February 2013
World Conference 2013
Lead with Knowledge
Seize Control Using Facts
Monday, February 11, 2013, 7:00 a.m. - 8:30 a.m.
Session 1363
Ray Cronin & Russ Conde
Desired Outcome
The
Wisdom of
the Crowd
Proactive,
Fact-Based
Leadership
SEIZING CONTROL
The
Confidence
of Knowing
Strategic
Benchmarking
Agenda
1. The Wisdom of the Crowd
• “The Same Survey, Once a Year, For All”
• The Science and the Benefit of Shared Knowledge
2. The Confidence of Knowing - The Common Business
Model
3. Strategic Benchmarking using Key Performance
Indicators
4. Fact Based Leadership – Shift the Discussion from
Tactical to Strategic
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February 2013
The Wisdom of the Crowd
Managers Seek Data
o Look to In-Box – constantly filled with reactive, adhoc questions from Chapter peers seeking facts
o Are Tuesday and Wednesday the busiest days?
o Boards are transitory and “uneducated” (need
continuous education) – They don’t know what they
don’t know
o Data is used for validation purposes – can be used
to measure performance as well
The Wisdom of Crowds
– The Science
o The Wisdom of Crowds by James Surowiecki
explains the science
o Who is the Smartest manager in the room?
o The Story of Francis Galton and The Jelly
Bean Game
o The Space Shuttle Columbia Disaster
o The Cost of Food – Real Time Demonstration
of The Wisdom of Crowds
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February 2013
The Wisdom of Crowds
– The Science
o Information must be Diverse and Independent
Geographically
Club Type
Club Size
o There must be a mechanism for aggregating the
diverse and independent data
o In 18 months The Wisdom of the Crowd has revealed:
The Industry is governed by a Common Business Model
The Key Performance Indicators that matter
Food & Beverage is an amenity NOT a Profit Center
Compensation is independent of geographic location
Becoming a “Wise Industry”
Frequency
THE PAST
Trading Numbers
THE FUTURE IS NOW
Sharing Knowledge
Reactive, Constant
Proactive, Once a Year
None
USFRC
Standardized process
None – point by point data
F&O, C&B, P&P
Standards
Context
Information
Diversity
Effort
Low – local and similar
Highly diverse – all clubs
Manual, time-consuming
A few hours once a year
None
Automatic
Graphical Output
AGGREGATED KNOWLEDGE
The Wisdom is Here
Industry-Wide Wisdom!
Takes less time
Proactive
Standardized
Each club enters the same
Club X
data at the end of each
fiscal year
Trends
Club Y
Base
Win, Win, Win
One, Centralized, Standardized,
Industry-Wide
Data-Sharing Platform
Club A
Club B
Club C
Knowledge
User-Driven
Comparisons
Club
Z+++
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February 2013
The Confidence of Knowing
The Common Business Model
Seeking Knowledge
o An Educational Challenge – Please ask yourself:
What do I know about my industry?
Do I understand the industry business model?
Does each club have a unique or common operating
model?
Does geographic location impact how a club operates?
What are the FACTS that govern my perception?
Where did I acquire these Facts? Are they correct?
How does my view effect how I manage my club?
What might I learn if I studied The Wisdom of the Crowd?
Defining
The Available Cash Model
o Step 1 – Separate Capital Income
o Step 2 – Separate “Fixed” Expenses
G&A
Buildings Maintenance & Operation
Fixed Expenses (RE Taxes, Prop.&Liab. Ins., Interest)
Non-Golf Sports & Recreation (Racquets, Fitness &
Spa, Aquatics)
Course Maintenance
Golf Ops Labor
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February 2013
Defining
The Available Cash Model
o Step 3 – Calculate Net from Revenue producing
departments
F&B Net = F&B Rev. – F&B Exp.
Rooms Net = Rooms Rev. – Rooms Exp.
Other Net = Other Op. Rev. – Other Op. Exp.
Golf Ops Rev. – (Golf Ops Exp. – Golf Ops Labor)
Yachting Net = Yachting Rev. Yachting Exp.
Defining
The Available Cash Model
o Step 4 – Calculate Available Cash
+
+
+
+
+
+
Membership Dues Revenue
F&B Net
Rooms Net
Other Net
Golf Ops Net
Yachting Net
Ancillary Sports & Recreation Revenue
Available Cash To Cover Fixed Expenses
The Available Cash Model
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February 2013
The Available Cash Model
o Step 5 – Calculate Net Available Cash
-
Available Cash
Course Maintenance Expense
Golf Operations Labor
G&A Expenses
Buildings and Maintenance Expenses
Non-Golf Sports Expenses
Fixed Expenses
Net Available Cash Operating Bottom Line
The Available Cash Model
The Confidence of Knowing
Group of Large, Well Known Clubs
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February 2013
The Confidence of Knowing
Group of Large, Well Known Clubs
The Confidence of Knowing
Available Cash as a Percentage of Total Operating Revenue
National 60%
Northeast
60%
West
Midwest
62%
56%
Southwest
Southeast
60%
60%
Club Benchmarking - 2011
20
The Confidence of Knowing
Course Maintenance as a Percentage of Available Cash
National 31%
Northeast
32%
West
Midwest
36%
30%
Southwest
30%
Southeast
32%
Club Benchmarking - 2011
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7
February 2013
The Confidence of Knowing
Net Food & Beverage income/Loss as a Percentage of Available Cash
National (-3%)
Northeast
0%
West
Midwest
(-5%)
0%
Southwest
Southeast
(-4%)
(-5%)
Club Benchmarking - 2011
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The Confidence of Knowing
G&A as a Percentage of Available Cash
National 23%
Northeast
23%
West
Midwest
22%
26%
Southwest
Southeast
25%
24%
Club Benchmarking - 2011
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The Confidence of Knowing
Golf Operations Labor as a Percentage of Available Cash
National 10%
Northeast
9%
West
Midwest
10%
10%
Southwest
11%
Southeast
10%
Club Benchmarking - 2011
24
8
February 2013
The Confidence of Knowing
Non-Golf Sports as a Percentage of Available Cash
National 10%
Northeast
7%
West
Midwest
7%
6%
Southwest
Southeast
10%
11%
Club Benchmarking - 2011
25
The Confidence of Knowing
Buildings and Maintenance as a Percentage of Available Cash
National 15%
Northeast
14%
West
Midwest
15%
15%
Southwest
Southeast
14%
14%
Club Benchmarking - 2011
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The Confidence of Knowing
Cash Fixed Expense* as a Percentage of Available Cash
National 10%
Northeast
12%
West
Midwest
9%
12%
Southwest
10%
Southeast
9%
*
Real Estate Tax
Prop. And Liability Insurance
Interest Expense
Club Benchmarking - 2011
27
9
February 2013
The Confidence of Knowing
Payroll as a Percentage of Operating Revenue
National 54%
Northeast
53%
West
Midwest
55%
54%
Southwest
54%
Southeast
53%
Club Benchmarking - 2011
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The Confidence of Knowing
The Confidence of Knowing
Beware of the Blind Spot
• “My Club is Different”
o While clubs certainly have different personalities……
o All clubs are subject to a Common Business Model
o The Common Business Model of clubs is the
Proportionate Sources and Uses of Cash
10
February 2013
The Confidence of Knowing
• Understanding Fact vs. Opinion is….
• Realizing the difference between KNOWING and
Thinking We Know
Knowledge Gained
o An Educational Challenge – Let’s Ask Again:
What do I know about my industry?
Do I understand the industry business model?
Does each club have a unique or common operating
model?
Does geographic location impact how a club operates?
What are the FACTS that govern my perception?
Where did I acquire these Facts? Are they correct?
How does my view effect how I manage my club?
What might I learn if I studied The Wisdom of the Crowd?
Strategic Benchmarking
The Key Performance Indicators
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February 2013
The Key Performance
Indicators
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
Total Operating Revenue and Available Cash
Available Cash as a Percent of Operating Revenue
Available Cash and Net Available Cash
Net Available Cash as a Percent of Available Cash
The Proportionate Sources and Uses of Operating Cash
Available for Capital Investment or Debt Reduction
Full Member Equivalents
Annual Recurring Fees – Full Member
Net Available Cash Per Full Member Equivalent
Debt per Full Member Equivalent
Interest Expense as a Percent of Available Cash
Total Payroll as a Percent of Operating Revenue
Net F&B Income as a Percent of Available Cash
F&B Labor Cost as a Percent of F&B Revenue
Cost of Goods Sold – Food, Beverage
Full Member Turnover Percentage
Average Member Age
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February 2013
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February 2013
Fact Based Leadership
Shifting the Discussion from Tactical to Strategic
Fact Based Leadership
Seizing Control
“Nature abhors a vacuum”
- Aristotle
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February 2013
Fact Based Leadership
Seizing Control
• If you put a bunch of Type A, generally successful
people on a Board - what will happen?
1. In the absence of DATA - there will be unending
questions (which show up on Chapter EMAIL)
2. In the absence of FACTS - there will be opinion (some
wrong – i.e. F&B has a strategic financial impact)
3. In the absence of a Framework - one will be
imprinted
Fact Based Leadership
Seizing Control
• KEY WORDS in an Opinion Environment
Too much
Too little
Not enough
• KEY WORDS in a Fact Environment
53% Over
18% Under
Increase by 13%
Fact Based Leadership
Seizing Control
Case Study #1
The Situation
o No dues increase in three years, significant deficit in Net
Available Cash, stuck on Food & Beverage
The Benchmark Process shows:
o Interest on debt consuming double the available cash, real
estate taxes and insurance very high, dues very low, F&B right
on track
The Result
o 9% dues increase after year began within 8 weeks, re-bid
insurance, go to Town Hall
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February 2013
Fact Based Leadership
Seizing Control
Case Study #2
The Situation
o Club is in great shape financially
The Benchmark Process shows:
o Club not spending to norms on Course Maintenance and
subsidizing staff health insurance
The Result
o Club increases budget for Course Maintenance by $100,000
(12%)
o Club commits $100,000 to staff health insurance subsidy
o Unanimous board vote
Fact Based Leadership
Seizing Control
A Framework
1. Study the Shared Wisdom
2. Understand the Business Model
3. Use the Business Model to
Educate, Budget, Plan and Communicate
4. Imprint Key Performance Indicators on the Club
Manage and improve them consistently
Benchmark trends
Use them to “bridge” changes in the Board
Fact Based Leadership
Seizing Control
Fiduciary - Honesty and Duty of Full
Disclosure of all Material Facts, either known,
within the knowledge of or reasonably
discoverable which could influence in any
way the principal's decisions or actions
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February 2013
Concluding Remarks
Summary
• Contribute To and Use The Wisdom of the Crowd
• Understand the Industry’s Common Business
Model
• Understanding Facts vs. Opinion and “I Think” vs.
“I Know”
• Understand the Key Performance Indicators
• Fact Based Leadership – Use the Key Performance
Indicators to Seize Control
Lead the Board to discharge their Fiduciary Duty
properly
Q&A
21
February 2013
Thank You!
www.clubbenchmarking.com
Ray Cronin [email protected]
Russ Conde [email protected]
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