Archive for the ‘benchmarking’ Category

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!

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Defense and Offense

Monday, November 28th, 2011

Defense and offense are words of opposite meaning, yet often linked together.  Their obvious meaning is demonstrated on the football field.  One team attacks an area defended by another, trying to reach the goal.  The purpose of the defense is to stop the attack, to defend their territory, to protect the goal.  Though these terms have most often been applied to armies at war, they can also be used to describe less physical competitions such as a game of chess.  What characterizes each of these examples is a conflict or competition.

Two words derived from these terms are the adjectives offensive and defensive.  The dictionary defines offensive as:

  • Unpleasant or disagreeable to the senses; obnoxious, disgusting.
  • Causing anger, resentment, giving offense; insulting.

Defensive means:

  • Carried on for the purpose of defending against attack or danger.
  • Having an attitude of defense.

Everyone has heard the phrase “a good offense is the best defense.”  This idea is especially useful on battlefields, football fields, and even chessboards.  By keeping your opponent so off balance by relentless attacks, he has no time or resources to plan attacks against your positions.  In this way your offense becomes your defense.

People have natural tendencies.   Whether inborn or created by longstanding habit, they are part of our makeup and we express them without thinking.  One such habit is the tendency to personally associate ourselves with that which we do.  Just as the farmer has a proprietary interest in the fields he labors so hard to till and harvest, we all identify with our organization or place of work.  A corollary to this sense of association is the natural inclination to protect that which we consider our own or with which are associated.

So it is natural for us to feel pride in our work and place of employment.  When someone attacks it with criticism, disparaging remarks, or complaints, the natural tendency is to defend it, to assume a defensive attitude.  This is all well and good unless you depend upon that someone’s goodwill for your livelihood.  When you work in the service industry, you literally cannot afford to become defensive.

When you become defensive, many things happen physiologically and psychologically.  Adrenaline starts flowing; you tense up, ready to repel any further attack; your heartbeat and respiration quicken.  Likewise, your mind races ahead to your next move or response so you don’t hear what is being said and you don’t focus on the moment.  Subconsciously knowing that a good offense is the best defense you become antagonistic; you raise your voice; you develop an attitude; you become abrupt and huffy with the other person.  At this point, without even knowing it, you have become offensive; that is by definition, “causing anger, resentment, giving offense; insulting.”

How can you avoid the natural tendency to become defensive?  The first step is to become aware that you become defensive when criticized or listening to a member complaint.  Notice the giveaways.  Are you tense and nervous?  Do your hands shake or your voice quaver?  Do you feel  a tightness in your chest?  Do you raise your voice?  Any of these symptoms reveal your defensiveness.

Realizing this, what can you do about it?  First of all, understand two important things:

  • Complaints are not usually directed at you, so don’t take it personally.  Allow some distance between yourself and the complaint.  Not too much, though; you must show a sincere concern to resolve the problem.
  • When a member complains, there is, in his mind, a problem.  Whether we think there is a problem or not is immaterial.  Furthermore, because of the nature of the service profession, the problem is ours.  When considered in this light, the member is doing us a favor by making us aware of the problem.  We should be appreciative and thankful instead of defensive.

In addition, there are some particular things you can do when confronted with a complaint.

  • Where there is no conflict, there is no need for offense and defense.  Don’t allow a conflict to arise.  Disarm the situation by cheerfully accepting our problem.  Listen carefully to what the member is saying.  Apologize sincerely for our shortcomings.  If you can solve the problem, cheerfully and quickly do so.  If you can’t, get a manager who can.
  • If you find yourself becoming nervous or defensive, take a deep breath.  The inflow of oxygen will help quiet your system and the moment you take to breathe has a calming effect on your nerves.
  • If you find yourself losing control, try to leave the room on some pretext.  If you are a server, tactfully excuse yourself “to check with the kitchen.”  Once there, take a deep breath and get control of yourself.  Try to put the member’s anger into perspective.  It’s not the end of the world.  Resolve to overcome that anger.  Take another deep breath and go back to the member.
  • Go on the offensive in a positive away.  Take control of the situation.  Ask pertinent questions about the problem.  Take notes as necessary.  This taking ownership of the problem demonstrates a proprietary concern and a desire to correct the problem.
  • While apologies must always be given, remember that easy apologies and facile excuses do not impress.  Our actions speak louder than our words.
  • Be sincere.  You should have a sincere desire to help any member with a need or concern.  If you don’t, you’re in the wrong business.

Two things you must never do:

  • Pass the buck or evade responsibility.  You may not have created the problem, but now that it’s been brought to your attention, you need to resolve it.
  • Don’t become defensive.  It is not us against the members.  We’re on their team!

Responding to member complaints is one of the most difficult things we face in the service profession, but when we avoid becoming defensive, we often can create a turnaround situation where the problem is solved and the member satisfied.  There is no more satisfying situation in service.

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!

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Guest Blog: Dignity…We All Crave It, So Why Do We Keep Ignoring It?

Monday, November 14th, 2011

donna-hicks-152x200

What is the motivating force behind all human interaction – in families, in communities, in the business world, and in relationships from the personal level to the international level?  DIGNITY.  It is the desire to be treated well.  It is an unspoken human yearning that is at the heart of all conflicts, yet no one is paying attention to it.

When dignity is violated, the response is likely to involve aggression, even violence, hatred, and vengeance; the human connection is the first thing to go.  On the other hand, when people treat each other with dignity, they feel their worth is recognized, creating lasting and meaningful relationships.  Surprisingly, most people have little understanding of dignity.  While a desire for dignity is universal, knowing how to honor it in ourselves and others is not.

After working as a conflict resolution specialist for twenty years, I have observed and researched the circumstances that give rise to dignity violations.  On the other hand, when the following ten elements of dignity are honored, people feel their dignity has been recognized and that they have been treated well.  Relationships flourish under these conditions.

The Ten Essential Elements of Dignity

Acceptance of Identity.  Approach people as being neither inferior nor superior to you.  Give others the freedom to express their authentic selves without fear of being negatively judged.  Interact without prejudice or bias, accepting the ways in which race, religion, ethnicity, gender, class, sexual orientation, age, and disability may be at the core of the other people’s identities.  Assume that others have integrity.

Inclusion.  Make others feel that they belong, whatever the relationship – whether they are in your family, community, organization, or nation.

Safety.  Put people at ease at two levels: physically, so they feel safe from bodily harm, and psychologically, so they feel safe from being humiliated.  Help them feel free to speak without fear of retribution.

Acknowledgement.  Give people your full attention by listening, hearing, validating, and responding to their concerns, feelings, and experiences.

Recognition.  Validate others for their talents, hard work, thoughtfulness, and help.  Be generous with praise, and show appreciation and gratitude to others for their contributions and ideas.

Fairness.  Treat people justly, with equality, and in an evenhanded way according to agreed-on laws and rules.  People feel that you have honored their dignity when you treat them without discrimination or injustice.

Benefit of the Doubt.   Treat people as trustworthy.  Start with the premise that others have good motives and are acting with integrity.

Understanding.  Believe that what others think matters.  Give them the chance to explain and express their points of view.  Actively listen in order to understand them.

Independence.  Encourage people to act on their own behalf so that they feel in control of their lives and experience a sense of hope and possibility.

Accountability.  Take responsibility for your actions.  If you have violated the dignity of another person, apologize.  Make a commitment to change your hurtful behaviors.

Our desire for dignity resides deep within us, defining our common humanity.  If our capacity for indignity is our lowest common denominator, then our yearning for dignity is our highest.  And if indignity tears relationships apart, then dignity can put them back together again.

Our ignorance of all things related to dignity – how to claim our own and how to honor it in others, has contributed to many of the conflicts we see in the world today.  This is as true in the boardroom and in the bedroom, as it is in politics and international relations.  It is true for all human interaction.  If we are to evolve as a species, there is no greater need than to learn how to treat each other and ourselves with dignity.  It is the glue that could hold us all together.  And it doesn’t stop there.  Not only does dignity make for good human relationships, it does something perhaps far more important – it creates the conditions for our mutual growth and development.  It is a distraction to have to defend oneself from indignity.  It takes up our time and uses up our precious energy.  The power of dignity, on the other hand, only expands with use.  The more we give, the more we get.

There is no greater leadership challenge than to lead with dignity, helping us all to understand what it feels like to be honored and valued and to feel the incalculable benefits that come from experiencing it.  The leadership challenge is at all levels – for those in the world of politics, business, education, religion, to everyday leadership in our personal lives.  Peace will not flourish anywhere without dignity.  There is no such thing as democracy without dignity, nor can there be authentic peace if people are suffering indignities.  Last but not least, feeling dignity’s power – both by honoring it and locating our own inner source of it – sets us up for one of humanities greatest gifts – the experience of being in relationship with others in a way that brings out the best in one another, allowing us to become more of what we are capable of being.

Donna Hicks Ph.D., author of Dignity: The Essential Role It Plays in Resolving Conflict, Yale University Press, 2011.  You can read more about the author and her book at http://drdonnahicks.com/

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!

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Guest Blog: What I Learned About Business Leadership from John Wooden

Monday, October 3rd, 2011

I have been a leadership coach for the past two decades for Fortune 500 CEOs and other senior leaders.  Much of my success, or more accurately the success of my clients, is due to the wisdom of John Wooden, the great former UCLA basketball coach, who passed away at age 99 on June 4th, 2010.  Mr. Wooden won 10 national championships, a record unlikely to ever be equaled.  Many have called him a national treasure. I concur, and would add that he was a treasure chest of great wisdom in many domains of life beyond basketball, including business.

Twenty-one years ago (1989), just before I became an executive coach, I had the good fortune to spend a few hours with Mr. Wooden during one of his Chicago visits.  He was willing to see me because of his relationship with two of my former coaches.  After the normal pleasantries, I asked Mr. Wooden this question: “What is the one thing you did that made you such a masterful leader and coach?”

His answer changed my life, and shortly thereafter began to change the lives of my clients.  His answer: “Most coaches have one commitment, and that is to winning.  I had a dual commitment-to winning, and also to relationships-and I was equally committed to both.”

I was astounded by his answer because as a corporate business leader earlier in my career, I had certainly fulfilled on his first commitment, but had not even given much thought to the second.  Mr. Wooden then elaborated on how he fulfilled on those two commitments, never compromising one for the other.  That definition of leadership, and other leadership principles I learned that day, have played a major role in my business coaching practice the last 20 years.  Here are some of the most important principles Mr. Wooden spoke about and how they apply to business leadership.

1.   Live the Dual Commitment-to Both Results and Relationships.

As Mr. Wooden said years ago, “The drive to win is a good thing, but when that drive becomes single-minded, it often leads to insensitivity to people.  The coach, by relentlessly focusing on winning, can, over time, damage the team’s performance.”

Most of my corporate clients, when they begin working with me, mirror the way I used to be in my corporate career-a strong commitment to Results and a relatively weak commitment to Relationships.  However, when those same business leaders learn how to fulfill on both commitments, key performance measures including sales and earnings typically reach unprecedented, sustainable levels.  I have seen that happen with thousands of my business clients the last twenty years.

2.   Implement the Discipline of Execution.

Mr. Wooden insisted his players and coaches, including himself, be on time, and keep their word about everything, big and small.   He expressed this axiom: “Powerful results require disciplined actions, where everyone can be counted on.”

To generate the results they want, business leaders need to cause powerful actions to be implemented in a coordinated, clear manner, where each person’s word is their bond.

3.   Be Transparent.

This means admitting you’re not perfect, that as a leader you can learn from anyone.  One of Mr. Wooden’s favorite expressions was “It’s what you learn after you think you know it all that really counts.”

In business, the most effective leaders realize the first person to lead is themselves.  In other words, they have self-awareness.  This requires the counter-intuitive practice of leaders asking for feedback from the people around them on what’s working and not working.  That kind of vulnerability is actually a sign of strength, not weakness, and creates great value for the business and the people in it.

4.   Slow Down in Order to Speed Up.

One of John Wooden’s favorite phrases was “Be quick, but never be in a hurry,” meaning be alert, be diligent, think, but don’t be in a rush, don’t be careless, don’t take things for granted.

Of course, this principle relates to business in a big way, if one looks no further than the oil crisis in the Gulf.   Effective leaders must overcome the many characteristics of our times that push leaders to react, rather than reflect and think.

MR. WOODEN, ON BEHALF OF BUSINESS LEADERS EVERYWHERE, THANK YOU!

Al Ritter, President, Ritter Consulting Group, ahritter@ritterconsultinggroup.com

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!

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