Private Club Governance
Clubwise President Jerry McCoy, MCM is a nationally recognized expert in club governance having authored many articles and publications on the subject. He developed the BOARD RESOURCE MANUAL, THE DIRECTOR'S GUIDE FOR UNDERSTANDING CLUB GOVERNANCE and THE GOVERNANCE CHECKLIST – Signature Publications of Premier Club Services. He was also instrumental in the development of both the 2003 and 2007 National Surveys on Club Governance. The most recent results are available below. In 2003 we developed a National Survey on Club Governance using best practices derived from The Director’s Guide for Understanding Club Governance. In 2007 we again partnered with Premier Club Services (PCS) to develop a second survey using the same 32 questions from the 2003.
Results of the 2007 National Survey on Governance
By Jerry McCoy, MCM
The 2003 survey received a fabulous return of almost 40%. The 2007 survey was distributed to 805 PCS members with a response rate of just over 25%. This is not as high as 2003 but certainly within a range that can provide some very interesting trends. A 25% response would have a plus or minus variance factor of 4% with a 95% confidence rating.
Please note the chart below. The responses from the four major areas of the country did not change much as a percentage of the whole.
In 2003 the results of the survey exposed many of the strengths and weaknesses of club governance. The results of the 2007 survey allow us to compare the new numbers against the benchmarks developed in 2003 and measure progress. For the purpose of this dialogue, the larger the percentage of yes answers, the closer the responses were to the best practices identified in the Guide. Low percentages reflect potential weakness in governance practices.
We reviewed the information based on a series of demographic questions that included:
- Did you participate in the 2003 survey?
- Were you at your present club or another Club?
- Were the PCS governance materials valuable?
- Have you shared the information with your Board?
- Have you used the information in orientations or retreats?
A total of 57% of the respondents in 2007 participated in the 2003 survey process either at their present club or another club. It is important to note the very large number of managers that believe the materials have value to them and that they have shared and used the materials to benefit the club.
Consider the characteristics of the participants in this survey. These managers would tend to be more progressive than the industry as a whole. They would be:
- Interested in improving the organization of the Club.
- More active in identifying trends and generating information that has value to them.
- Curious as to what other clubs are doing.
- More likely to take positive action to facilitate change.
The results of the survey are detailed in the following material and charts. The questions have been divided into five areas for analysis purposes. The charts include:
- Board Service
- Orientation & Training
- The Club Organizational Structure
- Board Policies and Procedures
- Planning, Evaluation and Oversight
I. Board Service
Board Service is the one area where change may least occur. This is due to the fact that these items normally tie directly to club bylaws. Please review the chart below. Remember that there is an error factor of plus or minus 4% with a 95% confidence rating. For the purposes of these statistics we have not considered a trend developing unless there is at least a 10% or greater variance. Even with a 10% variance, the information may not be providing a trend just based on the specific respondent demographic information.
This is especially true when evaluating this section. We have a few areas that varied up or down approximately 10%. However, based on the direct relationship to bylaws issues, we are sure there has been little change in these areas. I have worked with some clubs that made bylaws changes based on governance improvement sessions that moved them closer to these best practices. However, it does not appear that there has been any movement towards changing the term of elected board members, addressing the concept of contested elections, or the system in which officers are selected.
It is interesting to note that the figures are somewhat different when we use data from those who participated in the 2003 survey. In every case except one, the percentages went up slightly. Not enough to establish trends, but somewhat of a different picture than if we use all respondents. It appears that these managers have been somewhat more proactive in this area, although the data is still inconclusive.
II. Orientation and Training
Orientation and training for both senior management and club boards is critical. It is foolish to assume that a newly elected board member can be effective in the short-term without some orientation to the organization and how it works. Please note the chart below.
There has been progress in three key areas. A trend is in the increase of board member orientation. In 2003 only 39% of respondents said that they held a comprehensive new board member orientation. This has jumped to 48% in 2007 or a 23% increase. It is reasonable and expected to see this trend as board orientations have been a common practice for 25 years in progressive clubs. This still leaves over 50% of the clubs not orientating the board members effectively. How can so many clubs still not be using this logical tool?
A second trend is to more board strategic retreats. Although this practice is still in the minority (only 27% of respondents), there was a 35% rise in the statistics. This should be expected. Not only do the governance materials stress both orientations and retreats, it is impossible to open an industry publication without there being some article support for these practices.
The third area is board self evaluations. In 2003 only 6% of clubs were involved in this practice. A board is supposed to set goals, monitor progress and evaluate their performance against those goals at the end of the year. Obviously we are talking about strategic goals. Great clubs have a strategic plan that is a living document. Boards address strategic action items in and attempt to move the organization toward the identifiable mission and vision. It is important for each board to review that progress and eliminate potential future roadblocks.
The results for 2007 show the number of clubs completing such an evaluation has doubled to 12%. This is still a small number and there is an overall error margin of 4% of the total. However, we have seen some movement by area of the country. It appears that clubs in the South and the West are more progressive when it comes to orientation and retreats than those clubs in the North Central and Northeast. Note the chart below:
There continues to be substantial support for training and development and participation in professional associations. Almost three quarters of the respondents said the board provides an annual evaluation of the general manager. Unfortunately, there is still one in every four clubs that do not evaluate the GM annually. From this writer’s perspective what can those one in four clubs be thinking about? Why would the GM not insist on such an evaluation? I am fairly sure that if you ask the major head hunting companies why managers lose their jobs, one reason would be a loss of communication between themselves and the leadership. Evaluations and goal setting defines responsibilities and provides an area for required dialogue.
III. Club Organization
This section deals with how the club governance functions. These are the group of practices that appear to be most commonly used by a majority of clubs. Note the chart below:
The largest growth has occurred in two areas that were weak in 2003. The Director’s Guide promoted the concept of having someone other than the GM or a board member take minutes at meetings. If either the GM or a board member is taking minutes then they will have a hard time being part of the conversation. It is best that an administrative assistant or possibly the club controller perform this task. There was a 43% growth in this area from only 30% of the clubs using this system to 43%. Although this is still under 50% of all clubs, we see significant movement in this direction.
It is interesting to note that a lot less clubs in the North Central and Northeast have a staff member take minutes than in the South or West. Why this is so is hard to detail.
It appears that board meetings are becoming more efficient. Board meetings that take under two hours jumped from 48% to 56% or a 17% growth. This is relatively easy to accomplish if boards concentrate only on committee action items that require their vote. If committee chairman don’t waste a lot of time rehashing the full committee meeting and concentrate on just the important issues, then boards should be able to be more efficient.
It is too bad that one in every four clubs still have not been able to supply their committees with clearly delineated goals and scope of authority. This appears to be a key to the smooth running of any governance system.
In the next issue of Boardroom we will review some significant trends in the areas of Board Policies and Procedures as well as Planning, Evaluation and Oversight.
IV. Board Policies and Procedures
Now we can look at the significant trends from sections IV and V. Notice the chart from section IV below:
There was significant growth in three areas that were weak in 2003. At that time only about one in ten clubs used ethics, conflict of interest and confidentiality agreements. In 2007 the use of these documents jumped significantly. Certainly they were promoted as a best practice in the Director’s Guide. There were other things happening in the US during that time that probably had an effect on their growing use. All of the corporate scandals have made boards think about their responsibilities. This seems to have spread to the club industry even though there is significantly less liability for unpaid volunteer leaders of a nonprofit organization than there is for a paid director of a for-profit company.
It is interesting to note that ethics and conflict of interest statements are still outnumbering confidentiality agreements. This may have something to do with the homeowner’s association (HOA) mentality that is pervasive in clubs within gated communities. The HOA’s operate like the government with open board meetings. So even though the club is a separate entity, members within the community may expect more openness from directors. Also it has always been hard to keep a secret in a club which is many times like a big family. This is true even when the dissemination of information too early, or in partial form, can be damaging to the organization.
It is interesting to note the difference in use of these concepts in the North Central area versus other parts of the country.
This should be an issue of discussion within the CMAA chapters representing this area of the country.
Note the first line item in the Policies and Procedures chart that states ‘The budget should represent reasonable expectations.’ In 2003 it was 94% and today it is 97%. We should probably be skeptical of these percentages showing that almost all clubs develop reasonable budgets. The pressure to cut expenses and maximize revenues can take several forms. Certainly trying to be more efficient is important. However, we see all too often clubs trying to place downward pressure on needed dues increases and not keeping pace with expenses that rise faster than inflation, such as health care, fuel costs and insurance.
There is also another pervasive concept being used that can be somewhat destructive. That is tying performance bonuses to meeting budgets. If, as the statistics say, the budget is reasonable then management actually only performed reasonably, and not exceptionally, if the club just meets its budget. It is common sense that bonuses should not be tied directly to the financial picture anyway as so much of the yearly outcome may be out of the manager’s control. Unfortunately there is not enough space within this article to fully discuss this topic.
V. Planning, Evaluation and Oversight.
There appears to be two areas within this section where significant improvement has taken place. The concept of strategic planning appears to have been impacted by the barrage of focus it has received through education programs, articles in industry publications and the successes of many clubs that have developed comprehensive planning processes. Note the chart below:
Completing a strategic plan, using it as a living document and staying focused on the mission are all growing factors in our industry. There are several reasons for this growth. Consider the following:
- The club industry has made great strides in the past two decades by moving from a management model of disassociated departments led by a group of unpaid volunteer leaders to a corporate model of a GM / COO driving the organization and volunteer leaders adopting quality governance practices. This has been due to the rise in competition from management companies and the education of club GM / COO’s. It is a logical transformation if one considers clubs as businesses with gross revenues in the multimillion dollar range.
- Progressive private clubs have led the charge. Their efforts to enhance their individual clubs through effective planning have paid dividends. Smaller and less progressive clubs have seen the success of these trend setters and are progressively following suit. There is no great club in the United States that does not have a business plan with strategic goals.
- How can you run a big business if you have no plan? The old adage is that if you shoot from the hip you may hit a lot of innocent bystanders. If a business is to be successful, it must take aim on an identifiable target. This requires looking at the organization from the 50,000 foot level. It is easier to find your way out of a maze if you are looking down on it than if you are on the ground looking at the walls.
- If the goal of the volunteer leadership is to protect the status quo, then that is the direction management will take. Without a plan, management has the tendency to be reactive to problems. They will follow this lead by attempting to maintain the organization rather than improve it. When a problem arises they take action. Progressive organizations attempt to identify potential future problems before they happen and adopt solutions so that the problem never occurs.
- Great clubs use the following 8 step approach to promote progress:
- Establish what the Club is – Mission
- Set overall priorities
- Complete fact-finding and problem definition – surveys, etc.
- Analyze issues
- Develop a plan to correct deficiencies
- Implement the plan
- Measure progress towards goals
- Revisit the plan regularly to update
- They understand that they are in the member satisfaction business. All progress depends on member support. Therefore they ask for member opinion regarding satisfaction and value.
- Clubs use this information to identify weaknesses and take action to address concerns and improve satisfaction.
- Planning requires knowing where you are from a member / customer perspective. Then identifying where you want to be. Once the gap is exposed, the club can make a plan to close the gap.
- Improvements take place by developing strategic goals and initiatives and then monitoring progress towards their accomplishment. This requires providing the financial resources necessary to be effective.
- Clubs are a service business. All service takes place through people. Great clubs have proactive human resource and training practices that promote and encourage the development of quality staff.
- A great club must provide quality products and services. However, overall new member growth and present member satisfaction can be impacted by less than adequate facilities. Clubs are image businesses. To be competitive a club must ‘keep up with the Jones’ in some respects with regards to image.
Strategic Planning appears to be stronger in the South and the West.
This must go along with the fact that both these areas are also stronger in board orientations and retreats. If a board is well orientated to good governance practices, then they will more likely be planning and using retreats to plan.
Several key trends in governance practices have been identified through this survey process. They are:
- Growth in effective board orientations
- More effective, shorter Board meetings with a staff member taking minutes
- Board evaluating their performance during the year
- Expanded use of ethics, conflict of interest and confidentiality agreements
- Expanded strategic planning with an emphasis to stay focused on the mission of the organization
- Greater use of planning retreats
Each of these trends provided evidence that the club industry is becoming more businesslike in their systems and operating model. To that extent this can only be very positive news for the future of the club industry.
Many thanks to Premier Club Services and Ron Rosenbaum, CMAA’s Senior Vice President of Marketing and Communication for partnering with Clubwise in this endeavor.
Jerry N. McCoy, MCM, is the President of Clubwise, LLC, a consulting firm specializing in strategic planning, master planning, operational audits and governance issues. In 2003 he developed The Director’s Guide for Understanding Club Governance, The Governance Checklist and The Board Resource Manual all of which are publications of CMAA’s Premier Club Services®. Jerry has authored numerous articles and regularly provides seminars to the club industry. He can be reached at www.clubwiseconsulting.com or CMAAMCM@msn.com