Archive for the ‘benchmarking’ Category

Guiding Principles and Operating Standards

Sunday, April 15th, 2018

Some time ago I blogged about a Culture of Service and the need for constantly reinforced organizational values.  Among those values I suggested the need for principles and standards to guide the enterprise.  Here’s one attempt to define the underlying values of an organization:

GUIDING PRINCIPLES: Principles that guide the conduct of our business!

  • Proactive leadership with service-based philosophy. Our leadership is active and engaged, while strictly adhering to service-based leadership principles (per Leadership on the Line).
  • Forward-thinking, professional expertise. Our professional knowledge should not only be up-to-date, but should be constantly looking ahead for cutting edge concepts and practices.
  • Proven management and operating systems. We utilize proven management practices and operating systems to efficiently organize and operate our club.
  • Sound planning and effective implementation. All of our projects and tasks must be planned thoroughly and implemented completely.
  • Innovative programs, continually reviewed. We offer innovative programs and we continually review them to make improvements.
  • A commitment to staff development and empowerment through formal, ongoing training. We operate in a detail intensive business and can only achieve excellence by thorough training and retraining.  Employees must be empowered to succeed and to solve member/guest issues whenever encountered.

OPERATING STANDARDS: Standards that form the basis for our operations!

  • Our vision and goals are articulated.  Our Club Strategic Plan lays out the long term goals for the operation.  Club Annual Goals are prepared as guides and targets for accomplishment.  We put them in writing to formally commit ourselves to their accomplishment.
  • We are uncompromising in our commitment to excellence, quality, and service.  To serve the highest echelons of our community, we have to set and commit to the highest standards.
  • Authority and responsibility are assigned and accountability assured.  Managers are assigned both the authority and the responsibility to direct their areas of the operation according to our highest standards.  These individuals are held accountable for their results.
  • We embrace innovation, initiative, and change while rejecting the status quo.  We seek continual improvement in all aspects of our operations.
  • Standards are defined, operations are detailed in written policy and procedure, and we seek continual improvement of products, services, programs, and operating systems.  Written standards (or the expected outcome of our “moments of truth”) for our products and services are detailed in written policies and procedures.  We seek continual improvement in these.
  • Member/guest issues are resolved politely and promptly to their complete satisfaction by our empowered employees.  No explanation needed.
  • Constant communications and feedback enhances operations and service, while problems and complaints are viewed as opportunities to improve.  We can never communicate too much or too well.  Informed employees are better employees.  Problems brought to our attention allow us to focus on solutions.
  • We benchmark revenues and sales mixes to evaluate members’ response to products, services, and programs, and we benchmark expenses, inventories, and processes to ensure efficiency and cost effectiveness.  We must pay close attention to what our members are telling us by their spending habits.  Benchmarking and analyzing expenses, inventories, and processes help us be more efficient.
  • We ensure clean, safe, well-maintained facilities and equipment while safeguarding club assets.  A good bottom line is only one measure of our effectiveness; we must also take care of all club facilities and safeguard their assets.
  • We acknowledge each operation as a team of dedicated individuals working toward common goals and we recognize the ultimate value of people in everything we do.  While each employee has his or her own duties and responsibilities, every member of our staff is important and works toward the common goal of understanding and exceeding the expectations of our members and guests.  Ultimately our business is about people and they must be valued and respected wherever and whenever encountered.

By themselves such statements have little value.  But by the  consistent example of management and the constant reinforcement to all employees these values are elevated to an animating spirit that permeates the organization.

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 hardworking managers throughout the country and around the world.

Benchmarking

Wednesday, February 7th, 2018

Imagine two professional baseball teams.  One team measures every aspect of every player’s performance – the number of at bats; number of hits, walks, and strikeouts; batting averages against right- and left-handed pitchers; slugging averages; and fielding percentages.  They also measure each pitcher’s earned run average, number of base on balls, strikeouts, wild pitches; and so on.  The other team decides it’s too much trouble and keeps no statistics whatsoever.

These two teams will meet each other eighteen times a season.  While well matched in player talent, hustle, and desire, and though each team possesses competent management and coaching, one team dominates the other season after season.  Would anyone be surprised to discover which is the dominant team?

As everyone knows, this example is ludicrous because every baseball team measures players’ performance and uses this information to make crucial game decisions.  What is it that baseball managers understand that some club managers don’t seem to grasp?  The fact that everything in life follows patterns. When patterns are tracked and analyzed, they can be used to predict future performance and set goals.

Benchmarking, the act of measuring and analyzing operating performance, seeks to understand the patterns underlying a club’s operation.  Reasons to benchmark include:

  • Benchmarks can be used to establish performance goals for future operating periods.
  • Benchmarks help identify under-performance and best practices.
  • Benchmarks from past periods can make budgeting for future periods easier and far more accurate.
  • Tracking revenues and comparing them to historical benchmarks allows management to measure member response to products/services and new initiatives.
  • Benchmarks create the measurable accountabilities for each manager’s work plan.

The club’s monthly operating statements provide good basic information, but these summary numbers can mask troubling trends within the operation.  For instance, higher food revenues can be a result of less patronage, but each member spending more because of higher menu prices.  The manager is happy with the higher revenues, but is blissfully ignorant of declining clientele.

Benchmarking is best accomplished by department heads who have bottom line responsibility.  Most performance measures will fall into the following broad categories.

  • Revenues and expenses, both aggregate and by type
  • Inventories
  • Retail sales mix to determine buying patterns of members

Most of the raw data necessary to benchmark comes from point-of-sale (POS) reports.  Much of this lode of daily information gets looked at briefly by department heads or the accounting office and is then filed away, rarely to be seen again.  The real value of this information comes from tracking it over time to determine trends by day of week, week to week, month to month, and year to year.  This makes it necessary for managers to pull the information from POS reports and enter it into spreadsheet software.

A few caveats:

  • There are as many aspects of an operation to measure as time, resources, and ingenuity will allow. Focus on those most critical to one’s operation.
  • Data used in benchmarking must be defined and collected in a consistent manner.
  • When comparing data, always compare like to like.
  • Ensure benchmarks measure events with only one underlying variable.
  • Do not draw conclusions from too small a sample.  The larger the sample, the more accurate the conclusion.
  • When two pieces of data are compared to generate a benchmark, both a small sample size or extreme volatility in one or the other, can skew the resultant benchmark.

Benchmarking is not complicated, but it does require discipline and persistence.  It is best accomplished by setting up routine systems to collect, compile, report, and analyze the information collected.  Like a baseball team, the knowledge gained by benchmarking will bring a club to the top of its game.

Thanks and have a great day!

Ed Rehkopf

This blog comments on and discusses the club 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 club managers throughout the country and around the world.

Eight Key Basics to Successfully Operating a Private Club

Sunday, November 26th, 2017

The club industry is facing difficult times and while we are all facing challenges, each club faces its own particular problems.  As is usually the case when facing difficulties, this is the time to get back to the basics of our business.  Here are 8 things each club should examine:

1.  Leadership.  Clubs need clear-sighted individuals to guide them through tough times – but not just at the top.  They need strong leaders at all levels of operations.  It’s also important that the leadership styles of club leaders at all levels are congruent.  Different leadership approaches can dilute or damage the General Manager’s service message when it’s not reinforced consistently by all managers and supervisors in both word and deed.

2.  Organizational values and culture of service.  Every employee needs to understand what, how, and why you do what you do.  The basics of what you stand for as an enterprise are of absolute importance.  Defining your values is only the first step.  They must be continually and consistently reinforced to all employees.

3.  Planning.  Haphazard planning results in haphazard operations and equally haphazard performance.  Your club should have a 3 – 5 year strategic plan focused on your competitive position in the marketplace.  The club should have an annual plan for what it expects to accomplish and the General Manager and all Department Heads should have detailed annual work plans.  As important, the requirements of work plans must involve measurable performance parameters.  Detailed benchmarking of all areas of the operation is the easiest and best way to do this.

4.  Benchmarks.  You need to understand the variables of business volume and average sale that underlie all of your revenues.  Without this knowledge you may be lulled by historical levels of revenue when they are actually made up of declining volume, but higher prices and fees.  Benchmarking in detail is also an excellent way to listen to what members are saying with their buying habits.

5.  Accountability.  The club business is too demanding not to hold individual managers accountable for results.  The performance of every manager and supervisor must be measured against their annual work plan and there must be consequences for failing to meet goals.  Poor performing managers degrade the efforts of the rest of the team and drive away good employees.

6.  Employee Turnover.  There is a high cost to turnover and it usually related directly to the quality of the club’s leadership at all levels.  It is particularly costly when you do a good job of training your people.  Do not become the minor league training ground for your competitors – both private clubs and local restaurants.

7.  Training.  There is much for employees to know in serving your members.  You cannot expect that your employees will inherently know what to do unless they are systematically and consistently trained.  Training gives your employees the knowledge and confidence they need.  Confident employees are more apt to engage your members and provide higher levels of service.

8.  Member feedback.  You need to understand what your members think about your club, the products and services it provides, and the service your employees render.  Surveys are an excellent tool to do this, but you must act on the information you receive in intelligent and thoughtful ways to make the most cost-effective decisions in satisfying wants and needs.

Getting back to the basics is a sure way to regain your footing during and after the current seismic shift taking place in our industry.  The good news is, and there’s always a silver lining, that the best leaders and their operations will inevitably rise to the top.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the club 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 club managers throughout the country and around the world.

A Roadmap to Successful Club Benchmarking

Tuesday, June 28th, 2016

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 info@clubresourcesinternational.com.

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 hardworking hospitality managers throughout the country and around the world.

Hospitality Resources International – Management Resources for Hospitality Operators!

 

A Roadmap to Successful Club Benchmarking

Monday, September 21st, 2015

In late June of 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 info@clubresourcesinternational.com.

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 hardworking hospitality managers throughout the country and around the world.

Hospitality Resources International – Management Resources for Hospitality Operators!

Benchmarking Your Way to Improved Performance

Monday, July 14th, 2014

William Thomson, Lord Kelvin, one of the leading lights of 19th century science said, “If you cannot measure it, you cannot improve it.”  While he was speaking of scientific inquiry and measurement, the same statement could be made regarding any desire to improve your company’s operating efficiency.

If you cannot accurately measure your current operating performance, how would you know where to best apply your corrective efforts?  Or even if those efforts were working or not?  This, in a nutshell, expresses the necessity of detailed benchmarking of all aspects of hospitality operations.

Every business operation monitors its performance by accounting for its revenues and expenses, thereby determining its level of profitability.  In the broadest sense the monthly financial statements are the measure of how the business is doing, but you must understand that the financial statements are summary numbers derived from the interplay of a large number of operational variables.

So if you want to increase your profitability, the numbers from your financial statements only allow you to say, “We need to increase revenues” or “We need to reduce our expenses.”  Without further detail as to where the problems are, you’ll never know where best to apply your efforts to increase revenues or cut expenses.

The key underlying variable for revenues in any operation is the number of customers patronizing the establishment, or volume of business.  This measure will be different for different areas of the operation – diners for the food and beverage operations, rooms occupied for lodging establishments, golf rounds for golf operations, retail transactions for the pro shops or other retail outlets.  The second and no less important variable is how much each customer spends on average while utilizing these facilities – the average check per diner in the dining room, the average room rate in a hotel, the green or cart fees per round on the golf course, and the average sale in the retail outlets.

The basic benchmarks of volume and average spend are computed by every POS system, but the real benefit of monitoring these benchmarks is in tracking them by day of week, week to week, month to month, and year to year.  This tracking over time allows the operator to monitor daily, weekly, and seasonal trends which is important because every area of an operation has its own variations based on time of day, day of week, and season.

Here’s an example of how benchmarks can help:

When dining revenues are down it’s important to know what combination of volume and average spend is causing the shortfall because the solution to one or the other is very different.  If volume is down, you need to figure out a way to bring in more customers more often.  If average spend is down, you need to figure out why – are they spending less because of the general economy, is your menu pricing appropriate to their expectations, or do your employees need more training in suggesting and upselling?

Other benchmarks can shed more light on the problem.  Are lesser priced menu items selling better?  If so it might indicate price sensitivity.  Are the cover counts down on Wednesday night when you offer your seafood special?  If so, this might indicate that customers are growing tired of this longstanding menu, or maybe another restaurant is luring them away with their own special pricing and fare.

Another example:  What if revenues are steady, but net income is down?  By benchmarking what menu items are selling, you might notice that you are selling large quantities of a low margin item from your menu.  By carefully tracking your food costs, you might discover that a key ingredient in your best-selling menu item has risen dramatically in recent weeks.  By benchmarking your labor hours and comparing it to revenues or cover counts you might find that your net is shrinking due to low productivity or over-scheduling.

What these examples demonstrate is that the more information you have about the details of your operation, the better able you are to analyze operational weakness and implement corrective action.  This premise of benchmarking key operating statistics is basic to any business, but in order to be most effective benchmarking must be a routine process with data being compiled, monitored, formally reported, and acted upon.  Only then can you use this wealth of information to proactively address emerging issues.  Without a formal system of benchmarking you will forever be reacting to the bad news from last month.

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 hardworking hospitality managers throughout the country and around the world.

Hospitality Resources International – Management Resources for Hospitality Operators!

 

Utility Benchmarking: The First Step in Energy Conservation

Monday, May 12th, 2014

Almost daily we hear more disturbing news about environmental degradation and the impact on our planet of our ever-increasing levels of fossil fuel consumption.  Just a few years ago there was a significant debate on whether the current period of global warming was man-made or if it was just part of the natural cycle of the planet.  While some scientist continue to question the exact causes of warming oceans, melting icecaps, degradation of the ozone, and other symptoms of our impact on Mother Earth, the consensus today seems to be we are facing a looming crisis and that much needs to be done to decrease our carbon footprint in all areas of our lives.

While most of us wait for some stroke of technology or government intervention to lead us out of the crisis, there are currently and soon-to-be other significant reasons for the business sector to address the problem within the scope of their operations – that of cost.  While government regulation of utility prices has kept the upward climb of utility costs manageable, we cannot always expect this to be so as the cost of extracting oil or converting to new greener technologies is expected to rise dramatically in coming years.

Environmentalists have long pointed out that the cheapest alternative to ever rising energy costs is that of avoidance – of conserving energy by the end user.  This applies to our homes, but increasingly is being looked at by businesses as a way of reducing or stabilizing these costs.  It seems at every turn we are being encouraged to change our light bulbs, better insulate, shift demand to non-peak hours, purchase more energy efficient machines, or just turn off unneeded lights and equipment.

Whether you are currently considering new investment in energy-saving technologies or will wait until it becomes a financial imperative for your operation, you will not be able to adequately determine the cost/benefit of any initiative without an understanding of the energy use at your facility.  Without this understanding any decision you make will be based upon wishful thinking or the promises of vendors.

So now is the time to start benchmarking your utilities which is easily enough done by tracking your consumption and cost for electricity, gas, and water.  For each one of these commodities you receive a monthly bill from your utility companies that provides all the pertinent information.  It’s a simple matter of extracting this data from the invoice and putting them in Excel spreadsheets month-by-month and year-by-year for each area of your operation for which you receive a bill.

Whether you plan to act soon to control energy costs or wait to some future time, these utility benchmarks will serve you well as you determine options and costs.  Someone once said that, “You can’t manage what you can’t measure.”  I would say that it’s also true that, “You can’t improve what you can’t measure.”  Start measuring your energy use patterns and costs now so that you can make those improvements when it becomes necessary.

Check out the utility benchmarking instructions and spreadsheets on the Hospitality Resources International website.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the club 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 club managers throughout the country and around the world.

Club Resources International – Management Resources for Clubs!

Three Critical Things Every Operation Should Benchmark

Monday, January 20th, 2014

I have written again and again of the importance of benchmarking key operating statistics which will tell you far more about your operation than just how much of a profit or loss you had in any given period.  While I strongly recommend that every department benchmark in detail, here are three key things that every enterprise should begin benchmarking immediately:

  1. Payroll hours by category (regular, overtime, holiday, vacation, and sick time) by department and payroll cost by department – both by pay period.  Just the fact that this data is being reported and looked at regularly will bring down overtime costs, while pinpointing further cost saving opportunities as the ongoing norms of the operations become clearer.
  2. Utility costs by category (electricity, gas, and water).  In most hospitality operations utility expenses are second only to payroll as the most significant operating expense.  Once routinely measured and reported, a variety of energy-saving initiatives can reduce these expenses.  Utility usage rates can be compared to various measures of usage such as rooms sold, meals served and rounds of golf to establish key benchmarks.  The vagaries of weather and its impact on heating and air conditioning can be removed by comparing electricity and/or gas usage to degree days for each heating and cooling period.
  3. Major revenues, number of transactions (rooms sold, meal counts, retail transactions), and average customer/guest/member spend by revenue category and profit center.  Taken together these measures will pinpoint whether shortfalls in revenues are caused by declines in volume (# of transactions) or by the average customer spend.  Since the steps to overcome these deficiencies are different, knowing whether the problem is volume decline or lower average spend is critical to turning the situation around.

There are many other key numbers to benchmark in club operations, but these three should be the starting point for implementing a larger discipline of benchmarking.  Remember the words of William Thomson, Lord Kelvin “If you cannot measure it, you cannot improve it.”

Note:  Hospitality Resources International has developed benchmarking spreadsheets for all areas of club operations.  The Excel files can be downloaded and customized for your operations. 

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 hardworking  hospitality managers throughout the country and around the world.

Hospitality Resources International – Management Resources for the Hospitality Industry!

 

Benchmarking Your Way to Improved Performance

Monday, March 18th, 2013

William Thomson, Lord Kelvin, one of the leading lights of 19th century science said, “If you cannot measure it, you cannot improve it.”  While he was speaking of scientific inquiry and measurement, the same statement could be made regarding any desire to improve your company’s operating efficiency.

If you cannot accurately measure your current operating performance, how would you know where to best apply your corrective efforts?  Or even if those efforts were working or not?  This, in a nutshell, expresses the necessity of detailed benchmarking of all aspects of hospitality operations.

Every business operation monitors its performance by accounting for its revenues and expenses, thereby determining its level of profitability.  In the broadest sense the monthly financial statements are the measure of how the business is doing, but you must understand that the financial statements are summary numbers derived from the interplay of a large number of operational variables.

So if you want to increase your profitability, the numbers from your financial statements only allow you to say, “We need to increase revenues” or “We need to reduce our expenses.”  Without further detail as to where the problems are, you’ll never know where best to apply your efforts to increase revenues or cut expenses.

The key underlying variable for revenues in any operation is the number of customers patronizing the establishment, or volume of business.  This measure will be different for different areas of the operation – diners for the food and beverage operations, rooms occupied for lodging establishments, golf rounds for golf operations, retail transactions for the pro shops or other retail outlets.  The second and no less important variable is how much each customer spends on average while utilizing these facilities – the average check per diner in the dining room, the average room rate in a hotel, the green or cart fees per round on the golf course, and the average sale in the retail outlets.

The basic benchmarks of volume and average spend are computed by every POS system, but the real benefit of monitoring these benchmarks is in tracking them by day of week, week to week, month to month, and year to year.  This tracking over time allows the operator to monitor daily, weekly, and seasonal trends which is important because every area of an operation has its own variations based on time of day, day of week, and season.

Here’s an example of how benchmarks can help:

When dining revenues are down it’s important to know what combination of volume and average spend is causing the shortfall because the solution to one or the other is very different.  If volume is down, you need to figure out a way to bring in more customers more often.  If average spend is down, you need to figure out why – are they spending less because of the general economy, is your menu pricing appropriate to their expectations, or do your employees need more training in suggesting and upselling?

Other benchmarks can shed more light on the problem.  Are lesser priced menu items selling better?  If so it might indicate price sensitivity.  Are the cover counts down on Wednesday night when you offer your seafood special?  If so, this might indicate that customers are growing tired of this longstanding menu, or maybe another restaurant is luring them away with their own special pricing and fare.

Another example:  What if revenues are steady, but net income is down?  By benchmarking what menu items are selling, you might notice that you are selling large quantities of a low margin item from your menu.  By carefully tracking your food costs, you might discover that a key ingredient in your best-selling menu item has risen dramatically in recent weeks.  By benchmarking your labor hours and comparing it to revenues or cover counts you might find that your net is shrinking due to low productivity or over-scheduling.

What these examples demonstrate is that the more information you have about the details of your operation, the better able you are to analyze operational weakness and implement corrective action.  This premise of benchmarking key operating statistics is basic to any business, but in order to be most effective benchmarking must be a routine process with data being compiled, monitored, formally reported, and acted upon.  Only then can you use this wealth of information to proactively address emerging issues.  Without a formal system of benchmarking you will forever be reacting to the bad news from last month.

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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Utility Benchmarking: The First Step in Energy Conservation

Monday, August 20th, 2012

Almost daily we hear more disturbing news about environmental degradation and the impact on our planet of our ever-increasing levels of fossil fuel consumption.  Just a few years ago there was a significant debate on whether the current period of global warming was man-made or if it was just part of the natural cycle of the planet.  While some scientist continue to question the exact causes of warming oceans, melting icecaps, degradation of the ozone, and other symptoms of our impact on Mother Earth, the consensus today seems to be we are facing a looming crisis and that much needs to be done to decrease our carbon footprint in all areas of our lives.

While most of us wait for some stroke of technology or government intervention to lead us out of the crisis, there are currently and soon-to-be other significant reasons for the business sector to address the problem within the scope of their operations – that of cost.  While government regulation of utility prices has kept the upward climb of utility costs manageable, we cannot always expect this to be so as the cost of extracting oil or converting to new greener technologies is expected to rise dramatically in coming years.

Environmentalists have long pointed out that the cheapest alternative to ever rising energy costs is that of avoidance – of conserving energy by the end user.  This applies to our homes, but increasingly is being looked at by businesses as a way of reducing or stabilizing these costs.  It seems at every turn we are being encouraged to change our light bulbs, better insulate, shift demand to non-peak hours, purchase more energy efficient machines, or just turn off unneeded lights and equipment.

Whether you are currently considering new investment in energy-saving technologies or will wait until it becomes a financial imperative for your club, you will not be able to adequately determine the cost/benefit of any initiative without an understanding of the energy use at your club.  Without this understanding any decision you make will be based upon wishful thinking or the promises of vendors.

So now is the time to start benchmarking your utilities which is easily enough done by tracking your consumption and cost for electricity, gas, and water.  For each one of these commodities you receive a monthly bill from your utility companies that provides all the pertinent information.  It’s a simple matter of extracting this data from the invoice and putting them in Excel spreadsheets month-by-month and year-by-year for each area of your operation for which you receive a bill.

Whether you plan to act soon to control energy costs or wait to some future time, these utility benchmarks will serve you well as you determine options and costs.  Someone once said that, “You can’t manage what you can’t measure.”  I would say that it’s also true that, “You can’t improve what you can’t measure.”  Start measuring your energy use patterns and costs now so that you can make those improvements when it becomes necessary.

Click here for utility benchmarking instructions and here to find spreadsheets.

Thanks and have a great day!

Ed Rehkopf

This weekly blog comments on and discusses the club 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 club managers throughout the country and around the world.

Club Resources International – Management Resources for Clubs!

Add                to Technorati Favorites