Most people are familiar with the “golden parachute” concept—the clause(s) in a senior executive’s contract calling for a range of benefits and payouts should an organization, for whatever reason, want that executive to leave.
But what happens in the reverse situation? What happens when the organization is extremely pleased with an executive’s work and strongly desires he/she stay, preferably for a lengthy tenure?
Clubs nationwide have been wrestling with this question for some time, considering recruiting and retaining private club executives is a highly competitive process. And clubs, like most employers, understand attracting good people involves incentives up front and retaining those good people calls for creative and valuable programs and benefits.
So how do clubs attract—and keep—high quality general managers, assistant general managers, chefs and golf pros?
The “Golden Handcuffs”
Clubs increasingly are considering what have come to be called “golden handcuffs,” which consist of any series of measures that, in addition to the annual compensation and typical benefits club professionals have come to expect these days, help ensure key staff stays at the club.
Ed Henderson, managing partner at Master Club Advisors, a leading private club executive search firm, says “handcuffs” typically aren’t in place when an executive is hired but are something that develops over time.
“Clubs don’t want to tie someone for the long term until they’ve tested him and driven him around for a while,” he remarked.
Jim Kielley and Gary Hallenbeck, independent consultants specializing in compensation and retention issues, agree with Henderson, noting they are typically called in by club directors a year or two after an executive is hired, once the directors are confident this is an executive the club wants to keep.
Help with Housing
In discussions with elite recruitment professionals and compensation consultants working with the club industry, a common area in which a club will look for ways to help keep a club leader concerns housing.
Dick Koplin and Kurt Kuebler of Koplin & Kuebler, a search company recruiting club general managers, golf course superintendents, and directors of golf, said this trend is simply a reflection of the current housing market crunch.
Kuebler noted, “Fifteen years ago, recruitment wasn’t as national as it is now, meaning that some managers are coming from tremendously different housing markets.”
Often that means moving to a much higher-end housing market, which sometimes makes buying a house very difficult for a new manager.
How, then, to overcome this housing hurdle?
Henderson offers this scenario. Suppose an executive is moving from Tennessee to, say, Chicago, where the cost of living is 30 to 35 percent higher. For the club to land this candidate, it will have to facilitate home ownership. Henderson has heard of circumstances where the executive receives as much as $150,000 to $200,000, which the executive can use only as a down payment for a home.
Moreover, Henderson adds, the club will forgive a certain percentage for each year the executive stays on the job. Many variations on this theme occur, with what constitutes a “reasonable time,” ranging from five years to as many as 15.
“It’s whatever mood strikes all the parties at the moment,” Henderson said.
That’s a fairly typical means of helping a new hire buy a home, but it’s not the only one. Some clubs establish a partnership of sorts with senior mangers. Dan Denehy, president of the consulting group at the executive search firm John Sibbald Associates, gives an example in which a club and its manager co-purchase the manager’s new home. Both parties assume joint responsibility for financing the debt and, on the same basis, share in the appreciation or depreciation of the property’s value.
“The split need not be 50/50 and can shift based upon each party’s capacity,” says Denehy. “However, a detailed and clear buy/sell agreement is required.”
Koplin describes how one club gave a senior manager $100,000 for a down payment on a house, planning to forgive 10 percent of it over the next 10 years. The club ended up forgiving the entire amount after just five years.
This kind of generosity from club directors and management bespeaks a great deal of appreciation, and, Koplin says, “It’s a nice way of handcuffing the manager to the program.”
Cars and Community
Helping an incoming club executive purchase a new home isn’t strictly a financial consideration, however. It’s also about getting the executive and his/her family ensconced in the new community.
There’s also a “quality of life” consideration, especially regarding the commute the executive will have with the new club, particularly so if he/she has relocated to a metropolitan region with far denser traffic than at his/her previous location.
Speaking of driving, a club might also elect to help its new manager by providing vehicle expense reimbursement, noted Michael Robinson, who, with his partner James Goslin, heads the New England–based search firm Robinson/Goslin. Some clubs will go so far as to provide the manager a car outright, he added.
Investing for the Future
In addition to car assistance, offering cliff-staged vesting programs can be highly effective in keeping quality management.
A cliff-staged vesting program entails putting a set amount of money into a fund each year for a set period of time, for example, 10 years. As the years pass, the senior manager is vested a percentage of the fund, heavily back-end weighted, with most of the vesting coming around the eighth or ninth year.
Denehy says that one club president who likes this benefit sets it up as a balance sheet account, adding to it each year. If for some reason the employee decides to leave before becoming fully vested, the forfeited funds can be used to help cover costs involved in recruiting a new senior manager.
Another approach in vesting programs enables employees to access some of the money prior to the end of the program.
Kielley and Hallenbeck give the example of a younger club executive with children he/she needs to put through college. The goal in this situation wasn’t to provide a supplemental source of funds only at retirement—in fact, the money was in addition to existing retirement funds—but also to allow access to some of the funds during employment, for educational or other purposes. The program was designed as a Supplemental Executive Retirement Program, but one that doesn’t have to be treated as a pension.
Kielley and Hallenbeck explained how it worked. Money contributed to this program would be vested five years after each year the money was invested. This would continue year after year, with the executive opting either to draw down some of the vested funds as needed or have it deferred until retirement.
However, any money in the fund that has not vested is forfeited if the employee leaves. An executive will “be leaving money on the table if he leaves before the club wants him to leave,” Hallenbeck notes.
Education Assistance
Education is another area in which clubs work to keep their senior staff satisfied.
Denehy notes that reimbursement for educational expenses, such as an MBA program at a local college or university, can be arranged in a way that requires the employee to continue his/her employment with the club for a specified length of time to qualify for this financial assistance.
Robinson agrees, saying, “Clubs are usually very supportive of this kind of thing.”
Koplin adds that funding for education needn’t be limited to the employee, explaining how some clubs provide assistance to pay for the manager’s children to attend private school.
More Bonuses and Benefits
Other perks helping to keep quality people on the job include a dining out expense, so managers can visit local restaurants and gain a sense of what’s going on in the community where members are going when they’re not dining at the club.
Clubs also may offer professional services to their top-level employees, including investment counseling, legal services and estate planning. One emerging area of professional service involves executive coaching.
“After a placement, there’s a honeymoon period, and we check in at the club to see what’s going on with the manager and whether or not he or she needs coaching,” Robinson says.
He recounts an instance where a senior manager was highly skilled in many essential areas, but there was “a rough spot that they wanted to polish a bit.” An executive coach was brought in for several sessions to help that manager develop the skills needed to succeed in the club’s setting.
Severance packages, once quite rare for club managers, are increasingly prevalent, adds Henderson. “Going back decades, managers had no legal protection, other than the whim of the club,” he remarked. However, today, chief management officers of clubs are much more highly regarded as professional executives and are much more involved in helping to create and set policy. (See sidebar “It’s Not Only about the Money.”)
Koplin adds the longer a manager has been with a club, the longer his/her negotiated severance becomes. As managers acquire years of service, they have what amounts to an insurance policy in the form of longer severance packages.
One risk facing clubs with long-tenured managers is losing those managers—and all the institutional knowledge and understanding of the particular club’s culture—to another club’s lucrative offer to come on board.
To avoid this scenario, spending time and money to keep a long-tenured manager may be one of the most cost-effective measures clubs can take—which may sound counter-intuitive. But, some recruiters say that sometimes long-tenured managers are out of scale, income-wise, with current markets, and boosting a long-tenured manager’s income often costs less than seeing the manager leave and then having to recruit a new one.
Kielley says that this scenario can be avoided. “There’s a lot of good data [on compensation] that’s available to both managers and directors. Club associations are developing this data on club executives for different sizes of clubs.” (See sidebar on compensation and benefits report.) Looking at this kind of data, managers can readily determine whether their compensation is on a similar level to peers managing similar clubs.
Additionally, clubs must be certain cost-of-living raises are keeping pace with markets. Further complicating the situation is that many clubs don’t have formal, consistent evaluation procedures.
“Boards need to be cognizant of what’s happening in the marketplace. If you don’t, you’re leaving yourself open to the potential of somebody looking over the fence and finding out that the grass is greener,” Kuebler observed.
A particularly good general manager is “the luckiest thing you can have if you want to be a good club director,” he adds. “You know what you’ve got, and you want to do anything you can to keep them.”
He adds that club directors need to realize flexibility and customization will always be critical in retaining key management.
Chris Collins is a freelance writer and communications consultant based in Arlington, Va.
More than the Money
Most people work to get paid, of course, but the recruiters and consultants we spoke with agree intangibles, such as appreciation and respect from club directors and membership, are critical in retaining quality management.
“This is an extremely challenging profession,” observes Ed Henderson. “It’s a lot more demanding than one might think.”
Club directors can show appreciation for senior staff in any number of ways, and it’s not necessarily all about money. Club privileges, for executives as well as their families, are always up for discussion. Professional services, such as legal advice and estate planning, are other ways of expressing the club’s appreciation of a top-flight employee.
However, club directors need to establish a clear understanding of what senior managers should expect. Perks and entitlements that aren’t regularly reviewed and updated by the executive committee can create an atmosphere of uncertainty and mistrust on the part of membership, board and staff.
“When we get calls from managers looking to leave a club, very often it’s not about compensation or bonus, it’s whether or not the club has a culture of respect and appreciation for management and staff,” Michael Robinson says.
A manager who feels under-appreciated may finally say something along the lines of, “The cost of staying here is just too much. Emotionally, financially, I’m out of here.”
Club executives are looking for more than just financial incentives and other perks.
“They don’t want to be job hoppers intentionally,” Robinson adds. Instead, he explains, they’re looking for a lengthy tenure and the stability it brings. They’re also looking for clarity, so they are aware of what’s expected of them. They want realistic goals, clearly defined expectations and managerial autonomy.
Sometimes, appreciation can be displayed toward the end of a manager’s career. Jim Kielley and Gary Hallenbeck note most “golden handcuffs” incentives are typically best-suited for managers in the early or middle stages of their tenure. A great way to show appreciation for a manager nearing retirement is to provide a supplemental retirement contract, in addition to whatever the manager is already contractually entitled to receive. This becomes income the manager never knew was coming.
“We were looking, in advance, to indicate our satisfaction with the manager’s service,” Hallenbeck says, to provide something that would be “more of a reward, rather than retention” measure.
He says it also functions as marketing collateral when looking to replace the current manager after departure. “It certainly helped when we went out to look for a new manager.”
2007 Compensation and Benefits Survey
The “2007 Golf and Club Industry Compensation and Benefits Report” is a joint project of the National Golf Course Owners Association and the National Club Association. The report represents the most complete compensation data in the golf course and club industry. A complete copy of the report can be purchased at NCA’s online store at www.nationalclub.org.
Benefits at Private Facilities
Health Insurance 99%
Traditional Indemnity 22%
HMO 47%
PPO 48%
POS 14%
MSA/HAS 3%
Other 3%
Other Health Benefits
Dental 87%
Prescription Drug 86%
Vision 56%
Mental Health 38%
Wellness 30%
Employee Assistance
Plan (EAP) 22%
Short-term disability 50%
Long-term disability 55%
Life Insurance 80%
Retirement Plans 88%
Defined benefit 10%
401(k) plan 87%
SEP-IRA 1%
ESOP 0%
Simple IRA 7%
Profit sharing 4%
Other 7%
Fringe Benefits
Car allowance 70%
Cell phone 80%
Dining allowance 77%
Professional dues 99%