Private Club Management & Governance – Defining Roles

Recently, Golf Property Analysts has been privileged to provide consulting and advisory services to several clubs developing long range plans and in some cases seeking new management. Observing and advising in the board room provides a most interesting perspective. What have we learned?

Though it doesn’t seem like it these days, marketing, or more subtly termed, membership development, is a never-ending pursuit for most clubs – even those with waiting lists. Recently, golf and club marketing consultant and author Andrew Wood, of Legendary Golf Marketing wrote this post about egos in the club boardroom. While not focused exclusively on marketing, Wood highlights a consistent problem that plagues many clubs, creates member dissatisfaction and most importantly converts an atmosphere of recreation, camaraderie and socializing to one of conflict, inefficiency and distrust.

Just like every airplane needs a pilot, clubs need sound and centralized leadership and management. That said, leadership and management are not one and the same. The role of club leadership (at member-owned clubs) comes from within the membership, typically from club leaders usually elected by the membership. Club management typically comes from club industry professionals, either a CEO/General Manager, who develops a team and manages daily operations of the club or a management firm who formulates that team. While often professionals themselves – in other industries – club leaders are volunteers, have a – sometimes oversized – interest in the operation of the club and assume a role of telling the professionals (management) how to do their jobs – micro-management.

Even though the passenger may own the plane, he/she should only tell the pilot where to go, but certainly not how to fly the plane.

Having developed a keen interest in club culture (and written a book about it) what often troubles me is the conflict that sometimes occurs between the hospitality professionals managing the clubs and the “amateurs” governing those clubs and how it impacts a club’s culture and member experience. Generally, it is acknowledged that growing the game of golf is a good thing. Happy, contented members are a big part of this, ensuring that they will source new members for the club as attrition occurs. While member attrition isn’t an imminent problem today, historically it’s a constant problem of many clubs. Clubs have a responsibility – and a vested interest – in growing the game.

Clubs seeking management have two options. They can either retain a General Manager, or they can hire a professional management firm. Some boards (most) fear a loss of control in dealing with a management company. I observed a complete transition of one search committee’s attitude in one case after interviewing candidates of both varieties. This is not to say that one option is always better than the other, but most certainly promotes the concept that club boards should be open-minded and explore all the alternatives. Every club is different and the GM model works better for some while the management company works better for others. The culture of some clubs, and their leadership, suggests that either a very strong GM or management firm is necessary and roles need to be clearly defined with a focus on avoidance of micro-management by the board. Let the pilot fly the plane. As a long time pilot, I’ve actually turned down flying opportunities where I saw passengers becoming to aggressive in that regard.

One example I often see of micro-management is boards overreacting to problems that management could efficiently resolve. Management should be selected with a specific focus on the club’s challenges, choosing that individual or firm that offers expertise in the areas where the club has its challenges, and the ability to speak truth to power when necessary.

Another club we’ve worked with, a limited revenue club, could likely have benefitted from the resources of a multi-club company, fearing loss of control, combined with the cost of retention, may have created a shortsighted decision. Still another club we’re consulting with – not seeking new management – seems reluctant to follow the advice of their onsite professionals and time will tell how things work out. Even healthy, vibrant and thriving clubs need to avoid micro-management.

The moral of this story is that the roles of management and governance need to be clearly defined. Financially, I often observe clubs either spending too much or not enough, both operationally and on capital improvements. The first question to be asked is what is the culture of the members? Are they “owners” or “customers”. Often, that will dictate the appropriate level of investment in the club and operating practices based on the membership’s willingness to pay.

As the COVID induced surge in membership has created either a cash surplus or enhanced borrowing capability for some clubs, many have invested heavily in capital improvements, often ignoring the fiscal concerns of their membership. Rising interest rates (and inflation) have increased the cost of debt, resulting in higher project costs and a resulting dramatic increase in the cost of membership. For instance, if a club had borrowed $10 million when interest rates were 3.5%, at present rates of, say 7.5%, on a 20 year amortization schedule the added debt service would be approximately $275,000 per year. Adding the pro-rated share of that to each member’s cost, already having incurred roughly $700,000 in annual debt service at the lower rates, could be significant. How many clubs can afford – or will accept – a $1 million increase in costs? Few clubs are populated entirely with high levels of wealth, and even those with waiting lists would be well advised to consider that the nature of cycles is that those waiting lists won’t last forever.

The roles of management and governance need to be clearly defined. Everyone likes to show off and brag about their club. It’s the responsibility of any board to hand off to the next generation a club that’s not only up to date and continues to be desirable, but also one that’s in good financial health, not overwhelmed by debt. Management needs to provide leadership with sound, objective information and advice, including from the outside, if necessary. Leadership should act accordingly and encourage management do what it takes to make members happy, providing a positive membership experience with value equal to or exceeding the cost.