According to a recent article by the consulting firm Financially Astute Clubs, the answer to the above question is – yes. Dictionary.com defines socialism as: “a theory or system of social organization that advocates the ownership and control of the means of production and distribution, capital, land, etc., by the community as a whole, usually through a centralized government.” The article raises a number of interesting points, highlighting the differences between for-profit businesses and not-for-profit private clubs. These include things like ownership, who the club serves, financial goals, handling underperforming areas (like F & B), capital reinvestment and measuring success.
Recently, I was visiting a very upscale and prominent club in the US Midwest on an appraisal assignment and was surprised when ordering lunch that the price of my Chicken Caesar Salad was only listed on the menu for $5.50. Upon asking management why the price was so low, I was told they’re on the “Monterey” plan which charges only for the cost of the goods and spreads the rest of the associated costs among the greater membership. In effect, this distributes the cost of operating the club over the broader membership, as opposed to burdening those who use the club more frequently.
Are there membership segments or one membership?
Many golf pro shops that are owned by the club also use a similar program, often referred to as the “Mill River” concept, whereby club members each pay a nominal fee to join the program and then receive discounts on merchandise purchased. The plan was originally designed to guarantee steady volume and base income for the golf professional by turning the pro shop into a high-turnover, low-margin co-op style setup.
As the article mentioned above summarizes, A private club is owned by everyone, funded by everyone and run for everyone. Operate it like a business, but own and govern it like a community, where very financial decision serves the membership as a whole.” In theory, that’s the concept underlying how most private clubs should operate. That’s not always the case.
Club politics being what they are, those in power sometimes (intentionally or not) put their thumb on the scale to the benefit of certain groups among the membership. In a membership typically comprised of successful and independent people, the “one size fits all” theory can cause conflict. I specifically remember my friend John, at a (now defunct) club I belonged to many years ago complaining when money was spent on anything but the golf course. He was a golfer and could’ve cared less about F & B, tennis or swimming, despite the fact that those members who didn’t play golf actually contributed to the club’s ability to fund golf functions at the club.
Thus, the folks at Financially Astute Clubs, in my opinion have observed something very important. In the club environment, typically capitalistic thinking members are likely to benefit from the socialistic characteristics of a private club. To many, especially in these politically charged times, socialism is a dirty word. However, whether employing the Monterey or Mill River plans at any given club, a degree of socialistic practices is likely necessary for achieving the greater good for the benefit of the club.
In the case of clubs, value, which is typically a focus of our work, can be defined in two ways. There’s economic value which addresses the the club’s economic fortunes, typically measured by revenues & expenses. There’s also members’ perceived value based on the cost of membership or access to and enjoyment of the club’s facilities and programs.
In a “perfect” (club) world all members are created and should be treated equally. This is likely to enhance the club’s value and encourage decisions based on the best interests of the club as a whole.
