Best Practices for Establishing a Modern-Day Performance Management System

Over time, while completing executive placements for private clubs and when reaching out to top-performing general managers, we have consistently been surprised to discover that in many scenarios there is a subjective process for performance evaluation or not one at all.

This is concerning as we often see a connection between managers who aren’t receiving feedback and managers who are being let go from their positions.

As we noted in Part I, “It’s YOUR Club … But It’s MY Life!” (BoardRoom magazine, January/February 2024), clear communication and alignment of initiatives are essential for a GM’s success.

Transparency is vital for a new GM and it is equally as important to maintain that transparency as time goes on. There should not be any blind spots for the club’s leader, and without regular feedback on performance or a system in place, there likely will be.

While some managers may be comfortable not having a specific and measurable review process, we see that top-performing clubs and their executives have formal annual goal-setting/feedback processes and meet twice annually to review these goals. These are reasons we believe managers should instigate the implementation of such practices:

  • With a formal system in place, there’s no denying that the review is fair, mutually agreed upon and measurable. The system also helps avoid challenges presented by board turnover.
  • Without a review, the GM doesn’t know the perceptions, priorities or preferences of others, and this creates blind spots. When the GM is made aware of blind spots, they can then work to communicate better or overcome these situations.
  • In the absence of measurable goals, there is the risk that an uneducated president or board could deny a portion of the GM’s bonus simply based on their opinion(s).
  • Accountability at every level is becoming mainstream in businesses today. It is only a matter of time until a board member or club president begins to question the process.
  • The best GMs in the business seek feedback and strive to constantly improve. Seeking feedback is proactive. Would the GM rather the board/executive committee/ club president design the review process, or would the GM like to lead that charge?
  • As feedback becomes more prominent with younger generations and in business practices, allowing feedback to flow through the entire organization will become increasingly important to club success.

We recommend the GM and club president/executive committee calendarize the review process so it isn’t forgotten about. At the beginning of the year, goals should be established together, then reviewed mid-year review and at end-of-year.

Managers and presidents must understand the importance of these meetings as they create synergy and avoid disconnects in club leadership. We believe these conversations should be kept to a group no larger than the executive committee, and the criteria should be determined and agreed upon by the GM, the club president and/or the executive committee.

While some clubs base a GM’s bonus 100 percent on financials or on beating the budget, we believe that is a mistake. We also have seen bonus potential of up to 50 percent of a GM’s annual salary and some with no bonus incentive. We recommend a bonus potential equivalent to 20 percent of the GM salary and based on measurable and mutually agreed upon goals.

The GM should have some input as to what he or she is being reviewed on and by whom. Those involved in the process should be a select group of objective people who know and understand the GM and the criteria based on agreed upon areas. The most common areas include:

  • Member satisfaction/Net promoter score – Must have surveying in place for one year 
  • Employee satisfaction/Net promoter score – Must have surveying in place for one year 
  • Financial management 
  • Membership management – Net growth/Waitlist management 
  • Human capital management 
  • Capital management 
  • Strategic leadership
  • Building maintenance/FFE management 
  • Communications

We suggest integrating the five strategic pillars relevant to running a successful club into the bonus/review process and attaching key performance indicators to each of these areas to ensure clarity and measurability. For example:

  1. Financial sustainability (20 percent of bonus): Operating the club in a way that supports the club’s mission, maintains healthy membership levels and all operating needs as well as capital investment.
    1. KPIs to measure:
      1. Achieve club annual budget
      2. Ensure all club departments achieve their departmental budgets annually 
      3. Achieve/maintain 1,500 total members by yearend.
  2. Effective leadership (20 percent of bonus): Leading the club through transparency, effective communication and adoption of best-in-class governance practices.
    1. KPIs to measure:
      1. Update and improve leadership onboarding to ensure a comprehensive approach, vital sharing of information and systems that will create successful outcomes
      2. Design and deploy ongoing leadership development processes to ensure key staff leaders are consistently educated, developed and invested in.
  3. Member engagement (20 percent): Cultivate deep engagement with the membership by ensuring frequent usage, meaningful relationships and emotional connection to create passionate ambassadors who embrace an ownership mindset.
    1. KPIs to measure:
      1. Achieve/maintain net promoter score of nine or higher
      2. Achieve/maintain previous year member usage numbers or higher.
  4. Human capital management/Operational excellence (20 percent): Building a well-trained, best-in-class, highly functioning team of professionals by actively attracting, retaining, developing and rewarding the club’s most valuable assets.
    1. KPIs to measure:
      1. Maintain/improve team member net promoter score of nine or higher
      2. Design and deploy standard operating procedures for all front-line positions to ensure club standards are consistently met in all areas of the club
      3. Establish an effective retention plan to reduce employee turnover to 5 percent or less.
  5. Capital planning (20 percent): Capital asset planning includes equipment, machinery, amenities, buildings, infrastructure and land needs being maintained, reinvested in and replaced in appropriate time frames to ensure facilities are fresh, relevant, functional and appealing.
    1. Create a capital reserve study to ensure all club assets are documented
    2. Execute kitchen renovation on time and on budget
    3. Effectively enhance the employee break room based on responses from employee surveys while completing on time and on budget.

The “weight” of each item and the “weight” of each KPI should change based on the importance of each to the club and its overall goals. How heavily each is rated should be mutually agreed upon by all parties. In addition, board discretion should be used when necessary. Taking the COVID19 pandemic as an example, boards should have the ability to alter, modify or amend the payout plan in the best interest of the club in the event of unforeseen events impacting the operation. 

Overall, when creating a review/bonus plan, the following questions should be answered with yes:

  • Do the goals support our strategic plan? 
  • Are the goals SMART? Can we define what success looks like? 
  • Does the plan reward team and individual performance – not one at the expense of the other? 
  • Upon accomplishment of these goals, will our club be materially closer to our vision?

Lastly, a case can be made for incorporating 360-degree performance reviews into a club’s performance management system. When considering implementing 360-degree performance reviews, we recommend participants are mutually agreed upon and that all department heads, some board members, some committee members and some members at large are included in the process. This doesn’t necessarily need to be an annual process, as a bi-annual 360-degree performance review is sufficient.

Clear feedback, as a dynamic exchange, benefits the GM/COO, the team, the board and the club as a whole. When GM/COOs actively seek feedback and participate in goal-setting, it demonstrates their commitment to personal and professional growth.

This commitment significantly contributes to the club’s success and fosters a positive, forward-thinking organizational culture. Such a culture not only meets the expectations of younger managers but also positions the club as an attractive workplace for emerging leaders eager to contribute to their own growth and the club’s overall success.

BoardRoom – March/April 2024