The Three Cycles of Performance Management

BusinessDictionary.com defines Operational Performance Management (OPM) as “the alignment of the various business units within a business to ensure that the units are helping the organization achieve a centralized set of goals.?This is done by reviewing and optimizing the operations of the business units.”

In private clubs this means that each department, or business unit, has a common understanding of purpose, methods, and means in meeting the mission and vision of the club.?These business units are broken down into two distinct categories:

• Line Departments – those who directly serve the members by providing them with products and services.?They include golf, food & beverage, golf course maintenance, membership, locker rooms, retail, activities, fitness and spa, aquatics, tennis, and others depending upon the amenities offered.
• Support Departments – those that indirectly serve members by serving the needs of the line departments.?They include human resources, accounting, facilities maintenance, housekeeping, laundry, grounds keeping, and administration.?These departments fulfill the important function indicated by Aldi founder and author Karl Albrecht when he said, “If you’re not serving the customer, you better be serving someone who is.”

Since every club department has its own manager or director with the distinct expertise and skill set to succeed in their unique enterprises, the general manager has the challenge and opportunity to direct these disparate business units to achieve the integrated set of goals.?To achieve this alignment or unity of effort the general manager must paint a clear vision of how the organization will perform and interact with members.?She must also define and continually reinforce organizational values and culture, while providing clear expectations for each department’s performance.?

Without this effort to clarify, unify, and integrate departmental operations, the club operates as separate businesses, each with its own standards and each interacting with members according to the dictates and example of its department head.?This then is where the general manager has the major task of optimizing and reviewing the ongoing operations of the business units.?If not properly organized and made routine this process of review and optimization can consume a lot of time and effort for an already busy executive whose principal focus is on board, strategic issues, and member relations.

So, what can be done to better organize the sizable and clearly important task of performance management??As always when confronted with a large and complex task, the first step is to identify, synthesize, and simplify the essential elements of the challenge.?In doing so we believe there are three essential elements to achieve the necessary unity of purpose.?They are:

• Planning and Execution,
• Financial Performance, and
• Management Accountability.

Each of the requirements encompasses a cycle of steps that provide the necessary preparation and operational execution to achieve performance alignment.?

Many elements of the three cycles are interdependent, and in some cases identical.?The following briefly describes each cycle:

Planning and Execution (P&E)

The Planning and Execution cycle is the logical starting point since the efforts of all three cycles are dependent on the club’s multi-year Strategic Plan.?

The second element of the P&E cycle – the Club Annual and Departmental Plans are also the starting point for the Financial Performance (FP) cycle.

Next in the sequence are individual Work and Action Plans for the general manager and department heads.?These specify goals and necessary steps, including timetables and deliverables, for each goal.

Throughout the year all managers work toward completion or Execution of their Plans.

Each month after the Financial Statement is distributed, the general manager holds a series of meetings with individual department heads to review financial performance, benchmarks, and work/action plan progress.?

Finally, the Annual Review for each department head formally summarizes each department head’s execution of his or her respective annual plans.

Financial Performance (FP)

The Financial Performance cycle starts with the approved Annual Club and Departmental Plans since budgets are affected by plans.

Zero-Based Budgeting is the next step and is distinct from the common practice of taking last year’s operating results and adding a percentage inflationary increase thereby incorporating last year’s operating inefficiencies and plan requirements into the financial plan for the coming year.?This problem merely compounds erroneous and often “fat” budgets year after year.

The concept of zero-based budgeting calls for each year’s budget to be built from scratch based on the coming year’s annual plan.?This seemingly challenging requirement can be greatly simplified by respectively using revenue and payroll projections based on two sets of variables – the number of sales transactions and average revenue per transaction and the number of payroll hours and the average hourly wage (for non-exempt employees).?These key drivers of revenue and payroll cost are easy to obtain if the department head has properly benchmarked his operation during the most recent year.

Next in the FP cycle is Real-Time Accounting which allows the department head to more closely monitor performance in real time thereby providing ample opportunity to intervene to Meet or Exceed Budget – the goal of every department head in executing their budgets.

Next is the same process for Monthly and Annual Review as described under Planning and Execution above.

Management Accountability (MA)

Finally, is Management Accountability.?In completing the other two cycles, the general manager has defined planning and financial expectations for each department head, plus any expectations for personal, professional, and departmental improvements.

The next step is a clear explanation of the department head’s strict accountability for enterprise performance.?While this step seems so basic many would argue it hardly needs saying, experience throughout a long career leads me to believe that while everybody says they embrace it, few actually do – mostly because they don’t have the method or means to hold subordinates accountable (read Creating Measurable Accountabilities included in Performance Management – An Essential Discipline of Success for further discussion).

The Work and Action Plans step is as described in the Planning and Execution cycle above.

Completion of Milestones and Deliverables encompasses all the requirements of accomplishment and timing laid out in work and action plans.

Once again, the Monthly Review provides a formal structure of review to ensure compliance with or completion of all plans, month by month as the year progresses – all with the aim of eliminating surprises at year’s end.

Lastly, the Annual Review formally summarizes the performance of each department head in meeting all performance goals and objectives.

Essential Management Disciplines

There are various factors necessary for successful performance management.?First and foremost, as usual, is sound leadership with its emphasis on open and thorough communication.?Beyond that are a handful of specific management disciplines that are clearly essential to the process:

• Benchmarking.?The act of measuring and analyzing key performance indicators is critical.?Without the ability to accurately forecast and monitor performance, there is no hope of controlling operating performance.?Benchmarks are also indispensable in establishing accurate zero-based budgets.
• Zero-Based Budgeting.?As explained above the need to create baseline budgets each year based on Annual Club and Departmental plans is a crucial contributor to a realistic financial plan.
• Real-Time Accounting.?Club operations are fast paced.?Without daily analysis of results during the ongoing rush of business, there little hope of meeting or exceeding budgets.?See Tools to Beat Budget – Real Time Accounting for a practical way to achieve and exceed budgets.
• Operational Best Practices.?All club departments must continually optimize their operating performance by utilizing the wide range of industry best practices.?There is so much to be done every day in busy operations it’s all too easy to take one’s eye off the ball.?Ongoing focus on operating efficiency is a major concern and benchmarks often provide valuable feedback on progress.
• Monthly and Annual Review.?Ongoing review of operations, including key performance indicators, budget compliance, and plan milestones and deliverables, is vital to success.?The establishment of regular and routine meetings with department heads for this purpose will keep everyone on track to meet performance objectives.

As with any cycle, the end comes back to the beginning and the process of planning, budgeting, and establishing management accountability begins anew.?With each passing year the discipline gained, and performance achieved, will more deeply imprint performance management in the club’s DNA – and shouldn’t that be a key expectation for the club’s management team?