Q: We have an exceptional general manager who we’d like to keep. How do we determine whether he’s being compensated appropriately relative to what other clubs are paying?
A: Retention of talented management is critical with the compensation package central to that effort. When it comes to the club’s general manager, there is a common industry misconception that executive salary is determined by the club’s geography—meaning that it is driven by the cost of living index in any given region. Club Benchmarking’s analysis of club industry data has disproven that notion, showing instead that executive compensation is directly correlated to the size and complexity of the club as reflected by its total operating revenue.
Looking at “head of club” compensation as a percentage of a club’s total operating revenue, industry data shows at the median, head of club total compensation (including salary, bonuses, club retirement plan contributions and any allowances) is about 3 percent of total operating revenue. For about one-quarter of all clubs, it’s less than 2 percent and at the high end, one-quarter of all clubs pay 4 percent or more. The exception would be at the extremes. For clubs with very high total operating revenue there is a “topping out” effect that results in a lower percentage. Very small clubs, on the other hand, tend to pay a slightly higher percentage of their total operating revenue, likely because there is a minimum cost for recruiting a high-quality executive—what you might think of as an “ante.”
Looking at the general manager’s impact on overall total club payroll (all salary and wages and all payroll taxes and benefits), club industry data shows that at the median, about 5 percent of total payroll is allocated to general manager’s compensation.
Other considerations to factor in include the executive’s education, certifications and tenure in the industry. Calculating total compensation as a percentage of operating revenue can provide you with a guideline based on what is typical in the industry, but ultimately the GM’s compensation package is up to the board’s discretion.
Ray Cronin co-founded Club Benchmarking in 2009 with his business partner Russ Conde, and has presented the concept of strategic benchmarking and the “Financial Insight Model” to club boards and committees across the country. He is currently serving his third term as president of Thorny Lea Golf Club in Brockton, Mass. He can be reached at [email protected].