Start a serious discussion about capital investment in your clubIf just one rule could be instituted in every club boardroom with the goal of making the entire industry healthier, it would be this… Every time a Board member is tempted to bring up the subject of F&B profitability, they have to stop themselves and replace that topic with two critical questions:

  • What are our future capital needs?
  • What are our projected capital resources?

Capital planning is at once the biggest challenge and the best opportunity for improvement in clubs, and yet few clubs seem to fully recognize its importance.

There are two easily calculated measures that managers and boards can use to gain keen and immediate insight into their club’s capital situation: Net Worth (owner’s equity in a for-profit club and unrestricted net assets (UNA) in a not-for-profit club) and the Net Available Capital to Operating Revenue Ratio.

Understanding the club’s Net Worth over time begins by assembling ten years of audited financial statements. Search the documents for “Owner’s Equity” if you’re a for-profit club or “Unrestricted Net Assets” (UNA) if you’re a not-for-profit club. Enter the number for each of the ten years into a spreadsheet and plot a simple line graph using that data. The resulting graph shows your club’s net worth over time and clearly illustrates whether your UNA is increasing, going sideways or declining.

The chart below shows a real-life example of UNA or Net Worth over time, plotted in this case by Carmel Country Club in North Carolina. The club’s impressive growth, from a net worth of about $12 million in 2004 to more than $30 million in 2016, is a direct result of a strong commitment to capital investment on the part of club’s Board and Management. The club’s consistent cycle of investment has, over time, produced amenities that increase the value of being a member of the club. Strengthening the club’s value proposition supports increases in initiation fees and dues and as a result, the club’s UNA is on a very healthy upward trajectory..

Plot the net worth of your club over timeThe second exercise, calculating your Net Available Capital to Operating Revenue Ratio, draws on the financial statements you gathered to study Net Worth. Using data from the financial statements, calculate your club’s earnings before income taxes, depreciation and amortization (but after covering expense of interest on debt). The result of that calculation is called Net Available Capital. It is the money remaining at the end of each year that can be used to pay down debt, make capital investment or put money in the bank.

Analysis of industry data shows that the healthiest clubs generate Net Available Capital equivalent to between 12% and 15% of total operating revenue every year. The number may be slightly lower in very small clubs. One quarter of clubs generate 5% or less (capital starved clubs) and at the high end of the spectrum, a quarter of all clubs generate more than 17% (capital rich clubs). Half of all clubs aren’t generating the necessary capital over time. If your club’s Net Available Capital is below 11% and especially if you are near the 5% to 6% range, you are very likely feeling the stress of too little capital – you may even see the evidence when you look at your physical assets.

Return on equity is measurable in private clubs

Those two quick, but critical, ratios will yield great insight. Now let’s address how to use the ratios as a catalyst for constructing a plan. There are three key points related to capital planning and aligning a Board and membership on this important issue.

  1. Industry data shows that clubs investing continuously over time have a higher rate of return on equity than clubs restricting investment. Capital investment is a momentum game, meaning the more you invest, the more money you will generate for further investment, through higher capital income. The less you invest, the less money you will generate because you won’t be attracting members willing to pay a reasonable initiation fee to join the club. During the last financial meltdown, many of the clubs that reduced or eliminated their initiation fee are now capital starved clubs.
  2. Every club should have a capital reserve study that looks out at least ten years. We believe that study should be conducted by an experienced 3rd party, professional firm. The study becomes the basis for your club’s needs over time which will allow you to focus on determining where the resources will come from to meet the needs.
  1. Club Benchmarking data shows clubs must focus on a tangible value proposition by continuously investing to create value if they are to succeed over time. If a club is focused only on cost cutting and not the value proposition, the data shows those clubs are likely to get swept into a cycle of decay that will be difficult if not impossible to reverse.
Read more

General Manager’s Perspective

collaboration_square.jpgThe private club industry in the United States has been a work in progress for more than 200 years. Clubs are deeply grounded in history and tradition, which may help to explain why the pace of change tends to be slower than in other industries. The evolution of clubs over the last few decades is apparent in areas such as social and culinary trends, but not as easy to recognize on the business side of things, so we turned to a veteran club management professional to get his perspective.

EXECUTIVE PROFILE:
Jim Butler, CCM, PGA
President & General Manager
Grey Oaks Country Club, Naples, FL

As a college student in 1985, Jim Butler took his first club job as a seasonal employee at The Forest Country Club in Fort Myers, FL. Three decades later, he’s moved through the ranks and navigated some significant challenges along the way: golf course and clubhouse renovations, new golf course construction, a transition from developer to member ownership. He currently manages Grey Oaks Country Club in Naples, FL and its two related property associations. In addition to learning the club management ropes from the bottom up, Butler holds an undergraduate degree in chemistry and a MBA in real estate development and finance.

Q: Over your 30-year career, what changes have you seen in the world of club management?

A: I’d say education and research – those areas have advanced since I started in the club business. Today, the education is available to help managers operate the business enterprise and we understand the business from a holistic point of view as opposed to a silo-view. 

Q: Your degrees are in chemistry, real estate development and finance. How does that translate to your career in club management?

A: I enjoy digging into things to understand how they work and that’s been my approach to the club business. Data and research have always been extremely important to me and that’s particularly true at this club. The leadership, meaning the original owners and my board members, are all very smart, business-oriented people. So are the members. They expect to have fact-based discussions about the club, just as they do in their own business environments. As a manager, I have a vested interest in making sure they get the right kind of data – it needs to be relevant to whatever it is we’re working on. I’ve found that when we incorporate data into the decision-making process, it’s easier to maintain a strategic focus and that moves the club forward.

Q: What kind of information is important to you and your board?

A: We rely on all kinds of research. We use the club’s internal financial and operational data as well as a variety of regional and national market research and club industry data. That information definitely wasn’t as accessible early in my career as it is now. What has been done in the club industry in terms of research over the last decade or so has really been transformative. Groups like McMahon, RSM, Club Benchmarking, and Global Golf Advisors have all played a role in progressing the industry to catch up with the rest of the business world.

Q: In your opinion, what have those groups done to move the industry forward?

A: In terms of having an impact, I’d say each group has brought something game-changing to the table. RSM was really the first to do club-on-club analysis by region and club size. They are an audit partner for a lot of clubs in the Florida chapter and their annual trend reports are highly regarded. It’s a comparison on prior year and year-over-year data that we all use and refer to. The Florida chapter considers them an important part of the local industry.

McMahon Group has broadened their approach to include lifestyle and strategic management and research is a key component of that effort. They’ve been working with research scientists like Dr. Jim Fisher for more than 20 years. When you can take a scientific data-driven approach to something as critical as a facility improvement plan, that’s powerful. Clubs are able to make informed decisions with the data. It’s much harder for emotions and politics to get in the way and derail the process.

Club Benchmarking has introduced a level of sophistication in the way we think about our clubs by framing a business model for the industry and bringing it to my desktop. I can access the analytics easily and I use them on a daily basis. My board and I can dig in and really study our business now and being able to filter our comparison sets allows us to look at it from a variety of different angles.

CB also created a level of education that helps managers who maybe don’t have a background in accounting or finance discuss core concepts with their boards. When a question about something like golf course labor expense can be answered with data, it takes emotion out of the discussion. I know my board appreciates the use of key performance indicators that include standard strategic business terms like gross profit and gross margin. That by itself has been one of the most significant changes I’ve seen.

Global Golf Advisors is focused on the industry at a global level and they recognize the need for the private club sector to think outside traditional boundaries. Henry DeLozier is a tremendous advocate for and teacher of strategic management with an emphasis on utilization of data and research. The fact that we’re seeing those concepts taught at the entry level, as young managers start learning about club finance and eventually working toward their certification is certainly a positive shift.

Q: Where do you think all of this is headed?

A: It’s the private club industry, so maybe change doesn’t always happen as quickly as we’d like it to, but it is happening. We’ve made a lot of progress just in the last decade. Boards and managers are already starting to come together around these business concepts in a way that benefits their clubs and that’s going to improve the overall health and stability of the industry.  

Read more

Which Mode are You In?

Building_Value_for_Your_Club.jpgClubs share a common business model, but when it comes to more qualitative aspects like culture, each individual club is truly unique. At the highest level, a club’s culture is defined by factors such as history, mission, traditions, member demographics, location and the mix of amenities enjoyed by its members.

Below the surface, there is another very important but less obvious factor at work that influences the member experience on a daily basis and ultimately shapes the club’s future; the operational mindset. Are the club’s board, management and members focused on value creation or are they operating in a mode of extreme cost control?

In a culture of value creation, club leaders seek to continually add to the benefits of being a member. The focus is on things like innovative programming that considers every member type, diverse offerings within the club’s physical environment that go beyond the basics, a careful balance of exciting new events and longstanding traditions. In a culture of value creation, the emphasis is on growing and evolving the member experience.

Cost control mode is exactly what it sounds like. Instead of seeking opportunities to enhance the member experience and boost revenue through increased dues revenue and activity, leaders search for an ever diminishing lowest common denominator where members are just satisfied enough. They’re literally attempting to cut their way to health. Over time, a culture of cost control leads to chronic dissatisfaction among existing members, an inability to attract new members and expanding financial stress.

In a strong economy and fertile member market, maintaining a culture of value creation comes naturally for most clubs. But what happens when the business environment weakens? In challenging times, clubs without a clear understanding of their own business model and financial drivers are vulnerable to making poor decisions that cause them to shift away from value creation into the cost cutting mode.

Over the last seven years of studying club industry data, we’ve learned that benchmark analysis reveals a club’s story and we can get a pretty clear picture of what’s going on just by looking at the data. Key Performance Indicators (KPIs) can be used to assess financial sustainability, show the impact of the choices or decisions the club has made and identify the telltale signs that a club’s culture is focused on either value creation or on cost cutting.

There are two key measures from the Club Benchmarking Executive Dashboard that are particularly revealing and easy to calculate; the Dues Ratio and the Net Available Capital Ratio.

The Dues Ratio
Picture a two-cylinder engine where one cylinder is the number of full member equivalents and the other is the dues amount each full member pays to belong to the club. We refer to that as the club’s dues engine and every club has one. Under the influence of a weak dues engine, clubs commonly slide into negative patterns like extreme cost control. They focus on treating the symptoms and ignore the root cause, which is too few members and/or dues rates that have not kept up with annual cost increases.

You can assess the health of your dues engine by calculating the Dues Ratio (total dues revenue as a percentage of operating revenue). It’s a critical measure since dues is the club’s most powerful financial driver with a margin of 100 percent. In the industry overall, the median Dues Ratio is 48 percent. Looking at the middle 50 percent of the industry (all clubs between the 25th and 75th percentile) the Dues Ratio ranges from 41 percent at the low end to 54 percent at the high end. Clubs with a healthy dues engine (indicated by a Dues Ratio at or above the median) are in a much better position to have money available to support value creation even after fully funding operations.

Net Available Capital Ratio
The ability to reinvest to replace aging assets and enhance the physical plant defines whether a club is or is not financially sustainable. Insufficient capital triggers a spiral of gradually decaying and out of date facilities which leads to an inability to attract new members and higher than normal attrition of existing members.

While a comprehensive capital reserve plan is required to fully determine a club’s capital needs, you can calculate your Net Available Capital Ratio by taking Net Available Capital (net operating result plus capital income minus lease payments) as a percentage of your total operating revenue to determine where your club is relative to the industry median of 12 percent. Clubs well above the median are considered capital rich and those well below the median are considered capital starved. The more capital rich a club, the more readily a healthy culture of value creation can be nurtured and sustained.

Running these two basic calculations—Dues Ratio and Net Available Capital—is an important first step in assessing your club’s operational mode and aligning the board and management around a fact-based view of your position on the cultural spectrum of value creation to cost control. If you would like to schedule an online session to review and discuss your benchmarks with one of our trained analysts, send an email to [email protected] 

Learn More About Value Creation in Clubs

Read more

Mainstream Business Practices Provide
Needed Perspective for the Private Club Industry   

Armies of people study the dynamics of industries across the world. Bankers, investors, competitors, consultants—searching for clarity and insight on the factors that separate market winners from losers. Analysis of industry dynamics in every market is unceasing and those with the best information are poised to win.

Financial models are a central element of understanding both industry dynamics and the performance of an individual business within the market in terms of its financial sustainability and long-term success. Such models exist to unearth and convey the key drivers of financial success. Investors, consultants and companies spend significant money developing financial models so they can understand how revenue, costs, margins, overhead, leverage and other financial metrics impact profitability and growth. The quest for fact-based insight is a direct and necessary response to unyielding competition and business challenges. The private club industry can’t escape this reality.

covey.png

Financial Sustainability

What does “financial sustainability” mean for a club? Think of it this way: If your current operational results and capital generation were continued for the foreseeable future, would the club be able to provide adequate funding for all amenities and member experience, and be able to re-invest back in the club every year to replace depreciating assets and facilities per a documented capital reserve study? As you consider the question, remember to maintain a clear separation of funds: No stealing of capital to patch up operational deficits and no consumption of cash reserves that were not part of a capital plan.

In order for a model to be effective in measuring and even predicting financial sustainability, it must be comprised of indicators that are:

  1. Correlated to operational results and capital generation
  2. Relatively easy to measure
  3. Impacted by choices and decisions made by management and board
  4. Able to be benchmarked

The Financial Insight Model for Clubs

For measures that correlate to operational results, we can refer to any Business Management 101 course or the Yahoo Finance page, with a bit of customization for the club industry. Historically clubs have eschewed measuring themselves like a business, but like any business, clubs have revenue, direct costs of revenue (COGS), resulting gross profit/gross margin, etc. Just as these measures are critical to industries such as automobile manufacturing or software, they are also critical to the club industry. We call our club model the Financial Insight Model (FIM). Please note that while data shown in this article is for clubs with golf, the model applies equally to City, Athletic, Yacht, etc. clubs with only minor variation.

Core Concepts of the Financial Insight Model

  1. Separation of operating and capital monies and accounting for separate bottom line operating and capital results is a necessity.
  2. All clubs raise and spend money on common activities and items regardless of geographic location, size or level of service. This “law of commonality” has been proven by the data collected by Club Benchmarking.
  3. Recognizing a set of common departments present in every club leads to identification of direct costs (expenses directly tied to producing revenue), variable costs (expenses directly tied to sales volume) and fixed and independent costs (essentially overhead expenses independent of sales volume or department).

To understand how a club uses its gross profit, we present the information in a pie chart which can be used to answer several key questions: How is our spending divided between overhead and amenities? What is our spending split across amenities? What do those distributions tell us about the club’s culture and priorities?

AUTHOR’S NOTE: The Financial Insight Model does not displace the Uniform System of Financial Reporting for Clubs (USFRC) which is the accounting standard in the club industry. Our model leverages the USFRC. We are presenting a business analysis and financial model, not an accounting standard.

The goal of the Financial Insight Model is to view clubs as businesses. 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 like that shown in the Table below.

yahoo_finance_example.png

This common view, at a glance, reports on the operational health of a particular company or business. Understanding the financial model of clubs requires a similar common view. Each club inventing their own fluid view that changes over time to suit the preferences of the current board defies all business logic and common practice. The premise behind the presentation of a common income statement on financial websites is simple: Identify the revenue, identify and calculate the direct costs of producing the given revenue, identify the fixed expenses necessary to run the business, identify the costs of financing the business (interest) and finally, identify and calculate the money the business drops to the bottom line. In a given industry, companies produce and sell a common product or service in a basically similar manner. As a result, there tends to be convergence of gross margin and operating margin across a given industry.

club_finance.png

The Financial Insight Model Considers These Specific Measures:

Operating Ledger

  • Operating Revenue
  • Gross Profit
  • Gross Margin
  • Fixed Expenses
  • Operating Result
  • Operating Margin

Capital Ledger

  • Carryover Operating Result (can be + or -)
  • Capital Income
  • Net Available Capital (net of operating result and lease payments)
  • Net Available Capital Ratio (to revenue)

Additionally, the Model includes two key operational measures:

  • Dues Ratio (dues revenue as a percentage of operating revenue)
  • Net F&B Ratio (net F&B result as a percentage of gross profit)

In follow-on articles we will discuss the Operating Ledger and Capital Ledger measures and why they are critical to a club’s Financial Sustainability.

Read more

Focus_into_focus
Capital Generation KPIs Bring the Future into Focus

In Part 1 of our Executive Dashboard series we introduced the idea of key questions for club leaders, the measures that can be used to answer those questions and the first section of the Club Benchmarking Executive Dashboard -- key performance indicators related to operating finance.

The “Capital Generation” section of the Executive Dashboard is comprised of three Key Performance Indicators that correlate directly to a club’s future. Healthy capital generation supports ongoing investment in the kind of facilities and amenities that a club must have to attract and retain members in an increasingly competitive market. Inversely, inadequate capital generation can lead to deterioration of the club’s offerings, declining membership and over time a financial and operational spiral that is difficult to reverse. This section of the Executive Dashboard helps club leaders assess the current state of their capital generation “engine” and determine what if any adjustments are needed to move the club toward the desired future outcomes.

Key Question #1
How much capital income did we produce?

KPI: Total Capital Income

Calculation: 
Total Capital Income = Net Initiation Fee Income + Capital Dues + Capital Assessments + All Other Capital Income (Property Sales, Net Profit from Tournaments, Gifts and Donations, Other)

Why It Matters:  Total Capital Income (TCI) is the income from all capital sources. The “capital engine” of a club is the key to having the money necessary to continuously make the capital investments necessary to maintain and upgrade the club’s facilities and amenities. Updated and compelling facilities and amenities are the heart of any club’s value proposition and are critical to maintaining and growing a vibrant, sustainable membership.
Common capital income sources include initiation fees, capital dues or assessments, sale of property, investment income, or any operating surplus (positive Net Available Cash). Given that capital needs are fairly consistent, clubs must strive for capital income that is also consistent over time. It is one of the most critical aspects of a Board’s governance and a management team’s duty to assure that capital income matches capital needs into the foreseeable future. Predictability in capital income is necessary and may drive clubs to consider capital dues as one key source of predictable capital income. The chart below shows that for fiscal year 2014, the median club had Total Capital Income of about $609K.

Total_Capital_Income
Key Question #2
How much capital is available after adjusting for operating loss or gain?

KPI: Net Available Capital

Calculation: Net Capital Available = Total Capital Income + Net Available Cash – Lease Payments

Why It Matters: Net Capital Available is ultimately more important than Total Capital Income. NCA is the amount of capital available for investment or debt reduction AFTER any possible operating subsidies as a result of negative Net Available Cash and after covering equipment lease expenses. Operating deficits (negative Net Available Cash) must draw money from capital income decreasing Net Capital Available. Conversely, an operating surplus contributes to the NCA.
 
Clubs with relatively low NCA must determine whether the weakness is caused by low TCI or by cannibalizing from capital to shore up operating deficits (negative Net AC). If the former is the case, implementing or increasing capital dues should be considered. If the latter is the case, focus should be on eliminating the operating deficit. Consistently strong NCA has a cumulative positive effect on a club by allowing continuous investment in the club. Consistently weak NCA has a negative effect over time which manifests as outdated and poorly maintained facilities and amenities.

Just as a clear view of NCA over time is mandatory, so is a capital reserve study. Clubs with a strong strategic plan and strong governance foundation understand the key to long term success is continuously matching Net Capital Available with capital needs year after year. A capital reserve study is the accurate view of the needs without which it is impossible to gauge the capital resource requirements of any club. The chart below shows that fiscal-year 2014 median NCA for all clubs in the CB database is about $631K.

Net_Available_Capital

Key Question #3
Do we produce sufficient capital?

KPI: Available Capital to Operating Revenue Ratio

Calculation: Net Capital Available Ratio = Net Capital Available/Operating Revenue

Why It Matters: The Net Capital Available Ratio is simply the Net Capital Available divided by the club’s operating revenue. Significant analysis has led to the conclusion that a sustainable level of Net Capital requires a Net Capital Available Ratio of approximately 12 percent. While clubs below the 25th percentile on this measure tend to be capital starved a capital reserve study is always necessary to precisely determine a club’s actual capital requirements. The chart below shows that fiscal-year 2014 median is 11 percent for all clubs in the CB database.

Net_Available_Capital_Ratio
To learn more about the Club Benchmarking Executive Dashboard, CLICK HERE

FROM OUR VIDEO LIBRARY: 

Read more

Capital spending club industryA Proactive Approach
to Capital Income

You know it when you see it. A private club facility that looks tired and outdated can leave you with the feeling that the club’s leadership either doesn’t care or can’t afford to make improvements. It’s not an impression anyone wants to make on current or prospective members. Unfortunately for many clubs, in today’s sluggish membership market, the flow of initiation fees typically used to fund capital improvement projects has become extremely inconsistent and unpredictable. A proactive understanding of this strategic aspect of your club’s finances is the key to avoiding the dangerous downward cycle we call Capital Starvation. It starts with three key questions.

Are You Asking the Right Questions?

#1. How much capital does the club need?
It isn’t unusual for clubs to ask “how much do we have in the capital reserve account?” That question usually comes up right after something major breaks—like the irrigation system or the HVAC system. Some clubs take a slightly less reactive approach by attempting to save at a rate that will at least cover depreciation. In a truly proactive approach to capital income, the question becomes “How much do we need and when are we going to need it?” How much money a club needs to address its capital projects is not a mystery. The number can be predicted and many clubs commission a Capital Reserve Study to get a clear picture of their long-term capital needs. Naturally, capital needs vary from club to club.

Chart Shows Data for All Clubs
Capital_Fund_Balance.png

#2. Are you producing enough capital to meet the club’s needs?
About 63 percent of clubs say they have a capital income account, but for roughly 25 percent of those clubs, the balance of the account is zero. You either are or are not currently producing enough capital to keep up with projects as they come along. Remember that in a proactive approach, the focus is on understanding what the club’s needs will be over the long term. How much is “enough” varies from club to club, but for scale, we like to look at capital generation in relation to the club’s total operating revenue. Industry data shows clubs at the median produce an amount equal to about 11 percent of their total operating revenue. At the 25th percentile, the number is 6 percent, which is a position we consider somewhat Capital Starved. About 15 percent of clubs are in the dangerous position of having either zero money for capital improvement or worse, depleting capital funds to support the club’s operational needs.

Net_Available_Capital_Ratio.png

#3. Are the club's sources of capital predictable and consistent?
The three most common sources of capital are Initiation Fees, Capital Dues and Capital Assessments. In larger clubs, surplus from operations can be a significant source of capital income. Smaller clubs tend to lean more heavily on capital dues and capital assessments. Capital Dues represent about 33% of Total Capital Income for the average club.

Sources_of_Club_Capital.png
With no real way to predict how many members will join the club in any given month, depending on initiation fees from new members as a sole source of capital income is risky. To smooth things out, many clubs (about 60 percent) use Capital Dues to serve as a baseline for choppy Capital Income. In that scenario, initiation fees become an additive to capital dues, giving the club a much more reliable and predictable flow of funding for projects, replacements and improvements.

Benefit of Capital Dues

Understanding your club’s capital needs and managing its sources of capital income proactively is the key to avoiding capital starvation and keeping your club on a healthy, sustainable path.

WATCH THE VIDEO
Capital_Video.png

Read more

Club_HR_ManagementOriginally published June 2014 on the CMAA Back of the House Blog
The structure and focus of the typical club management team has changed significantly over the last two decades with the addition of Membership Marketing Professionals, Member Communications specialists and, most recently, the position of Human Resource Manager or Director. The people taking on these new roles must be provided with appropriate tools and a supportive network of peers in order to be successful.
 
“In the 25 years I’ve been doing this, I believe the single best position I’ve added was HR,” said John Schultz, General Manager of Carmel Country Club in Charlotte, NC. “Not just for managing the tactical issues like I-9s and general tax and legal compliance. All that is certainly important, but adding someone who could address HR strategically has really been a game-changer for us.”
 
In 2009, Schultz hired Ann Van Dyke, an experienced HR professional whose résumé includes more than a dozen years as a top HR Manager for luxury retail giants Saks Fifth Avenue and Neiman Marcus and a Masters Degree in Organizational Psychology from Columbia University. Van Dyke came to the club industry at a time when club-specific HR tools were limited. 
 
“In a corporate setting, we had data, training programs and other resources readily available. When I started in the club industry, I really had to be creative,” Van Dyke said.

Human_Resource_benchmarking_for_clubs 
In 2010, Carmel subscribed to Club Benchmarking, which provided Van Dyke with the relevant industry-specific compensation and benefits data she needed. Fast forward five years and Van Dyke has positioned herself as a strategic partner to the leadership team.
 
“Ann makes us better at what we do,” Schultz explained. “She has made me a better manager and made us a better employer by improving the way we recruit, train and retain employees. As a result of that work, we have a team of great leaders here at Carmel.” 
 
Schultz said the one of the most dramatic improvements has been the creation of an HR strategic plan, a project in which club industry benchmark data played an important role. “As an HR tool, the data made it possible for us to start answering some key question like what are optimal staffing levels for this club or where do we want our compensation to fall in the continuum of industry norms?”
 
For example, Schultz believes the level of compensation should reflect the club’s high expectations for service performance and he uses industry benchmarks to monitor progress toward that goal. “Where we find ourselves at the median or below within a specific peer group, we are working to move toward a position that better reflects our standards and the value we place on our employees.” 
Club_HR_Benchmarks
Across town at Charlotte Country Club, Human Resource Director Stacy Applegate came to the club industry two years ago. Like Van Dyke, Applegate spent more than a decade in a corporate environment. She was used to having access to compensation data and national surveys to help her understand the norms of her industry and was pleased to learn that similar resources existed in the club industry via Club Benchmarking and the CMAA Annual Surveys. “Having data is the only way to know whether you are leading or lagging the market. I want to be able to tell if we’re achieving our recruiting goals or how our compensation packages compare to industry norms.” 
 
Van Dyke and Applegate are currently working together on an event both believe is a great addition to the tools available to their club HR peers—a Human Resource Symposium developed by Master Club Advisors (MCA) with data gathering and analysis provided by Club Benchmarking for the first time this year. The event will be held at Charlotte Country Club on July 30 through August 1.
 
Bill Schulz, senior partner and principal of MCA, said the idea for the Symposium actually came from a Director of Human Resources after she sat in on a MCA Managers session at her club and recognized the value that could come from exchanging information and ideas with her own industry peers. 

 “We held the first HR Symposium in 2008 and even then it was clear that the human resource function in clubs was evolving into a very important specialized position,” Schulz explained. “We felt the time was right to develop a symposium for that group. The original vision was that it would develop into a great resource for club HR professionals and we believe it has. It’s gratifying to see the Club HR Symposium participants develop into a network that continues to share information and ideas throughout the year.” 

For more information about the 2014 Symposium and HR data-gathering effort, visit www.clubbenchmarking.com/mca-hr 

Read more

Where Do Your Members Look for Information?

Member Communications Social MediaClubs have been communicating with their members for as long as there have been clubs. Based on Data in our Member Communications section, we know that the benchmarks for where, how and when that communication happens are definitely changing. The question is: Will that change come quickly enough to satisfy the current generation of information-seeking members?

Shanna Bright, a California-based communications consultant whose career includes a stint as Member Relations Director for the City Club Los Angeles, thinks the industry is overlooking an important opportunity. Recently, when fires triggered evacuations of several private clubs and resorts near her home in San Diego, Bright took note of a critical lag in how clubs connect with members. Read Bright's post.

 

 

 

 

Read more

What Spending on Golf versus Other Sports Says About Your Club’s Identity

AC_PLAIN

Dividing the Pie 
In the club world, much like in our private lives, the need for funds is often greater than the supply. As individuals, we prioritize competing interests on a regular basis—a new car, college tuition, family vacation, etc. For the club manager and board member, the struggle manifests itself in the budget process, where the true tribal nature of clubs comes to the surface. One group of members may be focused on golf while another contingent is keen on non-golf athletic amenities such as tennis, aquatics, fitness, squash, croquet, etc. Some golf-focused clubs may be feeling the pull to add non-golf facilities in order to re-connect with existing members or win over less golf-centric prospects.

While the money to build non-golf amenities (fitness centers, tennis courts, etc.) most often comes out of capital funding sources, sustaining the new amenity requires operational dollars from dues or other surplus generating departments. Simply building a tennis court or fitness center does not necessarily mean it will generate incremental operational funds, which raises an important question: "How much will it cost to operate the new facility and where will that money come from?"

Patterns in the Pie
The Available Cash Model (ACM) is a strategic framework for understanding a club’s proportionate sources and uses of cash. Early on in our study of industry data, it became clear that clubs typically spend about one-third of their Available Cash (think gross profit) on course maintenance. That number has proven consistent across the industry. Recently, another very interesting pattern has emerged from the data—a direct relationship between course maintenance spending and the spending for non-golf sports amenities.

Over the last 12 months, we’ve brought more than 150 new members on board in Club Benchmarking, a process which includes a one-on-one walkthrough to review and analyze their data. What we noticed was a marked consistency across the industry where the combined percentage of Available Cash going to course maintenance and the operation of non-golf amenities typically totals 40%. Golf-only clubs spent about 40% of their AC on the course and nothing on non-golf sports amenities, while clubs that have very significant non-golf sports/spa facilities are spending an average of about 15% on those facilities and 25% on the course. Within the spectrum, we find clubs allocating 30% course/10% non-golf, 36% course/4% non-golf, etc. This is one of the most clearly-defined patterns we have seen emerge from club industry data over the course of the last three years. The image below uses actual data from three different clubs to illustrate the remarkable consistency of the pattern.

course_maintenance_vs_other_sports_3_piesWalk the Talk
Does your club’s allocation of operational dollars align with its goals? Does your spending reflect that of a dedicated golf club, a diverse country club with a family focus, or some variation on those themes? There is no right and wrong here. Just the revelation that a club can instantly see and understand if its actual spending is in line with its stated strategy. If you claim to be a family-friendly club with amenities for the whole family and you are allocating 30% to the course and 10% to non-golf sports, you are staying pretty true to that objective in your proportionate spending. If the balance is 37% to course maintenance and 3% to non-golf sports, your spending is inconsistent with the family-friendly claim.  When it comes to facilities and club culture, you can't be all things to all people. You have to make a strategic decision about what kind of club you want to be and then target spending in a manner that supports those goals.

Additionally, with this new-found understanding, a club thinking about expanding its offerings can extrapolate and estimate the impact of those changes on their budgets and funding needs. Most often we see golf clubs attempting to build and offer non-golf activities. The net result could mean a reduction of course maintenance spending to support the new operations, or it could have no impact on the course budget if the new amenities succeed in attracting new members and the associated increase in dues revenue (resulting in more Available Cash).

Conclusion
The club business model is defined by the relative uses of operational funds. One of the relations made clear by actual industry data is that 40% of a club's Available Cash is allocated to the combination of course maintenance spending and non-golf sports spending. Understanding the direct connection between course maintenance spending and non-golf sports spending as it relates to the club’s strategic goals is pivotal for managers, boards and members. The AC Uses pie chart provides a graphic illustration of this relationship that can serve as a catalyst for meaningful discussions and help align disparate tribes (e.g. golfers vs. tennis players) around a common goal.

CB Member Note:
Login to your CB account and run the Available Cash report from the My Reports tab to check your Golf/Non-Golf spending pattern.

Read more