By John G. Fornaro
The art of governing, or leadership, is as old as society itself. It’s the exercise of authority by an individual or group of individuals or organizations in what it does, and how and why decisions are made.
Still private clubs are a quite separate segment of both the service and hospitality industries, and what works for one, might or might not work for the other.
However, good governance is the responsibility of a private club’s board of directors, which must take responsibility for recruiting, hiring and evaluating the performance of a club’s general manager.
A private club’s members are its customers and also its owners and employers…a strangely unique but interesting anomaly. This, of course, sets the stage for many challenges in running a member-owned private club.
“Club management is something that on the surface looks easy, but it is very difficult,” expressed Frank Vain, president of the St. Louis-based McMahon Group.
“The notion of providing a great golf experience or restaurant is fairly straightforward, until you have to define ‘exceptional’ for a group of people and prioritize the use of their resources to make it all happen. As is the case with governments, club members tend to like programs and spending that directly benefits them, but they are highly critical of ‘wasting’ funds in other areas,” he added.
“The avid golfer can’t understand why the food and beverage program loses money they feel should go to the golf course, the pool users wonder why they can’t have towel service or better food, and on and on. Intergenerational issues related to programming, dress, services, and the big one, capital investments are ongoing and difficult to resolve. One member’s pet peeve can be another’s valued tradition,” Vain intoned.
“The key challenge for the general manager and the other leaders is to create a common vision that binds the members together into something that is bigger than the individual or a particular interest. Clubs ultimately exist to serve a community of members, but it takes work to hold the community together. Hitting the sweet spot for each of the various departments is difficult, particularly when emotions run high and often result in a change of course.
“Next year’s board may want to go in a new direction and management must sometimes go along to get along, or be bold and persuasive enough to stand up to rogue agendas. It’s the intriguing intersection of politics, money and power,” Vain asserted. “While it might be a bit of a tempest in a teapot compared to trying to run a city or a town, it is a teapot that people care deeply about – and there is no shortage of opinion for how to fix all that ails it.”
Rick Coyne, managing partner of ClubMark suggests there are three specific areas that challenge private club management.
“First, boards are short term and in the absence of a process of working up through committees, boards have a scant three years to learn the business, the club, the processes and the market. That’s difficult at best,” Coyne remarked.
“Secondly, add any bias or personal agenda to the mix and you potentially have a recipe for disaster. When boards are elected, there is little opportunity to choose the best candidates based upon the needs of the club, their specific background and/or knowledge.
“While boards can be the greatest brain trust ever, poorly formed they can be a key ingredient to dysfunction. As Will Rogers once said, ‘There is nothing so stupid as an educated man, once you remove him from his field of education,’” Coyne added.
“Third, the board member is also a key user of the club facilities, often with a specific objective in mind for their term. In my experience, fully one third of incoming board members will choose food and beverage as their ‘windmill.’ Really?
“How many of us would go out and build a $5 million restaurant in a town of 600 people? Often, when cash flow issues emerge, costs are the first line of offense, rather than dealing with revenue opportunities,” Coyne suggested.
“The equity club is unique, and I like to compare it to a church and its membership,” explained Gordon Welch, president of the Association of Private Club Directors.
“Sometimes I believe there is a ‘calling tree’ that takes place all week after a church service. Many members of the church (or club) have ownership and take pride in the facilities and staff. However, if the minister or priest is saying the wrong thing from the pulpit the members will leave or ask for their removal from the church. There is a lot of ‘buy-in for the GM (minister) and if something is going astray the parishioners like to talk,” he offered.
Welch suggests that managing an equity club as opposed to an individually owned club raises a number of differences, and he’s managed both.
“There are many differences to whom you cater to as a general manager and who has authority or can persuade the board or owners,” he commented.
“Collaborative governance should rule the equity club. It all begins at the executive board and should trickle through the board, committees and be communicated to the membership.
“I believe the successful operation of the equity club and personality differences are the key to thriving or being eliminated at an equity club. If you can manage those two areas well and have the proper support from the board and staff you will have a ‘good’ journey. If you can’t manage gossip, micromanagers and your support staff you’re in for a difficult and emotional process,” he lamented.
It’s also a fact that managing an equity club differs significantly from managing a traditional hospitality business such as a hotel.
“In the traditional, corporate owned business, there are standard operating procedures, realistic budgets, strategic plans, capital plans and responsibility grids that provide a roadmap for day to day as well as strategic objectives,” Coyne explained. “Standards of performance are the norm. Staffing is a planned exercise to capably provide for the sales, marketing and delivery of services.”
Private clubs are a completely different business model, added Vain.
“First and foremost, the customer base of a club – the membership – is far more engaged and interested in what it offers and does than the guests at a hotel, resort or restaurant. This is related in part to the fact that they are at some level owners, even to the point of being financially responsible for the club’s successes or failures. It is much more than that, however, encompassing much larger emotions like pride, prestige, community and branding,” Vain stipulated.
“A club is that ‘Third Place’ in a person’s life, where they go when they aren’t at home or work to socialize with friends and fellow members, to entertain guests or host important family events, to serve as a family center. As opposed to the ‘one and done visit’ that constitutes the bulk of activity at other hospitality properties, beyond even that of the regular customer who visits frequently, members are financially and emotionally invested in their club.
“It is a much deeper part of their lives and they can’t choose next week to try a different club if they are somehow disappointed with the one they have. As such, they are going to express opinions much more readily and push for changes they want to see. They have a voice and they are willing to use it.
“The club member’s relationship with their club is much more of a civic arrangement than that of a customer. They’ll get deeply involved in things, just as they do at other important institutions in their lives, like churches, schools and work. They care,” Vain stressed.
“The club is a family, albeit a dysfunctional family, but they (the members) share their lives with you good and bad,” Welch injected.
“Club general managers will have knowledge of families that no one else may know. They must be very diligent with the privacy of the club culture. All other areas of hospitality can have a close relationship with customers – but the club doesn’t have customers – they are, in a sense, family members.”
So are there advantages or disadvantages to each of these models? Absolutely!
“In either system, some people get too close to their members. I’ve seen general managers play golf every day or play cards with the members weekly and that usually doesn’t have a good outcome. It can work for a while but it isn’t a good idea,” Welch explained.
“It does depend on the club culture but there is a fine line between close relationships and too close. You will share the birth of a child and the death of loved ones in the club and those relationships are exceptional. But when you begin to be friends with members you must be very careful of what is shared.
“The club governance is better in an equity club. Most owners don’t put much weight behind an advisory boards input,” he suggested.
“Obviously, from a business perspective, the private club is more challenged than corporate hospitality situations. The intangible is that in the private club it’s all about the members,” Coyne explained.
“We get to know our members and host many of their most precious moments in life…births, weddings, and even death. They become family to us and we to them.
“Rather than a revolving door of strangers in a hotel, we are privileged to know each family member, their likes and dislikes. If we are diligent in these processes, we can make remarkable memories and create experiences that only a private club can provide,” Coyne added.
“Advantages include the opportunity to leverage the loyalty and emotional investment members have, to affect people on a much deeper and more meaningful level than what is possible in an overnight stay or one-week vacation, to get to know them on a very personal level and serve them over a long period of time. Members are part of a club for 20 or 30 years, their parents or children may also be members,” Vain offered.
“The disadvantages are that the customer – the member – is going to come back again and again. It requires that the executive work to understand them, reacts effectively to complaints and responds to evolving demands. Memories are long,” Vain expressed.
“A hotel guest may simply choose not to visit a property after a poor experience. A club member is going to voice their concerns, and if over time other members feel that way, they are going to change the executive rather than leave the club.
“This requires an elevated level of responsiveness, communication and problem resolution. Of course, if that energy is channeled in the right direction, new programs or facilities will result and the club will move to a whole new and better level,” Vain added.
Because these differences exist, what can a private club’s board and management do to work together more effectively and efficiently?
“There must be a structure in place that builds trust and enables the staff and board to collaborate,” Welch explained. “It requires strong leadership from the club’s president and general manager. Clubs that have this trust and leadership have tenured GMs and happy members.
“The challenges arise when you may have a disgruntled member and the ‘calling tree’ takes place. The chatter that can grow can quickly end a GM’s career if it is not dealt with directly. This is also when micromanagement begins to take place.
“Strong leadership, commitment, trust and hard work are the best ingredients in a club,” Welch recommended.
“Club boards are often criticized for micromanagement and managers are fired for failing to perform to expectations. Interestingly, both problems arise from the same circumstance – a failure to work together to identify the club’s vision and key issues and develop an effective strategic plan and appropriate operating plan,” Vain indicated.
“There remains a lot of emotional decision-making at the leadership level instead of working from plans sourced in facts and data. Too many boards are willing to say they know what the members want without ever really asking them, and managers can be tone deaf to the vocal minority that may be reaching a critical mass.
“Despite a structure that allows them to get close to the customer, personal agendas can prevail. To be successful, the leadership needs to work together, balance competing agendas in an atmosphere of respect,” Vain concluded.
A ‘magic wand’ might work suggests Rick Coyne, but in reality, “boards would be chosen on the basis of their background and experience and they would go through a process of committee work in preparation for serving on the board and they would have six year terms.
“They would have a carefully crafted strategic plan that each year, at a retreat, is evaluated on the basis of completed tasks, tasks left to complete and any market changes that would alter the plan.
“They would have a responsibility matrix, which clearly delineated the lines of authority for general manager, board, and committees. The general manager would have an extended term ‘no cut’ contract, allowing them the latitude to manage, unencumbered by fear of offending the wrong person.
“Working strategically, with a plan, squarely places the burden of performance on the staff with boards concentrating on philosophic and/or strategic direction.”
Publisher’s final thoughts
If we go back to my first thought, “Governing is the exercise of authority by an individual or group of individuals or organizations in what it does, and how and why decisions are made.”
How is this relevant to running a private club today? Well, we can start with the board of directors itself, and so often we see private clubs wandering through the wilderness simply because their governance system…their boards are not established to govern. They don’t know what their supposed to be doing and often don’t have the people on their board to drive the club to higher aspirations.
It all starts with the board of directors and the need for clearly defined roles and responsibilities. In my travels visiting private clubs across this country, we have often encountered clubs where there are no written job descriptions for directors, for the board itself and also committee members.
So how can boards and board members critically evaluate what’s happening in their clubs if they have no clearly defined roles or responsibilities themselves? Thank goodness this is changing as more and more clubs methodically decide who and what they are, and how they should be governed.
Clubs face a challenge in getting the right people on their boards at the right time…boards that have the complete mix of personalities, skills, talent, experience and credibility to drive their club to higher heights.
The trick here, of course, is to identify and recruit the right people to meet the current needs of the club. This includes people of all stripes who have skills, talent and experience they can offer. In fact, this is why so many more clubs today are now nominating only individuals who can clearly make a difference for a club. These people are being sought out, and urged to devote time and energy to their club to help create a well-balanced and influential board.
Gone are the days of boards with members pushing personal agendas, with members who feel obligated to ‘friends’ on the board, or rogue board members with their disruptive tactics creating havoc. These board members create nothing but grief, leading to endless meetings where board members wander aimlessly for hours, accomplishing little.
Good governance today demands collaborative governance…where boards and a club’s paid management cooperate in creating and driving a successful private club.
We’ve heard it before, but I reiterate: The role of the board of directors is to ensure the success of the club’s success by deciding the right thing to do (setting policy).
The general manager’s responsibility is to decide how to do the right thing, as effectively and efficiently as possible…to ensure a memorable member experience at their club.
At least, that’s the way I see it! BR
John G. Fornaro, publisher
If you have comments on this article or suggestions for other topics, please contact John Fornaro at (949) 376-8889 or via email: firstname.lastname@example.org