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Focused Leadership

PRIVATE CLUB BOARDS have clear charges: 1) preserve and protect the club’s assets; 2) ensure effective strategic vision; 3) provide thorough financial resources; and 4) execute sound governance. Yet, many club boards struggle to achieve focused leadership, becoming distracted with tactical matters that should be left to management. As Fred Laughlin, the author of the “Club Governance Model” and a 40-year nonprofit governance expert at PriceWaterhouseCoopers, puts it, “Board members are club members 99 percent of the time and board members 1 percent of the time— give or take—and they can sometimes forget which hat they should be wearing.” Following is guidance for how club directors can achieve greater focus during their service to the club’s board.

Preserve and protect the club’s assets
The club’s balance sheet records its assets and liabilities. It needs to be the point of emphasis for club directors, and not operational issues, such as fees, dues and pricing for services. The reference point for Finance Committee members should be operational matters reported on the income statement, as those factors impact the value of assets and the source of available cash on the balance sheet.

To preserve and protect the club’s assets, club directors should focus on:

  • Balance sheet factors such as cash, receivables and asset condition and life-cycle.
  • Security issues involving the club’s assets, such as cyber security of financial records and privacy for members and employees.
  • The club’s Form 990, which each board member must read and understand, as it is the “public face” for most clubs in reporting to the IRS.

Ensure effective strategic vision
The National Golf Foundation (NGF) indicates that roughly one-third of private clubs consider themselves “financially fit.” Of those clubs, almost three-quarters (73%) rely upon a strategic plan. Top performing clubs use strategic planning advantageously: They focus on goals and not tactics; translate the strategic plan into a business plan; measure expected results and monitor the plan’s execution; and communicate to ensure that all stakeholders understand the plan. Strategic boards empower the management team to develop the business plan (the tactical implementation of the board’s strategy), and monitor the effective execution of strategy.

Provide thorough financial resources
Global Golf Advisors estimates that roughly one-fifth of the 4,400 North American private clubs are financially at-risk. Paired with the one-third of financially fit clubs estimated by NGF, that leaves approximately one-half of North America’s clubs with uncertain financial outlooks.

The fate of these clubs will follow their boards’ financial decisions. Boards that make sound financial planning decisions must:

  • Understand how market elasticity can enable revenue growth adequate to future prosperity.
  • Focus on economic sustainability, which is the measure of a club that generates revenues to pay operational costs and fund future capital needs.
  • Plan for realistic capital asset replacement in accordance with American Institute of Certified Public Accountants standards of assets’ useful life.

Too many clubs fear raising dues will cause member attrition. Clubs that price to the bottom of the market remain at the bottom of the market.

Execute sound and trustworthy governance
Effective governance in private clubs is uncommon due to personal agendas at work in the boardroom, uninformed board members, micromanagement and ignorance of club governance best practices.

To govern effectively, boards must:

  • Stand in the future and look back. How will your actions make the club healthier in three to five years?
  • Stand in the present and look around.
  • Focus on open communications and transparent dealings.

Sound governance in a private club requires genuine exchange in the boardroom, including differences of opinion. However, those differences must remain in the boardroom. To borrow more insight from Laughlin, “Boards deliberate as many and govern as one.”

The best clubs in the future will effectively protect assets, enact sound strategy, plan for financial durability and govern wisely.