The Three Biggest Myths About Private Club Governance
A club president recently asked me about common practices I observe on my club visits that I would correct if I had the power. I told him about three typical behaviors I call the “myths of good club governance.”
The first is that the board needs to have an “executive session” at the end of every board meeting without the general manager. A bad practice, a terrible idea and unsustainable in the long run if the club wants professional management.
Either the board believes it has a trusted partner in club management or it doesn’t. You can’t be half-pregnant on this issue. Having a portion of each board meeting without the general manager/COO signals to everyone in the club that there is a need for some “secret discussion” without the key paid leader present. There can be no good end to that story.
Most capable general managers/COOs will begin to update their resumes if that practice ensues in their clubs, and with good reason. Why would someone want to work in an environment where there is less than full trust on the part of the board? The private club is filled with “he said, she said gossip.” This practice feeds the rumor mill and provides fodder to the “mischief makers” to undermine the general manager/COO. Bad practice: Get rid of it.
The second is that there should be multiple candidates for a set number of open board positions. The days of “popularity contests” should be over in private clubs, and nominating committees should present the same number of recommended candidates as there are open seats on the board.
Most of the successful private clubs we work with have adapted the model that almost every successful business has used to nominate board members. This practice allows the club to benefit from its best talent rather than take a chance and elect “barking dogs” to the board simply because they have campaigned effectively for the position.
The third is expecting the club amenities to produce a profit for the club. I often quote Phil Newman from the RSM accounting firm. Newman once said that “private club budgets need to be driven from the top down in the sense that there is a collected group of people with common interests who want to enjoy certain amenities and they decide what they are willing to pay to enjoy those amenities. Contrast that to a typical business where the budget is driven from the bottom up or totally reliant on selling a product or service to produce revenue.”
Too often in private clubs, the board expects food and beverage, pro shop merchandise or swimming pool fees to “carry” the budget for the year and take pressure off the dues line. Flawed thinking. It is a bonus if those amenities can contribute to the bottom line. However, don’t plan your business or operational budget based on those departments producing revenue that should come from the dues line.
The club was not created to make money but to provide certain amenities for like-minded people who understand that the financial basis for the club resides in the dues and fees charges, not in how much money the kitchen can make on a hamburger.
If I could wave a “magic wand” and eliminate those three myths, we would see some clubs focus on what is truly important. Board members, general managers/COOs and club members would all be better served if those three myths went away for good. This much I know for sure.
THE BOARDROOM MAGAZINE – March/April 2025
“The Three Biggest Myths About Private Club Governance” is an updated and republished article originally featured in the September/October 2023 edition of BoardRoom magazine.