In late June of 2012 I participated in a panel discussion on benchmarking at the Hospitality Finance and Technology conference in Baltimore. My fellow panelist was Russ Conde of Club Benchmarking. Some weeks after the conference I received a sheet summarizing attendees’ reviews of the session. While mostly positive, one of the attendees said that the discussion covered a lot of benchmarking concepts, but was short on the specifics of how to benchmark.
As I have written in Twelve Reasons I Benchmark, there are a number of reasons to benchmark your club’s operations. One important reason is to compare your club’s performance to that of the wider industry – and Mr. Conde’s Club Benchmarking service does just that in a simple, automated way via the Internet while providing standardized benchmarks industry-wide. The CB analysis tools and reports support strategic versus tactical thinking in the boardroom. A study of data from more than 1,200 clubs currently in the CB system has revealed a number of Key Performance Indicators with direct impact to the bottom line and confirmed the existence of a common private club business model now known as the “Available Cash Model.” I cannot commend Mr. Conde and his partner Ray Cronin enough for this invaluable service to the industry.
But just as there is value in benchmarking your operation externally, there are valid reasons to benchmark your performance internally – that is within each department and the club as a whole. Having provided this context, let me now provide some of the key specifics on how to benchmark.
First, for those wishing to compare their performance to other clubs and graphically visualize how their operation relates to the industry’s common business model, it couldn’t be any easier – simply visit the Club Benchmarking website and sign up for their service.
Second, for those who want to set up an internal program of benchmarking, here’s a discussion of some of the challenges and pitfalls, as well as information on where to get the necessary benchmarking instructions and spreadsheets to do it:
- Let me start by saying that every day there are literally hundreds of data points generated in club operations. The real benefit of benchmarking, though, is in tracking data over time. The number of meals served in the club dining room on a particular Friday night doesn’t signify very much; it is simply an occurrence. But if that number is part of a declining trend in Friday night dining, it is certainly a cause for concern. Without the effort to track trends and compare them to historical performance, there is no way to manage for either quality or performance.
- It is essential that the club’s General Manager buys into the value of benchmarking and fully supports the effort. Without his or her backing, it will be far more challenging to implement club-wide benchmarking. That doesn’t mean that individual department heads cannot benchmark within their departments and be successful, but it does limit the overall value of benchmarking to the club.
- It is helpful to have a point person for the project – and I suggest the club controller. This does not mean that the burden of benchmarking falls on the controller’s shoulders – as each department’s benchmarks must be the responsibility of the department head. But it is helpful to have a person knowledgeable about accounting and the use of MS-Excel to help guide and assist less knowledgeable department heads through the process.
Having said this I also want to stress that the controller’s office is the logical place for the preparations of several key reports (some sort of Weekly Revenue Report, see HRI Form 203 for an example, and a Pay Period Summary Report, HRI Form 229) that will facilitate data availability club-wide, as well as the consolidation of key benchmarks from all departments into the Executive Metrics Report which I have advocated as a useful enhancement to the monthly financial reporting package.
But even in the absence of such reports from the accounting office, a conscientious department head, recognizing that she is the person fully responsible for her department’s performance, can with a little effort get the necessary data to benchmark. For example, revenue information can usually be accessed from point of sale reports and payroll data is available from the accounting office or payroll service – both merely take a little initiative to get the desired information.
- Depending on the club’s pace of operations and individual department heads’ workloads, it may make more sense to start small with one or two departments whose managers are “numbers” people and who relish the idea of a deeper empirical understanding of their business operations. The enthusiasm and resultant success from these early adopters or “pathfinders” will serve as an invaluable inspiration and guide for others. An alternative would be to implement one significant form of benchmarking club-wide – say benchmarking payroll costs across all departments. In time, the value of this will lead to a desire for more robust benchmarking of other areas of club operations.
- While every club can set their priorities for data to benchmark, here are some suggested priorities and the reasoning behind them:
Profit and Loss Statement (as part of the Executive Metrics Report) – low hanging fruit, easy to access data from P&Ls, requires only monthly data entry.
Payroll Cost – largest cost in operations, potentially yielding greatest opportunity for improvement and savings; makes future budgeting far easier; most effective when employees are paid on a bi-weekly basis (read Why Our Workweek and Pay Cycle? to understand why).
Departmental Revenues – by day of week, week by week, monthly, and annually; easy to access data, historical record can improve staff scheduling, makes future budgeting far easier.
Food and Beverage – probably the most effort and time-intensive if done thoroughly (tracking sales of beer, wine, alcohol, appetizers, desserts, specialty drinks, etc.), but provides critical feedback on any efforts to improve the average check; data can also help with managing inventory levels of alcoholic beverages.
Inventory and Accounts Receivable – low hanging fruit, easy to access data in accounting office, helps monitor and correct inventory volatility, requires only monthly data entry.
Retail – can dramatically improve performance when coupled with other retail disciplines.
Utilities – low hanging fruit, data comes from monthly utility bills, once-monthly data entry for electricity, water & sewer, and gas; helpful in spotting and investigating usage and billing anomalies.
Individual Departments – prepared by department heads, makes them more knowledgeable about operations (enhancing their authority and influence), analysis of benchmarks leads to improved performance.
- All the resources to begin internal benchmarking at your club can be found on the Club Resources International website. Simply purchase the 153-page Club Benchmarking Resources for $99 at the Marketplace store. It contains the background information, the basics of benchmarking, departmental benchmarking instructions, and samples of benchmarking spreadsheets. Each departmental instruction gives a list of benchmarks to track and sources of data, as well as specific instructions on how to use the spreadsheets and a sample spreadsheet for both year-to-date and year-to-year tracking.
A number of benchmarking spreadsheets are available on the Club Resources International website and can be downloaded at no charge. After downloading and reviewing the benchmarking material, managers can customize the spreadsheets* for their operations, and begin collecting and recording the necessary data. If key data has never been tracked before, patterns will emerge pretty quickly as benchmarking progresses, though the longer the data is tracked, the more valuable the benchmarks will be as operating standards.
- My experience with benchmarking over the years is that it usually takes several months of close focus and review to successfully set up; thereafter ongoing benchmarking becomes part of the club’s routine.
- Some department heads may need training and handholding during implementation, particularly if they are not familiar with computers or spreadsheet software, but once up to speed, they fully appreciate the value of monitoring the underlying details of their operations.
- An important discipline that fully exploits the benefits of benchmarking is to make a formal review of departmental benchmarks part of the ongoing monthly review of financial statements with each department head. When combined with the Tools to Beat Budget program and an examination of progress toward the goals of the department head’s annual work plan, benchmarking becomes a particularly effective means of driving progress and performance club-wide.
- All departmental benchmarks are then summarized on a monthly basis using the spreadsheets and a copy forwarded to the controller for the next and final step in the benchmarking program.
- The club controller completes the Executive Metrics Report using selected benchmarks from the departmental spreadsheets and submits it to all stakeholders as part of the club’s financial reporting package. One controller who presented the EMR to the club’s finance committee reported that a particularly influential member said he was “thrilled” to see such underlying performance data and looked forward to reviewing it on an ongoing basis.
Benchmarking is an essential business discipline that yields significant benefits to club operators. As H. James Harrington author, engineer, entrepreneur, and consultant in performance improvement, said “If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”
*Individual clubs will undoubtedly want to customize the Excel spreadsheets for their range of departments and scope of operations. While spreadsheets are “protected” to prevent inadvertent write-over of cell formulas, the protection is not password-protected, allowing individual clubs to modify the spreadsheets as necessary.
If you have any questions or want more information about any aspect of benchmarking, contact us at firstname.lastname@example.org.
Thanks and have a great day!
This weekly blog comments on and discusses the hospitality industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hardworking hospitality managers throughout the country and around the world.
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