Governance structures

Governance, management and performance

This article from CMAE Conference speaker Ed Chapman CMDip is based on his research project, ‘The effect of governance structures on management practices and organisational performance: a survey of golf clubs in Great Britain and Ireland. ’

This is an abstract of the research project I undertook, conducted as the final paper in a Master ’ s degree in International Business Leadership and Management. I hope you enjoy reading the article as much as enjoyed conducting the research, and I’ m sure some of the findings will surprise you while others will reconfirm your own beliefs and experiences.

Abstract

This research focused on governance structures, management practices, and organisational performance of golf clubs in GB & Ireland. This was done through a review of relevant academic literature combined with the collection and analysis of empirical data, a questionnaire and interviews with club managers. The findings from this research provide evidence that the performance of golf clubs (GC) can benefit from modernised governance structures and that all types of golf clubs can benefit from a for-profit mindset. The main conclusions drawn from this study are that golf clubs need to select their board members based on skill and expertise, and have a strategic plan in place to protect the future of the club.

What did the literature review reveal?

There were three key findings from the literature review – a process where you critically read academic papers on relevant topics and then synthesise the findings – that this article will focus on.

1.Differentgovernancestructureshadnocorrelation to board performance, however, structural dysfunction and both input and process variables were significantly correlated with board effectiveness. What were these variables?

1.1. Staff communication channels to feedback on how strategies and policies are being implemented and their performance.

1.2. Obtaining members ’ views, i.e. surveys.

bers: selection based on skills; experience and timecommitment; and a periodic review of board per-

formance.

2.Theimportanceofusingfinancialratiosaskey performance indicators for club operations. What are the benefits of using ratios?

2.1. Ability to benchmark against the industry, either as a whole or against similar club types.

2.2. Helpful in predicting future performance.

2.3. Gaining preferential loan rates.

2.4. Comparing departments internally.

2.5. Assist managers in making fact-based decisions backedupbydataandpresentingbenchmarkeddata to their boards for easy performance comparison.

3. Operating with a for-profit mindset and using corporate management practices to elevate the performanceofclubs,bothequityandnon-equity. However, non-equity clubs need to be careful nottofocusexclusivelyonthebottom-lineatthe expense of members, and staff, satisfaction.

3.1. Planning and using a budget were highly ranked for frequency of use and importance for management competency in equity clubs by managers. With rolling budgets and zero-based budgeting gaining wider adoption in the corporate world for the agility they provide.

3.2. Positive member experiences are key for attracting and retaining members, which is partly driven by continual facility improvement: this requires capital expenditure which in turn requires revenue to be turned into profit. This can also provide a financial safety net for any exogenous events, such as a global pandemic.

3.3. Best practice for tracking performance was defined as continuous tracking and communication to all staff using a range of visual management tools. Targets were considered best practice when they were a mix of financial and non-financial, with the latter often being more inspiring and challenging.

Findings and discussion

A questionnaire was sent out, with 52 usable responses returned. Four club managers were interviewed to gather empirical data to be analysed against the literature review findings. The most interesting findings will be discussed in this article.

The need for modernisation of governance practices was frequently cited in the interviews as key for performance, which aligned with the literature review. One of the key findings is that the structure of the board is not the key component, but the people on the board and the continuity that this offers, or not. Having board members selected based on skills only was cited as key to success in both the interviews and in the literature, with a nominations committee providing this.

One of the key roles for boards cited in the literature, survey and interviews was that of strategic planning. A lack of strategic planning and the problems this causes were frequently commented on as a major issue at clubs and the knee-jerk decision making this creates. This ties-in with the importance placed on member surveys with 74% of clubs using them and 76% of those clubs citing them as being very or extremely important in influencing strategic planning.

This leads to another finding; a correlation between employee and membership satisfaction. This matched with 85% of managers seeing staff retention and satisfaction as very or extremely important to the level of service, financial performance, and member/guest importance. However, this importance did not match with the employee feedback channels used, which were very limited and only 23% of clubs measure employee satisfaction/engagement. With 78% of clubs reporting an increase in the number of rounds played in 2020 vs 2019, retaining staff and keeping them motivated will be critical to take advantage of this unique opportunity. However, with the mental health challenges of Covid-19, the associated lockdowns, uncertainty and burnout levels from overworked staff, it is important to regularly check-in with your staff and make them feel valued.

There is a distinct lack of corporate management practices used in golf clubs. Only a small number of clubs use any financial ratios, which are the backbone of benchmarking performance versus the industry. The interviews indicated that a combination of a lack of knowledge of ratios and worrying that the board might not understand them, as key reasons for not using them. A surprising finding was that 10% of clubs operate without a budget, which is antithetical to the literature review finding of planning and using a budget being a top competency of club managers.

Clubs need to act with a for-profit mindset to generate enough profit for capital investment and continual facility improvement, with bigticket items such as irrigation systems requiring replacing on occasion, and the need to be ready for these. There was a statistically significant positive correlation between clubs returning a profit and making capital investments, not surprising that a club that makes a profit is able to invest in the facilities. However, 35% of equity clubs stated that returning a profit as either not at all, or only slightly, important. Whereas the clubs that stated making a profit as extremely important more often make capital investments higher than 10% of operating profit and have higher member satisfaction and retention levels than those that rank making a profit as not at all important. A for-profit mindset does not necessarily mean compromising member experiences and can, in fact, offer the opposite with continual facility improvements and having enough funds in hand to survive low-probability events like a global pandemic.

A for-profit mindset does not necessarily mean compromising member experiences and can, in fact, offer the opposite with continual facility improvements and having enough funds in hand to survive low-probability events like a global pandemic. “ ”

Recommendations

Two key recommendations for practitioners were identified from this research. Firstly, a nominations committee to recruit board members with the correct expertise and skill set. The involvement of the board in items such as strategic planning is important, and having experts on the board to capitalise on their experience and knowledge can be invaluable to both the GC and the manager, as well as clearly outlining this as being the role of the board, and the day-to-day running of the club as being the role of the GC manager.

This links to the second recommendation which is for GCs to have a strategic plan to protect the club’ s future and guide it there. Without a strategic plan to formalise a vision and objectives, it is difficult for decision making and spending not to be reactive. This links to employee satisfaction/engagement because if there is no clear vision or purpose for objectives to be linked to then staff can become demotivated and disengaged due to not seeing the value or purpose of the work they are undertaking.

CONTACT DETAILS

Ed Chapman MSc, CMDip, PGA m. +852 6926 2841 e. edchapman23@cloud.com