The recession sent wake-up calls to all clubs—and left loud-and-clear messages about the critical need to properly define, and respect, the distinct roles and duties of owners, Board members, committees and managers.
On Club & Resort Business’ LinkedIn site last summer, amid the usual posts from club managers seeking fresh ideas for holiday party themes or suggestions for how to find seasonal workers, a membership director from a Michigan resort property that has a private club component started a new online discussion with this question:
“How do larger clubs use their Board of Governors? Over the years, ours has slowly taken a back seat, and I would like to see them take a bigger role.”
Almost as soon as the “ink” on this posting was dry, responses and comments began to pop up from other managers that generally fell into three categories:
1) Did you really mean to say “bigger” role?
2) Have you talked with your General Manager about this, and if so does he/she feel the same way?
3) If the answers to 1} and 2) are really “yes,” be careful what you wish for.
By the time reaction finally started to die down, the topic had sparked one of the site’s most substantial discussions in its history, both in terms of the number of comments received, and their depth and passion (six months later, it still ranks that way). It also drew in some general managers from prominent clubs around the country who don’t normally participate in such groups, but felt compelled to weigh in on the subject after word got around that the question had been posed.
“If your Board is taking a back seat, then you must be doing something right,” said one.
“Many GMs would like this scenario,” said another.
The fact that the question touched such a nerve is not surprising, given the times and their tenor. Clubs, and club managers, finally began to emerge last year from an extended period of hunkering down to make it through the recession—a period marked by an emphasis on short-term survival tactics that also subjected managers to intense scrutiny, and heightened performance expectations, from their ownerships and Boards.
So it was understandable that some managers might react with dismay to any suggestion that Boards could take on larger roles. But if they surveyed the landscape to objectively assess why some clubs were still standing and others had become casualties of the recession, those managers would see the real lesson to be learned about club structure and governance from the industry’s recent traumas. It wasn’t that Boards or owners should always take a back seat—but rather that the club business now requires a properly balanced sharing of the load and a clear understanding of who’s going to drive when, and for what purpose.
Around the same time the LinkedIn posting spurred such a negative, knee-jerk reaction, the McGladrey consulting firm was issuing a report on a series of seminars it had held featuring panels of general managers from private clubs throughout Florida. On the subject of club governance, McGladrey reported, the panelists “debated whether [governance] has been reevaluated sufficiently in recent times.
“Panelists reflected on the roles management should play, versus those of committees and Boards,” the McGladrey report said. “One general manager offered this outline: Board equals strategy; management equals operations; and committees equal recommendations for the Board.”
Lessons from Leaders
Even more powerful lessons emerged through the recession from the examples of leading clubs that, while well-positioned to withstand the economic challenges, still took steps during that period to further strengthen their focus on long-term strategy and assure that it would be properly implemented through an appropriate governance model.
At the 2013 PGA Merchandise Show held in January in Orlando, the Chief Operating Officer of Congressional Country Club in Bethesda, Md., Michael G. Leemhuis, M.A. Ed., CCM, PGA Master Professional, will present on “Future Trends and Issues: A Private Club Management’s Perspective.”
Leemhuis’ presentation, part of the Leadership track of the show’s education module, will be drawn from an internal strategic-planning process that was started at Congressional in April 2010. Even though the club has a substantial waiting list and was well-fortified to ride out the economic storm, it still wanted to take the steps to help it make well-informed decisions for whatever the future might have in store, and to retain its leadership standing.
Those steps started with the formation of a planning group, made up of an immediate past President, current President and another Board member, who would work with Leemhuis and the consulting team of Dale Lefever and Fred Laughlin. A group of 25 leading private club GMs was then asked to identify the national trends they saw having the greatest impact on their clubs over the next several years. For the resulting list, that group, along with 20 additional GMs, was then asked to rate the trends according to degree of impact on their clubs. Those ratings would then serve as guideposts to help Congressional’s planning group shape that club’s strategic plan.
As shown in the box below, improving management and governance emerged from the survey as one of the highest-impact trends. To Leemhuis, the message to be drawn from this is clear.
“Any club that wants to succeed in today’s world needs to take a good hard look not just at revenue streams and cost reductions,” he says, “but at their governance model and strategic plans as well, to ask ‘Is this right for where we want to go?’ ”
The answers for exactly how that model should look, and for what the particulars of the plan will be, will vary from club to club, Leemhuis stresses. But certain guiding principles, he adds, will always hold true. First and foremost, the club needs to be run as a business, with the Board setting strategic direction and professional management staff entrusted with day-to-day operations. And once a strategic plan has been established, it must be continually revisited and reassessed. “You can’t put it on a shelf,” says Leemhuis. “Ours took 18 months to create, but we still revisit it two or three times a year.”
|Impact of National Trends on Individual Clubs
% of surveyed general managers
rating impact of trend as very high or high:Intergenerational Issues (83%)
Increased Interest in Fitness (79%)
Impact of Technology (71%)
Improving Management & Governance (70%)
Emphasis on Family Programming (61%)
Demand for Casual Environment (59%)
Emphasis on Being Green (53%)
Changing Diets and Food Preferences (53%)
Popularity of Non-Golf Activities (36%)
Flat Growth in Golf (35%)
Tailoring Membership & Fee Structures (33%)
Non-Traditional Services & Amenities (24%)Source: Congressional CC survey, 2010
Managing the Process
While the recession highlighted the importance of a Board’s role in helping to establish and guide long-term strategic direction, the chaos experienced at many clubs during the period also shined a harsher light on structural defects that have long existed in many traditional private-club governance models. These flaws hamstrung many clubs’ ability to make effective decisions for dealing with the unprecedented challenges posed by the economic crisis—and, because those challenges brought threats to a club’s very existence, often proved fatal.
Heading the list of defects that industry leaders say were exposed by the recession are the overpreponderance of unnecessary operating committees, and the fact that many of the committees that are needed are overpopulated with ineffective or disruptive members.
The McGladrey report on its Florida meetings also highlighted a discussion among the assembled general managers about “the common problem of having too many committees that act in more than a purely advisory capacity.” The report added that “A consensus [also] arose that ‘just because you raise your hand and volunteer does not mean you are the right person for the job.’ ”
Congressional’s Leemhuis agrees that the trend is now toward “more compact committees, filled with 12-15 people prepared to do the heavy lifting. You don’t want to have committees of 25, with people who come to the meetings just to be there,” he notes.
The unabashed champion of the need for the club industry to go on a serious committee-reduction regimen has long been Michael McCarthy, Chief Executive Officer/General Manager of Addison Reserve Country Club in Delray Beach, Fla., and an active director on the national level for the Club Managers Association of America, as well as for its largest (Florida) chapter.
McCarthy says he hopes the recession may have helped open the industry’s eyes to the need to fix what he’s tirelessly cited as a critical impediment to clubs’ ability to move forward. But he is still troubled by reports he hears of “old-guard, free-standing private clubs, especially in the North, that are down under 200 members and in deep trouble, because they still don’t understand how they have to change” to appeal to the next generation of membership. Making that needed change, he adds, “starts and ends in the boardroom.”
Clearly Defined Roles
At Addison Reserve, in a governance structure that McCarthy acknowledges may be a bit on the “radical” side, there are now six committees: Finance, Audit, Grievance, Legal, Membership and Nominating. “No greens committee or social committee, or tennis or fitness,” he says. “No one to decide what color the tablecloths should be or how the golf course should be mowed—that’s all done by the professional staff.”
The structure only works, McCarthy emphasizes, because it was created, after he arrived at Addison Reserve in 2007, as part of a plan to redirect the member-owned club through a strategy that was proactive rather than reactive, and goal-driven rather than agenda-driven. The reshaped Board was given four primary areas of focus: hiring (or firing) one employee only, the CEO/GM; approving the budget; setting policy; and developing the strategic plan.
That’s not to say that members have no input on club activities. To the contrary, McCarthy reports, “clubs within the club” have flourished under the structure. “Book clubs, travel clubs, cooking clubs, financial clubs—you name it, we’ve got it,” he says. “They’re all organized and run by members, and supported by our staff. They’re just not set up as Board- or committee-level parts of the operation.”
The payoffs to be gained from functioning under this governance model were unveiled at the end of 2011, when Addison Reserve reopened its restored and expanded clubhouse that now offers a variety of innovative dining concepts (“Broader Perspectives,” C&RB, January 2012). The club has also renovated much of its Arthur Hills-designed, 27-hole golf course and made significant upgrades to its spa, fitness center and other facilities, as part of positioning itself to be out front in appealing to women and younger members who are the key customers of the future, McCarthy says.
“It’s a $24 million club operation that’s part of a $1 billion real estate development,” he says. “You can’t run it like a candy store. It’s by no means an easy job, especially when you’re striving for five-star performance in every aspect of the operation. But it’s much easier to accomplish when the Board leaves it to the professionals to achieve, as opposed to having committees, and people on them, who aren’t qualified, but still try, to make all the decisions that go into establishing and maintaining a high standard of excellence.”
In for the Long Haul
Another key component of effective governance, industry leaders agree, is establishing cohesion and stability by requiring longer terms of service from Board members—in particular, club Presidents—and being more proactive, and selective, about how Board candidates are identified and prepared for the job. At the same time, experts add, it’s important to have mechanisms that guard against anyone becoming too entrenched, and to continually inject fresh energy and perspectives into the governance mix. Further, general managers must do their part to ensure that Board duties aren’t onerous, and that those who do serve are properly appreciated by the staff and membership at large.
Addison Reserve’s nine Board members have three-year terms, McCarthy says, and no Board member can serve for more than two terms. “Boards that change every year just invite chaos and open the door for disgruntled individuals or groups who will drive personal agendas,” he feels. McCarthy also makes sure he limits Board meetings to a maximum of one and a half hours, by preparing and distributing detailed reports well in advance. He also ensures full transparency of all activity and decisions, to help all members and staff understand and respect the Board’s efforts to set the long-term direction for the club.
To help put the best-qualified and most committed members in Board seats, many GMs say that constant and “quiet” recruiting of future directors has become an important part of their jobs. “To secure good governance, it’s important to develop a stream of potential Board members and get them involved in the process,” says Congressional’s Leemhuis. “[Clubs] need to take time to develop a bigger pool of potential governors and assess their characters, work ethic, and personality.”
One panelist for McGladrey’s Florida seminars, it was reported, described a way to “connect the dots between useful committees and club leadership, by having a full-time leadership committee that has the sole purpose of identifying and promoting the future leaders of the club.”
Critical Choices for Critical Decisions
The need to pay close attention to who’s on a club Board (and who’s not), and to what the proper structure should be for how those who are on it should function, was all shown to be especially critical during the recession, when many clubs were confronted with an unprecedented wave of make-or-break decisions that needed to be made about initiation fees, membership categories, tax structures, capital plans and other fundamental aspects of the business on which the futures of their operations suddenly hinged.
All of this created something of a perfect storm of opportunity that was potentially “great for consultants,” jokes William P. McMahon, Sr., Chairman of St. Louis-based McMahon Group. But, he adds, there was often little chance to help clubs with poorly structured governance models.
Of these situations, McMahon adds, the most vexing can often be traced to a club having a one-year term for its Board President. While some clubs can make this model work, he says, more often it proves to be a “fatal flaw” that impedes any significant progress towards real long-term implementation of a strategic plan.
“Only about one-third of private clubs have multi-year terms for their President,” McMahon says. “Others tell us they want to make the change, but we really haven’t seen it take hold. There seems to be a ‘you first’ mentality that’s still keeping a lot of clubs from doing it, even though they know it would help slow down the strategic planning process to a more manageable and effective pace.
“Every time you change Board members and committee chairs—and especially club Presidents—you change the character of how the club is directed,” McMahon explains. “When you do that each year, there’s a good chance one of two things will happen: There will either be chaos, as a whole new wave of agenda items are introduced, or everything that the previous President and Board had set in motion will grind to a halt.
“It really takes any Board member, and especially a President, most of the first year just to learn the ropes,” McMahon notes. “Often after nine months, if they know they’re only going to be in for one year, they’re already starting to prepare to turn things over to the next President. But if you can get that second year established, especially with the right person in the position, we find there’s a much better chance of keeping in sync with the strategic plan and bringing about meaningful change for the club.”
The good news for the industry, adds McMahon Group’s President, Frank Vain, is that ample evidence can now be found for how the recession caused even well-entrenched clubs to recognize how significantly the business is changing. That in turn forced those clubs to search for new ways to respond and stay viable, be it through a revamped governance model or other adjustments in membership or fee structures.
“There’s no doubt the message is getting through that governance models must do a better job of separating the strategy component from management, and that Boards should get out of the way of letting professional talent run the club, as they’ve been hired to do,” says Vain. “That promises to cut down on some of the running around in circles we’ve seen in the past, where management chases every new idea a committee wants to pursue, which isn’t productive for anyone.”
Vain also notes examples of more clubs that have taken successful steps to install strategic planning in their culture, by instituting annual Board retreats that are specifically intended for long-term reviews, with significant side benefits in terms of developing greater understanding and mutual respect between members and staff.
He’s also seen effective formation and use of “ambassador groups” that are being written into strategic plans, to emphasize participation in membership recruitment by newer club members. “[Membership] committee members who are in their 50s and 60s no longer have the kinds of connections to the target markets as those who have recently joined and are more likely to know people through their kids’ schools and other groups,” he says. “It’s basic networking and a good way to get the right people involved.”
Perhaps most encouraging of all, Vain cites examples of clubs that have discovered that, while they may have lost some members to the recession, those who remain are more than picking up the slack. “One club that has 50 fewer members found that its volume was up 15% this year,” he says. “I think that might show we’ve been through the eye of the needle, and that the members who are still around have made a commitment to their clubs as being important to their lifestyle. If that’s a trend that holds, it can help Boards and managers do a better job of focusing part of their strategic planning on providing what [remaining] members want and need.”