Protect, Preserve, and Grow Club Assets
Protect, Preserve, and Grow Club Assets
Why every Board Room meeting should include a conversation about Growth.
Core Value: Strategic stewardship
Best Practice: Protect preserve and grow the assets through comprehensive capital planning that addresses obligatory and aspirational improvements within a unified facilities master plan.
Has your board ever had a discussion about growing the club’s balance sheet? The key balance sheet metric for measuring growth in clubs is Net Worth which we believe is the single most important data point for any club. Non-profit clubs generating capital income in excess of the depreciation expense are growing (net worth) and those generating less capital income than depreciation are shrinking (net worth). Growth in clubs results from generating the necessary capital to fund a unified facilities master plan which addresses both obligatory and aspirational improvements. The plan is critical to protect, preserve, and grow the club’s assets.
Increasing your club’s net worth is important because it forms the foundation of well-maintained and relevant facilities, which along with access to special people and programs, is the ultimate promise of club membership. The facilities are the vehicle through which the club drives engagement and builds a sense of community. Therefore, facility maintenance and enhancement are a critical function that requires the leadership’s full and consistent attention. To have the greatest chance of sustained success in the new economic and demographic environment, clubs must provide an excellent recreational experience along with up-to-date dining and social facilities that are in tune with current consumer preferences. Offering a broader variety of activities and services in addition to the key dining and golf offerings is a strategic response to the greater emphasis members and prospective members now place on these once less-important services and amenities (i.e. fitness, group exercise, aquatics).
You might ask, “Should my club be growing when we are a not-for-profit business?” Isn’t the club business different because we have a fixed number of members and fundamentally operate on a break-even basis each year? We must grow to remain relevant, improve membership satisfaction and loyalty and continuously and consistently recruit new members. Ninety percent of not-for-profit clubs set the operating ledger to break-even, excluding depreciation. The financial growth in a club stems from the capital ledger requiring capital income in excess of depreciation. This is a key point to understand in not-for-profit clubs.
Despite its importance, most clubs struggle to manage facility upkeep and planning future improvements effectively. It is a capital-intensive process, yet the rotating board structure, all-too-frequent management changes and concerns about member pushback derail efforts to ask the members for the capital to renovate or add facilities. Without a master plan to guide orderly and cost-effective facility development and a financial structure to regularly replace and grow the assets, appearances fall below acceptable standards, and the member experience stagnates. The best positioned and maintained clubs continue to prosper and grow. Many are benefitting from a “flight to quality” as members defect from lesser performers. Their success validates the benefits to be gained from thinking strategically, maintaining existing facilities with strict attention to detail, and investing in new amenities to respond to changing social habits and recreational pursuits.
What does growth look like in a not-for-profit club? The answer is found in investment in property, plant and equipment. As a matter of fact, 80% of the assets in the average club are in the net property, plant, and equipment line of the balance sheet. Net Worth is not a new term in the corporate world, but we believe it needs to be embraced in the club industry based on the fact that 63% of clubs are not growing Net Worth at or above the 3.5% per year recommended by Club Benchmarking. Is your club meeting the recommendation? Are your facilities up to date? Do you have a great resort pool, an updated irrigation system, a dynamic fitness center and great casual dining? The member experience is enhanced by great facilities which are the result of great capital planning and execution. Clubs with great facilities are typically successful and clubs with lackluster facilities are usually not successful. The quality of a club’s facilities and the strength or weakness of its financial outcomes go hand in hand in most instances.
Why should you be concerned about growth of your club? As fiduciaries of the club, managers and boards are responsible for growing the business. In fact, the definition of fiduciary is just that – one who is entrusted with preservation and growth of assets. It is one of our primary functions as professional and volunteer leaders and yet industry data shows that 66% of all clubs have net worth that is stagnant or declining. Clubs have many assets including the physical structure, the golf courses, fitness centers, tennis centers, restaurants, boat slips, and all the equipment that fits into those spaces. As leaders, we must keep moving the club forward in investing and growing our property, plant and equipment which, on average, form eighty percent of our assets. We must stay focused on planning to preserve, protect and grow the assets – which means focusing on forward-looking capital planning to assure we can keep our property, plant and equipment, fresh and up to date. A unified master facility plan coupled with a forward-looking capital plan is the vehicle for doing so.
Developing and Maintaining an Effective Strategic Plan
Developing and Maintaining an Effective Strategic Plan
The strategic plan is vague. The majority of clubs have them and they were usually developed when a club had a major challenge. This was often when the need to make significant facility upgrades was realized and the club had no funds available. It was when membership was declining, with new members not joining. Or it was when the board was not on the same wavelength as the members on basic philosophical issues like dress codes, golf only attitudes, youths against seniors’ schisms and attitudes of frugality strangling a club’s ability to serve its members.
One way or the other strategic planning has become the best method of bringing members and their boards together to understand what the club’s purpose is, in other words its mission, so then all members could work together to achieve that purpose in a spirit of compromise to achieve an end goal.
Just what is strategic planning?
Private Club strategic planning is essential to do and is effective for achieving and maintaining club success in our ever changing world. Its process, is accomplished by a club’s Board and General Manager. Don’t let it be done by selecting a special group of older members or past presidents. If this is done, you will get a plan for the past, not for the future. Only the current Board with the General Manager should strategic plan because if the Board develops it, then the Board, future boards and the General Manager will follow it. The Strategic Plan’s continued use, however, very much depends on a club’s General Manager. He or she will be most responsible for keeping the plans alive.
The Strategic Planning Process
Strategic plan development takes six months to complete. It starts with a comprehensive, membership survey having initial focus groups to identify strategic issues from the members’ viewpoint. Then with survey results in hand, the Board, General Manager and strategic planning moderator review the survey results, do the strengths, weaknesses, opportunities, threats (SWOT) analysis, identify the club’s key success factors, and then develop the club’s Mission statement defining:
- Who the club serves,
- What the club provides,
- What quality level does it strive for, and
- What makes the club unique in its marketplace.
Once the Mission is determined, the next step is setting goals with specific action plans necessary to achieve each goal. The strategic planning’s success greatly depends on the plan’s moderator and his/her organizational skills and knowledge of the club world. The club world is very different from the for-profit business world and even the charitable organization world. A club’s members are both owners and customers, one-in-the-same. This complex relationship with each member of the club affects this duality relationship which can make club governance and accomplishing major achievements difficult. This is where strategic planning becomes so necessary as it resolves issues amicably so the club can move forward in achieving its success in service to all members.
Maintaining A Strategic Direction
Having a good strategic plan is one thing, following it year after year is quite another challenge. Almost always the strategic plan was developed to help solve a major club challenge. It was usually very effective in resolving that one thing, and then it, the plan, is laid aside as other ongoing issues arise. The Board that developed the plan, change. A new president is elected who has new ideas on where the club should go. It is at these times that it is most important for management to keep the Board focused on the strategic plan, to keep the plan relevant as a guide for directing the club’s future. Only management can do this, so the General Manager becomes the custodian and promoter of the strategic plan. If a manager leaves for another club or retires, this becomes when a new or refreshed Strategic Plan should be developed by both the Board and new General Manager. It is critical that when managers change, the new General Manager and the Board need review and refresh the old strategic plan.
The most forgotten aspect of effective strategic planning is, “Following it”. This means when every important club decision is made, this Board and General Manager should ask the question, how does our action comply, or agree with the club’s Mission? The club’s newsletter should always state the mission. The Board and General Manager should have an annual planning retreat to reflect on the year past and with a view to the year ahead so the primary strategic objectives for the year ahead are endorsed by the new Board each year. Only by following this practice will the governance and management be effective in leading the club in good and bad times.
Strategic Planning – The Key to Club Success!
From an old Japanese proverb, truth is learned.
“Vision without action is a daydream” “Action without vision is a nightmare”
We in club governance and management have the responsibility to lead. Only through this leadership will clubs succeed.
Embrace data-driven leadership rooted in strong governance principles and transparent communication to all stakeholders
Core Value: Informed Leadership
Associated Best Practices
- Embrace data-driven leadership rooted in strong governance principles and transparent communication to all stakeholders.
Embrace the Data
High performing clubs embrace data-driven leadership rooted in strong and proven governance principles;and they communicate transparently to all stakeholders. The unfortunate reality is that too many underperforming or dysfunction club board, who are ELECTED and therefor have a MUCH higher level of actual fiduciary responsibility to the club, allow the Finance Committee, who are mostly APPOINTED, to ‘hijack’ the agenda andbecome de facto boards in many cases.Board members need to understand their legal role and also have to recognize that data, NOT emotion, has to lead their decision-making in the boardroom.
Most dysfunctional and underperforming boards haven’t talked about KPI’s (Key Performance Indicators), don’t understand industry trends and tend to have a narrow vision of decisions—seeing only the expense, not the member value enhancement or ROI of the cost.Or, don’t recognize their role and responsibility to grow the club’s net worth or value, real orin satisfaction/engagement data.
Ultimately club executives have to find a way to get emotion out of the board room as best as they can. It will never fully be gone but with better data and the understanding of what the data means, what it’s telling us and what the trend line is saying, decisions can be made on a more solid basis. Board members can’t be making decisions about something they don’t fully understand. Opinions are disputable, data is not.
All too often, the performance of board members becomes hindered because they don’t understand the data or are intimidated by the financial experts in the room. This is why it is so important for stakeholders to be educated continuously. Then they can understand what the data is, what it’s saying, and what the outcome should be as a result.
Conduct mandatory and comprehensive orientations for all stakeholders
Core Value: Informed Leadership
Associated Best Practices
- Conduct mandatory and comprehensive orientations for all stakeholders.
Orientation is not Optional
We believe the highest performing clubs do a great job of educating their consumers not just once, but continuously. It’s the reason we urge every club to conduct mandatory and comprehensive orientation for all stakeholders (Board, Committee, New and Existing Members and Staff). We think education is so important that you should even be educating prospective board members, prospective members and prospective employees! Explain what they can expect in the role and what you will expect from them.
Stakeholders must go through a mandatory—not discretionary—orientation process to ensure they are fully informed and educated. If you want to maximize their performance and ensure that they “hit the ground running” in their role, you’ve got to give them the information they need to be successful right out of the gate. You would never expect a new employee to know all of their roles and responsibilities without first going through an orientation. Why are board or committee members any different?
Provide stakeholders with the necessary information and teach, train and educate them to be the best board and committee members they can be. When you do, you dramatically reduce the learning curve that typically exists. If new board/committee members understand where you’ve been, where you’re going and why, it takes their focus off of worrying about when to talk in meetings and how to conduct themselves. Orientation helps eliminate that awkward transition period and helps your stakeholders be knowledgeable, well-informed and highly functional decision makers for your club
Adopt the fact-based, private club business model and related financial best practices and Key Performance Indicators
Core Value: Informed Leadership
Adopt the fact-based, private club business model and related financial best practices and Key Performance Indicators
A club board is more likely to achieve alignment and work together productively if everyone in the room is speaking the same language, but a disconnect often occurs when it comes to discussions about club finances. The communication gap can be bridged through understanding of the financial model of private clubs and adoption of fact-based financial best practices and key performance indicators specific to the club industry.
Financial models are a central element of understanding both industry dynamics and the performance of an individual business within a given market in terms of its financial sustainability and long-term success. Such models exist to unearth and convey the key drivers of financial success common to the competitors in a given industry. Investment bankers, financial analysts and consultants spend significant money developing financial models so they can understand how revenue, costs, margins, overhead, leverage and other financial metrics relate to profitability and growth. The quest for fact-based insight is a direct and necessary response to unyielding competition and business challenges and the club industry is not immune. High-performing clubs embrace the power of data-driven leadership and the central tenets of the demonstrated financial best practices.
The club industry is a fragmented, cottage industry that until recently did not have access to the data and insight necessary to truly understand itself. That has changed. Financial best practices and the associated Key Performance Indicators now exist to clearly illuminate the drivers of financial sustainability. The Club Leadership Alliance is committed to propagating financial best practices and associated KPIs that will benefit the industry. Visit Yahoo Finance, Google Finance or any financial website and type in any stock ticker symbol (regardless of company or industry) and you will get a very simple, common view of an income statement. This common view can be used to assess the financial outcome of a particular company. Understanding the financial model of clubs requires a similar common view of the finances. Through significant effort, a common financial framework has been identified that can, and does, apply to every single private club regardless of its size, type, location or quality. That common financial framework, developed and propagated across the industry by Club Benchmarking, provided the context necessary to discover the common financial best practices and the KPIs.
Core Concepts of the Common Financial Framework for Clubs
- Separation of operating and capital monies and accounting for separate bottom line operating and capital results is a necessity.
- The sources and uses of money on both the operating and capital ledger are the same for all clubs regardless of their geographic location, size or level of service. This “law of commonality” has been confirmed through extensive analysis of club industry data.
Tips for Adopting this Best Practice
- Review, understand and adopt the fact-based, financial best practices.
- Embrace benchmarking leveraging the common financial framework and the associated KPIs.
- Use the KPIs to assess your own club’s financial health and identify challenges and opportunities.
- Utilize fact-based insight emerging from the benchmarking exercise to make decisions that will positively impact future outcomes.
Perform regular team engagement surveys, compare to benchmarks and act on results.
Core Value: Empowered Management and Team
Associated Best Practices
- Perform regular team engagement surveys, compare to benchmarks and act on results.
The level of employee engagement in your club has a direct impact on the club’s culture and long-term financial success and the difference between engagement and satisfaction is very important when it comes to employees. While a satisfied employee is generally content with their role and responsibilities relative to their compensation, engaged employees believe that their work contributes to the club’s success in a meaningful way, aka they feel empowered. They are invested in their job with a strong desire to contribute to the club’s success. They understand the vision and mission. They go the extra mile for the members and for their teammates and supervisors.
Just as soliciting member feedback is the first step in evaluating and improving the member experience and club culture, creating a positive workplace environment requires employee feedback in order to fully understand the staff’s perspective. Monitoring and measuring employee engagement on a regular basis and acting on those findings is considered a best practice because recruiting and retaining team members who are reliable, passionate and motivated is essential to a club’s success.
Club Benchmarking member research confirms that a member’s relationship with the staff is more highly valued than the member’s relationship with their fellow members. In contrast, our employee engagement research indicates that more than 30% of club employees are at risk for turnover.
In the club environment, where the staff/member relationship is so important, losing a valuable employee not only affects other employees, it affects the members. In many areas of the country, competition for top talent is fierce, and for any business, the cost of training new hires is steep. Effective employee engagement strategies improve financial outcomes by reducing staff turnover, improving productivity and efficiency and retaining members at a higher rate.
Achieving strong employee engagement requires the board and management to prioritize understanding and improving the quality of club’s workplace environment and the first step is to solicit feedback through an employee engagement survey. Club leaders who are afraid of the truth and daunted by the work required to address issues tend to avoid taking that first step, and in doing so they miss an opportunity to reap the many benefits of an engaged, empowered team.
Tips for Adopting this Best Practice
- Commission a professional employee engagement survey to establish a baseline understanding of engagement and workplace culture at your club.
- Develop an action plan based on insights from your first survey.
- Repeat the process annually or more often to measure results.
- Apply insights to your employee orientation program with emphasis on positive workplace culture, empowerment and continuous improvement as a team.
Continuously educate stakeholders (Board, Committees, Members, Staff) regarding best practices and important societal trends impacting the private club industry
Core Value: Informed Leadership
Associated Best Practices
- Continuously educate stakeholders (Board, Committees, Members, Staff) regarding best practices and important societal trends impacting the private club industry.
Knowledge is Power
The need for constant education of stakeholders (Board, Committee, Members and Staff) has never been as critical as it is today. The foundation of a healthy organization is built on trust and confidence which stems from information and education. Therefore, educating stakeholders continuously regarding best practices and important societal trends impacting our industry is essential for creating a successful club.
We encourage club leaders to “memorialize the standards” so everyone knows what the standards are, how they work and what the best practices are surrounding those standards. Use every opportunity to educate your people to ensure they know their roles and responsibilities and how they connect to the other positions’ roles and responsibilities. When you create a culture where continuous education is commonplace, you set the stage for board members, committee members, members at large and your employees to take learning seriously as part of their job in the organization.
How do you ensure education is weaved into every position at your club? Make it a priority! Every agenda (Board meeting, Committee meeting and staff meeting) should include an agenda item for education. Talk about societal trends and how they are impacting your club. Talk about industry trends and what other clubs are finding successful. Ask questions and get the discussion going. Consistency and continuity are crucial for creating informed and educated stakeholders.