Is This The Time To Join A Private Club?

Though many clubs are confronting similar challenges, few have presidents or boards with Ausen's vision. Even if they do, club-governor turnover is frequent. In the biennial churn, clubs--their members, their facilities, their employees, vendors, budgets and strategies--get jerked around. Incoming governors, many of whom have no management experience, typically repeat the errors of their inexperienced predecessors.

This governance gap has created a market for contractors and vendors who have built entire businesses on exploiting it. Mike Young, a golf-course architect in Athens, Ga., has observed the spendthrift ways of boards for years.

"If I'm designing for an independent developer or owner," says Young, "he knows going in exactly what the work he wants done is going to cost, whether it's $5 million to build a golf course or $30,000 to re-do a green. Boards, on the other hand, have their own in-house 'expert' who is determined to spend more than the club down the street did. I've actually lost out on private-club projects in which I added a 30 percent markup. I lost because I was too cheap."

Fred Laughlin, who has long consulted with nonprofit groups on management issues, has recently begun working with the Club Managers Association of America on governance modeling for private clubs. His initial impressions of American private-club management and governance were not good. "Just awful," he says. "Mired barely in the 20th century." (See accompanying story by Davis Sezna.) How did we get here? Many of these clubs started because founders wanted to get together with friends. After a while the founders turned over management to boards, which in turn appointed presidents, who eventually hired GMs. "This happened over decades," says Laughlin. "Now we've got to a point where people are asking, 'Who's in charge?' "

It doesn't take a CFO to realize that there's something unsustainable about a 90,000-square-foot clubhouse in an age of dwindling enrollments. "A club needs to be run like a business," says Laughlin, adding that the top private clubs would rank among the top-10 percent of all businesses in the United States. Business-like thinking should extend, he says, to governance. "Who in their right mind would invest $50,000 in an organization that changes its CEO every year? Yet that's exactly what these members are doing and what these clubs are asking them to do."

As for Merrill Hills, in 2006 the club had one new member and normal attrition of 13 or 14 members. In 2007, as expected, about 35 members left the club because of Ausen's assessments. Even with that exodus, the enrollment is down only about 10 spots or so. Usage patterns and revenue will be the ultimate judges, but, says Ausen, "At least we have a plan. We now have something to offer in addition to a beautiful golf course."