An interesting phenomenon occurs when we talk to a member-owned club's Board of Governors about injecting millions into the club to pay off bank debt and fund capital improvement projects at the club. The Board almost always votes unanimously in favor of recapitalizing the club, after researching the pro's and con's carefully. But the Board members are deeply concerned about what their members will think when the Board presents such a historic change in the club's governance and strategic direction. And the members vote in favor by a 90% to 100% vote every single time.
What causes this misplaced fear? And why is the concept universally embraced once fully understood by both Boards and club members?
First, Boards of member-owned clubs are conditioned to fear presenting controversial proposals to the membership. Often they have presented a seemingly straightforward capital project, and seen either a "no" vote or weeks of dissension among the membership leading to a split 50-50 or 60-40 vote that is hardly a mandate for moving forward. After all, most assessments cause 5-10% of members to quit, so each assessment has risks.
Next, no one feels like they got elected in order to sell the club or bring in a capital or operating partner. Most Board members envision a quiet period as the respected or even visionary leader, followed by handing the reins to the next leader who continues with the same strategic plan. When they dig into the financial projections and membership trends, and look at the capital needs of the club, they often scratch their heads and face some challenging strategic decisions:
The board President who brings this solution forward is ushering in a new era for the club. The club will be debt-free, have fresh capital improvements, and the track record of clubs using this model indicates a very high success rate: an influx of new members, new activities for the members, improved course conditions and dining experience, and rising levels of member satisfaction. But it means that the Board is transitioning the club to new leadership, essentially giving up most day-to-day controls to the professional operator. Keeping a member Advisory Board helps to preserve the strategic direction that the members want, but the new professional operator is now in charge.
Interestingly, Boards routinely vote unanimously in favor of this option, because they realize after talking to clubs that have successfully made the transition to a professional owner do not rue their "loss of control." They are glad to be members again, enjoying their club instead of trying to micro-manage it. They reflect back on the fears and rumors about such a change, and they laugh. "We have no expertise at agronomy or food & beverage, but these folks do; plus, they have capital - let them invest it instead of us. Let the professionals work for us," they routinely say.
Members initially mirror the Board's fears about such a transition, in the absence of good information. Once they meet the professional operator and hear the Board members discuss the rationale, the vote is uniformly in the 90% to 100% range in favor of recapitalizing the club.