BoardRoom Briefs May/June 2017

briefs What younger members Want

By Frank Vain

A key challenge for clubs is replacing the members that age out each year because of unremitting natural forces with new younger members.

Of course, the essential requirement for attracting them is to offer a membership experience they want. So, what are they looking for? We’ve asked that question in a survey, and here are the top five facilities you need to draw in prospects under age 50: 1. Casual bar and grill 2. Outdoor dining and lounge areas (bar/fire pits, etc.)

3. Resort-style pool complex 4. Full-service fitness facilities and exercise studio 5. Youth activities/game rooms If you want to attract the next generation, the first requirement is to modernize your dining and social facilities. Everyone eats, so your path to success starts with a great bar and grill with an equally inviting outdoor area – something that competes with the latest options in your area. It also creates an environment where they’ll meet other members, which is something that doesn’t happen in a stuffy old dining room.

After finding a hospitality environment that appeals to them, the young group will be looking for that all-important family amenity, the resort-style pool. Combining the basics of a good pool for the swim team with the new priorities like a zero-depth entrance or bench-seating/play areas and fountains, expanded foodservice options and larger decks

with shade structures, the resort-style is the place young members can see the entire family using the club together.

It’ll provide the feeling of a vacation getaway right around the corner from home and a place where they can all meet up after a round of golf or a set of tennis.

Add two other things, and you’ve got them hooked. One is a full-service fitness center, described as having space for classes and programs, in addition to the basic workout area.

This is a big value-added amenity for younger folks. They are going to have a gym membership somewhere, why not one bundled in with their country club membership?

Finally, they’re looking for play space for the kids. Families see themselves coming to the club as a unit, but maybe not spending every minute together. They like the idea of the kids having an area to run off to within the safe and secure club setting while the adults might linger over dinner or play another set of tennis.

A lot of clubs struggle to attract the next generation. Invest in these amenities and you’ll be on your way to a sustainable future. BRB

table of contents board Strategic Planning; It’s Necessary - p2 One Team, One Mission - p8 club culture What Younger Members Want - p1 Take Pride in the Club - p2 club trends Welcome to the Experience Economy- p6 Governance Club President Q&A- p6 Change, Evolve and Succeed- p8 Refundable Equity to Outgoing Member- p12 Human resources Annual Performance Management - p12 membersHip Sell the Gasps, the Tears, the Laughter - p4 More Than a Hole in the Ground - p4 tecHnoloGy Technology and Club Operations - p10

briefs

MAY/ JUNE 2017 VOLUME 2 | ISSUE 3

boardroom briefs is complimentary to boardroom magazine subscribers.

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.

John G. Fornaro / Publisher dee Kaplan / Advertising

Heather arias de cordoba / Editor dave White / Consulting

If you have a story idea, please contact heather@boardroommag.com or call (949) 365-6966.

For more information please visit www.BoardRoomMagazine.com. Interested in advertising, please email dee.kaplan@gmail.com or call (310) 821-0746.

contributinG Writers and industry resources Peter M. Cafaro / sr. vice president Judd Brown Design / pcafaro@jbd.cc Michael Crandal / CNG and BoardRoom Magazine contributor / www.linkedin.com/in/michaelcrandal Henry DeLozier / golf management consultant / hdelozier@globalgolfadvisors.com Ken Donovan / president, Fiddler’s Elbow Country Club / Bonnie J. Knutson Ph.D. / professor, The School of Hospitality Business, MSU / drbonnie@msu.edu Priya Kumar / director of marketing, Northstar Technologies, Inc. / priya.kumar@globalnorthstar.com David Lacey / managing director, human resources services, Hirshorn Boothby / dlacey@hirshorn.com Frank Lucas, CPA / Tax Senior Manager, RSM US / Frank.Lucas@rsmus.com Philip Newman / partner, RSM / philip.newman@mcgladrey.com Mike Phelps / CEO, Pipeline Marketing / mike@pipeline-inc.com Whitney Reid Pennell / president, RCS Hospitality Group / www.ConsultingRCS.com Frank Vain / president, McMahon Group / fvain@mcmahongroup.com

strategic planning - it’s necessary

By Henry DeLozier

It’s a known fact about a quarter of private clubs operate with a strategic plan. What does a strategic plan do for a club?

Yogi Berra famously warned, “If you don’t know where you’re going, you’ll end up somewhere else.” Many private clubs don’t know where they are going. In the simplest form, the club’s strategic plan sets forth its value system; identifies the primary goals and objectives of the board of directors; and establishes an action plan for meeting the goals.

Club leaders do well to remember that a strategic plan is more than a capital expense plan, a policies manual or a loose description of the club’s history.

Many clubs struggle to develop strategy because they do not know where or how to begin and immediately bog down in parsing the words for the mission and vision statements. The foundation for great strategy is laid in thorough market research. This assumes that the club should be what most of its members and prospective members want it to be and mean in their lives.

Once the club understands its market thoroughly, it is ready to develop strategy that is scalable and actionable to the wants and needs of the market. The goals and objectives for the club should reflect the values and lifestyle of the club’s members.

Following are three important touchpoints for goal-setting in a private club:

1. membership recruitment and retention – For economic and social reasons the club must sustain an adequate number of dues-paying members to deliver on the vision and mission that are promised; 2. economic sustainability – The club must pay all of its bills and obligations and reserve funds for future capital needs.

3. excellence in club Governance – Members want to belong to a club of which they can be proud. Thus, the club leaders must act in honorable, respectable and trustworthy ways. Great club governance is a matter of responsible governance.

Some clubs have strategic breakdowns when the continuity of the strategy is broken by a fractious board or a rogue leader who does not honor the established strategic plan. These behaviors break down trust and reliability, which usually leads to economic decline – because members leave or do not recruit their friends – when club leadership is questionable.

Effective use of strategy becomes the glue that binds together the club, enables its fulfillment of its purpose, and empowers its members. BRB

members/staff should both take pride in the club

By Michael Crandal, CNG

It’s easy to allocate club dollars to areas where members frequent and take pride in having guests see. But, what about maintaining and improving areas where employees frequent, and where members and guests, by design, never see?

Employee areas may be out of sight, but should never be out of mind. Club employees are disheartened to see ongoing major capital improvements all around them — while behind the scenes they feel forgotten.

It’s unrealistic and impractical to expect employee locker rooms, dining area, and restrooms to mirror member and guest areas — however, these areas should still be in keeping with the manner in which members expect to be served.

Many clubs would be well served by taking a fresh look behind the scenes and making sure all employee areas are reflective of the same upkeep and pride as the rest of their club.

Is your dining area full of mismatched stacking chairs and old folding banquet tables? Are metal lockers bent and rusted? Is lighting provided by flickering fluorescents with an annoying page 2

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hummmmm? Do restroom plumbing fixtures show their age? Is the tile flooring discolored? Are temperatures and humidity not all that different than outdoors, no matter the season?

Are the walls adorned with ‘motivational’ posters highlighting words like: Quality, Respect and Service? Perhaps it would help if a framed copy of the club’s mission statement and core values were proudly displayed to help employees remember to take pride in being a part of such a great club!

The easy take away here is, unless you know FOR SURE that none of the above applies to employee areas at your club — make it your business to tour the area and then take appropriate action. It could provide an opportunity to earn tremendous appreciation by staff and instill genuine pride in being a part of such a great club! BRB

sell the Gasp, the tears and the laughter

By Bonnie J. Knutson

It’s a fact that most prospective club members buy with emotion and use logic to justify the purchase. They join the club that makes them feel the best. The question is, then, whose club do they feel best about – yours or someone else’s?

When you’re inviting someone to become a member of your club, you have to make sure they feel best about yours. And the only way you can do that is to sell the benefits.

To illustrate, let me paraphrase a story told by advertising wizard, Roy Williams: One day, the owner of a jewelry store saw one of his salespeople watching an older gentleman who was looking at jewelry in the window. The sales person was naturally happy when the man walked into the store and wanted to see the bracelet. She scurried over to the window, retrieved the bracelet and brought it to him. Seeing that the price was only $400, he said, “I’ll take it.”

The storeowner continued watching them from across the store until the sales person placed his gift-wrapped box into a bag and thanked the customer for coming in. Seeing that he was about to leave, the owner walked over to gentleman and said, “I see that you bought the marvelous jade bracelet in the window. “ Is it for her birthday or your anniversary?”

The gentleman said that it was to be a gift for his wife on their wedding anniversary.

“I guarantee she’s going to love it,” replied the owner.

“That’s really a very special bracelet, and I can promise you that none of her friends has ever seen anything like it.

Before you leave, let me show you a necklace that goes

just perfectly with it. Maybe someday you’ll want to add it to the bracelet.”

The customer followed the storeowner over to a showcase, where he dramatically presented an $8500 necklace over his arm, saying, “If you ever want to take her breath away and see her cry, just give her this.”

Five minutes later, the gentleman walked out the door with a second package in the bag. He bought the necklace immediately because the storeowner sold him the benefits — not the necklace.

There is a postscript to this story. A few days after the sale, the owner received a note from the gentleman’s wife. “I only wish you could have seen his face when I gasped and began to cry. When I saw how startled he was, my husband told me what you had said that made him buy the necklace, and then we both laughed and laughed and laughed until we had to sit on the floor. Thank you for making this the happiest anniversary any two people have ever had.” Then she added: “Harry has promised me that he will never again shop at any jewelry store but yours.”

The moral of the story is: Sell prospective members the gasp, the tears and the laughter, not the golf course, the dining room and the children’s programs.

Your bottom line will thank you!

BRB

more than a Hole in the Ground

By Peter Cafaro

When we talk about vacations, everyone has a favorite that comes to mind. Think about it – remember your favorite?

I’m sure part of what made it special was the location and your experience.

As we enter summer – FINALLY – thoughts turn to the pool. There has been much discussion over the past few years about resort style pools. No doubt, the pool and its support facility must be up to resort level expectations in order to engage your members.

Zero entry, splash pads, water slides, poolside bars and family changing rooms are all part of today’s private club pool facility.

Beyond the facility, the experience must also meet, or exceed your members’ expectation. What are you doing to recreate that memorable vacation experience for your members each day?

Members want many things from their pool experience. Shade areas are extremely important and will dramatically enhance members’ experience at the pool. Private cabanas will also give your members a resort feel right at home.What about food and beverage? It’s critical that food and beverage offerings in the page 4

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pool area reflect the high standards and variety that you offer in the club’s other dining venues. Fried everything doesn’t even come close. There must be healthy and flavorful options for all age groups. Along with food comes service. When you are on vacation, do you like to leave your chair to go to order food?

Most members prefer, at least on busy days, the opportunity to order from their seats at the pool through a staff person – or – maybe even smartphone app!

And don’t forget events. The pool facility provides an ideal location to have very special summer style member events that will create excitement and loyalty among all demographics. Don’t be afraid to try unusual events beyond Sunday barbeques. Make the pool your members’ resort and they will make it their favorite summer vacation place. BRB

Club President Questions & Answers Ken donovan, Fiddler’s elbow country club a 2016 top club president recipient

Welcome to the experience economy

By Michael Phelps

America’s GDP has been growing for eight straight years, gas prices are low, unemployment is under five percent, and the last 18 months have been quietly excellent for wage growth — particularly for middle- and lower-income Americans.

We’re clearly not in a recession.

Yet, major retailers are closing hundreds of stores. The worst year on record was 2008, when 6,163 stores shut down. Barely a quarter into 2017, year-todate retail store closings have already surpassed those of 2008… it’s possible more than 8,600 brick-and-mortars will close their doors in 2017.

Ken donovan, president, Fiddler’s elboW country club, tom Hurley General manaGer

What is the most pressing issue or challenge that you faced as the incoming president?

We, at Fiddler’s Elbow, had an unusual challenge to face. For 48 years we were a for-profit, corporate-only membership. This unusual membership structure was very successful. New Jersey has long been a popular location for corporate offices. A combination of regulatory and economic issues convinced us to reconsider our membership offering and we initiated a plan that would make Fiddler’s Elbow a “hybrid membership” club.

We continued to offer our existing corporate memberships but in response to the changing climate we created membership levels for individuals and families. This transition, and wholesale repositioning of the club, was our greatest challenge. Our corporate members were satisfied with our 54 holes of golf and dining options. In order to attract non-corporate members we had to add to our physical plant the amenities they would want before they would become members. We added a multi-pool aquatic center with a full kitchen, a fitness center, a double-sided golf range and short game practice area, indoor learning center, new pro shop, state of the art tennis and paddle tennis facility, and a renovation of our entire English manor clubhouse.

During this transition our excellent staff enhanced our service plan to accommodate more private members with different needs. We began these changes before the economy began to recover from the Great Recession. The market responded enthusiastically and we are at membership capacity. BRB page 6

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Of course Amazon.com and other online players are partially responsible for the decline of retail in America, but not nearly to the degree you might think. In 2016, only six percent of retail purchases were made online. But retailers are down by a lot more than six percent.

Want to know what categories are doing better than ever?

Travel is booming. Hotel occupancy is booming. Domestic airlines have flown more passengers each year since 2010, and last year U.S. airlines set a record, with 823 million passengers. Events and live music are booming, with the live-touring business growing over 400 percent in the past decade.

The rise of restaurants is perhaps the most dramatic. In 2016, for the first time ever, Americans spent more money in restaurants and bars than at grocery stores.

In other words, we’re buying fewer things, but more experiences.

We’re spending more than ever on togetherness, entertainment and fitness. We hunger less for prestige, more for experiences and relationships. In fact, more than three-quarters of millennials report they would choose to spend money on a desirable experience rather than buy something desirable.

Because of the digital age’s increased access and availability of products, consumers increasingly value offline experiences…especially the less accessible ones.

Seemingly, private clubs are well positioned to benefit from an experience economy.

But beware, the tradeoff for charging admission is heightened expectation — well beyond providing quality products and addressing members by name. Excellent design, marketing and delivery will be every bit as crucial for member experiences as they are for products and services. in the experience economy, ingenuity and innovation will always precede growth in revenue…something the club industry has historically resisted. BRB We’ve developed a simple framework to help clubs create experiences that resonate for prospects and members – if you’d like a free copy, send an email to info@pipeline-inc.com.

change, evolve and succeed!

By Whitney Reid Pennell

As society continues to evolve – and clubs experience changing demands from a multigenerational membership seeking new products, amenities, and services – clubs should be looking for ways to continuously improve to stay competitive.

The clubs who survive and thrive recognize the changing times before they become noted as trends. These leaders have readily adapted to shifts in society. The factors that can prompt these changes can lead a club to reevaluate everything. Look out for the following changes, if you aren’t already. competition for club membership is well documented, most notably busy lifestyles of potential members and health/wellness needs. Travel and Leisure is even reporting about an airbus concept that includes inflight spin cycles, yet some club leaders still cling to health and wellness as just a fitness center in a repurposed storage space. They don’t realizing it’s an entire way of life for many (meaning menus, learning opportunities, activities, experiences at the club).

experience; spend money there.” Yet, many clubs have failed because of under-investment in non-golf amenities. Clubs must remain competitive with all amenities. need to improve service or process requires new thinking. How do you improve? Define and document standards. Train frequently. Have a culture of accountability.

Government regulations are also impacting clubs and forcing many to reevaluate, balancing cost versus membership value. Healthcare, overtime rules, minimum wage debates and taxes and regulations imposed on our vendors are just a few to have on your radar. BRB

technology evolves everyday. On average, your members receive about 4,000 messages a day. Do you know the best ways to answer the demand for technology in your club to better connect with your members? need or desire for growth may spark a club to reevaluate its method of operations and capital spending. Perhaps you’ve heard, “The golf course is the most important part of my

one team, one mission

By Gordon Welch

I recently participated in a leadership summit in Washington DC, and while listening to the speaker, my mind drifted …

I began thinking about club governance. Whether you are a seasoned private club director or a novice there are a few factors you want to keep in mind.

First, your club will be more efficient if the board is pulling together. One motto that often comes to mind is One Team, One Mission. It’s a good directive your board members can adopt.

We all have issues in life that can distract us. As a board member, sometimes outside factors distract you from your commitment to your club’s board. Generally, we all suffer from a time famine. There are other good causes that you could spend your time on, so here are a few ways to keep your commitment as a board member on the forefront.

There is often a value proposition as a board member.

Everyone is different. What is your ROI as a board member?

Many individuals feel there should be an ROI on their time spent volunteering at the club. Please, put that notion on the backburner. Donate your time and your knowledge to the club you love. If you’re looking for a return on your time, other than experience and knowledge, don’t make the commitment. page 8

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You must embrace the generational differences. Whether they are differences in communication styles, lifestyles or financial ability plan for your membership, embrace all of them. In addition, you should have the same consideration of the staff.

Your club must adopt the use of technology. If your club has been through a technology upgrade in the last three years, it’s out of date. You need to save monthly for technology upgrades and security. Don’t forget that technology touches all club departments from locker rooms to finance to food and beverage.

And finally, the three “musts” of a board member: Duty of Care; Duty of Loyalty and Duty of Obedience. Follow these three “musts” and you will stay on the right track!

One Team, One Mission is a selfless motto and one that should be used more in the private club industry. BRB

technology and the impact on club operations a Q&a with bill Wagner

By Priya Kumar

William “Bill” Wagner is the club industry advisor at Northstar. Bill, a former president of the Club Managers Association of America (CMAA), was previously the general manager at Shadow Wood Country Club and Riviera Country Club.

He can be reached via email at bill.wagner@globalnorthstar.com Q: Do you feel that technology has had a major impact on club operations in the last 10 years?

BW: Absolutely, what industry has not been impacted? For a long time in the club industry, technology was mostly equated with efficiency of accounting, controls and POS functions. Now, its biggest impact is on personal member service. Since the first Club 101 class I attended, rule number one has always been know all the member’s names.

Members feel better about their club membership when the staff recognizes them.

With the advent of apps, beacons and live reservation systems, it’s possible to have all the family information available to every staff member. Club employees provide better member service when they know the members and their family, including things like allergies, likes and dislikes, reservations, pictures of the family, spending patterns, etc. Technology can enable and enhance this.

BW: When clubs hire new or replacement staff, it’s usually for a specific role that needs to be accomplished.

A role-based technology system is one that delivers the specific resources, to complete the job required, to each staff member based upon their role. For example, the catering manager and/or the chef has access to all of the BEOs in realtime, rather than on printed pieces of paper that are outdated with every change.

The membership director can see the list of all the guests at the club in real-time, so that they can greet all the potential members while they’re at the club.

The pro shop staff can similarly capture the guests contact information, which feeds directly into the membership CRM system for later action.

Food and beverage managers can view kitchen operations and know ticket-by-ticket if a ticket is “stalled” in the kitchen, and if they need to go to that table to avert a catastrophe.

Role-based technology systems place the power of technology in the hands of the staff, so that they can provide exceptional member service.

Q. There is a debate that technology has dehumanized service - what is your opinion?

Q. Any final comments?

BW: Technology has really changed the way the clubs operate and I strongly believe that this acceleration is going to increase exponentially. It’s important that clubs use technology as a tool and not as an end goal. Technology should always be in service of the member experience, which is the question we ask ourselves all the time at Northstar when developing new products and features – how will this functionality or feature ultimately benefit the member and the club overall? BRB

BW: In many service industries, service has been replaced by efficiency, such as self-service. There is a place for that, but not in the highly personal-service realm of the private club. In the club industry, technology can do both.

Great service has many elements — speed of service, quality of the product, and human interaction. The best technology balances speed of service along with the human touch, where the member remains the primary focus, yet the technology is there to provide the speed. This is best exemplified in some of the newer POS solutions.

Q. What is a role-based technology system? page 10

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clubvieW – nortHstar’s role based tecHnoloGy system

boardROOM briefs March/april

Northstar’s role based technology system is called ClubView and has been received with a great deal of excitement from the club industry. For more information call 888-240-3501, email info@globalnorthstar.com or visit www.globalnorthstar.com

refundable equity to the outgoing member

By Frank Lucas

Refundable equity can create problems on your club’s balance sheet and might make it difficult to sell new memberships…but did you know it can also create issues with the IRS? We’ve all heard that refundable equity is more of a developer concept. It was used to help ease the pain of buying a club membership at tens of thousands of dollars with the promise of getting some, or possibly all of the money back after resignation.

For most clubs, the largest headache related to refundable equity is making the payment to the outgoing member. However something that crosses almost every club’s mind at some point is…does this payment require reporting to the IRS? In several court cases and rulings, the IRS has stated that they view equity certificates in the same way that they view stock in a corporation. Additionally, in recent IRS audit defenses, the agents have requested to see 1099-Bs issued and matched them against all resigning members.

So, in the same way that you receive a 1099-B at the end of the year for selling Amazon or Apple stock, you will also receive a 1099-B from selling your equity certificate. As with any stock, there is basis in an equity certificate. This basis could be used to offset most, if not all of the gain. Therefore, the fact that you are receiving a 1099-B doesn’t necessarily mean that a tax payment is required, but it does mean that the transaction needs to be reported to the IRS.

There are a few common instances where a member can sell an equity certificate and can make a profit. The most common one usually occurs when the individual has been a member of the club for a very long time. Another less common instance is when the equity certificate was purchased during the time the club was developer owned and was subsequently sold after the club had turned over to the members. The gain in this instance is due to the fair market value of the equity certificate significantly increasing after being turned over to the members. In the event a member makes a profit from the sale of his or her equity certificate in any way, they would be subject to capital gains tax.

You might ask, what if my club has refundable equity and does not issue 1099-Bs? Failure for the club to properly report the sale of equity certificates on a 1099-B could cause penalties on a “per instance missed” basis. If your club has refundable equity and is not currently issuing 1099-Bs, you should consult with your tax advisor to determine if a filing requirement exists. BRB

What is the Future of the annual performance management program?

By David Lacey

Of all the people management processes, performance management is clearly the one to do right. However, the standard of doing the annual review well has become dated. Frequently the annual process is not effective because: • • • • •

The manager is not well prepared.

There is too much of a gap between timing of the review and the employee’s workplace behaviors.

It is viewed as a necessity to satisfy the HR head, and not as an important management process.

The manager’s comments are vague and too general.

A poorly executed review lowers morale and can lead to erratic employee and business performance.

All of these implications have led organizations — especially those with a hospitality focus — to abandon the annual review. This is not a stopgap action, but rather the abandonment is permanent.

The likely question is: What is replacing the annual review?

I am pleased to report two new initiatives by country clubs that are replacements.

The first initiative is what I call debriefs. As an example, the food and beverage team debriefs the day after the anniversary page 12

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event, discussing what worked and what didn’t. The worked list results in actions for the team to continue doing. The did not work list leads to actions that the team should start and stop doing. Debriefs are immediate. The short cycle between the event and the performance feedback increases the probability of the team’s effective actions being repeated in the future.

A second initiative is shadowing. A manager follows or shadows an employee as they do their job. The shadowing can range from two to four hours depending on the position. It offers the opportunity to affirm or applaud what the employee does well; and to remedy shortfalls with immediate corrective actions.

Shadowing can be implemented as frequently as practical.

Debriefing and shadowing are performance-based initiatives that are replacing the annual review. Both initiatives offer many advantages and eliminate the downsides of annual reviews. BRB