Global Edition

The Business of Golf Discussion: Innovation Or Stagnation Part 3

11.48am 30th August 2019 - Management Topics - This story was updated on Friday, August 30th, 2019

Francois Schoeman, COO of the GEMS Property Management Company in South Africa, in conversation with John Cockayne, the host of our Business of Golf Discussion Series. The company manages an extensive and diverse property portfolio, including assets at three of the country’s top golf estates.

Francois Schoeman: Career Summary

Francois Schoeman’s professional experience lies in driving business growth through strategic marketing and business development initiatives including core competencies in management, and planning.

While at The Clarens development in South Africa he was a key member of a team which took the facility from potential liquidation to profitability and stability.

This was achieved by creating unique external revenue streams and taking over full operations of previously outsourced revenue opportunities.

This was then followed by his role as CEO with the prestigious Pecanwood development, one of South Africa’s premier residential developments.

Pecanwood was able, within a period of only 8 months after Francois’ involvement, to stabilise struggling relationships with the international owners of the major amenities. The estate then created a business model for the future, giving control to homeowners of the most significant neighbouring assets that determined their property values.

Within three years Pecanwood was taken from a ‘stale’ and troubled estate, to winning the African Property Awards for Leisure Development, and the achieving acclaim for being the Best Property Management Company in Africa.

As the recently appointed COO of GEMS Property Management, he continues to develop and nurture GEMS expertise in structuring, developing site specific management procedures and implementing these particularly during the development phases.

The Group has more than 20 year’s exposure in the management and the structuring of leading developments such as the Fancourt, De Zalze Winelands Golf Estate, Val de Vie Winelands Lifestyle Estate and Copperleaf Golf Estate.

Currently GEMS oversees an eclectic mix of more than 67 developments in its portfolio.

Francois holds qualifications in Property Development and Investment, and Facilities Management through UCT. He also holds a CMCA and AMS through the American CAI and is a Certified Director through the Institute of Directors of SA.

 

 

The Thorns at Serengeti

 

 

John Cockayne. I asked the question in the previous section, re the clubs touted as being successful, innovative and forward thinking, whether they were ‘deserving’ of this accolade or perhaps deserving of another: clubs doing what everyone else should be doing i.e. the 101 in a business sense?

Francois Schoeman: As an answer in general terms, I would say no to the first and that it is probably the latter ‘accolade’ that might fit – although whether you should receive any accolades for doing the business basics right is highly debatable.

If anything, they will have been doing all the basics right, and in this sense I think that the previous references that have been made in this discussion to how vision and alignment will play a key role.

At these clubs the staff resources will almost certainly have been aligned effectively and will likely be made up of two separate parts, or teams:

  • The strategic; this will be the team that will focus on a few overarching or macro strategic issues i.e. the ‘BIG PLAN’.

Jim Collins and Jerry Porras refer to a BHAG, the Big Hairy Audacious Goal – it has to be bold and it has to even be a little scary!

  • Planning and delivery; this will see to the planning of the implementation of the ‘BIG PLAN’.

The key here is that you will be required to set up annual and quarterly priorities, track outcomes and KPIs, and the process will be best served if middle management and front line employees are involved.

JC: You have been involved at the grass face and have now stepped back slightly into a role in which you help others in grass face roles to manage property within the GEMS portfolio.

Even with the correct alignment, in general terms are clubs’ and golf estates’ management teams properly equipped to face the challenges posed by a new trading environment?

FS: This question is probably best answered by another question albeit in 2 parts!

  • Can you explain the club’s business strategy in clear and simple terms and is it delivering in terms of sustained growth and gross margins?
  • If the answer is no to the strategy question, then it will not be possible for staff to deliver the vision, while a ‘no’ to the second part will require a re-think of the strategy itself and analysis of the HR resources.

If the answers are yes to both, then by adding into this mix both disciplined action and active learning activities, you will have a basic but effective ‘Think’, ‘Plan’, ‘Act’, ‘Review’ cycle of strategic planning and execution.

JC: In this discussion we three agree that for many years the golf industry enjoyed the really ‘good times’, through the surge in growth the game experienced from the 1960’s to the end of the 1990’s.

In response the industry trained its management and professionals to possess skill sets which were very largely custodial and effective in an environment where a situation of balanced costs and revenues prevailed.

Looking at the custodial skills’ sets of many managers how restrictive do you feel this is now in delivering changed outcomes?

The golf course at Vaal de Grace was designed by Nick Price and is located on an island in the Vaal river

FS: A custodian will generally be too afraid to venture into the unknown and this is often simply because they don’t know enough about it!

A person with a specific skill sets however will comfortably tackle any issues in the same area and have the skills’ sets and abilities to move this sector of the business forward.

That said a specialist with broader experience, strengthens the ability to deliver solutions that solve the immediate problem and which fit with and complement the broader operational picture instead of being sucked into a cycle of continual firefighting and crisis management.

Unfortunately, ‘Personality’ in golf can still play too big a role in choosing staff.

Clubs need to find more professionals with the capacity and experience in change management, turnaround strategies and with real business skills instead of just a person with friendly face, or ‘yes-man, at the bar who just happens to plays off scratch!

JC: An incorrect ‘mix’ of skill sets is often sought when employing management people and not effectively upskilling the incumbent management and staff also seems still to be a big a problem.

In this I am reminded of the story (possibly an urban legend) between a CFO and CEO. In this discussion the latter is worried about the costs of spending on upskilling staff that might leave, to which the CEO responds – ‘what if we don’t train them and they decide to stay?’

Having a great accountancy background is all well and good, but accountants manage income, they don’t generate revenues (they are not ‘rainmakers’) and, as we have commented before, when there is no income, what business actually needs an accountant?

Most of these employment errors stem from the club’s committee or board not having a clear understanding of the real needs of the business, especially in terms of achieving its long term strategy – if there is one!

FS: Sadly this is very true and continued investment in staff is a must do.

The tested and pretty much universally accepted business sequence for scaling up as you follow the S-shaped curve of growth is to:

  • Attract and retain the right people
  • Create a differentiated strategy
  • Drive flawless execution            AND
  • Have plenty of cash in reserve to weather any storms.

JC: Many management companies (and indeed clubs) baulking at the costs required to put really effective top line managers in place, rather put more lower paid staff into the same management ‘space’ and or an incorrect ‘mix’ of skill sets to cover the required areas instead.

The Eye of Africa in PGA Championship week

The board, committee, or management company will then try to micromanage the staff, either directly, or in the latter’s case by remote as a part of their overall retainer or fee.

Using illustrative figures; the management company will appoint four staff members at £ 1 000.00 per month into the structure, rather than one person at £5,000.00 per month in tandem with a really good assistant at say £1,500.00.

They will then show a monthly saving of £2,500.00 per month to the business owner, or board in support of and to vindicate this decision.

What they won’t discuss, or share is that eighteen months down the line, the £ 4 000.00 spend for the four staff members will still be a fixed bottom line operational cost (and will remain so for the foreseeable future), whereas the £ 6 500.00 paid to the top line manager and assistant would have been self-liquidated as a result of the business efficiencies introduced and the new revenues generated by this alternative combination.

Is just throwing bodies into the staff mix effective as a management solution?

Francois at the ARC Conference

FS: This is a key debate and so is the question: ‘Do you have the “right people doing the right things right” inside the organization?’

To get the ‘right’ mix, which I agree entirely, is not about numbers of personnel on the payroll, but whether the staff you have the skill sets to help you achieve the business goals that have been set.

To understand the HR needs and whether it is correctly balanced, the business will need to evaluate all the key relationships surrounding it such as:

  • Are you keeping all your existing customers happy?
  • Are you happy with your investors/ bank or key partners?
  • Are your vendors supporting you properly?
  • Are your advisors — accountants, lawyers, consultants, and coaches in step with the vision and supporting you in every step of the process?

Then, designate one or two key performance indicators (KPIs) for each function, defining objectively what activities each senior leader needs to be focused on day-to-day.

Lastly, decide on a handful of results/ outcomes accountable to each function (i.e., who is accountable for revenue, gross margin, profit, cash, etc.). These outcomes normally represent line items on the financial statements.

JC: Micromanagement: As the old saying goes – if you have a dog why bark yourself?

Many clubs’ committees and boards, which are generally temporary by their very nature in a business management context, try to micromanage the staff.

These will be the very same staff employed, at no little expense, because they are expert in their fields or fields of activity!

 FS: The good old chestnut which just won’t go away!

Apart from the inefficiencies, the duplication of effort and the demotivation, at a staff level, that all this can bring, there are also the very real and inherent dangers of not allowing staff to do their jobs!

Some boards and committees are experts in diverting executives’ attention away from key business principles, tying them up in the political arena and still expecting the business side to tick along without the time being afforded for the executive to do their “real” job.

Each entity must understand their roles and territory, and if you employ an expert, use him for his or her skill set and set them free to bring home the results.

JC: For me teamwork is the key: irrespective of the skills’ levels of your management staff they will not know everything and even education cannot hope to make them all things to all circumstances, unless they give up their job to become a full time student!

Consultants can provide a key plug and play role here and can bring in skill sets exactly suited, and at relatively short notice, to assist a management team, or division to deal with a particular need or problem.

The key word here is HELP.

This word applies to the ethos behind the support and its origins as it should also include access by management to all the skill sets available to the board as a resource to the management team.

This type of support and inputs whether from the committee or a consultant should not be seen as weakness on the part of management, nor should it be threatening to management’s credibility, but rather the exercise of a mature and pragmatic management process.

Vaal de Grace

FS: Every business is more valuable to the degree that it does not depend on its top leader alone.

Teams need to use four tested principles to master the areas we have already identified; the Right people; Strategy; Execution; and Cash, to weather the storms.

First take a page from parenting in leading people: establish a handful of rules, repeat yourself a lot, and act consistently with those rules.

In setting strategy, follow the definition from the great business strategist Gary Hamel.

You don’t have a real strategy if it doesn’t pass two tests: first, does what you’re planning to do really matter to enough customers; and second, does it differentiate you from your competition.

In establishing how to drive execution, implement three key habits:

  • Set a handful of priorities only, the fewer the better
  • Gather quantitative and qualitative data on a regular basis and review those weekly to guide your decisions
  • When managing cash, not running out of it is key!

This means paying as much attention to how every decision affects cash flow as you would to revenue and profitability.

JC: A lack of marketing activities:

Central to any successful business’ ‘story’ will be a history of equally successful marketing activities.

It is commonly accepted as good business practice for an SME (small to medium enterprise), which is the category into which most golf estate’s golf operations and golf clubs fit, to spend around 7.5% of its gross revenues on marketing.

If we look at a typical golf estate or golf club in South Africa as the benchmark in terms of revenues:

  • 25,000 rounds @ an average of ZAR 300 00 per round
  • 12,500 cart rounds @ an average of 250.00 per cart round
  • 100 rand per head spend on average in the pro shop per player round

(I have excluded F&B revenues in this scenario as many clubs have outsourced this function)

The above totals ZAR 13 million and some change and 7.5% of this = ZAR 976 875.00.

12 of the 13 clubs and golf estates that I questioned between November 2018 and end January 2019 had no defined marketing budget for golf.

Many clubs are aware of the reasons that they need to change so are there any real justifications not to set such a basic business line item as a marketing budget, or for the club’s CEO or GM to have access to it if there is one?

FS: Obviously not, as these are business fundamentals.

As discussed earlier you can be sure that the clubs being referenced as innovative, different, etc. will all have these requirements in place.

All of this refers back to some previous key points about whether you have developed a strategy, gone through the business basics and have the right people in place to control and spend the budget in step with the agreed strategy.

Changing from a current mode into something more effective requires scaling up, and there will be three key areas to attend to if this transition is going to be successful:

  • Accelerators: this will involve the use of consultants, the importance of learning and the impact that the right technology can have.
  • Processes: Using the data to create systems, automation and making sure people are in the right seats doing the right things right, monitoring accountability as we move along.
  • Change of velocity: the conscious decision to change will have been one moment but in contrast the key here will be the understanding that this process is an iterative one – “keep up and keep going or lose out”

So there you have it – change can indeed be scary, but in the words of Robert T. Kiyosaki:

“Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.”

 So – experiment and innovate or be prepared to face the consequences which could end up with your club looking something like this!

 

       

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