Q What are the nonmonetary top trends in GM compensation packages?
A Over the years, there has been a sea change in compensation for private club general managers. During the 70s, 80s and 90s, GM salaries were typically lower, though many may have included a variety of provisions and allowances for everything from clothing, dining and automobiles to private school tuition, housing allowances and simple interest loans—just to name a few. Though some clubs may still offer some of these benefits, in part because of legacy programs and tradition, they are no longer the norm. As the private club business grew in terms of its complexity and its revenues, compensation and the expectations of leadership grew as well. As the industry matured, compensation trends have largely shifted toward performance-based, incentive-driven models.
This evolution was driven in part by the Sarbanes-Oxley Act of 2002, as it expanded and specified the club board’s oversight role. The transparency mandated regarding club finances greatly increased scrutiny of executive compensation. Furthermore, many board members have experience in the corporate world, where pay-for-performance is often the compensation standard for upper-level executives.
Even so, there are many flexible and creative ways to structure compensation packages. Compensation packages can be tailored to benefit both the general manager and the club through opportunities to leverage assets or services provided through the club as well as by members.
Non-current compensation trends go beyond the traditional 401(k) and simple IRA. There are non-qualified plans that include the 453b, 453f and other sophisticated tools that can be used depending on the circumstances. They allow both parties to construct a comp plan that provide monies in the future that are currently non-taxable to provide the golden handcuffs top clubs with top managers seek.
Technology allowances and provisions that were once considered ‘benefits,’ such as cell phones, iPads and laptops, are now considered fundamental tools necessary for work in today’s business world and are a necessary part of the job. Business tools should not be considered part of a compensation package. For most executives, the use of these tools overlap between personal and professional use. Usually the personal use is limited for legal reasons pursuant to data access and control by the employer. This is a tenuous area as evidenced recently by the access of employee e-mails at Harvard University without prior notification.
Many GMs highly value ongoing education—not only the educational programs offered by NCA or CMAA, but traditional higher education as well. For example, executive MBA programs at local universities or one- or two-week programs offered by top universities such as Cornell, Harvard or Stanford, enable GM’s to interact with other top executives from a broad range of industries and functional areas and gain a broader perspective on leadership and management. Many general managers take these opportunities very seriously and use these programs to stay current on industry trends, adapt to technology shifts, and learn best practices to apply to their respective clubs. As a firm, we recommend that clubs support excellent, ongoing, committed education for the modern club manager (and the entire management team) to remain progressive and fresh. Education dollars should not be construed as compensation and are usually budgeted and spent in the year they are budgeted.
Striking a Balance
In crafting compensation packages, the challenge is to attract the best talent that fits the requirements of the role as well as the unique culture of the club. Yet, just like the industry in which they operate, the best managers are risk adverse. On one hand, strong managers—many of whom will still be employed during their job search—will try to structure the best deal at the outset of their relationship with the club. On the other hand, club boards will attempt to be fiscally prudent and responsible in terms of executive compensation. To attract and retain the best talent, clubs must balance standard salary with incentive-based compensation and additional perks, all while ensuring that the board effectively and responsibly uses club funds.
Dan Denehy is the president of DENEHY Club Thinking Partners, an executive search and management- consulting firm that has handled nearly 300 projects for more than 100 private clubs and boutique resorts. He can be reached at [email protected] or learn more at www.denehyctp.com.
One of the benefits of NCA membership is access to our extensive network of industry-leading experts. Club Director is pleased to introduce “Experts’ Corner,” a new magazine department in which the National Club Association’s Strategic Alliance Partners share their expertise and insights in response to our readers’ most pressing questions. To submit questions you would like to have answered by these experts, please forward them to Cindy Vizza at [email protected]