As an avid student of organizational leadership, I’ve spent considerable time contemplating what makes some boards so successful while others flounder. Over the last three decades, I’ve reported to boards of directors as CEO of three different nonprofit golf associations and I’ve served as a board member for various companies both inside and outside of golf. I have seen firsthand the profound impact governance has on the success of an organization, and based on that experience, I have developed a seven-step framework for excellence in governance that can be readily applied to any type of organization.
1. Define the Leadership Roles
Before any type of meaningful work can be accomplished by a board and its chief executive, a precise and thorough understanding of all leadership roles must be established. There should be no confusion about the governance responsibilities of the board and the authority of the chief executive in carrying out the policies set by the board.
2. Identify Key Performance Indicators
Whatever the organization chooses to call them, both the board and the chief executive must have absolute clarity about what constitutes success. These objectives must be measurable and agreed to by both parties, and they should constitute the top priorities of the enterprise. They should be reviewed regularly at board meetings to ensure ongoing focus on the key performance indicators (KPIs) of success. These KPIs should be strategic in nature and based on industry best practices. The board’s focus should be on the strategic KPIs, while management should maintain focus on operational KPIs.
3. Use Objective Data
Leadership should agree on which data it will rely on to both inform its decision-making and measure its progress. Besides the annual audit, membership surveys and the like, benchmarking against other similar clubs in key areas of financial performance should be a standard practice. Highly effective boards are in constant pursuit of the most objective, current and relevant data to drive their deliberation and decision-making. They often develop a dashboard of key metrics that are monitored on a regular basis. Making important decisions based on “feel” or “gut instinct” may be appropriate in individually owned businesses, but most assuredly are not best practice in member-owned private clubs where board members are acting as fiduciaries that requires, by definition, the use of objective data.
4. Communicate According to Plan
The board and chief executive should agree to a highly specific communications schedule that leaves no room for interpretation or surprise. Expectations for timely communication of items such as financial information, board meeting agendas and progress relative to KPIs should be clearly understood and adhered to closely.
5. Establish Accountability
A mutually agreed upon, written expression of how the board wants its chief executive to operate the club is imperative. Service standards, implementation of policies and other areas of operational importance to the board should be set forth in as much detail as necessary to ensure complete understanding of what matters most to the board from an operational standpoint. These standards should transition from one board to the next with minimal adjustments. In addition to KPIs, performance against the club’s operating standards should constitute a significant portion of the chief executive’s performance review. Boards should also participate in an annual self-evaluation in order to continuously improve the governance structure of the club.
6. Keep Learning
The best boards and chief executives are on a never-ending, mutual journey toward excellence, as individuals and as a group. They regularly engage subject matter experts to assist with specific areas of need, actively participate with their peer groups and stay current on key trends in the club and hospitality industries. In short, they are perpetual learners and they are not afraid to invest in their own development. These boards are driven by questions, as opposed to individual members making declarations that may or may not be supported by objective data.
7. Plan for Succession
Because board members serve limited terms, the development of a deep bench of qualified future board members must be a top priority for effective private clubs. Candidates for future board seats should be interviewed by the nominating committee to ascertain their motivation and ability to serve. Only candidates who express a desire to advance the long-term success of the club on behalf of its members should be considered. There is no room on any board for individuals seeking to pursue their own agenda.
Boards should be constituted in a manner that is representative of the club’s membership. Accordingly, future board member development should include serving on club committees, which allows the club time to involve future board members in the business of the club and provides opportunities for substantial member participation. Committee participation is usually an indicator of how a club member will function as a board member and as such it is an excellent tool for ensuring the best and brightest members make their way onto the board. With the board’s oversight and approval, the chief executive should also create a succession plan to ensure a smooth transition when his or her tenure with the club is complete.
Boards and chief executives that successfully focus on these seven areas help steward a club that is financially successful, operationally superb and exceeds the expectations of its members. While not easy to accomplish, it is a journey worth taking for any board interested in creating a sustainable club that provides a best-in-class experience for its members.
Steve Mona is Club Benchmarking’s Director of Governance & Leadership. He can be reached at [email protected].