HAVING SERVED AS PRESIDENT OF THE WESTMOOR CLUB’S BOARD OF GOVERNORS for the past several years, I have grown to appreciate that at the very core of a successful club are clearly defined, strict procedures for overseeing a club’s finances and subsequent long-term financial health. While a club’s facilities and various activities are most visible to the membership, it is the constant and consistent financial oversight that perpetuates a successful and healthy club.
Private clubs have various forms of ownership and financial structures including, but not limited to, equity and non-equity memberships. And while membership structures are generally consistent, individual clubs have their own parameters relating to governance, membership, resignation policy, membership transferability and “membership fee” or “initiation fee” and the refundability of those fees. While governance spans multiple aspects and constituencies within the club’s ongoing operation, a key element is financial oversight. Every club’s board of governors has the responsibility to provide keen awareness, oversight and accountability for the club’s long-term financial health and well-being.
The Finance Committee
In its role reporting to the board, a club’s Finance Committee has the fiduciary responsibility to the membership to provide the oversight, processes and procedures to optimize best practices and financial results.
Finance Committees have multiple responsibilities and specific areas of focus often defined by the financial structure and needs of a particular club. But there are certain key responsibilities relevant to the majority of clubs today. Those fall into four distinct areas.
1. Thorough, accurate budgeting and financial forecasting are requisite collaborations between the club’s chief financial officer or controller and the Finance Committee. “Forensic” financial forecasting with monthly and quarterly reviews of forecasts versus actual results are of paramount importance. Knowledge of the club’s revenue and expense results at any point in time allows for course corrections to minimize unwelcomed year-end surprises. The private club industry operates in a very challenging cost structure environment. Wages, health care, technology upgrades and capital expenditures challenge the revenue stream. However, the club that uses best practices to maximize revenues, anticipate unexpected costs and make appropriate adjustments without sacrificing membership satisfaction will be able to control and minimize annual dues increases.
2. A club’s long-term financial planning process requires capital expenditure, planning and review. Budgeting for and making an annual allocation to the capital reserve account is a forced discipline that helps mitigate both expected and unexpected capital expenditures.
3. One of the critical constituencies of any club is its professional staff and all employees. Membership satisfaction and fulfillment are often dictated by the level of professional courtesy and service provided by the club’s employees. General managers and boards recognize how critical it is to attract, hire, train and provide career growth opportunities to their employees. To do so, clubs must consider and know how competitive their employee compensation and benefits structures are in order to attract and retain superior employees.
4. Finally, an excellent Finance Committee with strong leadership, defined roles for each member, sound processes and procedures all coupled with a strong working relationship with the chief financial officer will produce sound financial health and long-term financial viability. Such a collaborative effort and financial focus will only enhance a club’s reputation and its ability to attract new members.
From my vantage point, the private club industry is quite competitive with ever-changing demographics and membership needs. The foundation that provides the confidence and ability of boards to meet the needs of its membership is strict and successful financial oversight. Private clubs with excellent long-term reputations are financially secure with “best in class” senior staff and employees. Such clubs will have high application demands with minimal resignations, only adding to their positive financial well-being.
Malcolm MacColl is a member of several clubs and serves as the president of the board of governors of The Westmoor Club on Nantucket, Mass. He is a director of NCA and serves on the Finance & Audit Committee. He can be reached at [email protected].