Risk-Reward is a commonly heard term when discussion a golfer’s choice of shots in a competitive match. In taking a significant risk of failure, the golfer can go for the green and, if successful with a challenging shot, reap the reward of a better score. In the financial world “risk-reward” is used to describe the potential for greater gain by taking a riskier position.
The underlying connotation is often a gutsy decision based on the elevated risk of failure. Such a gamble may be appreciated, even applauded, when the stakes – whether winning the match or scoring big in the commodities market – are personal, that is, the downside impacts only the person taking the risk.
In the club management profession, though, the actions of the manager impact the welfare and investment of the club’s members, so decisions affecting the club’s performance and solvency should be made with care and full consideration of all risks involved. Certainly this is what conscientious managers do every day while diligently managing the operation, meeting the budget, ensuring the club continues as a going concern, and planning strategically for the club’s future.
As every club manager knows, such strategic planning requires careful evaluation of the strengths and weaknesses of the club, as well as seeking those opportunities that offer greater success and security while recognizing and avoiding potential threats to the organization’s viability.
While there may be some sizeable external threats to a club such as competition from a new club with more extensive and up-to-date amenities or the closing of a large employer in the community resulting in the loss of members, there are far more significant threats within the club’s operations – the unappreciated and often ignored potential for legal action as a result of unaddressed liability issues.
Such issues usually arise from one of two causes:
1. Managers and supervisors, intentionally but more often inadvertently, violating federal, state, or local laws and ordinances relating to the workplace.
2. Lawsuits by members, applicants for membership, current or former employees, vendors, visitors to the property, community members, or club neighbors for almost any complaint imaginable, but most often related to club operations, ill-advised operational or board-mandated policies, or alleged negligence on the part of the club or its employees.
In the first instance, the underlying problem is often poorly-trained managers or supervisors who are unfamiliar with the detail and nuance of a wide variety of regulatory requirements such as the Fair Labor Standards Act, the Occupational Safety and Health Act, Equal Employment Opportunity/Discrimination, and others. See Legal and Liability Issues for more information.
While it is in every manager’s best interest to be familiar with the basics of such regulation, it is the absolute responsibility of the club to properly train their management and supervisor employees in the full scope of their duties. This can accomplished by a combination of establishing and making available detailed club standards, policies, and procedures covering all areas of concern (for an example see Club Personnel Standards, Policies and Procedures) and by providing sufficient indoctrination and ongoing refresher training and reminders of these important requirements (for examples see Managers Handbook and On the Go Training). Doing anything less is a form of management malpractice and, given the potential for significant fines and penalties, as well as the damage to the club’s reputation, is a risk that must not be ignored.
In the second case of lawsuits arising from a broad range of issues, the burden is again on management to be familiar with existing case law that has created a fairly broad picture of the legal risks of operating a private club and a clear indication of actions and safeguards to put in place to avoid such suits. See Book Review – Club Litigation Book – Keeping Clubs Out of Court for a comprehensive review of club litigation and steps to take to avoid lawsuits.
Managers must understand that while lawsuits are relatively infrequent occurrences, they most frequently spring from loosely-operated establishments that have not considered and planned for known or potential contingencies. Finally, the cost of defending from litigation and the size of potential judgments can be an existential threat to the ongoing operation of the club.
Bottom Line: Risk-Reward can be a gutsy play on the golf course, but ignoring the legal and liability risks to a club can have a devastating downside for which there is no reward.
Thanks and have a great day!
This weekly blog comments on and discusses the hospitality industry and its challenges. From time to time, we will feature guest bloggers – those managers and industry experts who have something of interest to say to all of us. We also welcome feedback and comment upon the blog, hoping that it will become a useful sounding board for what’s on the minds of hardworking hospitality managers throughout the country and around the world.
Hospitality Resources International – Management Resources for Hospitality Operators!