Getting Back to Normal
ECLUB NEWS |
This article was originally written and published in an industry magazine approximately two years ago. A few recent discussions led to its resurfacing and seemed to illustrate how relevant the thoughts expressed continue to be.
In recent years, all eyes in the private club industry have been on expense reduction. The nation's dramatic economic downturn put extreme pressure on club management to lower expenses – through the elimination of overtime, wage and hiring controls and freezes, consolidation of jobs and headcount reductions, operations adjustments, capital spending delays and tough bargaining with vendors to hold steady or reduce costs. At the same time, most clubs have kept member dues level, reduced activity fees where practical, and in some instances, reduced joining fees – all in an effort to avoid adding to the financial burden of members during tough economic times. For many clubs this effort has been successful in that members' pocketbooks have been minimally affected while club operations have continued – albeit at a reduced level of service.
In the short term, cost reduction methods are effective in dealing with financial downturns. But as a degree of economic stress continues to linger, we move out of the short term – and into the long term reality of a sluggish economy. Should our short-term strategies be continued indefinitely, or is it time to adjust our strategic focus?
Does your club still need emergency procedures?
Emergencies demand swift and decisive action. When a severely injured person arrives at the hospital, they are immediately admitted to the emergency room. Specially trained doctors, nurses and technicians swing into action to provide urgent care to the patient. In extreme cases these teams must pull out all the stops to make sure that the patient survives. Once survival is assured, the team then focuses on stabilizing the patient so they can be transferred out of emergency to a less intense treatment environment. The goal is to return the patient to their 'normal level of health' as quickly and safely as is practical.
It seems that many private clubs checked into the emergency room more several years ago and are now stabilize but have elected to remain in the hospital (or even the emergency room) for a prolonged period. Let us look at why it is time for those clubs to check out of the hospital and focus on getting back home to a 'normal' life.
The downside of prolonged cost reductions
Hospital care is extremely costly. So are drastic cost reductions at a private club. While clubs will certainly save dollars in the short term through dramatic cost cutting, the long term result is not so positive – eventually producing a reduction in the club's overall value to its members. If severe cost-cutting is allowed to continue beyond the term of the true emergency, the reduction in overall value can also become severe. Prolonged cost reductions tend to produce the following results:
- Reductions in service levels – due to restricted availability of amenities
- Reductions in service quality – due to deteriorating staff morale
- Reductions in amenity and infrastructure quality – due to delayed maintenance and upgrades
- Reduction in the overall value of the club's membership – as a result of the three items above
Should you wait for the economy to rebound?
In one word, no. Savvy organizations know that when a down economy has bottomed out it is the time to take actions – and invest funds in initiatives that begin to move the organization back to 'business as usual.' If your club has essentially 'stabilized' here are some suggestions for action:
- Increase the dues – The major factor affecting a club's financial stability is its dues structure. It has always been about dues in this industry. If the dues are sufficient to support the member experience, chances are the club will do well. If the dues are insufficient over a prolonged period, the club will slowly deteriorate in value, and the members will eventually find another club that satisfies their expectations. If your club has stabilized, it's time to increase dues. History has proven the long-term damage of holding dues steady – especially for an extended length of time. Get back to normal with at least a modest dues increase so you can keep the club's value at a level the members expect.
- Increase service levels – Use the additional revenue from your dues increase to bring service levels back up to par. Add some staff in strategic areas. Allow some wage increases and a limited amount of overtime to build staff morale. Put back in service some of those amenities that were restricted or discontinued during the dark days of the recession. By raising service levels, you will increase the overall value of the club to the membership.
- Increase the capital budget – Identify one or more capital projects that offer a win-win to the membership – a relatively small investment for a noticeable member benefit. Or, take the plunge on an ambitious project that the members were supporting before the recession hit. Chances are that the cost for that project is well below what it was two years ago, and can now be delivered to the membership at a bargain.
- Proactively promote the club – Stay in front of the members with website postings and e-marketing geared to encourage increased member activity. Use the club's computer system to create targeted email campaigns that publicize the club's events, and be sure to appeal to individual member tastes.
- Ask the members what they want – Conduct a membership survey that candidly asks what the members value most. Engage a representative sample of members in focus group meetings. Take the current pulse of the membership, and deliver additional value.
- Establish a strategic plan – Whatever your plan was two years ago, it probably needs to be updated with the recent recession – and upcoming recovery – in mind. Hire a professional planner who knows the club industry, and cover all the bases in your strategy, including:
- Governance and management – Take a fresh look at how your club is governed and how members are engaged, or not engaged, in club life. Review best practices and innovative ideas from other similar clubs. Get creative – and make some changes.
- Non-member income – If your club's financial future is improving, but still a bit uncertain, explore the feasibility of significantly increasing non-member income. Evaluate the value of outside events versus the inconvenience to the club's membership. Find ways to balance the pros and cons.
- New member categories – Evaluate the feasibility of adding some new membership categories, such as limited golf, sports with no golf, introductory memberships (dues only for a limited time to allow prospective members to 'try out' the club), dining only – limited categories that can attract new members without encouraging existing members to 'step down' to lower dues categories.
Check out of the hospital – now!
Do not wait until the economic recovery is well underway. That will be too late to take full advantage of the opportunities that lie before you. If your club has 'stabilized' make solid plans to check out of the hospital right away. Set a goal to get home as soon as possible to a 'normal' life – the one that your members truly value.