An Anatomy of Two Committees

Of all the club committees, none is more important that the nominating committee and none is less important than the executive committee. You may think it a radical thought, but before you dismiss it, consider the following rationale. One of the five principles of good governance is electing board members on their merits and not on their popularity, personal agendas, seniority or some other basis. Honoring that principle is best achieved via an uncontested election, where the number of candidates equals the board slots to be filled. An uncontested election requires two essential ingredients:

*An independent, objective nominating committee.

*A board-established profile that lists the requirements and desired characteristics of board members.”

Member trust in the uncontested election process is directly linked to their perception of the nominating committee’s integrity. To ensure that trust is nurtured, establish your nominating committee using the following guidelines:

Smaller is Better

The size of most club nominating committees is between five and seven members. Because of the high premium placed on the confidential proceedings of the committee, we prefer the smaller size.

Selecting the Chair

The key decision in forming the committee is the selection of its chair. Club bylaws often specify that the chair is selected by the president. Others may identify the immediate past president as the chair. Of the two approaches, we favor having the president select the chair, primarily to avoid the appearance of a self-perpetuating board. However, the importance of this decision calls for a board-approved set of criteria for the chair. For example, the board may require the president to select a chair based upon their reputation of integrity, independence and objectivity; their understanding of club governance; and their ability to lead a highly confidential vetting process.

Allow the Chair to Select Committee Members

Once the chair is designated, there is the selection of committee members. Some bylaws have the president selecting the committee members. For those clubs whose bylaws are not specific as to how committee members are chosen, we recommend leaving that decision to the newly appointed committee chair. If they have been selected using criteria like those listed above, they will recruit like-minded members to carry out this important role.

Define the Ideal Candidates

As important as selecting the right chair and committee members is the process used by the committee to prepare a slate of candidates. The board should approve a profile that includes both required and desired characteristics of board members. Further, we recommend the committee be held accountable to use the board profile to vet potential candidates. A properly formed nominating committee using a board approved process and referencing a board profile is best equipped to select a slate of highly qualified candidates for the board.

The Executive Committee

While the nominating committee has the most important role among club committees, we believe the executive committee has the least. Our concern with a board’s executive committee is that it can become a mini-board, i.e., it can make decisions that are best left to the entire board. One of the principles of good club governance is the board speaking with one voice. Having the executive committee stand in for the full board dilutes this principle and can result in board members not on the executive committee feeling like second class citizens.

Despite the threats to the one-voice principle, executive committees have a long history in clubs primarily for two reasons:

  • There are board decisions that must be made between board meetings.
  • There are matters calling for a group smaller than the board to handle.

Regarding the need for decisions between board meetings, the last two years have demonstrated how easy it is to call an online meeting of the board. If an issue requires a decision by the board, the president can email an invitation to board members and assemble an online meeting within days. Some bylaws require a notice period of a week or two before a special meeting of the board but many clubs have amended their bylaws to allow only a few days’ notice, given the ease with which board members can be contacted and made available for the meeting.

The second rationale for having an executive committee is the occasional need for a small group to handle a particularly sensitive issue or provide the general manager with counsel on a policy or a decision. While a smaller group is more efficient and may be more secure with sensitive information, we do not see an executive committee as the one-size-fits-all group. For example, if the behavior of a staff member may result in adverse publicity for the club, it may be best to assemble a group of board or club members based on their expertise and not their office. Similarly, if the general manager needs counsel on handling an issue or transaction, they can call on board members or club members best suited to offer the advice.

A final point: Although the common board size is nine members, many clubs have 12 or more members. These larger boards are more likely to lean on an executive committee for efficient decision making. However, the more these larger boards rely on their executive committees, the more likely the non-committee members will feel left out. If a board is unwieldy, reduce its size rather than creating a two-tiered board by depending on an executive committee to make intermediate decisions.

This piece was authored by GGA Director, Frederic Laughlin for the National Club Association‘s Summer 2022 Issue of Club Governance. 

Corporate Policies and Best Practices for Proper Club Committee Alignment

More and more, private clubs are looking to corporations for policies and best practices in governance. For example, private clubs have realized the benefits of modeling the relationship between their boards of directors and general managers after the relationship between corporate boards and their CEOs. Although there are other lessons from the private sector clubs are learning, there is one area clubs seem slow to embrace: the appropriate alignment of committees.

Corporate boards maintain committees such as strategic planning, finance, audit and nomination committees to support governance functions. But they leave the formation of advisory committees on matters such as accounting, customer relations, sales, marketing, communications and the like to the CEO. In contrast, most private clubs have all their committees reporting to their boards. We believe there is a more effective approach to aligning club committees with the functions they support.

Assume you are just starting a private club and you have been assigned to develop a governance model. You decide on the size of the board, the terms of office, the election process and other features of the model. Next comes the task of identifying club committees, including their purpose, configuration and leadership. What’s the first step in this task?

The Purpose

Begin with the primary purpose of a committee, which is to serve as an advisor on policies relating to the issues subsumed by its scope of services—for example, finance, membership, golf, house, strategic planning, etc.

The next question is to whom does the committee report? The answer lies in the functions being supported by the committee. The board is a governing body with a strategic perspective. It needs committees to support strategic functions like finance, strategic planning, membership and governance/legal. In a good governance model, the board delegates the authority and the responsibility to the general manager to manage club operations, which includes delivering the services and activities efficiently and effectively. The committees supporting these functions, therefore, are best positioned reporting to the general manager.

We recommend two types of committees for a private club:

  • Board committees that support board functions and report to the board.
  • Operations committees that support operational functions and report to the general manager.

Unfortunately, the inertia militating against this alignment is rooted in history, where virtually all committees have reported to the board. Most club bylaws state specifically or clearly imply that all club committees report to the board, meaning that even boards that seek to realign their committees must first go through the process of amending the bylaws. Even if their bylaws allow for a restructuring, many boards are reluctant to effect the change.

Their rationale tends toward one of the following:

  • Having operational committees report to the general manager would diminish their role and prestige in the club, making it harder to recruit members to serve on these committees.
  • Moving operational committees away from the board reduces the board’s ability to stay informed on operations.

Value and Attraction

It is difficult to refute outright that service on operations committees will be less valued and therefore add to the difficulty in attracting quality members. Yet our experience suggests that club members are more persuaded by the influence of a committee and the quality of its management than by the person or persons to which it reports. In that vein, the closer the committee is to the decision-maker, the greater its influence and sense of value. Accordingly, we believe that whatever loss of status presumed by having operations committees report to the general manager is more than offset by the linkage the committee enjoys with the person who is responsible for making the decisions it recommends.

Likewise, we can understand the perception that not having operations committees report to the board will cause board members to lose touch with these important functions. However, there is no reason the board cannot require reports from the general manager that contain metrics the board believes are necessary for it to monitor performance.

Additionally, having operations committees report to it may encourage the board to meddle rather than monitor. Too often, board meetings are burdened by committee reports that address matters that belong to the general manager—not the board. If the general manager’s handling of an operational area is in question, the board can always ask for input from the committee. But to bake committee reports into the board agenda not only consumes meeting time, it also invites the board to be inappropriately involved with operational matters. Moreover, it blurs the clarity of responsibility for operational performance. If boards are holding general managers responsible for operational performance, the general managers must be given the authority to carry out the duties and the authority to form committees that support the functions related to operations.

Clearing Hurdles

As mentioned, many clubs refer to governance models of successful businesses, such as adopting the COO model, which clearly separates the governance function of the board from the operational leadership of the general manager/COO. But too many of these clubs are unwilling to realign their committees to more accurately reflect the corporate model and more effectively connect their committees to the appropriate level. We don’t discount the years of tradition that resist such a change, but we recommend that clubs clear the hurdle of the status quo and place their committees where they will most efficiently serve.

This piece was authored by GGA Director, Frederic Laughlin for the National Club Association‘s Summer 2022 Issue of Club Governance. 

Key Metrics for Effective Management of Gen Z

Generation Z (Gen Z), representing those born between 1996 and 2010, is quickly graduating from “children of members” to Junior and Young Executive membership categories in many clubs. Aged 10-25, this next generation follows millennials into private club membership and is set to become an important part of a club’s generational mix. Many of today’s key performance indicators (KPIs) focus on a broader vision that reflects a club’s priorities, values and purpose. Clubs who are proactive in addressing the needs and wants of this next generation will be poised to benefit from protection against rising attrition from a more vulnerable generational mix.  But how, exactly, should clubs cater to the priorities of Gen Z members and what information will help them to do so?

Clubs who seek to attract and retain Gen Z members will need to both understand the specific needs of this generation and know what data to track to determine whether those needs are being met. Learning about Gen Z, and what differentiates from past generations, will help identify successful strategies to engage a group who is soon set to reach full purchasing power.

The following metrics will assist Boards in making better business decisions related to Generation Z:

Generational Mix

The club’s Generational Mix outlines the percentage of members belonging to each of the generational groups. Traditionally, these generational groups include the Silent Generation (1928 – 1945), Baby Boomers (1946 – 1964), Generation X (1965 – 1980), Millennials (1981 – 1995), and now, Generation Z (1996 – 2010).

A club’s Generational Mix can say a lot about its culture and how it evolves over time. The mix can also reveal age clustering whereby there is insufficient distribution among the generations, making the club more vulnerable to large waves of attrition. Tracking the mix over time can identify historical trends and provide the opportunity to predict the future mix, allowing for the appropriate infrastructure to be implemented to meet the needs of future members.

Boards should regularly monitor and evaluate their club’s generational mix. For example, the MetricsFirst Lifecycle Dashboard identifies generational trends of various segments within club membership.

Diversity Profile

Gen Z are a diverse generation to the extent that they tend to take diversity for granted and have been taught by their Gen-X parents to disdain outright exclusivity. Tracking diversity markers, whether by race, gender, age, marital status, or otherwise, is helpful to understand the profile of your membership and how it is changing over time.

Clubs need to understand who Gen Z’ers are and where their priorities lie. The new generation expects organizations to take a stance on societal issues and are keen observers of how they are behaving in and out of the boardroom. Gen Z will expect governance from a Board that is as diverse as its membership – understanding how diversity, equity and inclusion is not just supported, but encouraged and represented throughout the Club, will be of value to this next generation.

Careful attention should be paid to how this data is collected, tracked, and utilized by clubs and boards. It is vital that appropriate, inclusive language is considered when requesting this information from members and emphasis placed on using the data to create an inclusive environment. External expertise may well be required to determine how best to obtain and safeguard this sensitive data.

Digital Engagement

Born into a world of technology, Gen Z is the first truly digital generation. This cohort expects private clubs to embrace technology as a complement to their overall customer service experience rather than a replacement for it. Clubs must focus on creating experiences for Gen Z’ers who understand and communicate using technologies like social media. This group’s natural use of technology will influence how clubs not only operate but engage. In addition to employing technology within the club environment for efficient ordering, registration, voting, etc., clubs should consider how technology, particularly social media, can be leveraged to drive engagement with existing members and to recruit prospective members.

The Net Promotor Score (NPS) is a valuable metric to track engagement and should be a standard metric employed to measure loyalty, which is important to younger generations. Social media metrics, such as likes, shares, and follows, are also helpful to track, and can be analyzed to determine content the membership finds most engaging. Remember to move beyond simply counting engagement – it is just as important to understand which social platforms members engage with to tailor content to those specific platforms. TikTok content creation is much different than content developed for LinkedIn. Tracking engagement to understand where to focus resources across social platforms contributes to effective management.

Amenity Utilization & Compaction

Gen Z’ers expect flexibility in their work and personal lives, with the ability to work in hybrid-type jobs and environments. Successful clubs will ensure that amenities are available on-demand to meet these needs. Boards should pay careful attention to the long-term planning for capital expenditures and human resources to make sure that the right mix of amenities is available to encourage long-term engagement between Gen Z members and their clubs. Opportunities may arise for utilization of club services and facilities in traditional off-peak windows, providing further incentive for clubs to encourage this next generation to engage with club membership earlier than previous generations have traditionally done so.

Metrics that identify compaction periods, and conversely, periods with excess capacity, will help clubs to take advantage of the flexibility Gen Z’ers bring.

Tracking club activity using member card swipes, digital card scans on mobile apps, or even facial recognition technology can help clubs better understand overall utilization. Combined with program participation (personal training lessons, class bookings, event registrations, etc.) and a valuable picture comes into focus of overall utilization, which can easily be broken down by demographic.

Gen-Z is defined by its prioritization of diversity, equity and inclusion, comfort with (and reliance on) technology, and expectation for on-demand services to meet flexible schedules.

As this rising generation begins to come of age in parallel with the “new-normal” of life post-COVID-19, clubs are faced with the opportunity to evolve to meet the needs of Gen Z. Leveraging data effectively will assist to understand what actions to take to do this. Private clubs contain a wealth of important data, with access to demographic, utilization and engagement metrics that can be very challenging to obtain in a more traditional business environment. The strategies that clubs can implement by analyzing this data more effectively have tremendous potential. Clubs that take advantage of the changing landscape of a post-COVID world to meet the needs of Gen Z are poised to benefit from the diversity this generation brings.

This piece was authored by GGA Director, Liz McDowell CPA, CA, CCM, and Trevor Coughlan, Vice President of Marketing at Jonas Club Software for Boardroom Magazine. 

The Conversations That Shape Business Results

Every club manager understands the value of effective conversations, with members, guests, employees, Boards and other stakeholders. Equally as important, is how the club approaches these conversations. What steps should clubs take to obtain the valuable information to hold effective conversations?

Surveys have historically served an essential role in building and maintaining successful club operations. As data analysis methods and technologies advance, surveys are now offering insights derived from data collected that were not previously available. In addition, surveys offer a valuable relationship-building practice with members and employers, the feeling of being heard.

As data-informed decision making has become increasingly vital in club management, surveys continue to serve a crucial role in the member feedback loop as clubs continually collect the right data to inform their operational strategies.  While operational and market data create a general understanding, surveys can target specific areas of interest to deliver unique insights that allow clubs to enhance their operations.

Types of Surveys

Surveys at clubs can be utilized for a variety of reasons, but all with the common goal of gathering data that can be used to inform decisions.

Member surveys are common and effective ways of gathering data. These can be in the form of an annual satisfaction survey, strategic surveys, or short pulse surveys aimed at capturing members’ opinions on a smaller range of topics (for example, food and beverage). These surveys usually have the highest levels of participation due to their short length. Overall, what separates member surveys is the customizable availability of the right data to identify opportunities for the club. By asking members their opinions and then acting on that information, members understand what they were asked, and they know the data is being used to keep their best interests at the heart of any changes.

Recent advances in statistical analysis allow clubs to extract even greater insights from satisfaction survey questions. One common error is to focus on those areas of the club that have the lowest satisfaction ratings. Instead, it is important to identify which areas of the club could benefit the most from investment to deliver ROI for members. Using advanced techniques allows clubs to identify touchpoints that can drive increased overall satisfaction by eliminating dissatisfaction and find those targeted risk areas that can negatively influence the member experience.

Another form of club surveys is the employee survey, which is becoming more popular at private clubs, especially considering the labour challenges that many have faced over the last few years. Like member satisfaction surveys, these surveys measure the satisfaction amongst employees regarding performance reviews, tools and resources, training, as well as their relationships with other staff members and club members. These surveys are a valuable way to build morale and satisfaction amongst employees, which contribute to increased retention rates.

Benchmarking Satisfaction

Satisfaction ratings are important to help make decisions. Changes in member preferences, economic conditions, or the industry are often reflected in satisfaction ratings and can be tracked and highlighted if the survey is repeated annually. Maintaining benchmarks as accurately and comprehensively as possible,  but also club and member profiles to provide segmented understanding, becomes important so you are aware of whether changes at your club are reflective across the industry, or which areas of club operations should be focused on the most.

During COVID-19, it was common for access to tee ratings to decrease and create strain on the golf course due to demand that exceeded previous years. Demand levels have begun to fall slightly in 2022 but continue to be far higher than before the pandemic began. Furthermore, understanding industry survey trends and best practices falls into favour when conducting surveys. For example, food and beverage operations are typically the most scrutinized area of club operations. However, a lower satisfaction rating for dining than the satisfaction rating for the golf course fairways does not necessarily mean that your club is struggling in that area. Accurately benchmarking this area of operations is important for club managers and their Boards to understand whether their ratings are unique or concerning.

Planning for the Future

Surveys are a useful tool for future planning at the club, ranging from interest in new amenities to changes to the club’s future vision. Asking members about their interest in potential capital projects helps prioritize these projects. Ensuring that members are asked about their tolerance to pay for these projects is an important consideration as this knowledge will help significantly in the planning/budgeting phase.

The club’s vision is another important aspect in helping the Board and management with decision-making and guiding the club into the future. Asking appropriate questions on members’ opinions of their future vision of their club offers them the opportunity to help guide the club’s positioning, based on their perceptions of the ideal private club experience.

Five Tips for Developing an Effective Survey

  1. Avoid including leading questions or those that may lead to confirmation bias as members want to know that their opinions matter, and that decisions haven’t already been made about changes to the club.
  2. Regularly conduct surveys, annually, if possible, to accurately track trends in satisfaction levels and member preferences as part of a larger data strategy.
  3. To prevent higher drop-off rates and lower response rates, keep the survey brief.
  4. Consider offering rewards or incentives for completing the survey and send gentle reminders; this typically increases the response rate, reduces costs, and is better for the environment.
  5. Ensure you ask questions to effectively segment the data to identify member differences; demographic questions are important but layered techniques, such as family life cycle, yield deeper insights.

As data collection methods and technologies continue to evolve, clubs that engage their members, employees and relevant stakeholders will gain a strategic advantage. Holding the conversations that matter and subsequently acting on what is needed will contribute to keeping your club connected, competitive and successful.

This article was authored by Michael Gregory, Partner and Andrew Johnson, Senior Associate for the Club Management Association of Canada’s Club Manager Quarterly Magazine. 

How to Use Performance Evaluation Effectively to Retain Best Talent

Amidst a global pandemic last year, businesses across the country began to face a new, unfamiliar challenge. 2021 saw the emergence of a global economic trend recognized as “The Great Resignation”, where employees voluntarily left their jobs en masse. Organizations in COVID-sensitive sectors like leisure and hospitality were hit especially hard. According to research from Business Insider, employees within these industries left their jobs at a rate double to the national average (6.4% vs. national rate of 3.0% in September 2021). More recently, the trend has shifted from employees resigning from their roles to increased demand and expectations for the right roles.

Unsurprisingly, human resources has become a major focus. In GGA Partner’s A Club Leader’s Perspective: Emerging Trends & Challenges survey, 67% of club leaders indicated employee retention being a key financial risk to their club and 77% of clubs see employee recruitment and retention being key issues facing the industry moving forward.

The big question facing those charged with governance is, what can we do to retain employees? The immediate solution is to raise compensation, which was indicated in the Club Leaders Survey as the most successful tactic in retaining employees. Clubs seem to be reacting accordingly, indicating planned raises to payroll by an average of 7.8% across all departments. Although increased wages are an important consideration, there’s more to the story.

McKinsey notes the strong connection between employee satisfaction and relational attributes (feeling valued, relationships with management, potential advancement) compared to more transactional attributes (compensation, prestige, role/company). Today, employees are thinking about what they want out of their job now more than ever.

Returning to the original question, how can organizations prioritize relational attributes to increase employee satisfaction?

Understanding the Problem

Surveys are a powerful tool to assess member feedback and provide a quantitative component to member feedback received on a day-to-day basis. The same attitude should be considered with employee relationships. Although results from a full employee survey will mostly be leveraged at the management level, this information is important for all at the club to understand how satisfied employees are through establishment of both an overall and department specific Employee Net Promoter Score, as well as how retention programs are performing.

Start at the Top

Employee satisfaction and retention are key concerns throughout all areas of the business; however, it is important to ensure those charged with governance do not bridge the gap between governance and management. While the board is directly charged with evaluating the General Manager (often its only direct employee report), it can also support establishing the structure and measurement method for evaluating other key management positions, as well as the structure for a comprehensive 360-degree review program for all employees. Boards should aim to establish a policy requiring a quantitative element of performance evaluation to key management figures within the club. This type of formalized, quantitative performance evaluation structure should be “pushed down” from the top level as an example to use throughout the club. This form of evaluation ensures employees are aware they will be provided the opportunity for advancement as well as providing SMART (Specific, Measurable, Attainable, Relevant and Time-Based) goals. The board can then monitor the club’s performance evaluation structure and process through the GM with a requirement for periodic reports at specified intervals.

Determining Quantitative Goals

In developing this performance evaluation technique, identifying which quantitative goals on which to evaluate an employee is an important determination. If the metric does not meet the SMART criteria, the employee may feel as if they are tasked with an impossible goal and satisfaction (as well as ambition) may decrease. Evaluation criteria should relate to key performance indicators established for the entire club that align with organizational goals. For example, if your club is attempting to grow the membership, raising the Net Promoter Score of the membership measured through an annual survey may be a performance evaluator established for the GM/COO of the club. For clubs at capacity, perhaps overall satisfaction score and/or ‘value for dues’ is a more aligned KPI for performance.

Take the below general example of a quantitative approach to evaluation (every club should determine the categories and weightings based on specific KPIs and goals established for their individual club). This score may be used to determine discretionary compensation, such as performance bonuses, raises or be used for evaluating candidates for internal promotions.

Employee retention is a key area of concern for clubs across the country and the world, and those charged with governance can take steps to help improve employee satisfaction throughout their business. These techniques will assist boards in understanding, setting, and maintaining performance standards that flow through the entire club, creating a transparent workplace with clear paths for goal attainment and advancement.

This article was authored by Ben Hopkinson, Director, Evan Van Eerd, Manager, and Adrian Mazzarolo, Senior Associate  for Boardroom Magazine. 

From Private Club Leader to Private Club Advisor

Connecting my technical background to leadership development

Growing as a professional has meant different things to me at various times in my career. After business school, my focus for growth centered around academic achievement and professional accreditation – becoming certified as a CPA, CA, and then a CCM. As my career developed, I have transitioned to focusing on the development of my team even more than myself. My focus has shifted from technical expertise to leadership, which is a change that I quite enjoy and am proud of. Prior to joining GGA Partners in 2022, my career had two distinct chapters – first, my professional practice as a public accountant and then my work running a premier private golf and country club. My career path accurately represents who I am, a self-proclaimed adrenaline enthusiast with a strong penchant for accounting!

Navigating through a pandemic

Navigating the COVID-19 pandemic has been a challenge, to say the least, but it has not been without it’s benefits. In the first year of the pandemic, I was operating a golf and country club. I felt a tremendous sense of responsibility to members and staff to deliver an exceptional experience in a safe way, even more so because it was our last year of operations following the sale of the club’s land and buildings. The highlight for me that year came from watching my team rise to the many challenges. I am tremendously proud of what we accomplished under truly extraordinary circumstances. As hard as it has been, I am optimistic that some of the changes forced upon us due to COVID-19 may be for the better – whether that’s the flexibility that comes from a hybrid work environment, the rapid acceptance of various new technologies, or the understanding that it’s better to stay home when you are feeling sick. With a young family at home, I am grateful to have had more time to spend together, even under very unusual circumstances.

Using my financial expertise to drive growth for private clubs

“My role as a Director at GGA Partners bring me immense joy, one of my core values. The opportunity to apply almost 20 years of professional accreditation and leadership experience in an industry that focuses on one of my own core values is a huge benefit, and I am thrilled to be able to share it with clients.”

GGA is the perfect fit for my skills and interests, and I get immense satisfaction out of advising private clubs, drawing on my background as a private club manager and from my technical expertise.

I am able to learn something new from each engagement, whether from the client, our team, or both, which keeps the work exciting and fresh. I can participate in a wide variety of engagements, from governance and strategic planning to operations and financial management, so there is never a dull moment.

Currently, I am conducting financial modelling for a prominent private golf club, a valuation exercise for a well-known golfing brand, and providing professional training through the Club Management Association of Canada.

More about me

I am a mom to three young, busy kids who keep me on my toes. Our family values time together through shared experiences, usually self-propelled and outside, like cycling, skiing, golf, team sports and hiking.

Liz McDowell is a Director at GGA Partners. You can reach her at liz.mcdowell@ggapartners.com.

From Forming to Performing: Principles and Practices for Effective Club Committees

Regardless of how a club chooses to align committees within its governance model, there remains the challenge of how best to establish them (forming) and realize their full potential (performing). Here, we describe the principles and best practices that apply to the constructive formation and effective performance of club committees.

Forming: Number, Size, Leadership, Membership and Terms

Number

There is no perfect number of club committees or ideal description of their scopes. The bylaws may specify what committees are required, but they usually authorize the board to create additional committees as it deems necessary and appropriate. Have a balance. Establish enough committees to address the breadth of areas prioritized by the club, but don’t overdo it. Having too many committees can lead to compartmentalization; having too few can burden them with too wide a scope. Most clubs have between six and 10 committees, which seems to provide a good balance.

Size

Committee size varies with the function and the desire for multiple perspectives. For example, the finance committee may contain four or five members who have relevant skill sets, while the golf committee may have seven or eight members and benefit from perspectives based on age, gender, handicap levels and the like. Avoid overpopulation, however, as too many members can reduce a committee’s efficiency and effectiveness.

Leadership

The next task is deciding on committee chairs. Here again, the bylaws may dictate the process. For example, the bylaws may state that the president selects committee chairs. They may also require that commit-tees be chaired by a board member. While we support the president selecting the committee chairs, we recommend a board policy with guidelines the president must use in the selection process. For example, the board’s policy may include a requirement for the president to refer to a board-approved profile of the ideal committee chair in terms of skill sets, leadership, good judgment, civil discourse and other desirable traits.

We do not favor the requirement that committee chairs be drawn from sitting board members. Select chairs on their merits, not their offices. If a board member fits the profile of a chair, fine, but unless the bylaws require it, don’t allocate committee chairs among board members simply based on their positions.

Membership

Now comes the time to populate your committees. We recommend allowing the committee chair to select his/her committee members. Again, however, we recommend that the board develop a policy to guide the chair in selecting committee membership. It is common for clubs to rely on volunteers to serve on committees. Yet, while a person’s desire to be on a committee is a useful criterion, it shouldn’t be the sole basis. Often, club members volunteer to serve on a committee to advance a particular agenda or program, which may make their membership on the committee more of a problem than a benefit.

Some club bylaws require the board to approve both the committee chairs and committee members. Although we don’t believe it is a necessary provision, it can be a way for the board to confirm that its policies were honored in the selection of a committee chair and committee members.

Many clubs require a year or two of service on a committee to quality for nomination to the board. This is a useful requirement as committees provide an excellent source for identifying board candidates. A member’s contribution to a committee is a good indicator of their likely contribution as a board member.

Terms

Clubs should have one-year terms for both committee chairs and committee members, with an allowance for additional terms so long as the chairs and members are selected on their performance and not by default. If you have a good pool of candidates who are willing to serve on committees, you may want to set a limit on the number of additional terms.

Performing: Management and Evaluation

Management

Once a club has established a committee and its chair, the board must develop a charter to clarify the committee’s role, its organization, the expectations of its members and the metrics used to gauge its effective-ness. The length of committee charters will vary with the amount of detail describing the committee’s scope. Although some charters include two or three pages of specifics, we favor general descriptions of scope that avoid exhaustive detail. If problems arise, such as a committee drifting out of its lane, the board can always add detail to bring it back in line.

Evaluation

It’s perhaps a bromide, but it’s true: What gets measured gets done. Precious few clubs formally measure the performance of their committees. Those that do rarely complain to us about the effective-ness of their committees. The below visual is an example of an instrument to measure a committee’s effectiveness. It can be used as a self-evaluation by committee members or as an annual survey for board members to complete. If committee chairs and committee members are aware of the rubric used in their evaluation, they are far more likely to be effective.

Gaining the full benefit of club committees does not involve sophisticated techniques or innovative approaches. It simply requires carefully choosing their scopes, organization, leadership and member-ship. Then, by managing and measuring their performance, a club will realize the potential of committees and add significantly to the effectiveness of its governance model.

This piece was authored by GGA Director, Liz McDowell CPA, CA, CCM, for the National Club Association‘s Summer 2022 Issue of Club Governance. 

The Challenge of Club Governance: An Interview with Damon DiOrio, CEO, Desert Mountain Club

Damon DiOrio, CCM, CCE has long been recognized as one of the top general managers in the private club industry, stemming from his 14 years leading the Charlotte Country Club and five years as CEO of the prestigious Desert Mountain Club in Scottsdale, Ariz. In a recent conference call with more than 100 university professors who teach hospitality, DiOrio was asked to identify the greatest current challenge in the club industry. He was quick to reply, “Club governance.” We wanted to know why. Here is what he told us.

Club Governance (CG): Damon, with all the other challenges facing clubs today—labor shortages, supply chain issues, inflationary food and fuel costs—why have you singled out governance as the greatest challenge?

Damon DiOrio (DD): To a large extent, it’s a matter of what we can control. While labor shortages and inflation present significant challenges, they are conditions beyond our control, and sophisticated club executives will implement tactical operational changes to successfully navigate through these issues. Establishing an effective governance model is a far greater challenge as many clubs have a history of poor governance, which can thwart an effective leader’s ability to effect positive change. My point, therefore, is to encourage club leaders to address a challenge within their control and work toward improving governance structures and policies that enable the club GM/CEO to effectively lead their operations.

CG: Why do you believe club leaders need encouragement?

DD: Mainly because developing an effective governance model requires challenging the status quo, which is based on decades of policies that are not best practices but have been institutionalized into a club’s culture. Changing entrenched club traditions is a systemic process that requires courage and strong leadership to challenge. While I generally appreciate the value of traditions in defining the brand of a club, when they stand in the way of good governance and positive results, they deserve to be reviewed and, in most cases, changed.

CG: For example?

DD: To start with, the election process. Choose board members on their merits and the skill sets needed to provide a well-rounded and diverse board. Then, use an uncontested process involving robust vetting by an independent, objective nominating committee. Too many clubs rely on contested elections that can result not only in reducing the candidate pool, but also in electing board members on their popularity, seniority or agenda.

CG: OK. Assume a club has put the right people on the board. Then what?

DD: Now you want the board to speak with one voice—in writing. It does that by developing policies, which are housed in a document we call the board policy manual (BPM). The BPM communicates how the board will carry out its fiduciary duties. It clarifies the role of the board, its members and officers, and the GM/CEO. It also describes the various club committees, their roles, and their proper alignment. Our board members are caring and successful professionals, but they are volunteers. Having solid policies in place provides stability and continuity.

CG: Speaking of committees, what advice do you have for club leaders on how to get the most of their committees?

DD: First, look at the functions where a committee can assist in proposing policies, advising leaders and bringing the benefit of multiple perspectives. There are generally two types of functions and therefore two types of committees: board committees like finance, audit and membership, and operations committees like golf, greens and grounds and house. The tradition among clubs is to have all committees report to the board, but having operating committees report to the board invites the board to micromanage functions to which it should hold the GM accountable.

CG: So do you have committees report to you as the GM/CEO?

DD: Absolutely. The house and golf and agronomy committee both report to me. We have seven golf courses at Desert Mountain and the golf and agronomy committee provides useful advice, player insights and the vision of the golf experience they desire to our key directors. For example, I recently asked the committee to help us define our outside tournament strategy, including a recommendation for a USGA Championship request. This type of strategic guidance is welcomed and appreciated.

CG: Golf is such an important part of the Desert Mountain community. Does your board worry about not having the golf & agronomy committee report to them?

DD: No. The board holds me accountable as the CEO for the condition of our golf courses and the quality of our golf program. It also gives me the authority and resources to get the job done. The golf & agronomy committee provides feedback and suggestions, and at the end of the day, it’s my responsibility to deliver the finest golf experience to our members.

CG: Is your title of CEO commonly given to general managers?

DD: No, but I highly recommend clubs consider it. Successful businesses are led by capable CEOs. They are not managed by committees or by boards of directors. Yet too many clubs hold on to governance models based more on traditions than operational efficiency. More than the title, a business mindset and model help shape expectations for all stakeholders and can help pave the way for a cultural shift. As a successful CEO you are expected to forge a safe, positive and healthy culture; engage state and local officials; be a philanthropic leader in the community; and protect the history and culture of your organization for decades to come.

CG: What would you say to someone who argues that running a club as a business will result in a more staid, impersonal culture rather than a more collegial community?

DD: I would say, “Come to Desert Mountain!” We see no conflict between a caring culture and an efficiently run operation. Just the opposite. We diligently promote a warm and welcoming culture, highlighted by personalized service and name recognition. Our people—members and our staff—are our top priority. But along with our commitment to community is our commitment to stewardship and that means using our authority wisely to govern effectively and to manage efficiently.

CG: Any final thoughts on the challenge of governing a private club?

DD: Only to remind club leaders that while they are forced to react to challenges like inflation and labor shortages, they can be proactive in addressing their governance model. There are plenty of good examples of clubs employing sound governance principles and practices. Search them out, adopt them and use them to develop a robust governance model, which will provide the tools to succeed in meeting all manner of challenges.

This interview was conducted by GGA Director, Frederic Laughlin for the National Club Association‘s Summer 2022 Issue of Club Governance. 

The Intricacies of Benchmarking Data

For years, we have proudly conducted industry research in collaboration with private club association across the globe, including the Club Management Association of Canada (CMAC), National Club Association (NCA) and the Club Management Association of America (CMAA). Regardless of the survey, one notion has consistently remained: analyzing research data to derive insight is complex.

The primary purpose of our most recent survey initiative in collaboration with CMAA, 2022 A Club Leader’s Perspective: Emerging Trends & Challenges (CLP) is “To explore the perspectives club leaders have about the industry and their club’s performance.”

The CLP research is not intended to provide comprehensive benchmarking for use in evaluating individual club performance, but rather to provide an overview of trends in the industry from the perspective of club leaders. And these perspectives are derived from a diverse cross-section of clubs, including a variety of club types, in different markets and with different business models. For instance, almost 20% of the 2022 CLP survey respondents represented for-profit clubs, which at times structure their business models differently than non-profit, member-owned clubs.

Why is this important?

Our firm routinely conducts comprehensive benchmarking and operational reviews for clients, and while we recognize the value of self-reported data, we do not rely on survey responses from any of our trends surveys or other industry surveys. For benchmarking to be effective, it requires in-depth financial analysis at the trial balance level, understanding of the key physical characteristics of a club’s facilities, understanding of the club’s operating hours and service offerings, and understanding of staffing, including head counts, full-time equivalents, salaries, wages, and benefits, with comparisons only drawn to truly comparable clubs. There is rigorous analysis required in conducting benchmarking.

Comparisons of aggregated data without detailed analysis and without context provided to club leaders by experienced professionals with respect to what the results mean to their club given their vision for the club, their members’ expectations and their unique market circumstances are not benchmarks and should not be relied upon to make strategic decisions.

Our work with club industry associations is incredibly illuminating and we are committed to continuing conversations with club leaders now and in the future. We fully support the use of perspective research to ignite discussions and to help highlight important topics of focus. After receiving a few inquiries related to 2021 Food & Beverage (F&B) performance as reported by the CLP Report survey respondents, we felt that additional context and clarity on this topic would be valuable.

Before delving into the F&B survey data in the CLP Report, we want to reaffirm that our research team conducted extensive analysis of the survey results, and the results reported in the report reflect the responses received. Nonetheless, readers will note from the scatter plot of responses provided in the report, that there are assumed outliers that we classify as highly likely to be inaccurately reported data by some survey respondents. While certain results reported by club leaders did not appear to be appropriate, we did not adjust the responses and reported the results as provided. The use of a median in the analysis is important given the likelihood of potentially inaccurately reported data in surveys of this nature. That said, given feedback we have received, we conducted further analysis into the survey data and developed additional context for our readers.

Digging Deeper into the Survey Data

The raw survey responses, as reported, produced a median total annual profit on F&B of approximately $70k, equating to an implied median profit margin of 7% in 2021, with 64% of respondents indicating that their club generated a profit.

Further consideration and applying both our best discretion and professional judgement to the data, we estimate that approximately 10% of the respondent data was likely not entered appropriately, either due to a possible misunderstanding of the question or a transcription error.

If we were to exclude these data points from the analysis, the median total annual profit on F&B is closer to break-even, with just over 50% reporting a profit. It is important to note that this does not consider potential improperly reported extraordinary loss data points, which is more difficult to ascertain and appears to occur less frequently in the data.

Food and Beverage Profitability Trends

The CMAA Finance and Operations Study provides a good frame of reference for food and beverage profitability: 

 

  • CMAA Finance and Operations Survey Trend – Food and beverage net profit/loss held a consistent (flat) trend from 2017-2019, with the average performance being a net loss ranging between 10-13% of revenue. This sample of respondents is more heavily represented by non-profit club structures as compared to the CLP survey respondent profile of clubs. In 2020, the pandemic driven challenges drove the median net loss on revenue to 37%. 2021 results will be included in the release of the 2022 Finance and Operations report.

When compared to our internal GGA Partners database of historical trial balance level client financial results and 2022 budgets, which includes both for-profit and non-profit clubs:

 

  • GGA Database Trend – Net profit/loss held a consistent (flat) trend from 2017-2019, with the median performance being a net loss ranging from 3-6% of total revenue. In 2020, the pandemic driven challenges drove the median net loss on revenue to 25%. In 2021, the median net loss remained consistent at 25% of total revenue. We expect performance to continue to improve in 2022 and generate a median net loss in the range of 8-15% of revenue, based on our review of 2022 budgeted income statements among our client base thus far.

Purpose at the Core of Strategic Decisions

“Is it possible to make money on F&B? Or are we better off subsidizing the operation to improve the experience for members?” For years, our clients have asked these questions. Food and beverage operations at private clubs create a challenging business model by nature and should not be compared to the restaurant operation down the street (even though members often make this comparison). However, to say definitively that your operation should not make a profit is also ill-advised. Many of GGA’s clients generate a profit within their F&B operations, however, this is a strategic decision (dependent on several market factors) and more prominent within for-profit structures.

Your budgetary philosophy on F&B is a strategic decision for your club and should be based on what members want, and what the market allows from a price elasticity and competitive positioning perspective. Our member survey work frequently demonstrates how important and impactful F&B operations at private clubs are. Often, there is a strong statistical correlation between members’ satisfaction with F&B and overall satisfaction with the club. As a result, when a non-profit club’s annual dues and overall business model can support an expanded food and beverage offering, elevated service levels and discounted menu pricing, many clubs make the strategic decision to manage their food and beverage operation to a loss, in favor of an elevated member experience and overall satisfaction with being a member.

While there is considerable skill required to execute a food and beverage business plan, the formulation of that business plan is largely a mathematical exercise that can be viewed as a sum of the parts. In a non-profit, member-owned club, the ‘parts’ are what the members, through the board of directors and as part of a well-formulated strategy, determine and communicate to management. These ‘parts’ include:

    1. The number of food and beverage outlets to operate.
    2. The hours of operation for those outlets.
    3. The level of service required and thus the staff requirements during operating hours.
    4. The quality of the products procured and offered for sale.
    5. The pricing strategy for how the club prices its food and beverage products it sells.
    6. The number of events the club plans to host.
    7. The source of events, whether member, member-sponsored or external third-party events, and pricing strategy deployed.

For those that may have read the F&B related CLP survey results with concern, we strongly recommend you ensure there is a comprehensive strategic plan in place at your club. This requires a clear understanding of the food and beverage experience that club members desire, and the operational and capital costs required to deliver on those expectations. The decision must then be made to determine how (or if) the club can deliver on the F&B experience in a manner that is financially sustainable. The feedback we received on the F&B results in the CLP research report underscore the necessity for strategic planning that incorporates financial forecasts and key financial targets, through which the board of directors guides management to operate, along with the importance of succession planning for board members, ensuring a knowledgeable and informed leadership group.

For any questions or for assistance in benchmarking your operation and setting the most impactful strategy for your club, please contract us at info@ggapartners.com.

Access the 2022 A Club Leader’s Perspective: Emerging Trends & Challenges report.

Read now

 

Developing industry-changing data analytics solutions

With a deep passion for sports, Elliott Leifer joined GGA Partners in 2021 as a Senior Associate on the Data Analytics team.

Golf has always been an integral part of my life. I grew up playing as many sports as I could, including golf, baseball, hockey and skiing. My family spent summers vacationing in Muskoka; a beautiful place that holds a special place in my heart. I enjoy spending time outdoors reading on the dock, discovering serene lakes on ATV’s, and skiing and barefooting on the water.

Building my data background

I studied software engineering at Western University where I fell in love with coding as it allowed me to combine my passions for math and problem solving. I later completed a Master’s in Business Analytics at Ivey Business School, where I learned how to translate real-world business data into actionable insights using statistical and technological methods. When I had an opportunity to join a small analytics team for the Toronto Maple Leafs and combine my interests in data analytics and sports, I knew it was an industry I was destined to end up in.

After completing an internship between semesters at Deloitte, I joined the firm full-time upon graduating. Working on Deloitte’s artificial intelligence team, Omnia, I was exposed to big data and unique problems in a variety of industries. In early 2021, I was sent a LinkedIn post about GGA’s work and realized this was the perfect opportunity to finally combine my passion for data analytics and sports.

My role in the firm

GGA’s data analytics team is building the future at GGA by organizing and collecting data as part of our analytics pipeline, allowing for robust analysis of clubs and leisure businesses around the world.

GGA’s data initiative focuses on providing efficient and tailored analysis to clients on levels previously unattainable or overly time-consuming. I am thrilled to be a part of this data transformation and am thoroughly enjoying helping our clients uncover unique and impactful insights through the application of our new data capabilities.

Our team is encouraged to challenge the status quo and suggest more efficient ways to approach problems. This openness and appreciation for continuous learning not only drives innovation at the firm but also has supported my research on how to best implement our data pipeline in the cloud, a skill I have been working to master for quite some time.

Outside of work, I find balance in the simple pleasures of life; making great pour-over coffee in the morning, practicing putting and chipping in my living room, and of course, playing with the family pup whenever I get the chance. While cooking dinner, I unwind by listening to music and recently put together a Yellowstone themed playlist on Spotify called “Montana Plains” – check it out!

Elliott Leifer is a Senior Associate at GGA Partners. You can reach him at Elliott.Leifer@ggapartners.com.

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