Is Your Golf Management Company Effective and How Do You Know?

I’m often asked by clients about the benefits and effectiveness of golf course management companies.  Those who’ve retained professional management services have had experiences from terrific to awful and everywhere in between.  Some say they’re just not sure if the fees are worth it.  While it might seem a simple analysis at first glance, I decided to pose a few questions to some of my professional golf course management friends. To avoid publicizing any “trade secrets” I’ve been asked not to name the respondents but will say that my feedback came from a large national firm, a medium sized national firm and a small, more regionally focused provider.

The questions I posed were:

  • How do you determine your effectiveness?
  • How do you “sell” your services to prospective clients?
  • How do you measure performance?
  • What do you tell prospective clients that you can do for them that they can’t do themselves?

Determining effectiveness, according to the management pros is based primarily on achievement of established goals.  The key is to establish realistic goals and it was emphasized that the goals vary from client to client.  For instance, the following five client scenarios that might be the reason for retention of management include:

  • seek enhanced national exposure
  • need to be freed of daily management obligations to return to their primary business
  • looking for assistance in executing a unique business model
  • merely looking to stabilize acceptable losses and enhance service/conditioning
  • wanting a management partner that delivers a higher level of engagement either at the property with staff (training/oversight/strategy) or with the owner

Obviously, each of these goals present different challenges and impact the goals to be set.  How is success measured?  The following are obvious:

  • financial results
  • client surveys
  • customer surveys
  • same store analysis

What’s important is to apply these criteria to the proper benchmarks and key performance indicators (KPI’s)  First and foremost from the financial perspective both client and manager want to ensure that the manager can pay for itself.  This can be through enhanced revenues, more effectively managed expenses or a combination of both.  An independent analysis of where opportunities exist is critical to identifying if this is possible.

Performance is often based on financial metrics and related to established goals.  Sometimes, however it’s measured on intangibles, like customer satisfaction, physical condition of the property or short-term issues like preparation for sale (especially in the case of bank-owned properties.  Of course, client satisfaction is always one measure and the obvious potential differences that exist there can be difficult to identify.  One comment was: “Our measurements of success are as varied as our clients.”   Another focused on the comparison of actual results versus budget, and of course realistic budgeting is a must using this measure.

Management firms sell themselves in different ways.  One firm stresses that most of the courses that reach out to them have already squeezed their expenses to the limit and that they need to expand revenues.  They focus on how they can help the client grow revenues.  Others emphasize that golf course management isn’t a “one size fits all” endeavor and emphasize that taking the time to learn the site specific issues and challenges is the most critical part of the relationship building process.  Management companies, just like most other businesses have “sweet spots” and it’s important to find the right fit for both the client and the manager.  A private club should focus on management companies that have specific private club experience.  Experiences, case studies and sometimes detailed analysis can be the “sales” method used to close a management deal.

NGF published the following questions in an article by Pete Davison that a board or ownership should ask when considering third -party management:

  1. Are we lacking the resources or experience in-house to fix our current problems?
  2. Are we prepared to make necessary changes in the way we operate, market and maintain our property?
  3. Do we understand that there is no quick fix, and that to turn the property around will take 18-36 months?
  4. Are we prepared to commit funds to competitively re-position the property if needed? Are we prepared for some employees, members, council members to oppose the necessary changes?
  5. Can we approve a plan and then allow the management company to do its job, the job that they, not we, are trained to do?

The last question (What do you tell prospective clients that you can do for them that they can’t do themselves?) brought the greatest variety of answers.  One said that sharing what he tells prospective clients he can do for them would be revealing his trade secrets.  Another focused on strategic marketing and better staffing, along with more efficient spending of resources and at private clubs distancing the board from day-to-day operations.  Some of the details include:

  • Human Resources
  • Staff Training
  • Accounting, Finance & Technology
  • Agronomy
  • Food & Beverage
  • Membership
  • Retail
  • Quality Control
  • Buying Power

As shown in this brief discussion, there are numerous choices a club owner or board needs to consider when thinking about third party management and it’s important to realize that an evaluation of effectiveness can be different things to different clubs.  I’ve observed that some golf management firms are more comfortable in the private segment while others thrive in the daily-fee market.  In some cases, this becomes even further specialized based on the various sub-segments of golf course types.  From the clubs’ perspective, evaluating management’s effectiveness requires well-conceived and realistic goals. Of course, the first goal is likely to be simply whether management pays for itself, but even that may not be possible in favor of relieving a dysfunctional club board of responsibilities, creating better food service or improving agronomic conditions and possibly considering the long term (as opposed to right away) health of the club.

I see many clients that need third-party management and say they can’t afford it.  Sometimes, they can’t afford not to.  Conversely, I also see management firms that aren’t carrying their weight (by any measure), aren’t doing the job and provide little or no benefit to the client.  I’ve advised some clients to look around.  There are other clubs that either don’t need or simply can’t justify the cost of third-party management.  Every situation is different and like we learned, there isn’t a “on size fits all” to be had.  Third party golf management can cost from $5,000 to $10,000 per month, often with percentage incentives and sometimes is simply based on a percentage of revenues or profits.  If a management firm can’t demonstrate to you how they can grow your business, or help you solve specific challenges, keep looking.