Finding Common Ground Through the Language of Finance
communication gap.jpgThe most successful private club executives are in a class of their own when it comes hospitality. They are experts at delivering an extraordinary club experience and managing large teams of people, but we’ve only met a handful that would be comfortable calling themselves experts in accounting or finance. While that’s not surprising since the skillsets are so different, it does present a challenge.

In the club boardroom, even strong managers can find themselves at a disadvantage when they come face-to-face with business owners, hedge fund managers, CPAs, private equity managers—people who are extremely well-versed in finance and business.  In that scenario an imbalance of power exists, due in large part to the vast difference between the way finance is discussed in the outside business world and the kind of discussions that take place inside the club boardroom.

It's a serious communication gap and it leaves many managers struggling to explain the club's results in a way that satisfies the board. The language of business is finance and it is certainly the native language of your board. Our goal is to help managers learn to speak the language of finance so they can feel more confident in the boardroom and communicate with their boards more effectively. 

Business people, like those who populate club boardrooms, understand financial modeling and they know the key performance indicators for their own businesses. They know their gross margin; they understand their fixed expenses as a proportion of revenue; they understand return on equity. Business owners explain their business using numbers every single day. For private club managers, knowing the club’s numbers, putting them into context and presenting them with confidence is the key to getting the board’s full attention and advancing their understanding of the club business.

Let’s look at just one example of how numbers and context can be used to address questions and explain an important aspect of the club business:

Explaining Club Payroll: Focus on Data and Context

  • “What are all these people doing here?”
  • “We have way too many people.”
  • “Our payroll is way too high.”

Every manager has heard those statements. They’re uttered every day in clubs across the country, in the boardroom and by members in the 19th hole. Absent data and context, those statements amount to little more than conjecture and responses like “We need all of these people” or “We have a smaller staff than XYZ Club up the road” are equally unproductive and unsatisfying. Thus, the debate continues.

The question boards and managers should be asking (and answering) is this: “Are we staffed at a level that balances the club’s financial results and our member service expectations?” The first step in answering that question and introducing numbers and context to the great payroll debate is to calculate the club’s payroll ratio (total “loaded” payroll as a percentage of total operating revenue).

The chart below shows the Payroll Ratio for clubs with golf using club industry data for fiscal year 2015. As you can see, the median Payroll Ratio for this data set is 56 percent. For half the clubs in the set (those between the 25th percentile and the 75th percentile) the Payroll Ratio ranges from 53 percent to 58 percent. It's a small spread but as you can see from the overlay of median operating profit, the impact of a few points is significant.

The blue dot in the lower quartile (payroll ratio of 49%) represents a real club – one that was, until recently, stuck in the payroll debate. A small contingent of the membership was actively working to convince others that the club had “too many people” and that those people were being paid too much. Clearly, having the number (payroll ratio) and putting it in the context of hundreds of other clubs via a comparison set is powerful. What the chart confirms is that this club has a payroll ratio lower than 88 percent of the other clubs in this data set.

Payroll Ratio FOF.png

In the example above the number was well below the median, but some clubs may find that their Payroll Ratio is at or above the median. Whatever the case, it’s important to remember that the number itself is not a conclusion but rather a starting point and foundation for a fact-based discussion about financial realities, club culture and choices. As an example, adjusting a higher-than-typical Payroll Ratio back toward the median is ultimately a matter of choices. Are members happy with current service levels? Would they be open to a reduction in staffing levels or service hours? Is the financial impact of the Payroll Ratio such that the board must make difficult decisions regardless of the members’ preferences? Without numbers and context, the payroll debate is bound to continue as a contentious guessing game. Armed with numbers and context, managers are equipped to bridge the divide and discuss the club's business with the board in their native tongue—the language of finance.


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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.

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.  

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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 

Learn More About Value Creation in Clubs

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Whether you're just starting next year's budget or you're further along in the process, benchmarking is a great way to "fact check" your decisions.

Consult high-level reports like the Executive Dashboard for strategic perspective on performance and the sustainability of your financial model. Department-level reports (Food & Beverage, Course Maintenance, Labor etc.) provide a solid, fact-based frame of reference and credible third-party support for your decisions. Club Benchmarking Essentials and Premium plan subscribers can also use the new Financial Forecasting feature to track progress throughout the year and get a look ahead at where those decisions are taking them. 

Fact-Check Key Areas of Your Budget

  • The Dues Engine: Are the club's dues rates and member counts really in balance with its cultural goals? Is the "dues engine" providing sufficient revenue to support future operational needs or is it time for the board to discuss a tune up?
  • F&B Goals and Results: Are results in the F&B department within industry norms? Are board expectations realistic or in need of adjustment? This is an area where presenting facts based on industry data can be a game-changer. Start by running the Available Cash/KPI report to get the big picture. For a deep dive, run your CB Food & Beverage report.
  • Course Maintenance Spending: The golf course is sacred turf which makes it an easy target for opinion-driven decisions. It's important to keep an eye on the facts: What percentage of the club's gross profit is going to maintain the golf course and how does that number align with the club's goals and culture? For most clubs, the combined allocation for course maintenance and non-golf sports is 40 percent of gross profit. Again, the high level view is in the Available Cash report. Run the Course Maintenance report for the breakdown.
  • Capital Funds: Many clubs burned through capital reserves to fund operational needs in the worst of the downturn, and getting deferred capital projects back on the front burner will be critical to survival for those clubs. Does your club have a viable, sustainable plan for funding capital? Study Capital Generation KPIs in the Executive Dashboard report, and get additional detail in the Balance Sheet-Capital-Debt report.
  • Payroll and Benefits: Payroll is a private club's largest expense, but the staff is integral to sustaining the unique culture that draws members in and keeps them coming back. Getting it right in this area of your operation is critical and the Payroll to Operating Revenue ratio shines a spotlight on how you're doing. In fact, it's such an important KPI that you'll find it in the Available Cash report, the Executive Dashboard report and in the Labor report. If you need additional detail, specific benchmarks for salaried and hourly positions are available in the Compensation & Benefits section.

Learn more by watching our recorded webinar: 
Using Benchmarks in the Budget Process

Do you have a question about benchmarking your budget or would you like to learn more about Club Benchmarking? Email us at 

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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.

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.” 
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 

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blue_golferKnow Your Club's Golf Experience Index

The experience of a round of golf can take on endless dimensions. Some days you may struggle through four hours of intense frustration and end up wondering why you play the game at all. Other times, you find yourself enjoying the Zen-like experience of being "in the zone." The mental experience is only one aspect of a golf round, but it’s undoubtedly the one that keeps us all coming back for more.

One perspective that a player typically does not consider, but those of us in the club management business should be aware of, is the value of the golf experience. What does it really cost to deliver that four-hour slice of club life? And if members are bringing guests out to experience the course, how does the cost of that experience compare to the price they actually pay for it—aka green fees?

Of course we all understand that there is no incremental, or variable, cost associated with a guest coming out to play. That's why guest green fee revenue is so valuable. It flows directly to the bottom line of the club. From that perspective, we are happy to collect whatever fee we charge. But is there a way to gauge the cost, or value of a round for either a member or a guest? And further, in the case of the guest fee, is there a way to compare the actual cost with the fee we charge. We believe there is and we created an index in Club Benchmarking called the Golf Experience Index as a way to measure it. The index is available to Club Benchmarking members in the Golf Operations Report View a Sample Report

Calculating the Golf Experience Index

STEP 1:  We start by calculating the Golf Experience Cost...
(Annual Course Maintenance Expense + Golf Operations Labor) ÷ Annual Rounds of Golf

This provides the delivery cost of a round of golf at the club. The median cost-per-round for the industry is $74, but as you can see in the chart below, the range is very wide—from about $40 per round up to nearly $200 per round. Click the chart to enlarge.


STEP 2: To calculate the Golf Experience Index, we simply divide the Golf Experience Cost by the guest green fee, so Golf Experience Cost ÷ Guest Green Fee = Golf Experience Index

A value greater than 100% means you are "covering your cost" and achieving experience margin over and above the cost.  A value below 100% means your guest green fee is at a discount to the cost of delivering the experience. The median value for the industry is 120%. The chart below shows that again, the range is wide, varying from 50% to 250%. It is important to note that about 70% of the clubs have an index greater than 100%. That may be food for thought  for clubs with an index of less than 100%. Click the chart to enlarge.


Certainly many factors influence a club’s Golf Experience Index; perception of the club’s brand, the quality of the course, course activity levels, recognition of the bottom line value of guest play, etc. As is true of many Club Benchmarking metrics, we want to emphasize that there is really no “right” or “wrong” number when it comes to the Golf Experience Index. What we offer is an established benchmark which can serve as a point of reference in discussions about the club's priorities and as a guidepost for the decision-making process. Because it relates so directly to the bottom line, we encourage clubs that subscribe to Club Benchmarking to login and review their own club Golf Experience Index. Understanding your position on that curve will help you determine whether an adjustment might be beneficial to your club. 


  • Login to your CB account
  • Click on Finance & Operations
  • Click on the My Reports tab near the top of the page
  • Scroll down to run the Golf Operations Report
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What Spending on Golf versus Other Sports Says About Your Club’s Identity


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).

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.

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There's a better way to get the information you need...


Club general managers and controllers seek information on a regular basis. Frequently, the scenario is a board or committee member asking the manager to reach out to his or her industry peers for information about their dues, member counts, course maintenance expenses, etc. Unfortunately, without context, the numbers being shared don't really mean much. For example, another club's dues number is meaningless without the context of other factors such as number of members, operating expenses, etc. Club Benchmarking uses credible comprehensive data to measure and compare key financial and operational metrics and provide context relative to the club itself and to the industry as a whole.

The Origin
Going back to its roots, “benchmarking” was a term used mostly by land surveyors who relied on one fixed point—a benchmark—to serve as a reference point from which all their other measurements were made. The word made its way into corporate vocabularies in the early 80s when an increasingly competitive global market left companies like Xerox, Ford, AT&T and Motorola desperate for customers and struggling for survival. As an example, Xerox lost 69% of its marketshare between 1974 and 1984 and the company’s profits dropped from $1.15 billion to $260 million between 1980 and 1984. While the numbers are significantly larger, there are obvious parallels between those circumstances and the economic challenges currently being faced by many in the club industry.

As they went to battle to save their companies, those companies were among the first to adopt the word “benchmarking" to describe the practice of systematically studying their own business performance relative to their peers and competition. The goal of benchmarking, then as now, was to gain actionable information in order to improve financial and operational performance. In the club industry, Implementation of formal benchmarking through CB is producing some interesting results.

The Difference
In Best Practices for Benchmarking, business author David Stauffer warns that those who benchmark “must be careful to analyze the best practices of others in light of their own culture and circumstances, or they may find that their efforts do more harm than good.” In the club industry, dues are a classic example of the dangers of data without context.  We know that dues are essentially a two cylinder engine: how many members a club has; how much each member pays. That engine must be balanced with the actual financial needs of the club, so there is no value in understanding only one cylinder and having little understanding of the needs side of the equation. In informal data sharing, questions like ”What are your dues?, Are your dues going up this year? How much did your dues go up last year?” may elicit a response, but the reality is, without additional detail and proper context, the answers to those questions do not provide a sound basis for deciding whether one's own dues level is appropriate.

To be effective, benchmarking must be both a comparative process and an investigative process where anomalies revealed by comparisons are explored and data is analyzed and put into proper context. Simply put, knowing whether your result in a particular area is lower or higher or even the same as another club without understanding why your results differ is not enough. Club Benchmarking gives you the reliable, actionable information you need to make the right decision for your club.


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navigate_club_board_educationBeware of Dragons...

Fair warning: The case study you’re about to read may be disturbing for even the most seasoned club leader. Any resemblance between this story and your worst nightmare is purely coincidental.

In medieval times, elaborate drawings of fierce dragons were used to mark the boundary between the known world and whatever certain danger might lurk beyond. Those who dared to defy conventional wisdom and venture past those limits were labeled as fools or heretics destined for disaster. In the modern world, business leaders are often called upon to face down “dragons” and navigate through unfamiliar territory in the process of executing a critical initiative or bold strategic plan. Unfortunately, and far too often in the club world, boardroom politics and personal agendas can block crucial information and sabotage the clear fact-based decision making process necessary to push on toward success. The belief that club food and beverage can be relied on as cash generating profit center rather than an amenity for members is arguably the club industry’s most notorious and persistent dragon. The real case below highlights what happens when chasing F&B business is placed above making sure the club’s dues engine is healthy.

Club Background: This cautionary tale begins in the boardroom of a long-established country club that has been part of its local community for nearly one hundred years. After a lawsuit almost a decade ago, the club was still struggling to regain its financial footing under the weight of considerable debt. The suit and subsequent economic downturn caused member counts to drop significantly and club leaders were anxious to reverse the tide and expedite the recovery process. In an effort to clearly identify the club’s strengths and opportunities for improvement, the club’s GM became a Club Benchmarking subscriber. Working closely with CB Co-Founder & COO, Russ Conde, they completed the data entry process and analyzed a variety of standard graphical reports in order to develop a plan of action.

As you will see in the detail below, the data clearly showed that through creativity and cost control the GM was actually patching up weak dues revenue with significant profit in F&B. They were taking steps that would not be acceptable in most clubs, but the club was generating F&B profit equivalent to dues from 35 members. The F&B performance was in the 95th percentile—clearly not much room for improvement there—and yet the club’s board remained convinced (erroneously) that the solution to their financial woes lay in even more F&B banquet revenue and more profitability from F&B. In reality, the board was out to slay a dragon, but unfortunately, they wanted to slay a dragon that had long ago been tamed. The true root of the problem—membership count—was obscured by the board’s singular focus on F&B as the answer to the club’s financial pressure.

Benchmarking Process: The benchmarking process began by running the Available Cash and Key Performance Indicator Report, Food & Beverage Report and Membership Report using the club’s data. Click here to view a sample Club Benchmarking report

  • Available Cash/KPI Report Findings: As the club’s management team suspected, the Available Cash & Key Performance Indicator report showed the club’s Net Available Cash was near break-even and at the 47th percentile nationally. The pie chart illustrating the clubs proportionate sources of cash revealed several anomalies, most notably the fact that the proportion of cash coming from membership dues was 25 percentage points below national norms (53 percent versus 78 percent as a national norm) and that F&B net was contributing a significant proportion (17 percent) to Available Cash with the national norm being a consumption of 3 percent of Available Cash. Clearly F&B outperformance was helping to mitigate insufficient dues revenue.

  • F&B Report Findings – The CB benchmark data clearly showed the club’s F&B operation was performing well beyond national norms from a financial perspective. F&B profitability was at the 95th percentile. Essentially, from a financial perspective, this club’s F&B department was operating as efficiently as possible. While 75 percent of all clubs consume operating cash to subsidize F&B, this club was producing 17 percent of the cash to run the club from F&B. Those results were attributable, at least in part, to extremely low labor costs in that department. F&B labor was 30 percent of F&B revenue (literally the 1st percentile) in contrast to the national median of 62 percent. The club’s F&B revenue per F&B FTE (full time equivalent employee) was very high—the 73rd percentile—which indicates a lean workforce producing very strong results. Management relied on a variety of measures to achieve those results including as-needed, part time college student hires.

  • Membership Report Findings – The club’s member count relative to clubs of similar size was very low (the 13th percentile) and the member turnover rate was very high—13 percent versus the national median of 5 percent. The initiation fee had been eliminated (national median for an unrestricted individual member in 2011 was $16,000), and the club’s investment in member marketing was lower than 75 percent of all other clubs in the country. Full Member Equivalent Count (total dues revenue divided by full member dues rate) was at the fourth percentile nationally, meaning the normalized number of members at the club was less than 96 out of 100 clubs in the country.

Data-Driven Results: This is not a typical CB case study. There are countless others where use of CB has had positive impact on a club.  This is a story about lost opportunity.

Based on the CB reports, it was obvious that the club’s business model was seriously out of balance. The data clearly showed that the most urgent need was to revitalize the membership base and fee structures, but the board’s obsessive focus on low-margin F&B as a solution to the club’s financial woes was draining resources away from efforts to attract and retain members. The board should have been commending the management team for keeping the operational results whole via F&B outperformance, but instead they were hounding the team for more F&B. Despite the overwhelming evidence, and the best efforts of the GM, the board chose not to accept the facts and instead stayed mired in the F&B über alles mindset.

This club’s board lost sight of their fiduciary obligation to utilize facts in their stewardship of the club, ignored the data available to them through their CB membership and declined an offer from the Club Benchmarking CEO and COO to provide a free on-site presentation and interpretation of the club’s benchmarking reports. They held fast to their own perspective on the club’s financial challenges, adamant that weak F&B performance was to blame despite an abundance of data to the contrary. They drew swords over expenses that CB reports showed were well below national norms including executive salaries, total labor expenses and a series of other critical expense benchmarks.

As you may have guessed, during this battle key members of the club’s management team, including the GM, were asked to leave. The board was intent on replacing them with “better F&B people with better skill sets” in order to book more banquets, essentially guaranteeing that the bulk of future management effort will be directed to F&B rather than membership growth. The prospects for the club’s eventual recovery seem in doubt absent a dramatic shift in the board’s internal dynamics and a willingness to govern based on fact rather than opinion or agenda. It’s a frightening story to be sure, and one that we hope will serve as a reminder of what can go wrong when opinions, guesswork and personal agendas compromise the ability of a club’s leadership team to rely on credible facts and data in the execution of its duties.

There are important lessons to be learned on two fronts in this case study…

Club Management: Be proactive in using data to help the board understand the business model of a private club and what drives that model. This takes time but it can change the dynamics and results of the club and set a proper foundation for board vs. club management roles and responsibilities. Taking a passive approach to board education increases the likelihood that a "nightmare board" will eventually find you. If you are facing a situation similar to the one described in this case study and would like to brainstorm with our team about the best way to get through to the board, please don’t hesitate to contact us.

Governance: Seek knowledge about the club industry and the business model of your club. Ask questions more often than you give answers. Don’t accept "because I just know" from fellow board members. Push for facts and data as you would in your own business. The tools exist for every board in this industry to be properly informed and thoroughly equipped for success.

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