Club department heads have bottom line responsibility for the financial performance of their departments, but the General Manager has overall responsibility for the performance of the club and is accountable to the Board for that performance. Therefore, a basic management discipline for the General manager should be to conduct monthly reviews of operating statements with each department head.
In order to ensure that the club meets the financial objectives of its annual operating budget, it is imperative that all department heads monitor their monthly performance closely and be prepared to answer questions about their department’s performance and give reasons for any significant variance from budgeted amounts.
The Program. On a monthly basis after the final statement is prepared and distributed, the Controller will set up a schedule of meetings for department heads to meet with the General Manager and Controller to review their department’s performance.
Department heads will bring their individual copies of the Tools to Beat Budget binder to the meetings.
Department heads must also be prepared to present plans to remedy significant or ongoing shortfalls in revenue or overages in expense categories.
Preparing for the Meeting. Managers can best prepare for their monthly meeting by ensuring that their Tools to Beat Budget binder is accurate and up-to-date.
They must also review their financial statements in detail, noting any under budget revenue and over budget expense categories. Items with significant deviations from budget must be investigated so that these anomalies can be explained to the General Manager.
Significant shortfalls in revenue should be analyzed and a plan drawn up to address the shortages. Such a plan would normally include marketing efforts to increase member traffic, special events or sales to increase revenues, or price increases to generate more revenue from the same volume of business (though managers must always keep in mind that volume may decrease with any price increase).
Often a particular expense category will be over budget due to timing issues – this happens when a budgeted expense is incurred earlier in the fiscal year than originally anticipated. Such an “over budget” occurrence will come back in line with budget in future months at the time when the expenditure was actually planned. Sometimes, the increased expenses may be the result of an unanticipated event, such as equipment breakdown and repair or an arising opportunity necessitating the purchase of new equipment or materials.
In any case the department head must be prepared to explain discrepancies and answer the General Manager’s questions about budget variances and what actions will be taken to remedy the situation.
Take Away. A monthly review of operating performance gives department heads the opportunity to brief the General Manager on the operating results of their individual “businesses” while keeping the General Manager fully informed of those factors impacting their bottom line. I also like to use these monthly meetings to review department heads progress on meeting their annual work plan. In both cases, this basic business discipline keeps the General Manager fully informed with the least investment of his or her time while reinforcing to department heads their accountability for results.
Thanks and have a great day!
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