Leading the Strategic Planning Process - Club Managers ...

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134 Chapter 4exploited by the club’s internal strengths. Threats and weaknesses, in the strategystatement, are either avoided or mitigated with suggested counter-measures.BudgetsThere are three types of budgets that clubs must create and manage: normal capitalbudgeting, project capital budgeting, and operations budgeting.Normal Capital Budgeting. The majority of clubs do not have unlimited capitalreserves. In fact, most clubs do not fund depreciation. Instead of funding depreciation,they traditionally spend about two to three percent of gross revenues onnormal capital items such as furniture, fixtures, and equipment (often referred toas “FF&E”). In recent years, and in view of the proliferation of developer-ownedclubs coming into the market, many clubs are finding it necessary to spend sevento eight percent of gross revenues annually on normal FF&E in order to maintaintheir elite-class standards. A club’s strategic plan should help prioritize capitalbudgeting.Project Capital Budgeting. Often clubs refer to major rebuilding, remodeling, and“adding-on” as “project capital.” Funding for project capital may come from capitalreserves (unspent capital), a supplemental monetary commitment from normalcapital over time, assumption of debt, or an assessment of the members. A memberassessment may come in the form of a cash requirement, either as a lump sum oras payments over time, to fund the project. The strategic plan should also prioritizeproject capital budgeting.Operations Budgeting. The process of operations budgeting by department isa tremendously time-consuming part of effective club management. Operationsbudgets consider how and when revenue will flow into the club and how andwhen expenses will flow out of the club. Operations budgets should be created inpainstaking detail and should be broken down into expected increments. Whencompleted, operations budgets should answer the questions, “What?” “Why?”“When?” and “How many?” or “How much?” (as the case may be).For example, if the membership department was budgeting revenue, budgetaryassumptions would be supported by answers to these questions:What? “The goal is 20 net new members for the year.” (Also answers“How many?”)Why? “The club is a growth club and, consistent with the strategic plan,the club will allow a growth of 20 net new members per year.”When? This would be a statement that projects when during the year thenew members will join the club. For example, club managers might projectthe following:“Consistent with the club’s resignation and join pattern over the past fiveyears, we forecast this seasonality during the following months”:
Leading the Strategic Planning Process 135MonthNumber ofmembers atbeginning ofmonthResignationsduring monthNew memberjoinsJanuary 360 0 0February 360 0 2March 362 1 3April 364 0 2May 366 2 6June 370 0 3July 373 0 2August 375 0 2September 377 1 3October 379 0 1November 380 0 0December 380 0 0Total 380 4 24These written assumptions will help explain any subsequent variance. Theywill help managers determine whether budget variances are valid or simply theresults of timing issues. The chart also provides a basis for forecasting membershiprevenue by month.Operations budgets should flow from the club-wide grand strategy and thesupporting departmental strategies.Action PlanThe action plan comes together after planning and budgeting are completed. Oftenreferred to as “operations” or “implementation,” the action plan is the realizationor practical application of the strategic planning effort. Strategy and operationsmeet during action planning. The strategy is what the club will do. Operations—the action plan—is how the club will do it (see Exhibit 3).There are four scenarios in which strategy meets operations. Knowing these scenariosprovides an understanding as to how the implementation is likely to occur. Inthe best case, the club has clear strategy and effective operations; the likely result isthat the club has enjoyed success in the past and will also do so in the future. If the
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