The Elephant In The Room – Evolving Financial Leadership In Clubs

The following has been republished and edited for length with permission from Financially Astute Clubs. 

If the role of a private club general manager (GM) needed to evolve to chief operating or executive officer, why did the role of controller not evolve to chief financial officer or director of finance?

I can’t begin to count the number of times random friends, neighbors and colleagues have said, “Oh, you work at a private golf course? That must be fun and relatively easy.”

Not many understand that private club leaders are running large scale, complex multi-million dollar organizations with numerous business entities and moving parts all rolled into the overall scope — including leading hundreds of employees from diverse backgrounds, being a valued thought partner to the organization’s board of directors and committees, a respected member and contributor to the local community, asset managers, construction project managers, and responsible for the satisfaction of thousands of member constituents — who also happen to be “owners” of the organization and each has their own personal beliefs as to how the organization should run. To make matters more complex, nearly all these private organizations are federally organized as a nonprofit entity, so the member dues revenue needed to sustain the organization is just barely enough income to cover the operating costs of the business. It’s not as “easy” as some people think.

It wasn’t too long ago that the industry was at an inflection point. The role and demands of the  GM evolved to so much more than the person responsible for the general daily operation of the club.

The Historical Role of Club and HOA Finance

Most private clubs have it written in their governing documents to designate roles of various officers — and in many cases a requirement to have a chief operating officer and a chief financial officer of the business organization.

In the case of the GM, they are often designated as the chief operating officer of the organization, and in some cases, he or she is designated as the chief executive officer.

But what about the chief financial officer (CFO) of the organization? Who receives that title and financial responsibility for being the senior finance leader?

In more times than not, the  CFO is often a volunteer member elected annually as the treasurer. This individual graciously volunteers part-time, and in many cases, is not retired and is still actively employed in their day job. The amount of time they have remaining to devote to private club financial matters is limited. And with every new year, this means the business organization may elect a new treasurer, who is ultimately responsible as the CFO  and senior finance leader of the organization, and the new individual may have their own personal ideas as to how to approach "running the business."In their limited time in that officer position, which is unpaid and voluntary, they must be up to speed and educated to fulfill their fiduciary duties to help protect the financial interests of the organization, manage the assets and liabilities, strategically plan for the future, budget and forecast, monitor cashflow, be involved in the annual audit process, and communicate the results effectively to the membership (owners) of the organization.

Unfortunately more often than not in this industry, the board or finance committee has not gone through proper education and onboarding for effective financial and governance oversight of a non-profit membership organization, so they often are left applying what they do know  — which is their personal career for-profit knowledge from their own business background —  which may not always be in alignment with the mission, vision, values and needs of the nonprofit membership organization that they were elected to serve.

Different industries have different success factors and KPIs.

Knowing the business complexities of the organization and why the GM role needed to evolve to COO/CEO, can anyone point me in the direction of any other major multi-million dollar business organization in the world that would consistently outsource their most senior finance position to someone volunteering to assist part-time for financial and accounting oversight?

How does that make any sense? (it doesn’t).

Or perhaps what's been happening does make sense — meaning the industry’s actual financial results as whole do make sense as a reflection of historical choices and decisions that are not best practice.

It's proven that over 50 percent of the private clubs in America have poor or failing organizational financial metrics due to lack of understanding of the actual private club/HOA nonprofit business model, misinformation surrounding private F&B operations, consistent repeating themes of (negative) Net Income, inadequate capital reserves to cover the organization’s asset base, lack of investment back into the property, and a consistent declining or stagnant balance sheet Equity.

Our industry as a whole is performing poorly from a financial perspective. But how can that be, if the senior financial officer is qualified, was voted in by members, and is often regarded by their fellow members and neighbors as a “Financial Guru” just because they were successful in their own career?

Our Industry, and Our Member (Owners) Deserve Better

Similar to the GM evolution, I believe our industry is at an inflection point to change and improve the role of private club finance leadership.

It’s time for private club and HOA finance leaders to step up to the plate and start leading and showing leadership. This means stepping outside their accounting box and getting uncomfortable. Accounting is not finance.

The role of accounting is historical, and records what happened in the past. Accounting is a critical business process that needs to be accurate, but it is tactical in nature and does not prepare the organization for the future.

The role of improved financial leadership and transparency is desperately needed and is a critical business practice that is strategic in nature.

It’s also important that club finance leaders lead discussions in both the boardroom and in the finance committee. It’s time to step up to establish yourself as the resident financial resident expert of the organization.

ClubBenchmarking recently conducted a study of 749 private clubs about organizations looking to fill vacant finance positions at clubs.

In the survey, what were  five financial priorities for private clubs for employee financial leaders?

1. Financial leadership experience

2. Communication skills and presentation skills

3. Forecasting skills

4. Capital project / renovation / asset management experience

5. Strategic planning experience

In Closing

We have a long way to go to make positive impacts and improvements. Just as the GM/COO is the thought partner to the board of directors, so is the necessary evolving role of controller to CFO needing to be the strategic thought partner to the board of directors and finance committee.

Our industry now has the data, benchmarks, dashboards and framework to make objective, data driven decisions that are factually proven to improve the financial health of the business.

What are we afraid of? What went astray thinking that the administrative team needs to be as lean or small as possible? Was it a one-time attempt to slightly lower dues and payroll expense? The facts don't lie, the thinking backfired.

How many controllers out there are pulling triple duty by also being the IT director and HR director in addition to their main duties? This model is not effective.

It’s time for all accounting and financial leaders to take the reins as the true head of finance in the club – become educated about the business model and best in class practices, be a great communicator, a great partner to the treasurer, be a great presenter and educator to members, and start moving the needle for financial health and sustainability.

 

Jeff S. Dekruif, CCM, CHAE, PGA Associate

Experienced in the leadership of top ranked residential golf communities in the Carolina and Georgia Lowcountry, Jeff has served as CFO, assistant GM, and general manager of several large club properties including Palmetto Bluff and Berkeley Hall Club. He currently serves as the Chief Operating Officer of Ford Field and River Club outside Savannah, Ga. The Ford is Henry Ford’s (Ford Motor Company) former 1,800-acre winter property and today is renown as one of the finest coastal golf and sporting communities in America.
Jeff is responsible for the leading Ford’s exclusive private club, the Ford’s homeowner’s association overseeing 1,800 acres of historic land, buildings and waterways, and Ford’s separate 501c3 scholarship foundation to serve the community’s nearly 200 employees. Jeff is a director on the HFTP Global Board.