Archive for July, 2013

Risky Business

Monday, July 29th, 2013
michelle-tanzer-2

Michelle Tanzer

Do you like to wager on your golf game, pick a winner in the March Madness pool, or place a bet on NFL playoff games with a friend?  While it’s perfectly OK to play with the loose change in your pocket, it’s never acceptable to gamble with the viability of the club you are charged with operating; nor is it wise to risk your professional reputation and career.  But this is exactly what you do when you ignore the inherent legal and liability risks in club operations!

As the overall guardian of the club’s well-being, you as the General Manager need to be fully aware of a wide range of risks and liabilities and take the active steps to protect the interests of the club.

But how do you come to recognize the many legal landmines littering the landscape of club operations?  Picking the brains of your club counsel at an hourly rate or scouring the trade journals for news of club court cases is hardly a cost- or time-effective way of educating yourself about the legal issues and problem areas for clubs.

But now there’s a much easier solution!  Michelle Tanzer, noted attorney and legal expert for the club and hospitality industries, has written the definitive book covering club legal issues.  Fully recognizing the challenge for busy club executives to find time to search out and cover all the issues, she has provided synopses of 118 club-related court cases from around the country, grouped under 18 legal categories such as Breach of Contract, Employee Discrimination, Member Discrimination, Employment, Negligence, Sale of Club, Taxation, and others.  After summarizing the cases in each category, Ms. Tanzer, in a straightforward, non-legalese style, lists the lessons to be learned from each case and provides an action checklist for the conscientious manager to protect his or her club.

While the book is 753 pages long, the essential information is provided in the first 115 easy-to-read and well-organized pages.  The remainder of the book covers the detail of each court case for those wanting a deeper understanding of the issues and rationale behind each decision.

The author is currently working on an updated second edition and everyone who purchases the first edition will automatically receive the update at no additional charge.

My Review: A valuable and well-presented body of important legal issues (particularly in the litigious U.S. market), this book is an essential addition to every club manager’s library.  I learned more about club legal issues in the two hours it took to read the summarized material than during a 38-year career in hospitality management.  The book is well-worth the $350 price given the material involved, the cost of legal counsel, and the potential consequences when you lack awareness of the issues.

Club Litigation Book – Keeping Clubs Out of Court, Michelle F. Tanzer, Esq., Club Book Series, Inc., Palm Beach Gardens, FL, 2006.  The book is available in either eshare or CD-ROM format. http://www.clubtax.com/ClubLitigation.html

Thanks and have a great day!

Ed Rehkopf

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 hospitality hardworking  managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

Is This the Hedgehog Concept for Private Clubs?

Monday, July 22nd, 2013

In his book, Good to Great:  Why Some Companies Make the Leap . . . And Others Don’t, author Jim Collins said that all good to great companies had a deep understanding of their Hedgehog Concept which guided all their efforts.  For Walgreens it was fanatical dedication to convenient locations that enabled them to achieve what Collins termed “one of the most sustained transformations in our study” of good to great companies.

For those of you who have read Good to Great (and I strongly recommend it for every club manager) you know that a company’s Hedgehog Concept is “a simple, crystalline concept that flows from deep understanding about the intersection of . . . three circles.”

1. “What you can be the best in the world at,”

2. “What drives your economic engine,” “the piercing insight into how to most effectively generate sustained and robust cash flow and profitability” – “a single denominator that has the greatest impact on the company’s financial performance,” and

3. “What you are deeply passionate about.”

Since reading Good to Great seven years ago, I have sporadically turned my attention to trying to determine an appropriate Hedgehog Concept for private clubs and have finally come to a conclusion.

But first let me point out an obvious distinction that makes a club different from other companies – that most clubs serve a geographically-limited market and therefore cannot be best in world at what they do, only best in their community or locale.  Unless you’re Augusta National or the Ritz-Carlton clubs, your focus is local.  You may also think you’re the best in the world, but unless you have a long waiting list to join and members who robustly and enthusiastically support your club with their patronage, you’re probably not.

I would also say that club managers should be deeply passionate about what they do or why are they managing a club?

This leaves #2 – the “single denominator” that drives your economic engine.  What single concept that when pursued with fanatical determination as the basis for all club decisions leads to transformational performance?

After much deliberation my candidate for the single denominator for club success is the level of member discretionary spending and the benchmark is Average Member Discretionary Spend per month and annually (computed by dividing non-dues revenue by the number of members*).  Here is my reasoning:

1.   To be viable a club must be profitable and even non-profit clubs must break even with sufficient set asides for replacement.

2.   A club with robust member discretionary spending** is by a combination of facilities, programming, and service levels not only satisfying their members, but exceeding their expectations, as evidenced by members supporting their club, that is, frequenting the club and spending their money there.

3.   As every club manager knows, having a full membership promotes financial health for the club.  But what factors lead to strong membership numbers and a waiting list to join?  Simply put, it’s the same factors that promote frequent use of the club – the quality of facilities, compelling programming, and high levels of service.  With these in place word of mouth reputation will do more to generate a strong membership than any amount of marketing effort.

By laser-like focusing on the Average Member Discretionary Spend benchmark and fanatically using member discretionary spending as the basis for business decisions, a club will be on the path to success, even greatness.  However, recognizing that a club is made up of multiple businesses – golf, food and beverage, tennis, aquatics, activities, and other revenue generators – I would strongly recommend that the Hedgehog benchmark be tracked monthly and annually for all profit centers.  This will focus attention of under-performing departments requiring attention and improvement.

In focusing on Average Member Discretionary Spend as the prime benchmark for both the club as a whole and each revenue-generating department, managers will have boiled down the club’s success factors to the single requirement for transformative performance – the frequent, sustained patronage of the club by its membership.  You must, however, be keenly aware of the impact of price increases on the average member spend.  Don’t go patting yourself on the back for improvements in the average member discretionary spend when the increase is due to higher prices charged to members.  One way to ensure the efficiency of your operation is to also track the percentage of net income to total non-dues revenues to see how much of what comes in the door translates to the bottom line.

Whether or not your club is on a good to great trajectory, tracking the Hedgehog benchmark will help you monitor your members’ spending habits.  If in decline you know something is amiss.  If robust and growing across all departments, you can be confident you’re on the right track.

Notes:

* I would use month end count of membership for monthly computation and average number of memberships (sum of month end memberships for all months divided by 12) for the annual computation.

** The two revenue sources that are problematic for computing discretionary spending are dues and food minimums.

  1. Once a member joins the club, dues are a given regardless of level of patronage and support for the club.  As a rule I would not include dues as part of member discretionary spending in computing the Hedgehog benchmark.
  2. Food and beverage minimums also present a problem in that they can be coercive.  Regardless of whether members feel good about the food service, they have to spend a set amount per period or be dunned for their shortfall (unspent minimums).  My solution to this issue is to include all food and beverage revenues regardless of whether it was truly discretionary spending by members or unspent minimums.  But, and this is a big but, I would separately track the average unspent minimums per member per period as a reality check for the Hedgehog benchmark.

Thanks and have a great day!

Ed Rehkopf

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 hospitality hardworking  managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

A Musical Analogy

Monday, July 15th, 2013

An orchestra is made up of a large number of individuals accomplished in their chosen instruments.  Through discipline, hard work, and long practice each musician has mastered the many-faceted intricacies of instrument, musical notation, and both solo and group performance.  Individually they are musical professionals, yet to be hired by a reputable orchestra they must prove not only their instrumental prowess, but also their skill and temperament to play in a larger group under the direction of the orchestra’s conductor.

A hospitality organization is typically an enterprise composed of a half dozen or more business specialties, each requiring managers of proven performance in their individual fields.  Not only must they demonstrate the knowledge, expertise, and disciplines of their vocations – rooms management, accounting, sales and marketing, food service, facility maintenance, housekeeping, retail management, recreation operations, golf management, agronomics, and human resources – but they must also work well together as a team of professionals dedicated to a common purpose under the direction of the general manager.

In preparing for the concert season the conductor must lay out his proposed program of concerts, the individual pieces selected for play, and his unique vision of how each piece is to be played – the orchestral composition, the musical arrangement, the style of play, and selection of solo performers, and other factors – and then rehearse the orchestra to achieve the desired performance.  Despite the accomplishments of individual musicians, the orchestra will never achieve critical acclaim, renown, and success without this unifying effort.

The general manager of a hospitality operation has a similar role to play.  Despite the qualifications of each department head, despite the specific knowledge of their chosen professions, without the direction and guidance of the general manager the multiple businesses will not perform in an integrated, professional, and successful manner.

To achieve this unity of effort the general manager must paint a clear vision of how the organization will perform and interact with customers/guests/members. He must also define and continually reinforce organizational values and culture, while providing clear expectations for each department’s performance.  Without this effort to clarify, unify, and integrate departmental operations, the enterprise operates as separate businesses, each with its own standards and each interacting with customers according to the dictates and example of its department head.

After nearly forty years in the hospitality industry, I am clearly convinced that the greatest mistake too many general managers make, particularly in small, standalone properties, is to get too involved in daily operations.  It’s a mistake I made all too often in my career.  Instead of guiding, instructing, and coaching department heads to run their operations like their own businesses, instead of spelling out my expectations, creating meaningful work plans based on measurable accountabilities, and then holding them strictly accountable for results, I spent too much time taking the initiative and solving problems myself.  Not only did this mire my efforts in operational problems when I should have be charting the strategic course of the business, but it also robbed conscientious department heads of their initiative and sense of responsibility for their operations.

Bottom Line:  General managers should be ever vigilant about maintaining their proper role in the operation.

Thanks and have a great day!

Ed Rehkopf

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 hospitality hardworking  managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

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Never Complain

Monday, July 8th, 2013

John was the longstanding controller at an exclusive private club.  When the new General Manager made the rounds of department heads to assess the state of the operation, John had a long list of complaints about the other department heads and their failure to meet accounting deadlines for payroll, inventories, and accounts payable.  In particular he said that invoices were not coded correctly requiring an inordinate amount of his time to research and correct before he could pay them.  Lastly, he said that a number of department heads and supervisors seemed to have no understanding of basic accounting and financial management . . . and trying to get them to prepare proper budgets was a nightmare!

The new GM listened patiently to this litany of problems and then responded, “So what are you going to do about it?”

Taken aback by this response, John mumbled, “What do you mean?”

“You’re the controller – the club’s subject matter expert on all matters of financial accounting and management – so stop complaining and do something about it.  For starters, do you have written standards, policies, and procedures for accounting?”

“Uh . . . no.”

“Well then get busy writing them and don’t forget to include detailed instructions of how to properly code invoices and develop an expense dictionary.  And it wouldn’t hurt to start holding classes to teach the other managers how to do things and what your expectations and deadlines are.  You’ve got my complete support, so let’s get to it.  Just keep me informed of any issues and problems . . . and oh . . . make sure you invite me to all your classes.  I need to learn too.”

At first John was offended and irritated that the entire burden for straightening out this mess fell on him.  But the more he got into it, the more he realized that he could either complain or fix the problem.  So, over the course of the next six months John outlined and wrote a comprehensive series of accounting standards, policies, and procedures; met with department heads to better understand their concerns and issues; and taught a series of 15-minute classes on accounting at the weekly staff meeting.  Eventually, he incorporated all the class materials into a workbook entitled Basic Accounting and Financial Management for Managers, which was used to train new managers and supervisors.

By year’s end the majority of John’s issues were resolved and the entire accounting flow was smoother and more efficient.  During his performance review for John, the GM commended him for his initiative, hard work, and execution of the project.  Not only did John get a major pat on the back, but the GM gave him an unexpected and substantial bonus for the improvements in all areas of the club’s accounting function.

John’s lesson learned:  Never complain; always occupy yourself with solutions.

Thanks and have a great day!

Ed Rehkopf

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 hospitality hardworking  managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

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