The Finance Decision Hiding in Your Org Chart
Labor is the single largest operating expense at most private clubs, and turnover is one of the most expensive line items on the P&L. Wage-and-hour exposure is one of the fastest growing sources of legal costs in the hospitality industry. Each of these is a finance issue. Each of them ultimately traces back to a single org chart decision that many clubs make once and never revisit: to whom does the senior Human Resources leader report?
In recent years, the industry has begun to elevate the Human Resources function in a way it never has before. The emergence of the Director of People and Culture role at clubs across the country reflects a quiet but important shift. Boards and General Managers are recognizing that talent, retention, and culture are not soft topics. They drive labor cost, member satisfaction, and increasingly, legal exposure.
Yet at many clubs, the structure has not kept pace with the thinking. The senior Human Resources role still reports to the Chief Financial Officer. It is one of the most common mistaken org chart decisions in the Club world, and one of the most quietly damaging, both to the Club’s financial situation and to the member experience the Club exists to deliver.
The Structural Conflict General Manager/COOs Should Recognize
The Chief Financial Officer and the head of Human Resources are both stewards, but of different assets. The Chief Financial Officer protects capital, controls costs, and is measured on financial discipline. The head of Human Resources is responsible for the workforce, which means advocating competitive compensation, investing in development, and helping to build the culture that retains the people who deliver the member experience day after day.
Asking one executive to referee that tension inside their own function is asking the impossible. Charlie Gray, founder of Human Resources consultancy Gray Scalable, said it plainly in CIO magazine:
“A senior Human Resources leader should never report to the Chief Financial Officer because the two roles are often in strategic conflict, and Human Resources becomes a non-strategic function if it reports to the head of finance. The reporting line predetermines the outcome.”
That is not a knock on any Chief Financial Officer. It is the job. The problem is that the structure asks the Chief Financial Officer to suppress half of their mandate to lead a function that often needs to push in the opposite direction. For the General Manager/COO, it means the people strategy you need to deliver the member experience never arrives at the executive table intact. It is pre-budgeted out of existence before you see it. For the members, it shows up as inconsistency, front-of-house turnover, and a service culture that never quite feels settled.
The Hidden Risk Boards Should Ask About
This is the issue Boards most often fail to see, and it is the one with the largest dollar consequence.
When an employee has a concern about pay, classification, overtime, harassment, or retaliation, the first place they go is Human Resources. The credibility of that channel determines whether the complaint stays internal, where it can be investigated and resolved at modest cost, or escalates externally to the state Department of Labor, the EEOC, or a plaintiff’s attorney, where the cost is measured in five- and six-figure sums before anyone reaches the merits.
Now consider what happens when Human Resources reports to the Chief Financial Officer and the complaint involves payroll practices, worker misclassification, overtime calculations, or someone in the finance department. The person investigating reports to the executive whose function is implicated. Employees read that structure instantly and stop reporting internally. When they start reporting externally, the Club no longer controls the timeline, the narrative, or the cost.
The Quieter Cost: Turnover the P&L Does Not Show You
There is a second cost that shows up long before any complaint, and it is the one Finance Committees might underestimate. When Human Resources reports through finance, people decisions get filtered through a cost lens before they ever reach the strategic conversation. Compensation benchmarking gets compressed, training budgets get trimmed, and replacement hires get delayed. Each decision looks defensible on its own. The cumulative effect is turnover.
Industry research has long pegged the fully loaded cost of replacing an hourly hospitality employee at roughly 30 to 40 percent of annual wages, and considerably more for management positions. That cost lives across recruiting, onboarding, training, lost productivity, and overtime paid to cover the gap. None of it shows up in a single GL account, which is precisely why finance-led Human Resources structures consistently miss it.
Members feel it first, in the small moments that add up. The familiar server who is no longer there, the new hire who does not yet know how Mr. and Mrs. Smith take their drink, the valet who hesitates at the gate and forces a longtime member to introduce himself at his own club. Every one of those moments eventually traces back to a people decision made through the wrong lens.
Where the Role Should Sit
The Director of People and Culture, or whatever your Club calls the senior Human Resources role, should report directly to the General Manager/COO, with a dotted line to the Board President or the appropriate Board committee responsible for governance, compensation, or Human Resources matters.
The dotted line is not symbolic. It is the safeguard that protects the Club when a serious matter involves senior leadership, including the General Manager/COO, the Chief Financial Officer, or any Board member.
This structure delivers what the finance-led model cannot:
- Workforce decisions get discussed strategically, with member experience and cost weighed at the same table.
- Employee concerns route through a credible channel, dramatically reducing the probability of external escalation.
- The Board gains direct visibility into turnover, compensation equity, and workforce risk, alongside financial risk.
- Recruiting strong Human Resources leadership becomes possible.As Jodie J. Cunningham, SHRM-SCP, SPHR, Human Resources/Talent Strategist and Search & Consulting Executive at KOPPLIN, KUEBLER & WALLACE, explains:
“If a Club wants Human Resources to operate as a strategic talent partner and contribute meaningfully to club business objectives, the function should report directly to the General Manager/COO rather than Finance. Reporting to the Chief Financial Officer signals that Human Resources is viewed primarily as a cost center rather than a strategic business partner, which impacts both perception and recruitment.”
Cunningham adds:
“Additionally, reporting structure is a non-negotiable priority for experienced Human Resources Director candidates. In my experience, top candidates immediately lose interest when Human Resources reports to Finance, as this clearly signals an outdated, administrative model rather than the strategic leadership role they expect. This structure directly undermines efforts to attract strong Human Resources talent.”
At a time when Clubs are competing for experienced Human Resources leaders capable of navigating labor shortages, compliance risk, compensation strategy, employee relations, and culture development simultaneously, the org chart itself has become a recruiting signal.
- The Chief Financial Officer is free to focus on the strategic financial work the Club actually needs from that role.
The Questions Worth Putting on the Agenda
If your Club currently has Human Resources reporting to the Chief Financial Officer, the conversation is not about blame. The structure made sense at a time when Human Resources was viewed primarily as transactional, and many clubs never revisited it. The industry has changed. The legal environment and the labor market have changed. Most of all, member expectations have changed.
Three questions belong on the next governance agenda.
- Does our senior Human Resources leader have a direct line to the General Manager/COO?
- Does our senior Human Resources leader have a clear, protected path to the Board when warranted?
- Does our org chart reflect the strategic role that people, and the experience they deliver, play at this Club?
If the answer to any of those is no, the fix is not complicated. Your org chart is a document your members never see, but they read it every day in the experience you deliver. Where Human Resources sits on that chart tells your team and your next great hire exactly how seriously you take the people side of the Club.
Michelle A. Riklan, ACRW, CPRW, CEIC, CJSS is a Career Strategist, Search & Consulting Executive at KOPPLIN KUEBLER & WALLACE (KK&W). KK&W is the leading executive search and consulting firm in the private club industry. Michelle can be reached at (908) 415-4825 and at michelle@kkandw.com.





