While governance is not traditionally viewed to be a proficiency of most club management companies, their expertise in club finances and strategy can be valuable.
Management companies generally do not take over the management of private clubs without a full, explicit and documented construct in which the management company operates the business in ways the club’s board apparently could not. Why else would they be there? This construct provides a voice the membership feels they need via the committee system that ultimately communicates the expectations, preferences and tenor of the membership in a synthesized approach to the management company.
Underperforming club boards may have discussions focused around nonessential items, while management companies generally focus on earnings before interest, taxes, depreciation and amortization, accounts receivable aging, balance sheet strength and member behavioral analytics to drive membership. Management companies are clear that it’s not about the first 100 members but rather the next 100 members. Our industry is trending toward embracing some of these concepts at the member- owned club level.
The complexities of club management are such that most clubs cannot afford or know how to build the infrastructure management companies create simply by “rolling up” disparate clubs while centralizing human resources, accounting, capital planning, bulk buying, management coaching and agronomic oversight.
You may be thinking that clubs run by management companies can’t have the soul, the culture and the history traditional clubs have, which is the reason members want to belong. This may be true for those iconic clubs in the best markets. But today’s members—especially those less than 50 years old—want to be entertained and are looking for creative, private experiences with the history and club culture being subordinate. Many have little interest in sitting on the Bylaws Committee in the hopes of making it to the House Committee. Those members are recreating with their families.
Since 2008 the club industry has been forced to evolve. Maybe there is a way for clubs with great club governance models to partner not only with club management companies but also with groups of clubs regionally or with clubs of similar culture, to have the best of both worlds— well run businesses integrating the best business tools and deep culture clubs with proud members.
Dan Denehy is president of DENEHY Club Thinking Partners, a full service executive search and management firm serving the private club and boutique resort industries. He is a director of the NCA Foundation. He can be reached at 203-319-8228. Learn more at denehyctp.com.