More and more, private clubs are looking to corporations for policies and best practices in governance. For example, private clubs have realized the benefits of modeling the relationship between their boards of directors and general managers after the relationship between corporate boards and their CEOs. Although there are other lessons from the private sector clubs are learning, there is one area clubs seem slow to embrace: the appropriate alignment of committees.
Corporate boards maintain committees such as strategic planning, finance, audit and nomination committees to support governance functions. But they leave the formation of advisory committees on matters such as accounting, customer relations, sales, marketing, communications and the like to the CEO. In contrast, most private clubs have all their committees reporting to their boards. We believe there is a more effective approach to aligning club committees with the functions they support.
Assume you are just starting a private club and you have been assigned to develop a governance model. You decide on the size of the board, the terms of office, the election process and other features of the model. Next comes the task of identifying club committees, including their purpose, configuration and leadership. What’s the first step in this task?
The Purpose
Begin with the primary purpose of a committee, which is to serve as an advisor on policies relating to the issues subsumed by its scope of services—for example, finance, membership, golf, house, strategic planning, etc.
The next question is to whom does the committee report?
The answer lies in the functions being supported by the committee. The board is a governing body with a strategic perspective. It needs committees to support strategic functions like finance, strategic planning, membership and governance/legal. In a good governance model, the board delegates the authority and the responsibility to the general manager to manage club operations, which includes delivering the services and activities efficiently and effectively. The committees supporting these functions, therefore, are best positioned reporting to the general manager.
We recommend two types of committees for a private club:
- Board committees that support board functions and report to the board.
- Operations committees that support operational functions and report to the general manager.
Unfortunately, the inertia militating against this alignment is rooted in history, where virtually all committees have reported to the board. Most club bylaws state specifically or clearly imply that all club committees report to the board, meaning that even boards that seek to realign their committees must first go through the process of amending the bylaws.
Even if their bylaws allow for a restructuring, many boards are reluctant to effect the change. Their rationale tends toward one of the following:
- Having operational committees report to the general manager would diminish their role and prestige in the club, making it harder to recruit members to serve on these committees.
- Moving operational committees away from the board reduces the board’s ability to stay informed on operations.
Value and Attraction
It is difficult to refute outright that service on operations committees will be less valued and therefore add to the difficulty in attracting quality members. Yet our experience suggests that club members are more persuaded by the influence of a committee and the quality of its manage- ment than by the person or persons to which it reports. In that vein, the closer the committee is to the decision-maker, the greater its influence and sense of value. Accordingly, we believe that whatever loss of status presumed by having operations committees report to the general manager is more than offset by the linkage the committee enjoys with the person who is responsible for making the decisions it recommends.
Likewise, we can understand the perception that not having operations committees report to the board will cause board members to lose touch with these important functions. However, there is no reason the board cannot require reports from the general manager that contain metrics the board believes are necessary for it to monitor performance.
Additionally, having operations committees report to it may encourage the board to meddle rather than monitor. Too often, board meetings are burdened by committee reports that address matters that belong to the general manager—not the board. If the general manager’s handling of an operational area is in question, the board can always ask for input from the committee. But to bake committee reports into the board agenda not only consumes meeting time, it also invites the board to be inappropriately involved with operational matters. Moreover, it blurs the clarity of responsibility for operational performance. If boards are holding general managers responsible for operational performance, the general managers must be given the authority to carry out the duties and the authority to form committees that support the functions related to operations.
Clearing Hurdles
As mentioned, many clubs refer to governance models of successful businesses, such as adopting the COO model, which clearly separates the governance function of the board from the operational leadership of the general manager/COO. But too many of these clubs are unwilling to realign their committees to more accurately reflect the corporate model and more effectively connect their committees to the appropriate level. We don’t discount the years of tradition that resist such a change, but we recommend that clubs clear the hurdle of the status quo and place their committees where they will most efficiently serve