During these difficult times for clubs, it might seem odd to talk about governance issues when clubs are focusing on serious concerns such as revenue growth, lack of new members, cost containment, type of club structure, i.e., nonprofit to for profit, and in some instances, a club’s very existence. However, some time spent on basic governance guidelines will serve clubs well in defining and strengthening members’ feelings and attitudes about their club and enhance their support. In addition, closer scrutiny by governmental agencies and others together with increased reporting requirements by the IRS would seem to make this a wise best practice for clubs at this particular time.
I believe there’s general agreement that board and management credibility and competence are essential in securing backing and confidence of the membership in the operation of their club. Time spent on sustaining and practicing good governance principles is time well invested in strengthening already good management. An emphasis on governance focuses not only on what the law requires, but also what the membership deserves. Clubs with a strong system of governance are more likely to be disciplined; make investments in training employees regarding proper procedures; instill a sense of ethics in dealings with members, coworkers and vendors; and, generally, exhibit the kind of behavior at the board and management levels that inspires the rest of the organization to mimic. Additionally, third parties tend to look favorably on organizations with documented governance structures. Often, lending institutions and insurance providers will evaluate an organization’s governance practices when deciding whether to do business with the club. Choosing which areas of governance to focus on may be the greater challenge.
Board Responsibilities
First, the board, management and committees should be acutely aware of their responsibilities and duties to the membership. This can be reinforced by dedicating time periodically at regular meetings of the board and committees to discuss specific best practices and to review governance guidelines. By doing this, word will spread to the membership that the board, management and committees members are concerned with the well-being of the club, aware of their stewardship responsibilities and not satisfied with the status quo. Additionally, the mission statement of the club should be included in club periodicals and on the website to remind the membership of the mission of the club and its long-term goals.
Members are usually very concerned about the financial condition of the club. The board of course monitors this on a monthly basis. However, once or twice a year the financial condition of the club should be reported to the membership. It does not have to be done in the form of full blown financial statements but could be accomplished in narrative form through comments in the president’s regular report to the membership or reports from the chair of the finance committee. Regardless of whether the news is good or bad, the membership should gain additional confidence in the board that they are being kept informed. This will also help to avoid surprises which can lead to chaos. More frequent communication is generally better.
Club Policies
In these troublesome times, consistent policies should be established by the board for such issues as dues delinquency, code of conduct and ethics violations by members and employees, transfers of memberships, and other sensitive areas. Governance guidelines—the documents that serve as a roadmap of the club’s principles and core rules and policies—protect the organization from charges of wrongdoing and document a clear vision for the club. Club statements of rules and policies separate from the articles of incorporation and bylaws permit clubs to amend policies not part of the core governing structure, but are important nonetheless. They are also subject to change more frequently due to industry trends, employee turnover and member demands. A regular review of club policies is recommended to make sure members understand and approve of club rules.
A key to successful governance is for the entire club community to understand the roles played by each group: the membership, the board, the committees, the general manager and the staff. Additionally, members should be aware of criteria for selecting board members. The nominating committee is charged with the responsibility of filling obvious needs for expertise, i.e., construction, insurance, real estate, legal, and finance expertise. Successful nominating committees of clubs with which I am familiar have been acutely aware of such needs and this philosophy has done a good job of breaking down the “good old boys” and “owners” syndrome evident in many clubs. It’s also in the best interest of the club that every member recognizes his or her place in the club hierarchy and understands the roles and responsibilities of each group.
Planning for the Future
Every club must plan for the future. Whether this means a new plant, a rebuilt golf course, a change in membership structure, property acquisition or disposition, or just meeting future needs and demands for the club, proper planning is essential. The long range planning committee should be board-chaired but with a diverse membership that is constructed to provide specific expertise and continuity. Even in difficult times when resources or lack thereof is obvious, the committee should meet regularly with the ongoing focus being what the club should be in 3,5,10 or 15 years in the future. The dynamics and habits of memberships change dramatically in such time frames and must be analyzed closely to determine what a club will require in the future to satisfy its members, and whether this can be accomplished within its financial means.
If the answer is no, then the overall direction of the club must be challenged. This is a touchy subject and requires communicating to the membership the issues and long-term needs/goals of the club. This whole subject is particularly critical in the current environment where ultimate survivability might be a real concern and should be addressed and actively analyzed. Consultants can help in some instances.
Communicating with Members
This article was begun by stating that active, effective club governance could be a real aid in emphasizing to members the credibility and competence of board and management. To accomplish this, proper communication needs to be conveyed to the membership from the board relative to governance issues. This can be done in a number of ways. The president should maintain regular correspondence with the membership. Committee chairs should report regularly on their activities to club members. Club management should post announcements, minutes, reports and other club documents on the members-only section of the club website. The goal is to achieve an appropriate level of transparency and disclosure within the club’s operation and to show members that the leadership is focused on matters of importance.
Clubs with strong systems of governance will inevitably establish the proper membership culture to engender the confidence that the club is sound, has a proper planning perspective and controls to insure its ultimate success. In these challenging times, establishing this should be most comforting.
An excellent resource for private clubs that wish to further develop their governance practices is NCA’s Club Governance Guidelines: A Path to Organizational Excellence. Visit the online store at www.nationalclub.org, or call 800-625-6221.
Samuel P. Bell Jr., CPA, was area managing partner of Ernst & Young for the Pacific Southwest area. He is the immediate past president of The California Club, a past president of Wilshire Country Club and Oak Hills Country Club in San Antonio, and is a board member of the Los Angeles Country Club and a member of The Argyle in San Antonio. He currently serves on the board of directors and as Secretary for the National Club Association.