success. The collections have grown exponentially, the Art Fund has included it in its AFI scheme, and the recognition for its programmes has been tremendous. It has really seized a place in the art world.

"Mima is my local gallery, as I still live in that part of the region, so I am pleased to see it go from strength to strength.”

While things seem to have been going well at Baltic, this is obviously not true for Vaga following its loss of ACE funding. But Worsdale is putting a brave face on this.

“It is an interesting one for Vaga,” he says. “Vaga really needs to be an independent, member-led organisation and being in receipt of arts council funding was a slight misnomer because you aren’t really an independent organisation if you’re heavily dependant on a stakeholder’s resources.

"In that respect it means Vaga has an opportunity to be really independent and secure that independence by serving its members interests and being given a free hand to represent those members’ views.”

Worsdale is keen for Vaga to make this transition from ACE-supported association to genuine membership body.

“Now is the time that we really need a Vaga. We need its importance to be understood and we need to see Vaga making an impact on behalf of its members and the wider arts.”

Having an impact on the wider arts sector is something that Worsdale is hoping to see the Baltic do as well. One of the gallery’s roles is to coordinate Turning Point, a national consortium based on regional networks of artists, arts professionals and arts organisations in England that are looking at ways to strengthen the visual arts.

Turning Point was initiated by the arts council, but responsibility for its development has been passed on to the sector.

Its early days for this new arrangement and, like Vaga, Turning Point’s precise future role is unclear. But overall, despite the cuts that visual arts organisations are having to make, Worsdale is confident that the sector is resourceful enough to move forward.

“We are a resilient sector and have never been one that has had lots of resources anyway, so even in an organisation as large as Baltic we are always looking at ways of getting the absolute best outcome for our investments and to be as efficient as possible,” Worsdale says.

“I think that it is a defining characteristic of the visual arts.”

Baltic at a glance

The Baltic opened in July 2002 and its inaugural exhibition, B.OPEN, featured work by Chris Burden, Carsten Holler, Julian Opie, Jaume Plensa and Jane & Louise Wilson.

Plans for the gallery began in 1991 when Northern Arts announced an ambition to achieve “major new capital facilities for the contemporary visual arts in central Tyneside”.

Work started on Baltic in 1998 and the architect was Ellis Williams Architects. Major funders included the National Lottery through Arts Council England, Gateshead Council, Northern Rock Foundation, the European Regional Development Fund and One NorthEast.

Baltic has hosted more than 40 exhibitions and welcomed nearly four million visitors since opening. Godfrey Worsdale is its fourth director after Peter Doroshenko, Stephen Snoddy and the original director, Sune Nordgren.

Baltic received £2,813,486 in 2011-12 from Arts Council England in the last year under the Regularly Funded Organisations scheme. Under ACE’s new national portfolio system the gallery will receive £2,963,000 in 2012-13, £3,034,112 in 2013-14 and £3,112,999 in 2014-15.

Godfrey Worsdale at a glance

Godfrey Worsdale started his career in the early 1990s at the British Museum, working in the department of prints and drawings. At the same time he established Cultural Instructions, an independent gallery for contemporary art in London.

He moved to Southampton City Art Gallery as a curator in 1995 and became its director within three years. From there he moved to the north east to set up the £14.2m Middlesbrough Institute of Modern Art, which opened in 2007.

Worsdale co-curated Mima’s debut exhibition, Draw, which featured drawings by artists such as Pablo Picasso, Jackson Pollock and Andy Warhol exhibited in relation to works by contemporary artists including Damien Hirst, and Gavin Turk.

Worsdale joined the judging panel of the Zoo Art Fair in 2007 and the Paul Hamlyn Awards in 2008. He is the chairman of the Visual Arts and Galleries Association.

He joined Baltic as its director in November 2008. He is a judge of this year’s Turner  Prize, which Baltic is hosting.