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Managing risk: The power of the operational audit


One risk that clubs are well aware of, but sometime struggle to manage, is brand risk. How do we ensure our brand, including our operating standards, is being adhered to? How do we test compliance? How do we consistently inform our employees of expected standards, including any changes to those standards? These are among the many questions we regularly receive from club board members; these are the issues that management must deal with on a daily basis. One tool to manage the risk of standards slipping is the operational audit.

Much confusion exists in the club marketplace as to what an operational audit really is. For purposes of this discussion, we will use this definition—an examination of the operations of the business. The objective of the operational audit is to examine:  Effectiveness–doing the right things with least wastage of resources; Efficiency–performing work in the least possible time; Economy– striking the right balance between benefits and costs to run the operations.

Strictly speaking, any type of audit can only take place when there are documented assertions by management. In the operations audit, those assertions would be management’s documented standards of performance for all aspects of the club operations–from how the phone is answered to how large the pour is in the bar. At too many clubs, this level of standard documentation is lacking and so management should first ensure that all standards have been documented and communicated to team members.

Probably the most strikingly consistent theme that emerges from the operational audits that we regularly perform is the lack of standard compliance monitoring. One recent example involved bartenders and the control of liquor costs. Of course there is the understanding that the club pour is traditionally significantly larger than that at a public bar or dining venue, but still, it should be a defined measure. We had a food and beverage manager swear to us that all pours were measured using jiggers or bottle pourers. One shift of anonymously observing the bartenders free pour all night long soon convinced us that management’s perception and the reality in the trenches were very different.

While we could quote many other examples of this ilk, from unmetered and unlocked fuel tanks to storerooms unstaffed during a delivery, the point is simple –having a policy or standard documented is only useful if it is followed, and how can we possible know if our standards are being adhered to if we don’t audit them?

A quick look through recent headlines involving the retention of management companies at clubs across the country highlights a common theme that members want and that management companies base their business models on—consistency of standards. So it would seem that general managers and COOs have to be able to offer a compelling argument, that they, too, can deliver consistent, verifiable and measurable standards of performance.

So as an experienced club operator and leader, ask yourself these sample questions:

How often have you actually observed an inventory delivery at your club? What are the procedures required of your staff during an inventory delivery? How do you know they are following them?

How often do you take the time to formally talk to your department leaders, one on one, about operations’ performance? Are they giving you unbiased feedback or simply telling you what they think you want to hear?

Remember, an effective operational audit should not be focused on finding fault, but on providing validation of club management to the board. It should provide a spotlight for management to showcase their ability to manage the club effectively. Suggestions for improving practices may well be forthcoming from an operational audit, but most club boards, where we’ve presented findings, are proud to hear about the things their clubs are doing well and are eager to understand that they are not operating outside of accepted industry best practices. Club leaders who are confident in their management approach understand that operational audits are about affirmation, not condemnation.