BoardRoom Briefs July/August 2016

briefs benchmarking basics

By Club Benchmarking

Without a healthy flow of dues revenue, no private club can expect to survive. The membership dues ratio, one of the most critical key performance indicators (KPIs) for club leaders to understand, is very simple to calculate: Total member dues (not including capital dues) as a percentage of the club’s total operating revenue. The industry median is 48 percent, meaning 48 cents of every dollar of operating revenue comes from dues. Clubs in the lower quartile have a membership dues ratio of 42 percent or

less and in the upper quartile, the ratio is 54 percent and above.

The membership dues ratio provides direct insight into the strength of what we frequently refer to as the club’s dues engine. Picture a two-cylinder engine where one cylinder represents the number of full member equivalents paying dues and the other cylinder represents how much a full member pays to belong to the club. An efficient dues engine, meaning one that produces enough revenue to fully fund the club’s operations, is a result of both cylinders working in harmony; an adequate number of members paying an adequate amount to belong to the club. A weak dues engine, meaning one that is producing insufficient dues

club culture Toxic Club Culture - p7 The Secret to Facility Success - p11 Governance Good Governance/Club Culture - p13 MeMbership Benchmarking Basics - p1 Bring on Your Club’s Brand - p9 Tips for Improving Membership Results - p11 trends Pop-up Dining Events - p9 industry news Brexit UK: The Transition Begins - p3 Brexit UK: The Club Industry in Europe - p5 wellness The Future of Club Spa and Fitness - p7

Club leaders should understand and stay focused on the membership dues ratio.

Typically, a low ratio occurs where member counts (FMEs) are low and/or dues per member is low. While it’s not uncommon for clubs to fall into a pattern of avoiding annual dues increases, that position is ultimately incompatible with a healthy dues engine and long-term financial sustainability. BRB watch the video: Finding the balance: dues and Membership.

briefs

table of contents board Habits for Today’s Board Meeting - p5

revenue, is the result of too few members, dues levels that are set too low or in the worst case scenario, both.

J ULY /AUGUST 2016 VO LUME 1 | ISSUE 4

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This newsletter offers content that goes beyond the buzz, by surfacing and summarizing important industry information. Each issue will offer practical insights from industry experts with a focus on fit for boards, board presidents and paid management.

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contributinG writers and industry resources Eddie Bullock / principal, Global Golf Advisors / Eddidbullockgolf@icloud.com Michael Crandal / private club consulting / mjcatexmor@aol.com Henry DeLozier / golf management consultant / hdelozier@globalgolfadvisors.com Teri Finan / director of communications, Club Benchmarking / tfinan@clubbenchmarking.com Stephen Jonston / founder & principal, Global Golf Advisors / sjohnston@globalgolfadvisors.com Jerry Kilby / Kanda Golf Marketing Services / jerry@kandagolf.com Bonnie J. Knutson Ph.D. / professor, The School of Hospitality Business, MSU / drbonnie@msu.edu William McMahon Sr. / chairman, McMahon Group / wpm@mcmahongroup.com Philip Newman / partner, RSM / philip.newman@mcgladrey.com Gregg Patterson / club consultant / GJPAir@aol.com Joanna Roche / spa & fitness director, The Westmoor Club / Joanna.Roche@thewestmoorclub.com

brexit uK: the transition begins

By Eddie Bullock

Leaving the European Union will, I feel sure, dominate the news for some weeks to come? But what impact will this have on the club industry throughout Europe?

Many clubs have come through the turmoil and challenges of the recession, changing the way they think, improving their risk and safety policies, establishing best practices and delivering better and improved service for their members and guests alike.

a bbc poll reported that younGer voters overwhelMinGly bacKed continued eu MeMbership

Conceivably these were policies and initiatives from within the EU! The financial markets will of course have an influence, some speculations have been voiced, a higher level of interest rate, changes in VAT and more local regional control of our environmental management, this all comes with uncertainty especially as there will be a change with the country’s leadership.

Potential changes in trade deals on certain supplies within the EU market may likely have a direct effect on how clubs view their long-term strategy.

Some semi-private clubs, who are geographically well situated, have intentionally built relationships with various golf societies in mainland Europe, for example encouraging their

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close neighbors in France, Holland and Germany. This could well become a declining market.

Many progressive clubs have been focusing on engaging and capturing with younger adult audience and family involvement.

With recent initiatives such as Sprint6 Golf, which is gaining positive traction within this demographic audience.

Do these stats give clubs a direct understanding of how the younger

potential future club members wish to react within a business and social environment, maybe not. However this does display they are a representative force whereby clubs do need to listen to them! Especially as some traditional clubs are finding it hard to change their governance policies, to equip themselves to the generational shift.

At this stage, of course, much depends on the day-to-day nature of post Brexit UK - a nation that could conceivably find itself without two of its member’s countries, Scotland & Northern Ireland, which firmly backed EU membership.

The constitutional changes will be poignant but it will be some time before the whole picture emerges of how people will live and do business in the years ahead.

For many of those working in the UK club industry, the hope will be that this political earthquake does not alter the landscape too dramatically.

My hope is that my next case of Chateau Saint Pierre, St Julien is saved from becoming out of my reach! BRB

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brexit uK: will it impact the club industry in europe?

By Jerry Kilby

The decision by the UK public in their recent referendum has caused shock waves not just throughout the European continent, but also all over the world.

Very few commentators really believed that the UK public would vote for leaving, but that only demonstrates how out of touch they were with public opinion.

The UK public voted in favour of leaving the European Union for many reasons, but I sense that the main reason was because the EU now is responsible for around 65 percent of the laws that govern UK society. I wonder how Americans would feel if politicians and bureaucrats that were elected by the populations of neighbouring countries were responsible for law making in the USA? I will not attempt to try and explain how we have arrived at such a situation, but suffice to say that the view of the UK public is now clearly different from our continental European cousins, many of whom see “ever closer political and economic union” as a goal to work towards, and potentially even a “United States of Europe” as the end game.

Will this decision affect the European club industry? In the short- and medium-term, no. Nothing will change for a few years, whilst the politicians are talking and planning the exit

strategy. In the longer-term however, perhaps three to five years from now, it is expected that the citizens of many European countries may need to apply for a visa to enable them to enter the UK, potentially for temporary visits (like vacations) and certainly for work. However, like the existing agreements with other countries, I feel sure that reciprocal arrangements will be agreed that will allow many people from all over the world to move with relative freedom to and from the UK. Whilst there are a few clubs in various European countries that have members living around the continent, the vast majority draw their members from their own communities, many of which are fairly local, so this decision is unlikely to affect a club’s ability to retain and recruit their membership.

The only area where the Brexit decision may affect clubs is the national economic situation, as a rise in interest rates might cause some headaches for financial controllers, and if economic uncertainty starts to trigger another recession across Europe, this would undoubtedly affect those clubs and resorts who rely on the tourist for their revenues.

defining habits for today’s board Meeting - part iv When members of a private club join a club committee or join the board, they do so for a variety of reasons.

Some people are looking to enact change, some are problem solvers and enjoy the challenge, and others simply do so because they enjoy giving their time towards something they love.

Whatever the reason, these individuals have stepped forward to help guide the club on the predetermined strategic path. Over time, as we speak with general managers, board members, committee members and board presidents, when referencing their board or committee meetings, we hear phrases like “lack of communication”, “misunderstood”, and “not listening”, even when their meetings or club conversations were not about complex ideas. So how can the board, committee members and the paid management communicate more effectively with one another?

avoid deFendinG your position When people cite communication issues in the boardroom, it’s often less about communication and more about defending their position. For example, during a meeting, Jill the membership

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director and James, who sits on the membership committee are discussing an upcoming new member initiative. Jill says, “This project is overwhelming the admin and membership staff; I think we need outside help.” James says, “You’ll be able to handle it.

Everyone will just have to put in some extra hours.”

Instead of having a meaningful conversation about what defines each of their observations, Jill gets frustrated because James “isn’t hearing her.” And James thinks Jill sounds like a broken record, going on about how overwhelmed she is. That’s not communication. Instead, effective communicators ask questions and try to understand all sides of the issue. In “The 7 Habits of Highly Effective People, “Stephen Covey advocates, “Seek first to understand, then to be understood.” By simply exploring others’ ideas, effective communicators rise above and get to higher ground. BRB

the Future of club spa and Fitness

by Joanna Roche

Over the past 20 years, traditional spa and fitness centers have seen unprecedented growth and change. Memberships to gyms and spa services, which were once viewed as a luxury, have come to be understood as preventive health care.

In fact, our culture has fully embraced the concept of wellness: • Insurance companies cover acupuncture and chiropractic and offer incentives to join a gym.

• Wellness programs including weight management and smoking cessation are part of workplace wellness initiatives.

• Families are engaging in group exercise.

• Yoga is now mainstream.

• Meditation is one of the most powerful wellness tools.

Wellness is a strategic opportunity to leverage member loyalty and spending – hire the right experts to help you develop your plan.

Plan and anticipate growth and future needs for space and expansion. There is nothing wrong with starting small if you plan for growth.

Educate your team, your board and your members – visit other top clubs and destination resorts and learn what they do. BRB

Club gyms and fitness centers; get ready to join the wellness movement! Here are a few things to consider as you evaluate where you are and where you want to be.

How are health and fitness programs incorporated at your club?

What do you offer and how’s it working? Complete a SWOT analysis.

What do your members want? What does your club need?

Create a long-term wellness program that matches your current facility. Thinking about expanding the facility? Those goals need to align with your club’s vision.

Market analysis – how would this affect your competitive advantage as a club? What are the revenue opportunities?

toxic club culture

By Phil Newman

It’s probably a universal truth that we have never encountered a successful club that has a toxic corporate culture.

Successful clubs have governance and management structures that ensure the club’s organizational culture is an asset and not a liability.

A recent article from the Institute of Internal Auditors identified six indications that a company’s culture may be trending toward toxicity and clubs would be well advised to keep a keen eye out for any of these symptoms: • Favoritism: some employees or members that receive special treatment not available to all.

• walking on eggshells: employees are in constant fear of being rebuked feel disrespected and ignored.

• bad behavior: employees, and indeed members, are allowed to engage in cutthroat behavior just to get ahead or get their way.

• lack of accountability: there are no consequences for members, staff, management or leadership for transgressions and rule breaking.

• lack of development: when management does not value training and development of staff at all levels, page 7

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performance drops and competitive advantages are lost in the war for talent and members • information hoarding: fear of losing control contributes to managers failing to share the information that others in the club need to do their jobs well. Does the course superintendent plan strategically with the director of golf?

Does accounting provide key performance metrics in a timely fashion to food and beverage management, and vice versa?

Clubs should guard against these indicators of a deteriorating culture by making sure value and ethics are explicitly discussed at board, committee and management meetings.

Clubs need to ensure that culture is evaluated using measurable behaviors. To that degree, clubs can follow some long established commercial business practices by creating a culture dashboard that tracks information such as employee feedback, ethics violations and vendor complaints. BRB

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club trends

bring on your club’s brand

pop-up experiential dininG events enGaGe Millennial MeMbers

by Bonnie J. Knutson

By Michael Crandal Traditional is out. More impromptu, one-of-a-kind, trendy is in. To stay relevant, retailers stay attuned to changing trends and consumer preferences. Nowadays, many private clubs are embracing the need to modify traditional offerings or face obsolescence.

Past experiences give perspective on enjoying our present experiences. From the perspective of Millennials, the internet, smartphones and options that they are used to impulsively act upon, is their life experience.

Millennial members are not traditional. The traditional club newsletter? Goes unread. Routine club events?

Deemed uneventful. Committing to advance reservations?

No, because something better may come up.

The solution? A growing trend of pop-ups — out of the ordinary, all but catch ‘em off guard unique dining and social opportunities. No printed invitations, or even email blasts. Pop-ups are all real-time text messages.

Very short bursts of information with a limited window for response and a small cap for total attendees. No more than two weeks away.

A sense of urgency is created to attend an event that almost seems secret — a can’t miss soirée of one sort or another. Pop-ups revolve around truly unique experiences: dining in crazy, different club locations, even the roof! Presentations and food not offered on regular menus. Novelty themes outside the norm, with intimate interaction with the executive chef and culinary team — and always, the unexpected.

Management is empowered to make changes and additions on the fly. Successful Pop-ups help create a loyal following of Millennials eagerly awaiting yet another unique experience at the club. BRB

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Brand is a word that has changed over time. The idea of branding began in ancient times, but it wasn’t until the late 20th century that marketers began to understand that a brand was really an image and that marketers could position a crafted perception of that image in the consumer’s mind.

In other words, your club’s brand exists only in the minds of your members. It’s the old adage of “perception is reality.”

So, then, what does brand mean for your club today? To really figure that out, you have to first understand what your brand is not. It is not simply your logo, name, newsletter, website, or strategy. Rather, your club brand is “the sum of all perceptions about a product, service, or company, built through experiences and communications…creating a set of expectations between that brand and its customers/consumers.” Said another way, your club’s brand is simply how people feel about it – members, prospective members, staff, and community.

The big question for you today is: just who is in control of your club’s brand? Ideally you are. But in reality, your members are. I’m often asked about how social media impacts club marketing. It’s simple. Social media means that you have lost control of your brand’s image. And that is true for any business. The marketplace sets the image. With focus, innovation, and consistency across all communication channels, however, you can help project a clear image of what your club is and lay the foundation for how your club is perceived. Ideally, the club’s realities match its brand perception. But, let’s be honest here, that doesn’t always happen.

In a case like that, the marketplace can again set a brand image, but one that may not be the one desired. Ask Sea World. Ask American Apparel. Ask Whole Foods and its consumer-given nickname, “Whole Paycheck.”

Like people, brands need to be carefully nurtured and managed, and like people, they get old and tired and need reinvigorating. In today’s 24/7 branded social media world, every club COO/GM has to perform a regular health check on the club’s brand — internally and externally. This means doing regular refresher sessions on how your brand image is communicated for all key leaders (board and staff) to ensure that they are passionately connected and understand how every member touch point impacts the club’s image.

To fully appreciate the role of image in club branding, grab a copy (paperback or e-book) of Positioning: The Battle for your Mind, by Al Ries and Jack Trout. It is a quick, entertaining read that sets a clear foundation for what had become known as branding.

Your bottom line will thank you!

BRB

Five Major points for improving Membership results Global Golf Advisors estimates that 6.5 percent of private clubs in North America are full with a waiting list. Stephen Johnston, founder and principal at GGA, says “Although membership fees and revenues are the economic backbone of private clubs, few club leaders focus on the requirements for keeping the club relevant to its members.”

Here are five keys for improving and sustaining membership growth: 1. Remember that this is an iterative process that has no end. Clubs must be in a state of constant recruitment.

Even those that are full can be increasing the wait list.

2. Implement a methodical process that is sustained by the people, systems and processes aligned to identifying prospects, engaging the prospects with existing members and converting the leads into membership applications.

3. Member referrals – as everyone knows – are the most effective recruitment methods. The key to remember is that members ONLY recruit their friends when they believe in the club.

4. One-in-ten referrals result in a new member. This 10 percent success rate indicates that clubs must aggressively build and maintain their lead lists. Everyone assumes that they will be more successful than 10 percent...until they are not.

5. The low-hanging fruit for membership growth are past members and legacies. Each group is acquainted with the club and its brand. Build your list from each category and launch a purposeful recruitment plan with these two groups concurrent to your overall launch with broader reach. Feed

on the low-hanging fruit until you have built enough support from membership recruitment programming.

Most clubs fall short in membership recruitment because of three missteps: 1. no process. Effective salesmanship – and that is what this is – requires a thorough and disciplined process for identifying prospects and cultivating their engagement from identification through recruitment through engagement to closing. There are no short-cuts.

2. inconsistency. Clubs that have not dedicated an individual who is trained in professional selling skills are at a disadvantage. Effective selling requires reliable consistency.

3. Zeal of converts. The newest members of your club are the most enthusiastic recruiters of their friends. Early engagement and on-boarding are needed to capture the zeal of new members. Most clubs are slow to engage new members.

Follow Steve Johnston’s advice to develop a system that can be implemented efficiently and consistently. BRB

the secret to Facility success

By William McMahon, Sr.

One of the biggest challenges facing clubs today is providing facilities that members want and will pay for. High quality facilities are a key ingredient for driving membership satisfaction, which results in increased club usage and more club members.

The challenge for any club is properly involving its members in the facility improvement process so that what’s improved is what members want; achieving a club’s mission.

First, the survey When considering facility improvements, be they for dining, golf course, fitness or the many other recreation offerings, begin by asking all members in all age and use groups what they want and what additional capital dues they want to pay to get them. This is best done in a comprehensive membership survey that tests member satisfaction with all aspects of a club’s offering, but with a special emphasis on facilities. Such a survey provides a prioritization of importance for potential facility improvements with an average dollar amount members would pay to fund them.

next, the planninG coMMittee With the members’ input available, appoint a 12-person planning committee of men and women of varied ages and usepage 11

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groups. The committee’s role is to study the club’s facility needs, work with an experience club planner and the general manager to develop a financially feasible improvement program. The goal here is to have the improvement plan be the members’ plan, not the board’s, manager’s or consultant’s plan.

proJect approval The secret to success in getting good facility programs approved is by positioning it as the members’ plan and presenting the project to the members for their approval. If a facility project is controversial due to its cost or some other major components, do a trial presentation to members without a vote. This allows for more input to see if there is enough support for the project prior to voting. A premature project vote can easily result in a negative outcome. So, when considering facility improvements for your club, involve your members throughout the process. Listening to them is the surest way to achieve success. BRB

Governance in a high relationship club culture – part ii

By Gregg Patterson

Last issue, (BoardRoom Briefs May/June 2016) we focused on the first five points in a high relationship club environment: trouble, research, historical principles, alternative principles and discussion.

4. the discussion continues: If required, the issues raised during the bond and debrief session, and the manager’s response, are discussed at the next board or committee meeting.

This issue we’ll continue to discuss overcomimg the potential downside of relationship governance in order to preserve the advantages of relationship governance.

1. the members’only bond and debrief session: Every board and committee meeting should end with a members’ only bond and debrief session during which issues and ideas that were left unspoken when the manager was present can be aired and discussed. The chair or president will guide the debrief, respond as needed and record the comments. Fact is, members will “bond and debrief” after a board or committee meeting regardless of the policy, either openly in the boardroom where there’s balance and constraint, or in the shadows at the bar where emotions and rhetoric will rule.

2. president and/or chair-manager debrief of “the members’ only bond and debrief session.” Following the members’ only session, the president or chair will sit with the manager and reviews the issues discussed, concerns expressed and recommendations made. This meeting is a candid “no holds barred” detailed discussion of the thoughts expressed during the members only debrief.

3. Follow up white paper/memo analysis: The manager then drafts a memo addressing the bond and debrief issues, provides further background, gives analysis and ships the memo to the board or committee for their review and comment.

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Great manager-member relationships can lead to good club governance or to bad club governance. The high relationship governance model I’ve outlined will allow the good parts of relationship governance to flourish and will mitigate the bad.

Making the bond and reflect opportunity a routine part of the club governance model will eliminate the by exception only executive session scenario that so annoys general managers and eats away at the relationship between manager, boards and committees. I’m now a believer, convinced that an end-ofevery-meeting members’ only bond and debrief session is the right thing to do in a high relationship club environment. Give “bond and reflect” a try. And enjoy the journey… BRB

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