A Roadmap to Successful Club Benchmarking

Some years ago, I participated in a panel discussion on benchmarking at a Hospitality Finance and Technology conference in Baltimore.?My fellow panelist was Russ Conde of Club Benchmarking.?Several weeks after the conference I received a sheet summarizing session reviews.?One of the attendees said that the discussion covered a lot of benchmarking concepts but was short on the specifics of how to benchmark.

As I have written, there are many reasons to benchmark your club’s operations.?One important reason is to compare your club’s performance to that of the wider industry – and Club Benchmarking does that in a simple, automated way via the Internet while providing standardized benchmarks industry-wide. ?I wholeheartedly recommend this invaluable service to those who would like an objective comparison of their club’s performance.

But just as there is value in benchmarking your operation externally, there are valid reasons to benchmark your performance internally – that is within each department and the club overall.?Having provided this context, let me now provide some of the key specifics on how to benchmark internally.?

Let me start by saying that every day there are literally hundreds of data points generated in club operations.?The real benefit of benchmarking, though, is in tracking data over time.?The number of meals served in the club dining room on a particular Friday night doesn’t signify much; it is simply an occurrence.?But if that number is part of a declining trend in Friday night dining, it is certainly a cause for concern.?Without the effort to track trends and compare them to historical performance, there is no way to manage for either quality or performance.

It is most helpful for the General Manager to buy into the value of benchmarking and fully support the effort.?Without his or her backing, it will be far more challenging to implement club-wide benchmarking. ?This doesn’t mean that individual department heads cannot benchmark within their departments and be successful, but it does limit the overall value of benchmarking to the club.

It is also helpful to have a point person for the project – and I suggest the club controller.?This does not mean that the burden of benchmarking falls on the controller’s shoulders – as each department’s benchmarks must be the responsibility of the department head.?But it is helpful to have a person knowledgeable about accounting and spreadsheet software to help guide and assist less conversant department heads through the process.

Having said this I also want to stress that the controller’s office is the logical place for the preparation of several key reports (some sort of Weekly Revenue Report, see PCPM Form 203 for an example, and a Pay Period Summary Report, PCPM Form 229 ) that will facilitate data availability club-wide, as well as the consolidation of key benchmarks from all departments into the Executive Metrics Report which I advocate as a useful enhancement to the monthly financial reporting package.

But even in the absence of such reports from the accounting office, a conscientious department head, recognizing that she is the person fully responsible for her department’s performance, can with a little effort get the necessary data to benchmark.?For example, revenue information can be accessed from point-of-sale reports and payroll data is available from the accounting office or payroll service – both simply require the initiative to get the desired information.

Depending on the club’s pace of operations and individual department head’s workload, it may make more sense to start small with one or two departments whose managers are “numbers” people and who relish the idea of a deeper empirical understanding of their operations.?The enthusiasm and resultant success from these early adopters will serve as an inspiration and guide for others.?An alternative would be to implement one significant form of benchmarking club-wide – say benchmarking payroll costs across all departments.?In time, the value of this will lead to a desire for more robust benchmarking of other areas of club operations.

While every club can set their priorities for data to benchmark, here are suggested priorities and reasoning:

• Profit and Loss Statement (as part of the Executive Metrics Report) – low hanging fruit, easy to access data from P&Ls, requires only monthly data entry.
• Payroll Cost – largest cost in operations, potentially yielding greatest opportunity for improvement and savings; makes future budgeting far easier; most effective when employees are paid on a bi-weekly basis (read Why Our Workweek and Pay Cycle? in PCPM, Professional Development, Two Best of the Best Practices to understand why).
• Departmental Revenues – by day of week, week by week, monthly, and annually; easy to access data, historical record can improve staff scheduling, makes future budgeting far easier and more accurate.
• Food and Beverage – probably the most effort and time-intensive if done thoroughly (separately tracking sales of beer, wine, spirits, appetizers, desserts, specialty drinks, etc.), but provides critical insights on efforts to improve the average check; data can also help with managing inventory levels of alcoholic beverages.
• Inventory and Accounts Receivable – low hanging fruit, easy to access data in accounting office, helps monitor and correct inventory volatility; requires only monthly data entry.
• Retail Sales Revenue and Products Sold – can dramatically improve purchasing decisions for both products and quantity, both critical factors to improve operating margins.
• Utilities – low hanging fruit, data comes from monthly utility bills, once-monthly data entry for electricity, water & sewer, and gas; helpful in monitoring usage, investigating billing anomalies, and implementing conservation strategies.
• Individual Departments – prepared by department heads, makes them more knowledgeable about operations (enhancing their authority and influence); analysis of benchmarks leads to improved decision-making and performance management.

All the resources to begin internal benchmarking at your club can be found in Club Benchmarking Resources on the PCPM Marketplace store.?This digital book contains background information, basics of benchmarking, departmental benchmarking instructions, and dozens of club and departmental benchmarking spreadsheets (monthly, year-to-date, and year-to-year) plus the Executive Metrics Report. ?Each departmental instruction gives a list of benchmarks to track, sources of data, and specific instructions on how to use the spreadsheets, as well as sample spreadsheets.

After receiving and reviewing the benchmarking material, managers can customize the spreadsheets for their operations, and begin collecting and recording the necessary data.?If key data has never been tracked before, patterns will emerge quickly as benchmarking progresses, though the longer the data is tracked, the more valuable the benchmarks will be as operating standards.

My experience with benchmarking over the years is that it usually takes several months of close focus and review to successfully set up; thereafter ongoing benchmarking becomes part of the club’s routine.?Some department heads may need training and handholding during implementation, particularly if they are not tech savvy or familiar with spreadsheet software, but once up to speed, they fully appreciate the value of monitoring the underlying details of their operations.

An important discipline that fully exploits the benefits of benchmarking is to make a formal review of departmental benchmarks part of the ongoing monthly review of financial statements with each department head.?When combined with the Tools to Beat Budget program and an examination of progress toward the goals of the department head’s annual work plan, benchmarking becomes a particularly effective means of driving overall club performance management.

All departmental benchmarks are summarized monthly using the spreadsheets and a copy forwarded to the controller for the next and final step in the benchmarking program. The club controller completes the Executive Metrics Report using key benchmarks from the departmental spreadsheets and submits it to all stakeholders as part of the club’s financial reporting package.?One controller who presented the EMR to the club’s finance committee reported that a particularly influential member was thrilled to see such underlying performance detail and looked forward to reviewing it on an ongoing basis.

Benchmarking is an essential business discipline that yields significant benefits to club operators.?As H. James Harrington author, engineer, entrepreneur, and consultant in performance management, said “If you can’t measure something, you can’t understand it.?If you can’t understand it, you can’t control it.?If you can’t control it, you can’t improve it.”