Insight from private club leaders
Highlights from panel presentations during the presentations of the 2012 Florida Trends in Private Clubs
Private clubs throughout Florida continue to develop business driven approaches to operations. The question remains how to operate like a business within the challenges of being a not-for-profit with a mission focused orientation. Several concepts that illustrate an intersection of business and club manager were addressed by panels of general managers recently at seminars hosted by McGladrey.
Refundable equity and resignation lists
While a few clubs have waiting lists to join, they are not surprisingly among the minority. Unlike several years ago, more have a line facing the opposite direction with members waiting to exit. This reality shines the spotlight on the topic of refundable equity. While one general manager offered insight into a decision to lower the amount of refundable equity upon resignation, another shared a strategy already implemented that requires members to resign officially when their names reach the top of the resignation list. The motivation behind this strategy is to discourage members from submitting their names in periods of panic, only to announce their intention to stay when the opportunity to exit presents itself. Other policies shared include allowing only the first ten members on a resignation list to know their place in the process with only the president of the club knowing the full length of the list; others shared sentiments about the merit of being completely nonrefundable in the tradition of old line northern clubs. Those discussions were balanced by those who felt that not refunding equity of any amount would be precarious for clubs as it would remove the perceived collateral when a member stops paying. If memberships are not actually selling for at least the amount of a member's delinquent balance, consider whether there is any true worth of that refundable equity to the club anyway.
Club marketing and brand differentiation
The panelists then turned their attention to marketing initiatives and attempts to differentiate their clubs. For some, the true experience of belonging to the club, and hence their means of distinguishing themselves, lies entirely in human capital (the quality and capability of staff members). With email communications appearing more common than ever before, a clear trend has emerged with clubs adding communications specialists to the payroll. One club has gone so far as to hire a fulltime communications specialist to manage its approximately twelve emails per week while others have added a single staff member with lighter email traffic. A couple of clubs have chosen to seek the professional resources involved in outsourcing these functions by hiring public relations firms. Multiple panelists spoke of website redesigns with one general manager of a bundled community sharing that the goals of their design were to emphasize an “other than golf” strategy by enabling a more seamless path between club amenities and information about the real estate. One remarkable comment was the prediction by a panelist that the role of a membership or communications director will be of equal importance to a director of golf in the near future. With an ever increasing volume of communications through different media, one panelist noted that his club realized that there was inconsistent brand messaging across departments. This was corrected by establishing standards and policies with compliance monitoring falling under the remit of the communications director.
Managing the real estate connection
Elaborating further on the topic of real estate, managers spoke of the importance of educating realtors who sell within the club. Some ideas on how to deliver this education most effectively included inviting realtors to the club each quarter for a visit. Another strategy implemented elsewhere includes asking realtors to introduce potential buyers to the general manager or another member of management—making a promise that someone from the club will be available whenever property is shown. In a similar vein, one panelist spoke about offering personal tours of the club and its amenities to the potential buyers.
The evolution of club governance
From real estate, the panelists turned their attention to club governance and debated whether it has been reevaluated sufficiently in recent times. A common sentiment emerged that paraphrased a popular slogan by saying that “an educated member is your best member.” Panelists around the state reflected on the roles management should play versus those of committees and boards. One general manager offered this outline: board equals strategy; management equals operations; and committees equal recommendations for the board. Within this framework, a discussion ensued about the common problem of having too many committees that act in more than a purely advisory capacity. A consensus arose that “just because you raise your hand and volunteer does not mean you are the right person for the job.” With increasingly more sophisticated and more educated professionals engaged in management, the role of the committee appears to be shifting for many clubs. No longer is it the case that the general manager happens to be the “last bartender standing.” Rather, today's general managers and chief operating officers are college educated with high levels of professionalism. Interestingly, one panelist appeared to have found a way to connect the dots between useful committees and club leadership by having a fulltime leadership committee, the sole purpose of which is to identify and promote the future leaders of the club.
Interest in benchmarking continues to thrive among committees and management alike but a new appreciation for intricacies and fallacies of blindly benchmarking across the industry has clearly emerged. One panelist who has a national perspective on the club management industry noted that it is very easy to “benchmark yourself to death.” He pointed out that the very definition of benchmarking involves an actionable element—cautioning not to gather data that does not offer the ability to make a change to operations. Evolving from a comment that benchmark data needs to be local information from true competitors, the panelists agreed that ultimately the best benchmark is performance against one's own budget. Similarly, comments were made about looking more inward in the form of membership surveys and sharing more information with peers within the club (e.g. at board orientations). The panelists recognized the importance of identifying truly similar organizations when attempting to benchmark outside of the club and some remarked about the need to consider different areas of clubs and potentially mixing comparisons based on similarities between specific amenities (e.g. compare food and beverage to one club but golf to another).
For a final topic, panelists shared some plans for upcoming and ongoing capital projects and how they will and are being funded. One general manager shared some insight into a current project being funded by an unsecured fixed rate loan at 4.25 percent without any assessment or dues increase to members (i.e. using current reserve funds and maintain the same dues level). Interestingly, the approval of this only required a vote of the board and not the full membership since the debt is unsecured. Meanwhile, another club is currently paying for a substantial renovation through a $250 per month capital assessment of members; this club was able to refinance its debt at lower interest rates due to current market conditions. If debt is cheap, then constructions costs might be even cheaper—relatively speaking. Discussions touched on the generally low costs of construction continuing even post recession. One panelist noted a 30 percent savings on a more than $20 million dollar renovation currently underway.
The theme of this year's Florida Trends in Private Clubs is “running your club like a business” and what this commonly voiced theme actually means. It is clear from the range of topics addressed by panelists at these seminars that many elements forge together in creating a club business and that a strategic perspective is required if a club is to address the entire spectrum while also remaining relevant to current and future members.