Club Managers Perspectives on Governance

Transcription

1 PULSE March 2014 Club Managers Perspectives on Governance

2 March 2014 CLUB MANAGERS PERSPECTIVES ON GOVERNANCE Building on the theme of education and knowledge sharing at the 2014 CMAA World Conference, the aim of this survey is to generate a deeper understanding of how your club s governance practices compare to similar private clubs. EXECUTIVE SUMMARY The purpose of Pulse Surveys is to give club leaders information they can use to compare their clubs with others in the private club community. In this survey we collected some basic data on club governance and added questions that concentrated on areas where club boards seem to have difficulty, namely in documenting their policies and in evaluating their performance. We received 413 completed surveys from private club General Managers and Chief Operating Officers. Below are observations and comments relating to results of the survey. GENDER MIX Club board members continue to be predominantly men. Well over half of the respondents said they had fewer than three women on their boards. While there is a decided increase in the role of women as decision-makers on matters such as joining clubs, that increase is not reflected in the profiles of club boards. There may be good reasons for the slow response to this trend, but we believe clubs that proactivity seek and nurture leadership roles for women will improve the way they serve their current members and appeal to potential new members. FREQUENCY OF MEETINGS Over 75% of boards responding to the survey meet at least 10 times a year. Over half meet every month. A good governance model with well-documented policies that clearly articulate the roles of the board, the officers, committees, and the General Manager/Chief Operating Officer (GM/COO) can markedly reduce the time boards need to spend in board meetings. Shorter and fewer meetings can be just as effective and less onerous for board members, making board service more attractive to potential board candidates. Page 1 of 12

3 TERM LENGTHS AND LIMITS The length of a board member s term and the rules for re-election are influenced by a tradeoff between the value of the experience and the value of allowing more members to serve on the board. A three-year term is the norm among clubs, with some stopping at one term and others allowing a second and even a third term. We generally favor the model of a three-year term with permission to stand for election for one more term. However, be careful that your Nominating Committee employs an objective and independent process for vetting candidates and does not merely default to a current board member. Allowing a poor board member to serve a second term is bad business. Not only will the board s effectiveness suffer, but so will the integrity of the election process. CHALLENGES TO BOARD EFFICIENCY AND EFFECTIVENESS With one exception, respondents seem to have met the challenges listed in the survey with respect to improving the efficiency and effectiveness of their boards. The exception came from almost 70% of respondents who said some directors brought a personal agenda to their role. While in a sense this is human nature, personal agendas can have a corrosive effect on a board s efficiency as well as detract from the positive culture boards seek to develop and maintain. While we are strong supporters of diversity in backgrounds and views on the board, the most effective boards combine the personal perspectives of their members with a commitment to decisions that benefit the club as a whole. In the end, the decision of the group becomes the decision of each board member. Good boards debate as many and govern as one. RESPONDING TO THE CHALLENGES Though we were buoyed by the responses to the challenges to improving efficiency and effectiveness of boards listed in the survey, we were disappointed with the use of some of the basic tools for equipping boards. All of these tools are readily available through club industry professional associations and periodicals. However, the only action that at least half the respondents have employed is the use of a formal, detailed orientation process. Page 2 of 12

4 Although we heartily recommend a thorough orientation process, it is often seen as the only training board members need. Yet relying solely on orientation is like pointing a traveler toward a destination and never checking to see if he arrived. Any job worth doing is worth evaluating, and governing a club is certainly a job. Because it is performed by volunteers, friends, and neighbors, sound business practices can be perceived as alien to club culture. But a good governance model can employ sound business practices and still maintain a culture of collegiality. Board evaluations needn t be overly complicated. However, they do need to be conducted consistently and regularly, ideally as frequently as quarterly. Competence and camaraderie are not mutually exclusive. We also noted that few clubs have a governance committee despite the focus on governance in club industry periodicals and club manager education programs. Club governance heads the list of the 10 Core Competencies for CMAA and CSCM. We would encourage clubs to consider a committee or task force in this vital area that can benefit both the board and management. BOARD POLICIES MANUAL We were pleased to see so many clubs with a Board Policies Manual (BPM). The BPM is a key component of good club governance, and we were encouraged by the responses to the survey. Our enthusiasm waned, however, when we saw that only 40% of those BPMs contain 100% of the board s policies. Not including all board policies diminishes the value of the BPM. We know of no reason why a BPM should contain less than all of the board policies. If there is a large document such as the Strategic Plan or the House Rules that you don t want packaged with the BPM, it can be incorporated by reference. If your board has a policy that has been longstanding, but undocumented, write it down. Chances are when the board members discuss the language of this policy, they will realize there was not as much consensus on the policy as was thought. The BPM can be an effective Governance Management System, but only if it: Contains all standing board policies; Is referenced frequently by both board and staff members; and, Is amended whenever policies are added or changed. Page 3 of 12

5 DETAILED RESPONSES TO SURVEY QUESTIONS Q. MAKE UP OF YOUR BOARD OF DIRECTORS The average board size amongst the respondents is 9.8 members: 23% women and 77% men. More than 65% of Clubs have 12 or fewer members on their board. The largest board size was 32; the smallest was 1. 7% 3% 9% 19% 8% 4% 5% 29% 7 Members 9 Members 10 Members 11 Members 12 Members 13 Members 14 Members 15 Members Diagram 1: Number of Board Members 23% Women Men 77% Diagram 2: Gender Mix of Board Q. FREQUENCY OF BOARD MEETINGS More than 8 in 10 (84%) boards meet ten or more times per year with the average number of meetings per year Twelve meetings per year is the most common number of meetings at almost 60% of the respondent clubs. 21% 4% 6% 5% 59% 13+ per year 12 per year 11 per year 10 per year 9 per year 8 per year 7 per year 6 per year 5 per year 4 per year 2 per year Diagram 3: Frequency of Board Meetings Q. CONSECUTIVE TERM LIMITS FOR PRESIDENT More than 8 in 10 (85%) clubs restrict the term of President to a term of 2 years or less. 25% 13% 1% 60% 1 Year 2 Years 3 Years 4 Years 1% 5% 1% 1% 1 Term 11% 36% 44% 2 Terms 3 Terms 4 Terms 6 Terms 9 Terms 10 Terms Diagram 4: Term Length - Average 1.56 Diagram 5: Term Limits - Average 1.63 Page 4 of 12

6 Q. CONSECUTIVE TERM LIMITS FOR DIRECTORS Nine in ten (90%) clubs restrict the term of Directors to three years or less; more than nine in ten clubs (93%) restrict the number of consecutive terms a Director can serve to three or less. At the majority of clubs (77%), Directors serve for three years and limit the number of consecutive terms to two. 2% 3% 7% 10% 77% 1 Year 2 Years 3 Years 4 Years 5 Years 6 Years 2% 1% 3% 13% 57% 23% 1 Term 2 Terms 3 Terms 4 Terms 5 Terms 6 Terms 10 Terms Diagram 6: Term Length - Average 3.04 Diagram 7: Term Limits - Average 2.24 Q. CHALLENGES TO IMPROVING BOARD EFFICIENCY AND EFFECTIVENESS Clubs seeking to improve the efficiency and effectiveness of their boards are often faced with challenges such as those listed below. Club Managers were asked to indicate the extent to which they agreed with each of the statements. Table 1: Prominent Governance Challenges Facing Club Managers Governance Statements Strongly Agree Agree Disagree Strongly Disagree 1. Our Directors are too involved in operations. 11% 32% 42% 15% Agree vs. Disagree 43% Agree 57% Disagree 2. Some of our Directors have a personal agenda. 17% 56% 22% 5% Agree vs. Disagree 73% Agree 27% Disagree 3. We cannot attract younger business leaders to serve on the board. 7% 29% 49% 15% Agree vs. Disagree 36% Agree 64% Disagree 4. We have a President who acts as a separate authority independent of the board and General Manager. 5% 13% 37% 45% Agree vs. Disagree 18% Agree 82% Disagree 5. We have too many committees. 9% 27% 51% 13% Agree vs. Disagree 36% Agree 64% Disagree 6. Our committees are inefficient and 9% 28% 52% 11% ineffective. Agree vs. Disagree 37% Agree 63% Disagree Page 5 of 12

7 Encouragingly, the majority of Club Managers (57%) do not believe their Directors are too involved in operations; however, 43% still believe this to be the case and an overwhelming 73% believe that their Directors have a personal agenda. The survey results suggest that most clubs (64%) are having success in attracting younger business leaders to serve on the board. Most Club Managers (64%) do not believe their club has too many committees; what s more, 63% believe their committees to be efficient and effective. A smaller minority (36%) believe their clubs have too many committees and 37% believe their committees are inefficient and ineffective. The majority of Club Managers (97%) who indicated that they do not have too many committees also feel their committees are not inefficient or ineffective. Q. STEPS TAKEN TO IMPROVE EFFICIENCY AND EFFECTIVENESS OF CLUB BOARDS Clubs seeking to improve the efficiency and effectiveness of their boards often use tactics identified in this survey question. The results suggest that the most prominent tactic used by clubs is a formal and detailed board orientation process for new board members. Otherwise, less than 10% leverage any of the tactics identified to improve board efficiency and effectiveness. Chart 1: Tactics Used to Improve Efficiency and Effectiveness of Boards 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% No Somewhat Yes Page 6 of 12

8 Q. PROFESSIONAL GOVERNANCE CONSULTANTS The majority of respondents (70%) have not used professional consultants to help improve the governance at their club. 70% 30% Yes No The most prevalent reason given by the respondents that have not used professional consultants is that their board does not see the need. Diagram 8: Professional Consultants Used Chart 2: Reasons for Not Enlisting Consulting Services 70% 60% 50% 40% 30% 61% 20% 10% 0% Our Board does not see the need 23% GM does not see the need 16% Board members' resistance to change 7% President's resistance to change 35% Cost of outside consultants 17% None of the above Q: BOARD REFERENCE BOOKS AND BOARD POLICY MANUALS A Board Reference Book (BRB) and Board Policies Manual (BPM) are two documents used by some private club boards. The BRB is a binder (or a set of digital files) containing reference material from which board members may access general information such as: Articles of Incorporation, Bylaws, House Rules, CC&Rs, board member contact data and Conflict of Interest forms. Many clubs also maintain a BRB that can be accessed by board members on their web site. A BPM is typically more specific than a BRB. The BPM is a multi-page document that contains all current board standing policies. The BPM should be succinctly written and organized to communicate how the board will carry out its fiduciary duties. The BPM Page 7 of 12

9 should be updated with every policy addition or change. Only 35% of respondents indicated that their boards consistently maintain a BRB, with 29% maintaining one on an irregular basis. Forty-nine percent of respondents said their board maintains a BPM. 36% Yes 29% 35% Somewhat No 51% 49% Yes No Diagram 9: Board Reference Book Diagram 10: Board Policies Manual Of the 51% of respondents that do not have a Board Policies Manual at their club, the most prevalent reason relates to a lack of familiarity with a BPM. Other responses include lack of enthusiasm and time required to create, as well as a lack of available education for Club Managers on the subject. Chart 3: Reasons for Not Having a Board Policies Manual 30% 25% 20% 15% 10% 5% 0% 28% Not familiar with the BPM 24% 23% Not necessary -- Policies Documented in Minutes Rely on Orientation for Training on Board Policies 1% Too costly to prepare a BPM 10% A BPM would never be kept up to date 12% Don't know how to prepare a BPM 28% Other The majority of respondents (79%) that do maintain a BPM at their club indicate that 80% to 100% of the board s standing policies are included in the BPM. Interesting to note, only 65% of the clubs that do maintain a BPM include executive parameters in the BPM detailing the limitations on the authority given to the GM/COO. Page 8 of 12

10 A description of the board s role, structure and processes are the most popular policies included in a BPM, with organization essentials and a description of the board/gm/coo relationship also included in most BPM s. Chart 4: Prevalence of Specific Policies in BPM 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 69% Introduction and Statement of Purpose of BPM 83% 89% 85% Organization essentials -- Vision, Mission, Values, Strategic Direction Description of Board's Role, Structure, and Processes Description of Board/General Manager relationship, performance criteria, and evaluation process 65% Executive Parameters -- limitations on the authority given to the General Manager The majority of Board Policies Manuals are updated less than four times per year. More than 9 in 10 (92%) of Club Managers believe that the BPM maintained at their club is somewhat if not very effective in providing direction for the board. 9% 77% 6% 9% More than 6 times per year. Between 4 and 6 times per year. Less than 4 times per year. Our BPM has never been updated. 64% 8% 28% Very effective Somewhat effective Not effective Diagram 11: Update Frequency of BPM Diagram 12: Effectiveness of BPM Q: CONTESTED AND UNCONTESTED ELECTIONS There are generally two types of board member elections -- Contested and Uncontested. In both cases a Nominating Committee puts forward the slates. In a Contested Election the Nominating Committee presents a slate containing more candidates than the number of board slots to be filled. In an Uncontested Election, the Nominating Committee presents a slate containing a number of candidates equal to the Page 9 of 12

11 number of board slots to be filled. Some club bylaws dictate a particular type of election, while others leave the decision to the Nominating Committee. The majority of club bylaws contain a provision for a nomination by petition or from the floor at the annual meeting. 19% Our Bylaws require a contested election. 60% 21% Our Bylaws require an uncontested election. Our Bylaws do not dictate, but leave the decision to the Nominating Committee. Diagram 13: Bylaw Requirements for Board Member Elections Diagram 14 (below) highlights the types of elections at clubs with bylaws that do not dictate the type of election. 11% 29% All of our elections have been contested. All of our elections have been uncontested. 43% Most of our elections have been 17% contested. Most of our elections have been uncontested. Diagram 14: Type of Board Member Elections Over the Past Five Years Most of the board member elections (64%) at respondent clubs have been uncontested over the past five years. Of the 60% of clubs with bylaws that do not dictate the type of election, the majority (72%) of elections have been uncontested over the past five years. Less than 26% of clubs have had all of their elections contested over the past five years. Page 10 of 12

12 Q: CRITERIA CONSIDERED FOR BOARD CANDIDATE SELECTION Overall, the top three criteria considered by Nominating Committees when selecting candidates for the board are: Members in good standing Member has served on a committee in the past The Member is considered to be a team player Chart 5: Criteria Considered by Nominating Committee for Board Candidate Selection 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% None Weak Moderate Strong The criteria given the least consideration by Nominating Committees are believed to be race, gender and age. The most often cited criteria provided in the Other comments section for this question was constituency based, indicating that Nominating Committees often attempt to identify the faction of club members that a candidate would represent. Thank you for reading and please do not hesitate to contact us with any question. THE END Page 11 of 12

13 ABOUT GLOBAL GOLF ADVISORS Global Golf Advisors provides highly specialized consulting services to the international golf, private club, real estate, resort, and investment communities. Headquartered in Phoenix,, Toronto and Dublin,), GGA offers its services in five strategic categories: i) Corporate Strategy, Financial Engineering and Transaction Advisory, ii) Asset Management, iii) Performance and Operations Consulting, iv) Club Membership Programs & Solutions, and v) Strategic Marketing and Business Planning. The firm takes a 360-degree view of financial, management and operational issues before developing a strategic plan that establishes benchmarks for success and identifies potential outcomes of recommended actions. In its 22-year history, GGA has consulted on more than 2,300 golf-related projects worldwide. For more information, please visit or call I N S I G H T S T R A T E G Y S U C C E S S GLOBAL GOLF ADVISORS Private Club Services Club Membership Programs and Solutions Board Retreats and Coaching Member Focus Group Facilitation Club Governance Reviews Micro Market Analysis Membership Research Membership Program Analysis Membership Document Planning Membership Marketing Plans Member Surveys Strategic Planning and Business Systems Strategic Planning Market Studies Strategic Marketing Plans Organization of Management Business Plan Development Business Risk Assessments Long Range Capital Plans Clubhouse Planning and Consulting Performance and Operations Consulting Benchmarking Reviews Operational Reviews Performance Analysis Financial Forecasting and Budgeting Budget Performance Monitoring Business Process Engineering Internal Control Reviews Information Technology Reviews Offices in Toronto, Phoenix and Dublin Connect with Global Golf Advisors and keep up-to-date on emerging trends and industry insights! Page 12 of 12