By Pete Davison^*

Benefits and Misconceptions of Hiring a Golf Management Company

In an ever increasingly competitive and economically challenged environment, the business of golf has gotten more and more difficult to manage profitably. Most markets are competitively over-supplied, demand/participation has been flat, costs have gone up, profits have gone down . . . and where are customer expectations? They remain frozen in the stratosphere. Bleak picture? Yes and no. Yes, because it is tougher out there than ever before. No, because there are answers. This article helps you to find the answers that are best for your facility with regard to whether you should consider working with a golf management company.

Goal

To determine whether your facility should consider a golf management company and, if so, for which business functions.

Key Points

1. The General Manager or Director of Golf, while capable, is no longer equipped to provide solutions for everything, at least not single-handedly.
2. There are criteria and considerations for selecting a golf managment company . . . use those criteria.
3. The management company follows the owner/developer's operating philosophy and the facility's operating budget. The management company is typically paid a management fee plus some type of incentives, which are usually based on areas that are important to the facility's financial success.
4. The benefits of hiring a professional golf management company are many and may vary somewhat depending on each specific situation.
5. There are a variety of misconceptions regarding how a golf management company operates; get the facts before you decide what's best for your facility.

Considering a Golf Management Company

Traditionally, facility challenges were more operational in nature -- dealing with slow play, for instance -- but now the challenges are sales, marketing, public relations, financial, technological and labor-oriented. The General Manager or Director of Golf, while capable, is no longer equipped to provide solutions for everything, at least not single-handedly. So owners need help, but have been hesitant to look, don’t know where to look or don’t know how to properly match needs with potential solutions. In this crisis of opportunity, ownership has embarked on these essential options:

1. Do nothing, but expect positive change (otherwise known as Business Suicide).
2. Try a variety of strategies that it hopes will work, but don’t have the staff, personal experience or financial resources to execute properly.
3. Hire a different general manager who will inherit the same issues, but will not achieve the turnaround in 90% of all transitional cases because he/she is not equipped with the skills, vision and experiences needed in today’s golf environment.
4. Hire a consultant who typically has sound abilities and makes a few good recommendations, but who will not be there day to day to ensure execution.
5. Hire a golf management company.

Reading this article, where do you find yourself? You are not alone. Less than 1% of all golf courses are under the direct supervision of a management company. And, like doctors, mechanics and lawyers, some of the golf management companies are good/successful and some are not.

The key is selecting the company that: • best fits your property's needs • has the experience in those critical areas to effect positive change • can be on-site at least every four weeks in season and 6-8 weeks in off-season • will provide value-add.

An owner, Board President or City Manager should ask the following questions before considering outsourcing their property's day-to-day operational management:

1. Are we lacking the resources or experience in-house to fix our current problems?
2. Are we prepared to make necessary changes in the way we operate, market and maintain our property?
3. Do we understand that there is no quick fix, and that to turn the property around will take 18-36 months?
4. Are we prepared to commit funds to competitively re-position the property if needed?
5. Are we prepared for some employees, members, council members to oppose the necessary changes?
6. Can we approve a plan and then allow the management company to do its job, the job that they, not we, are trained to do?

If the answers to these questions are no, then avoid the wasted effort and continue to operate your property as is. If the answers are yes, then you should investigate the benefits of a golf management company. These companies stay in business by making clubs successful, not by making them fail!

Potential Service Offerings

In a normal third-party management situation:

• The owner/developer maintains the financial responsibility for funding the costs of operating the facility and receives all facility revenues.
• The owner/developer approves all faciliity budgets, which are prepared by the management company.
• Ownership approves the philosophical direction or operating philosophy for the facility.

The management company follows the owner/developer's operating philosophy and the facility's operating budget. The management company is typically paid a management fee plus some type of incentives, which are usually based on areas that are important to the facility's financial success.

Potential Benefits and Services

The potential benefits of hiring the appropriate Professional Golf Management Company are many but they vary somewhat depending on each situation. Following are some of the specific benefits and typical services provided by a reputable Professional Golf Management Company:

• access to experience and expertise in the areas of facility development, facility marketing and facility operations
• the expertise and the responsibility for operating the facility on a day-to-day basis and oversees the operational details in each of the following areas:
  • General and Administrative
  • Accounting and Finance
  • Human Resources
  • Information Technology
  • Golf Course Maintenance Operations
  • Golf Operations
  • Food and Beverage Operations
  • Marketing/Membership
  • Tennis/Swim/Fitness
• business expertise and bottom line approach to financial management of facility
• recruiting and hiring of all executive and non-executive facility personnel
• expertise in employee compensation and benefits administration
• ongoing training and development programs for all facility personnel
• expertise in quality control
• expertise in creating service-oriented culture
• technology, accounting, reporting and facility operating systems
• cost savings and enhanced service through preferred vendor relationships
• expertise in procurement of equipment, supplies and inventories
• agronomical and environmental expertise
• expertise in facility tax and legal issues
• Pgolf/tennis retail expertise
• expertise in all areas of food and beverage and banquet operations
• membership plan development and sales/implementation expertise
• golf market analysis expertise
• develops and builds the facility brand
• golf course and vertical construction management and development expertise.

While the benefits and services offered by reputable Professional Golf Management Companies are detailed and diverse, the above listing outlines many, but not all, of the benefits of hiring a Professional Golf Management Company. However, Golf Management or third-party outsourcing is not for every property; in most cases a management company can direct you to additional options, as appropriate.

To hire a Professional Golf Management Company, an owner/developer should study the specific requirements they may have for their facility or project and match them to the qualifications and services offered by a specific reputable Professional Golf Management Company. (See Strategic Outsourcing).

Common Misconceptions

The following will list some of the common misconceptions or questions owners have about golf management companies:

• “We are afraid/concerned about losing the financial control over the Club.” The owner maintains financial control by approving the Club’s operating budget and fee structures and receiving weekly or monthly financial information regarding the Club’s financial performance. It is the management company’s responsibility to operate under that budget.

• “We are concerned about a company changing the direction or philosophy of the Club.” The owner dictates and/or approves the philosophy and direction of the Club. It is the management company’s role to follow that direction.

• “We are concerned that if the management company is not performing, we don’t have the ability to terminate the agreement prior to the end of the term.” Most management company agreements have a non-performance clause that allows the owner to terminate the agreement with no financial penalty, if the management company fails to perform under the terms of the agreement.

• “The management company is just an added expense with minimal chance of that expense being recouped.” A good management company should not only take the day to day operational burden off of the owner, but should come close to recouping or exceeding their fees through improved operations, management, marketing and lower operating costs through their national agreements. The quality and service of the operation should improve as well.

• “We are concerned that a golf management company will replace all of our current staff.” Typically, a golf management company assumes the existing staff and attempts to train them and create a buy-in to their management philosophies. It is in the management company’s interest for there to be a seamless transition with the existing employees. Occasionally, some staff members may resist the management change and will probably not remain part of the operation.

• “We are not being relieved of the total operational burden because we are still responsible for the employees.” In a typical golf management company arrangement, the employees become employees of the golf management company’s legal entity and do not remain the employees of the owner.

• “We are concerned that the golf management company is more interested in marketing themselves and building their brand than marketing the Club and its brand.” A golf management company should focus their efforts on the marketing of the Club and the building and promotion of the Club’s brand and not their own.

Conclusion

Golf management companies are a viable approach to improving a facility's operation and financial health. The keys to success for using a golf management company include: know what you want from the company, research the best company for your needs, structure a specific contract, and assist with the transition.

Related Articles

Strategic Outsourcing

Outsourcing: A Viable Way to Combat the Economic Downturn in Golf?

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Credits

Originally posted by PeteDavison on 05 Aug 2008.
All contributors: JimKass, LynnwoodBrown, MichaelBrezin, PeteDavison,

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