July/August 2017 BoardRoom Briefs

Your Club’s Tech and Touch

BRIEFS

By Bonnie Knutson, PhD Alvin Toeffler and John Naisbitt seem to have gotten it right. And from a Member Relationship Management (MRM) perspective, it is scary.

In his 1970 book, Future Shock, Toeffler talked about how mass disorientation results from technological innovations coming faster than most people can grasp them.

establishing the emotional connection between your club and your member. These two elements are, it seems, an oxymoron in today’s competitive private club environment.

A decade later (1982), John Naisbitt echoed this belief in Megatrends when he introduces the concept of High Tech/High Touch as a co-evolution of technology and culture. He tells us that High Touch is an important counter-balance to the everaccelerating pace of technological change.

With the rapid acceleration of technology, there seems to be an increasing gap between the Tech and the Touch. The Tech and Touch of the member experience are not yet fully in sync. This is the MRM gap that is scary.

His argument is based on the interplay between the introduction of technology and human responses to it. He points out that, sometimes, people initially reject technology. Ultimately, however, the introduction of new technology has always resulted in social change – i.e. how all consumers behave. Consider the drive-thru window, ATMs, credit cards, cell phones, and online booking of reservations for airlines, hotels, or tee times. Each has altered the way in which members buy and how clubs market to them.

As clubs adopt advances to increase productivity and/or cut costs, the balance scale tips towards the High Tech side. As a result, Naisbitt says, people feel a little left behind; they feel overwhelmed, even disoriented or alienated. In other words, your members will not feel as welcome as they should feel in their club. If they do not feel genuinely welcome, they will not be active, they will not come as often, and they will not ask others to join. And if they do not come, your club cannot prosper and grow at the rate you want.

High Tech, Naisbett says, is about shortening time; it is about pushing everything towards real time; it is about increasing productivity and decreasing costs. It is about fast, faster, and fastest. On the other hand, High Touch is about human interaction; it is about the process; it is about time for discovering the nuisances in the club’s product or service delivery; it is about

The bombardment of technology accelerates the need for us to rethink how the High Tech/High Touch relationship best fits into our MRM strategy. It places urgency on us to clearly understand how we can give our members the gift of Touch in an increasingly technological world. When you figure out how to best do that for your members, your bottom line will thank you. BRB

BRIEFS

Table of Contents BOARD Planning for Wellness/Fitness at your Club - P2 No Bull! - P6 Board Training “Musts” - P10 CLUB CULTURE Designing your Club’s Fitness Center - P4 Club Fitness Center for Your Members - P8 GOVERNANCE Wellness Centers at the Club and the IRS - P2 Cut Your Facility Costs in 4 Steps - P10 MEMBERSHIP Fitness and Tennis Combined - P12 Fitness Facilities – A Social Experience - P12 PRESIDENT Q&A Fred Noa, Outrigger Canoe Club - P6 Randell McShepard, The Union Club - P8 TECHNOLOGY Your Club’s Tech and Touch - p1 Net Promoter Surveys - P4

JULY/AUGUST 2017 VOLUME 2 | ISSUE 4

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.

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CONTRIBUTING WRITERS AND INDUSTRY RESOURCES

Bill Boothe / president and owner, The Boothe Group, LLC / bboothe@boothegroup.com Michael Crandal / CNG and BoardRoom Magazine contributor / www.linkedin.com/in/michaelcrandal Henry DeLozier / golf management consultant / hdelozier@globalgolfadvisors.com Kelley Harris / principal interior designer, Harris Interiors / kelley@hintatlanta.com Bonnie J. Knutson Ph.D. / professor, The School of Hospitality Business, MSU / drbonnie@msu.edu Frank Lucas, CPA / Tax Senior Manager, RSM US / Frank.Lucas@rsmus.com Len Simard / search executive, Kopplin Kuebler & Wallace / len@kkandw.com Craig J. Smith / co-founding partner/co-creative director, C2 Limited / csmith@c2limited.com Frank Vain / president, McMahon Group / fvain@mcmahongroup.com Gordon Welch / president, APCD / gordon@gordonwelch.com Dave White / editor, BoardRoom magazine / whitepks@mac.com

Wellness Centers at the Club and the IRS

By Frank Lucas

Have you recently walked into a Starbucks or McDonalds, noticed the calorie count at the bottom of every item and wondered why they would ever disclose that information?

This is mostly thanks to society’s push towards a healthy lifestyle by understanding the amount of calories that we are consuming… and because legislation passed in 2010 mandated that large restaurants must do so.

As part of continuing to make private clubs the place the members visit, the most, certain clubs have found ways to capitalize on recent health conscious trends. If your club hasn’t already jumped on board, you might be getting pressure from your members to do so. Adding a fitness facility as part of the amenities qualifies as an exempt member activity as long as it promotes social and recreational purposes. Any activity that does not meet the definition of a social club could be considered a non-traditional activity and if the revenue was large enough, it could jeopardize the club’s exempt status.

Another very unique and growing trend in the wellness area is private clubs partnering with health care companies to provide physical therapy on club premises. This is a great benefit to

members as they would not have to leave the club and could conveniently drive up in their golf carts for physical therapy.

Under this arrangement, usually the health care provider pays the club rent for the use of one or several rooms in the clubhouse. Even though this is a convenient benefit for the members, rental income does not qualify as an exempt function activity. Rent is considered taxable income and reportable on the 990-T. However, just because it is reportable doesn’t necessarily mean the club will owe tax. The IRS does allow certain expenses related to the rent to be used to offset the income.

While it is important to keep up with current trends, it is just as important to make sure that you understand the tax implications and possible risk areas. Consult with your tax and auditing firm before adding any health related amenity or entering into any agreement with a health care provider. BRB

Planning for Wellness and Fitness at your Club

By Gordon Welch

As your club delves into considering new facilities for fitness programs, you need to be very thoughtful and deliberate in your boardroom. It would be ideal if you have someone on your board that understands fitness programs and facilities but that is probably not going to happen.

As a board member, you have a few things to consider. First, is a fitness facility needed, wanted or even practical for your club?

Can the club support the cost of staff needed to run such a facility and proper equipment for your club’s needs?

Having been through this process let me offer some advice.

Please do not think that if you find a, small, unused room or open space at the club you can install a few treadmills and some free weights and all your members will drop the health club and work-out there. It doesn’t happen.

Take the time and the money to hire a professional that is a part of the needs assessment. The professional should work with the members to first assess if it’s necessary and will be used. Spend your capital wisely on the space and equipment you need.

Next steps in planning include staffing schedules and possible retail needs. The club’s insurance will probably want a staff person there always in case of injury. Also, take advantage of needed sports clothes, shoes, etc. and offer some retail. Does the club have the income to fund the venture?

It’s not an easy decision and there are no guarantees your members will use it faithfully. I will finish with a final request.

Please do not have your golf professional or tennis professional or clubhouse manager oversee the facility. Hire a professional or an experienced individual to run your facilities! BRB

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Designing your Club’s Fitness Center for your Members

By Kelley Harris Fitness and wellness are among the top club trends, attracting members of all ages. Improving or introducing fitness makes your club relevant and enticing to new members.

Engaging a team of professionals who can guide you through the process should be your first step. The collaboration between a qualified interior designer and fitness consultant will take your fitness amenity to the next level!

Cardio equipment and weights are still among the most utilized equipment; however, current fitness trends focus more on strength and group training. It’s important to create well-rounded fitness spaces that can easily convert from TRX to Pilates, for example, or easily adapt to the evolving fitness trends.

identity, like your club’s signature color, or use colors that complement the color palate of the clubhouse.

Once you have the fitness center your members desire, they will have another reason to use the club. And once members are on property, they are likely to stay for lunch or dinner, generating revenue! BRB

There are many materials specific to fitness; making selections can be overwhelming. Whether it’s rolled or modular rubber sports flooring, luxury vinyl plank, turf, or cork, it’s important that you make the right material selections to support a variety of uses.

Your fitness center should also have an identity that is unique to your club. Choose a color palate that nods to your club’s

Net Promoter Surveys

By Bill Boothe

A survey technique using the Net Promoter Score (NPS) concept has gained wide acceptance throughout the business world.

The NPS approach uses a single survey question to measure the loyalty of customers to a particular company or brand. This customer loyalty metric was developed by Frederick Reichheld and introduced in the Harvard Business Review way back in 2003. Now some 14 years later it is seeing wide usage as a valuable tool for businesses to gauge the overall satisfaction and loyalty of their customers. Originally touted by the inventor as a measure of potential business growth, companies have focused instead on the fact that customers are more likely to respond to a brief and timely survey than a lengthy list of survey questions.

Here’s how NPS works (according to Wikipedia): A single question is posed to the customer: How likely is it that you would recommend our company/product/service to a friend or colleague? The scoring for this answer is most often based on a 0 to 10 scale.

Those who respond with a score of nine to 10 are called Promoters, and are considered likely to exhibit value-creating behaviors, such as buying more, remaining customers for longer, and PAGE 4 | BOARDROOM BRIEFS JULY/AUGUST

making more positive referrals to other potential customers.

Those who respond with a score of 0 to 6 are labeled Detractors, and they are believed to be less likely to exhibit the value-creating behaviors. Responses of 7 and 8 are labeled Passives, and their behavior falls in the middle of Promoters and Detractors.

The Net Promoter Score is calculated by subtracting the percentage of customers who are Detractors from the percentage of customers who are Promoters.

Private clubs are getting into the Net Promoter act by issuing brief surveys (usually 1-3 questions) to measure member satisfaction. These mini-surveys are generally focused on a particular member experience, and are often timed to arrive via text to the member’s phone soon after the target event (i.e. an hour after the member’s POS check is closed in the dining room).

Some club software solutions are able to automatically issue these surveys based upon a specific experience, in a specific amenity area, during a specific date/time range. By issuing timely, targeted mini-surveys, clubs are able to measure member satisfaction in a precise manner, and respond to specific member opinions rather than wade through mounds of generalized data. In addition, since the survey respondents are known (which is not the case with anonymous club-wide surveys), members who report a high degree of dissatisfaction can be approached to address their individual situations. BRB

Club President

Questions & Answers Fred Noa, Outrigger Canoe Club, Honolulu, HI A 2016 Top Club President Recipient

What is your view on collaborative governance between the volunteer board and paid management? In today’s private club, how do you see this governance model operating?

Collaborative club governance by and between volunteer boards and paid management is the key to the very best practices and subsequent member, staff, and guest club experience which preserves the heritage and legacy of the club. It also provides the path for the organization to evolve as necessary. This relationship requires leadership at the highest level, starting with the club president and GM/COO, providing both modeling and tone for the rest of the board, management, general staff, and member’s alike.

NO BULL!

By Michael Crandal Dictionary.com defines Sacred Cows as: “ individuals, organizations, institutions, etc., considered to be exempt from criticism or questioning.”

Bad Sacred Cows are oftentimes disguised as: outdated mission statements ― boilerplate position descriptions ― antiquated organizational charts ― or any old habits that hinder innovation. They need to be routinely “culled” from the herd. Bad sacred cows need to be identified, put on the agenda and never be exempt from constructive criticism or questioning.

Great marketing firms conduct blind tests to learn what descriptive adjectives best capture the thinking of the public to their client’s offerings. Imagine if a marketing firm came back and delivered a message like this: Well, the overriding obstacle we found is one word that continued to surface.

That word is IRRELEVANT. The perception is your club is blatantly not relevant to today’s lifestyle.

Like any relationship that thrives over time, an investment of capital which consists of respect, transparency, courage, honesty, grace, and lots of communication are traits that should be embodied by both the board president and GM/COO which again needs to be the model for the rest of the organization.

The governance model works best when both the board and management have collaborated in creating and or re-evaluating and re-aligning the club’s short, mid, and long-term business plan and strategies. Execution of the business plan is management’s responsibility and should not be micromanaged by the board. The board’s responsibility is to hold management accountable to the agreed upon strategies and to provide management with the cover and tools to succeed.

Yup. It’s time to cull the herd of antiquated sacred cows!

Perhaps some of the areas below have been considered to be exempt from criticism or questioning. But, it may be time to get mooooooving!

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Reinvent your approach with a fresh mission statement, vision, and core values that reflect the times.

Identify ways to appropriately say YES to younger members by being relevant to their lifestyles.

Establish an all new organizational chart (with members at the very top!) and fresh position descriptions where every board member, committee and employee knows their role — ALL of them member experience oriented.

Streamline your governance model. Do you really need all those committees and an unwieldy large board?

Really?

Important tools for success are investing in best practices.

Affiliation with industry organizations like the CMAA are important to the club’s growth, management needs to be in touch, evolve, and stay relevant in a dynamic and ever changing club world. Member participation and feedback is also important. It’s a good habit to survey members on a regular basis and to provide members with a path to participate by serving on committees. This type of involvement helps insure that management and the board are on the right path and create member ownership and accountability for the process.

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Lastly, when necessary, have the courage to stay the course in the midst of uninformed and or unreasonable member objections that are driven by personal agenda. Equally important, be quick to account for mistakes and shift in real time when required. BRB

Old Sacred Cow tails cannot be allowed to wag the future of your club! Approaches to club governance/operations that exist solely for historical reasons, which no longer remain relevant in today’s world keep you locked in an orbit around a world that no longer exists. And, that’s no bull. BRB

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Club President Creating a Club Fitness Center That Fits Your Membership!

Questions and Answers

Randell McShepard, The Union Club Cleveland, OH A 2016 Top Club President Recipient

What is your view on collaborative governance between the volunteer board and paid management? In today’s private club, how do you see this governance model operating?

In my opinion, collaborative governance is the only way that a club can function effectively and seamlessly. Every aspect of the private club business should meld the experience and execution of the paid management with the vision and oversight of the board.

In doing so, all facets of the club’s daily operation will be addressed in a timely and strategic fashion, thereby enhancing the overall club experience for members and mitigating challenges.

The volunteer board should be the conduit to the membership while the paid management (general manager in particular) serves as the link to the staff. It is also helpful to engage paid management in the work of club committees, as they are more likely to be keenly attuned to club member aspirations when they hear them first hand and help to bring them to fruition.

Open and frequent communication between the board and management is a major determinant of success and progress in the private club industry! BRB PAGE 6 | BOARDROOM BRIEFS JULY/AUGUST

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

As a club designer and stylist, I always enjoy discovering new approaches and trends that can aid our country club partners. Our firm was hired by a local country club to design a new fitness center facility as part of an overall clubhouse master plan. The assignment was to repurpose underused space into an amazing, historically inspired, fitness center to contextually blend with the club’s architecture.

Working closely with the club’s GM and fitness director, we identified the essential drivers for the facility design. These were: how the design relates to programming and the club’s intended operational philophy; coordination and compliance with local and national building codes; the club’s diverse membership demographic; the desired hours of operation; member off-hour access; and, of course, the club’s budget requirements.

I am happy to report that the facility is open and the facility is strong and thriving beyond all expectations.

SO WHY SUCH A SUCCESS? The club equates the overwhelming success to our initial four-key, yet simple, planning and design touchpoints for creating successful fitness and wellness facilities: 1. Maximizing spatial utilization, efficiency and adjacencies 2. Durability of finishes selected 3. Proper ventilation and dehumidification 4. Interior acoustical design and sound transmission prevention Obviously, there are myriad small details beyond the aforementioned that go into planning and constructing a new fitness center. From drilling down on layout details and how they work from both a member and staff perspective, to the complex behind-the-wall infrastructure requirements, to design coordination to ensure the feel of the facility’s interiors are comfortable, to ensuring the contextual aesthetic is inviting, efficient, and stands the tests of time. BRB

Board Training “Musts”

By Henry DeLozier

In many private clubs, board members are smart, dedicated and experienced in the science of corporate governance.

Most board members these days know that the board must assertively monitor and avoid conflicts of interest, the necessity of boardroom confidentiality, and the value of supporting the authority of the club manager.

Private club boards must tend to strategy and strategic planning, finance and financing, and protecting corporate assets. One other important duty of club boards is to prepare successor board members to serve the club well.

Following are five necessities for new board member training that each board member must fully understand about the club:

1. Governing documents – Each new board member and committee members who aspire to board service must fully understand the club’s by-laws and Board Policy Manual (“BPM”).

These documents describe the rules of authority, accountability and standards of governance for the club. Among the most important facts for new board members to understand are that these documents are the non-negotiable standards of trust and continuity for the club’s members.

2. Current strategic plan - Strategic plans are deliberate and concise descriptions of the primary goals and objectives for the club. Every board member must fully understand the club’s strategy and devote themselves to fulfilling the strategy’s promises. The strategic plan describes what and why the club will do for its members.

3. Brand plan – Private clubs function on basic promises – such as privacy, economic sustainability and socialization – made by the club to its members. The club is a brand, which signals the values and standards that it represents. In a private club, the brand is a promise of lifestyle, which may be “friendly”, “staid”, “golf”, “family” or other descriptors. Over time, this concept becomes associated with certain qualities, attributes,

and standards on which members rely. The brand is a promise made by the club. Most new board members have not made this promise; although they assume the duty to deliver the club’s promise to the members and their guests.

4. Manager’s annual business (or tactical) plan – The manager converts the strategic plan into action. The management plan describes how, when, who and where the board’s strategies will be put into action. This tactical plan must address the goals and objectives established by the board and how those ambitions will be achieved. This board guidance must be measurable and holds the management team accountable to the board.

The board transfers its authority to management through its approval of the business plan.

5. Club’s financial profile – Every board member – whether financial experts or not - must understand the financial aspects of their club. Many board members abdicate this responsibility to “the numbers guys” and are wrong to do so. The annual budgets, which show operational characteristics and capital needs and requirements, are shown in the Balance Sheet and Income Statement. Non-profit clubs are typically obliged to file Form 990 as a part of the club’s annual tax reporting. Every board member should fully understand Form 990 as it is the primary economic “face” that private clubs show to the public

The primary duty of every board member is to protect the assets of the business and to ensure its economic sustainability.

Being an effective board member requires preparation and ongoing training. BRB

Cut Your Facility Costs in 4 Steps Between aging infrastructure and the potential reduction in your workforce, it’s more important than ever to proactively take control of your maintenance costs. The average age of buildings in the United States is 41-years-old, and within the next 10 years, 50 percent of all maintenance personnel are expected to retire.

Even with all the planning and upkeep that your teams do, you could be facing an uphill battle – but it’s never too early to start preparing.

Keeping your facilities in top condition for your members while staying mindful of budgets is an important initiative for all clubs. As your buildings age and your workforce is reduced, it will be more important than ever to have a system in place to support your team’s work. A computerized maintenance management system (CMMS) helps you take charge of your dayto-day work orders. With more visibility and control over your operations, you’ll be able to work proactively and better prepare for the future.

A CMMS will not only help you take charge of your operations now, but also assist in planning for the future. By reducing your facility costs and arming your workforce with the right tool, you’ll PAGE 10 | BOARDROOM BRIEFS JULY/AUGUST

be able to increase efficiency and make their work lives easier.

Read our whitepaper, 4 Ways to Cut Maintenance Costs, and discover how you can create an ironclad system for success. BRB

Fitness and Tennis Combined: On-Court Benefits

By Len Simard

As so many club members continue to seek time-efficient ways to enjoy the social aspects of a county club sport, as well as an efficient fitness workout, many clubs are turning to TRX (Total Body Resistance Exercise).

Imagine a cardio tennis class or Power 90 tennis class that has a court maximizing eight-12 members on it and in 90 minutes you get a great cardio workout, develop core strength and stability, increase rotation/flexibility and improve balance. Certainly, it’s a win-win for all involved. Many clubs, both private and municipal, are realizing the benefits of this quickly growing alternative to the humdrum doubles clinic that often leaves players heading to the gym after play.

Adding this to your tennis and fitness calendar of events will likely maximize your income while increasing your membership satisfaction as they win more matches and outlast the opponents. BRB

The TRX system is a lightweight, portable, suspension trainer that is easily connected to your tennis court fence. Simply divide your players and rotate time equally between tennis and fitness in 10-minute segments. Fitness directors or tennis pros can keep the workout session fun by playing energizing music.

Minimize tennis instruction in this class and the results are likely to be increased participation and revenues.

The TRX system has been used by many professionals including Max Mirnyi, Kevin Anderson, James Blake and Melanie Oudin, and combining tennis and TRX improves on court performance and helps to reduce injuries as well.

Fitness Facilities – A Social Experience

By Frank Vain

The role of a fitness facility continues to be one of the most misunderstood aspects of the modern club.

Even though around two-thirds of clubs offer some type of fitness facility and the typical club only reaches equilibrium between its offerings and demand after the third expansion, many club leaders and members remain skeptical of the importance of fitness to their club’s success. The most frequently cited reasons to doubt the need for fitness include viewing it as a fad that will soon fade or the plentiful availability of other options in the community around the club.

To dismiss the importance of fitness is a misreading of its primary role. The key reason to develop a fitness facility at a club is not because of a lack of supply in the marketplace. People with the level of affluence to belong to a private club are not deprived of places to exercise. In fact, they have many options. The reason you want to offer fitness is to support your social mission. Surveys show that the most frequent reason cited for resigning from a commercial fitness club is “the failure to establish a social relationship.” Private clubs can come at this business from the opposite side – as an organization that is primarily social. Private clubs can also leverage their perceived safety and security advantages. This is especially the case for women and seniors, who are much less likely to frequent large commercial gyms.

Fitness works for clubs because it provides a highly valued service to affluent people who spend time and money on their health, it connects members to one another and to the club because of the frequency of use, adds values to the membership experience because it can be a direct replacement of a membership fee that some two-thirds are typically paying to another provider and it drives social interaction – a club’s core reason to exist. It is really one of the best things a club can do to grow its business and evolve to meet modern demands. BRB