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Why Benchmark?

Posted by Teri Finan on 1/26/14 4:03 PM

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.


Topics: Finance and Operations, Articles

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