United States

Revisiting a desire to benchmark the operations of private clubs

ECLUB NEWS  | 

Board directors and club managers often inquire about the financial and operating standards of excellence for the club industry.

Members of the board want to know that their members receive the best value for the dollars they spend, and that the club is well managed. They also want to know which other clubs operate efficiently and what their best practices are so that they can learn from them. These are admirable desires.

Often, however, board members want to know things like how many employees should be needed to maintain the golf course and work in the dining room or kitchen.

Typical responses to such questions are anecdotal and should remain prefaced with the caveat that no two clubs are alike. These are difficult questions to answer and nearly always require further study.

The club industry is unlike other industries, such as the manufacturing, distribution or banking industries, where routines are fairly standard and there have been many studies to develop more efficient and effective practices and procedures. This is what makes it difficult to provide standard benchmarks (i.e., standards by which something can be measured or judged). However, although not a significant quantity of formal documentation about club industry operating standards exists, it is important to remember that the management team at each club has established standards for its own club.

Questioning the reliability and validity of data

Still, board members and managers continue to seek meaningful financial information to compare against their operating results. While there is again no questioning that the process of comparing an organization's financial performance to an industry standard is a worthy endeavor, this endeavor is not without complications and deliberation.

Club professionals must question whether the available financial information is really a good measurement of the operating results of their clubs. As is well known, McGladrey is one of the organizations that produces an annual statistical report that contains an abundance of interesting and valuable information about club operations and financial position. The report being referenced is one that is derived from the financial statement audits of approximately 200 private clubs in Florida. While most clients, in and outside of Florida, find this report to be informative and useful, an occasional critic will state that the findings are not indicative of his club. The critique often includes comments about the averages in the report being higher or lower in than they are at the given club. This leaves the general manager in a position of defending his results.

The intent of these observations is not to dissuade reference to the McGladrey report or other sources of data. It is instead to challenge the idea that this information should be used as a measure of success or failure. The information is valuable but only when framed in the proper context.

Identifying meaningful peer groups

Designing a peer group requires some effort but the reward—more meaningful and reliable financial information to use for comparative purposes—makes the effort worthwhile.

Clubs should begin the process with a management meeting where relevant parties discuss which clubs in the area or even outside the immediate vicinity are most similar.

An important caveat to this exercise is that clubs should feel comfortable considering different clubs when reflecting on the different areas of their operations. For instance, a club might select to have a peer group for a food and beverage discussion and a different peer group with some common or even completely different members when discussing golf course maintenance.

When clubs compile data, they should organize such critical information as the number of members, employees by department, number of seats in a dining room, number of maintained golf course acres, the identity of golf course designers, square footage in the clubhouse and so on.

The rest of the information will come from a club's internal departmental financial statement. Gathering the information will require the cooperation of other clubs in the peer group. While this might sound like a significant obstacle, many clubs are more than willing to cooperate. Once peer groups are established and the information to be shared is agreed upon, it should be a relatively easy process to update it regularly. As a side note, McGladrey professionals are able to assist with identifying like clubs and outlining information on more targeted peer groups.

The budget benchmark

Club professionals often spend months absorbed in the budget process. During that process, decisions are made about operating philosophy, salaries and wages, employee benefits, capital budgets, hours and days of operations and other standards of operations.

Club managers have clearly learned how to run their clubs more like businesses. Departments have become leaner, and work routines and processes have been re-engineered.

Given all of this, consider whether there is a better benchmark for a club than its own budget. By measuring performance against intent, clubs are able to understand their performance in context of their goals rather than separating their goals and measuring success against the desires of unrelated parties. If each Club's strategic plan is unique, then surely each club's budget should be unique, if it is in fact aligned with strategy.

The right number of amenities

Among the many questions posed regularly are questions about having too many amenities to support relative to the size of membership and the subsequent questions about reducing or eliminating some of those amenities.

Many clubs have amenities and services that require valuable resources, including time and effort of management. Some amenities and services may be expensive to maintain and their elimination would not impact member satisfaction. Meanwhile, others are expected and desired by members and their elimination would negatively impact member satisfaction and ultimately retention.

As part of any program to reduce costs, amenities should be studied and, if need be, they should to be discontinued, reduced or replaced. These decisions are not easily made by comparing the statistics of other clubs though. They are driven by a given club's membership and its shared desires and expectations.

For these and other reasons, club professionals are simultaneously commended and cautioned for their desire to engage in benchmarking—a worthwhile venture should it be in context and through a truly introspective lens.