Governance

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:

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.

• KPIs to measure:
  • Achieve club annual budget
  • Ensure all club departments achieve their departmental budgets annually
  • Achieve/maintain 1,500 total members by yearend.

Effective Leadership (20 percent of bonus): Leading the club through transparency, effective communication and adoption of best-in-class governance practices.

• KPIs to measure:
  • Update and improve leadership onboarding to ensure a comprehensive approach, vital sharing of information and systems that will create successful outcomes
  • Design and deploy ongoing leadership development processes to ensure key staff leaders are consistently educated, developed and invested in.

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.

• KPIs to measure:
  • Achieve/maintain net promoter score of ___ or higher
  • Achieve/maintain previous year member usage numbers or higher.

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.

• KPIs to measure:
  • Maintain/improve team member net promoter score of ___ or higher
  • Design and deploy standard operating procedures for all front-line positions to ensure club standards are consistently met in all areas of the club
  • Establish an effective retention plan to reduce employee turnover to ___ percent or less.

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.

• Create a capital reserve study to ensure all club assets are documented
• Execute kitchen renovation on time and on budget
• 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:

1. Do the goals support our strategic plan?
2. Are the goals SMART? Can we define what success looks like?
3. Does the plan reward team and individual performance – not one at the expense of the other?
4. 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

An eager and extremely qualified GM begins a new job with a great club. The club president and board give the new GM goals and set initiatives.

Everyone is excited about the new working relationship. Within a year or two, the GM completes the initiatives set forth … yet confusion and frustration begin to arise in factions of the membership. Then those feelings begin to spread to more members. Soon the staff also begins to raise concerns that are then fueled by members’ frustrations … all because members and employees don’t know or understand the board’s directions to the GM. The problems snowball and suddenly the GM is let go … even though the GM did exactly what the board asked the GM to do.

This story may seem far-fetched, but this kind of situation happens over and over again in the club industry. All too often decisions are made to eliminate a GM based on emotional factors caused by gaps in communication and misalignment. When it comes to significantly impacting a person’s life, career and family, terminating a GM should not be quick or reactive.

Members and employees must be included in the initiatives the board and GM have agreed upon, or they will be left to make their own conclusions and assumptions. When objectives are not shared or not clearly articulated, it leads to a lot of behind-the-scenes conversations which lead to misinformation. When misinformation is fueled by emotion, things get out of hand and escalate quickly.

So, when bringing in a new GM, the board must share with the membership and staff the direction/goals that the board has given to the new GM. Transparency is essential so the path ahead is clear, there is a level of understanding and no surprises. During a transition and the onboarding of a new GM, widespread understanding is essential.

Alignment and accountability of the club’s constituencies (board, committees, members at large, employees, etc.) are crucial for a successful transition. Constituency groups may get overlooked or are unaware when boards only communicate directions, master goals and initiatives among themselves and the GM. Consequently, there must be effective communication, which is never easy, along with clear expectations and alignment between constituency’ goals, and accountability at every level.

To ensure alignment and accountability:

1. Schedule a board orientation that includes the new GM within the first 30 days of the new GM’s start. We have found this to be one of the most effective ways to ensure alignment.

2. Clearly define roles and responsibilities and tie them to the master goals, which the board sets with the GM.

3. Have a plan, data and information for true accountability. This document clearly spells out the objectives, tactics, accountabilities, time frames and costs, and it should be updated for each board meeting to ensure continued focus of this critical success factor. Essentially, use a performance management system to document the GM’s accountability and the accountability of anyone else in the organization who is responsible for certain aspects of the plan.

4. Communicate the role members and employees play in helping the GM achieve goals.

The GM must be aware of the performance management criteria. Scheduled performance reviews should occur regularly (annually at minimum, quarterly at most) to ensure alignment of priorities and that goals are being met. Master goals for the GM should inspire the performance management criteria.

Use an evaluation matrix to give the board a clear snapshot of the GM’s performance and provide a basis for decisions that may need to be made in the future. If predetermined performance goals aren’t met, the performance evaluation matrix should detail a specific timeline to offer the GM the opportunity and time for improvement.

When it comes to GM accountability, there should be a standard operating procedure for raising an issue about the club/operations/GM. The process should be respected and the results clearly communicated. The board must also be brave, prompt and communicate effectively the actions being taken. This is much more successful than the board defending itself or the GM after “shots have been fired.” Establishing
trust right out of the gate with members and employees is crucial. Ensure a transparent, data-driven process and follow up and follow through, recognizing that communication takes many forms for constituencies to fully understand expectations, priorities and overall allocations of money, time and focus.

Boards must be vigilant on the front end to create success on the back end.

For example: If pace of play is an issue at the club and the pro is out on the golf course actively moderating pace of play, then there shouldn’t be much shock that the pro is hurrying people along. And the pro most certainly shouldn’t be reprimanded for doing so. If the golf committee’s goal is to speed up the pace of play, then the members can’t be allowed to criticize the pro for working to speed up play. This initiative needs to be communicated effectively in advance so no member should be surprised.

Being good communicators and “playing offense” is much more effective than keeping directives closely held by a small group of members and the GM, and later being on the defense when people claim to be unaware of what is happening and why. People rarely win when they only play defense.

Clubs must make every effort to openly share expectations, provide data-driven feedback and identify areas of improvement with reasonable timelines to ensure managers are well aware of how their performance aligns with club expectations.

Club presidents and boards must consider the ramifications of just “switching out a manager” or making quick decisions without thinking about the lasting effect a termination has on the person, their career, their family … and on the club.

As a follow-up to this article, we will offer best practices for setting goals and creating a performance management system in the next issue of this publication.

BoardRoom – January/February 2024