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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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 

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