Our “guest speaker” in Midwest Entrepreneurs class yesterday was a very familiar face; course co-instructor Dr. Mike Connell, speaking in his capacity as President of Board of the Monmouth Country Club (MCC). Connell has held this position for eight years. The story he shared with the class differed from others we have heard this semester due to the fact that the MCC is a non-profit organization. As a result, the goals of the MCC are not stated in profit or other monetary terms. However, as was made clear by Dr. Connell during his presentation, MCC managers—like all entrepreneurs—must still creatively find ways to generate enough revenue to allow the organization to achieve its goals. As Connell put it: “The goal of every organization is to strategically use its assets to achieve its goals.”

Connell addressed the overriding theme of how to manage a non-profit by way of two interrelated examples. First, he discussed the love and glorification of golf—particularly as manifest at the Augusta National Golf Club of Augusta, Georgia (home of the upcoming Masters Tournament)—as exemplary of an organizational goal above and beyond money. Second, Connell shared with Midwest Entrepreneurs students the ongoing evolution of the non-profit business model at MCC; another organization driven first and foremost by the goal of the love and glorification of golf. Each example is discussed below, with a summative “lessons learned” section to follow afterwards.

The Love and Glorification of Golf at the Augusta National Golf Club:

Dr. Connell started his discussion of Augusta National’s goal being the love and glorification of golf by referring to golf as “the game of tradition and honor.” He then reinforced this claim by stating that it is the only sport wherein players call penalties on themselves.

At Augusta National (see: http://www.augusta.com/) the love and glorification of the game of golf is just a goal; it is an absolute obsession. While Connell shared many examples of this obsessively pursued organizational goal with students, consider the following short list.

1. The course was built in the early 1930s by legendary golfer Bobby Jones shortly after his retirement from the game. According to Mike Connell, Jones’ goal was to build “the world’s perfect golf course.”

2. The Masters Tournament, the preeminent golf tournament played annually in the  United States, is played at Augusta National (and is its signature event). In fact, in  order to maintain optimal playing conditions at the course, playing season is              severely limited; it closes for the summer after the Masters Tournament.

3. There is special and unparalleled reverence for the purity of the game of golf at the Masters Tournament. This is evident in the incomparable respect for Champions of the Tournament. Connell here discussed how (a) each year’s Tournament dinner is hosted by the previous year’s Champion, (b) Green Jackets—which are awarded only to the winner—are specially made/tailored for each participant before play begins (and the winner must return the Green Jacket to the Augusta National clubhouse after one year), and (c) at Augusta National, there is a special room that can only be entered by former Masters Champions. This keen reverence for the purity of the game of golf is also seen in the Masters Tournament’s ongoing focus on amateurism; not only is there a special ceremony and award for the top amateur player each year, but the top amateur plays with the  defending Masters (pro) Champion the following year.

4. Former Augusta National Chairman Clifford Roberts remains famous—some may say “infamous”—for being a tyrannical advocate for the purity of golf at the course. He is known best in this regard for both kicking (then-sitting) President of the United States Dwight D. Eisenhower off the course and banning U.S. Vice President Spiro Agnew for life; due, in both cases, for showing up at and playing the course uninvited.

Yes, clearly, the primary objective of the Augusta National Golf Club is not to be stated in monetary terms; it is all about the love and glorification of the game of golf.

The Ongoing Evolution of the MCC Business Model:

The love and glorification of golf is also the overriding goal that drives Mike Connell in his role as MCC’s top manager and decision maker. However, Connell pointed out to students that in order to maximize the probability of attainment of this goal, MCC has recently had to make major changes in its business model.

THE OLD BUSINESS MODEL: According to Professor Connell, MCC’s business model when he became President of Board eight years ago was closely patterned after the “standard American country club model” developed in the 1930′s, 40′s and 50′s. In this “standard model,” membership was limited and there were often waitlists to join. Would-be members had to be sponsored by existing members and there was a membership committee that investigated and voted on new members; membership votes were not always positive. The new member paid an initiation fee for the privilege of joining what were commonly highly elitist organizations. In addition to the initiation fee, members paid annual or monthly membership dues. Most country clubs provided services including not only a private golf course but also a swimming pool, upscale dining services, tennis courts and a health club. Further, members were expected to eat at the club several times a month and were prescribed a minimum monthly food purchase amount (with clubs members being sent bills if they did not meet their stated minimum). On top of that, if the club had an operating loss for the year, as was common with many country clubs, each member was sent an additional “year-end assessment” to cover the operating losses (e.g., Connell recounted that a family member of a Monmouth College faculty member once received such a bill for more than $50,000). While the overall cost of club membership was beyond the reach of most American households, many flourished because they were the best golf course in town, had the best dining available, and were an essential place to make business contacts.  Small town social life and business deals often revolved around the local country club.

However, things—socially, culturally, and economically—changed for country clubs in the United States; especially in small towns like Monmouth, IL. Nice public golf courses were built.  Good restaurants opened. Television and other entertainment options evolved to compete for limited entertainment dollars. Local businesses were driven out of the market by malls and big-box stores (and remember that local business owners were traditionally country club members).  The population became more mobile and small town ways perished in many areas. Many country clubs, including MCC, struggled financially. Many clubs went bankrupt or were bought up at bargain basement prices for other purposes (e.g., housing developments and even farming). Most small-town country club managers responded by raising dues and prices. These price increases further reduced membership and revenues; hastening the downward spiral.

THE NEW MCC BUSINESS MODEL: MCC, like other small-town country clubs, came to be faced with a serious financial crisis. One result of this crisis was that its operating loan was so large that local banks could not allow its debt to increase further. Foreclosing on a golf course is not a pleasant option for a local bank as the market of potential buyers is small. Given the financial crisis, the MCC board concluded that the old full-service, high-dues, elitist model was both outdated and doomed for abject failure. They also concluded that MCC could not compete with a newer local public course for the competitive golf dollar.

With all this in mind, the MCC board decided to pursue an unconventional business model. First, the MCC board lowered annual dues; from $1,500 to its present $900. They also began to sell a new, limited mix of often customer-co-produced services. All food minimums and assessments were eliminated. The restaurant was leased to private operators and the dining room was opened to the public. MCC began to focus on family-oriented golf; an un-crowded, leisurely paced place where women golfers and children—even family pets, to some extent—are welcome.

By this time, you are likely saying to yourself: Doesn’t all this fly in the face of the need to generate enough revenue to allow the organization to even have a chance of meeting its higher-order goal of the love and glorification of golf?

Not so quick…

As Connell explained to the class, it is not just a matter of revenue generation. It is also—and this is the focus of the new MCC business model—a matter of creatively cutting costs. Toward this end, the MCC pro shop was staffed with volunteer labor and later came to run on the “honor system” (with members voluntarily paying for the items they purchased or writing up tickets to be billed later). Snacks and non-alcoholic beverages are sold on the same system. While the Club still owns its bar, golfers are free to bring their own beer to the course (and the bar, as well as the clubhouse as a whole, is rented out to members and non-members for private parties). A retired member acted as the business manager for a salary of $1.00 a year and another member kept the books without compensation.  All of this eliminates expensive labor (i.e., wages and insurance and other benefits). While it does not “create jobs for the local economy”—something we hear often in the media as the supposed #1 goal of all political and economic activity—it does keep the MCC open (and it allows Mike Connell and the MCC to keep pursuing the ultimate objective of loving and glorifying the game of golf). Viewed alternatively, there is only so much revenue that can be generated by a country club in a small town like Monmouth and if you focus too much on revenue generation—to the exclusion of controlling costs—you are quite likely to not have a business to run for very long.

LESSONS LEARNED: Change is the only constant. Adaptation is necessary to survive. The world is a dynamic place. Businesses must constantly adapt to remain viable. Small town country clubs are not viable in a modern world of competitive entertainment choices. The primary function of every business manager is to keep its doors open by providing a product mix for which there is adequate demand at a price that enough customers are willing to pay. MCC has changed its business model in an unconventional—but, when carefully considered, quite common-sense—way.

As Mike Connell told the class yesterday: “The goal of every organization is to strategically use its assets to achieve its goals.” This holds true no matter what the goals of the organization are. Goals may be stated in profit or other monetary terms. Maybe not. Instead, the goal might be—as it is at both Augusta National and the MCC—to love and glorify golf. No matter the goal, managers—entrepreneurs and others—must creatively find a way to keep the doors open. And, as we have seen here with MCC, keeping the doors open is not necessarily just a matter of generating revenue; it can be predicated just as significantly on creatively cutting costs (while still offering goods and services desired by customers).

Finally, all this talk of business models is rather ironic given the fact that I just finished reading student “Hometown Entrepreneur” papers wherein the top regret of the nearly 20 entrepreneurs interviewed was far and away not creating a business plan or model to follow and guide decision making. Certainly, any entrepreneur seeking external funding is going to need a detailed business plan. But all others should have one. However, as the case of MCC demonstrates, not one to be followed strictly and without regard for the changing environment in which the business exists. So: Formulate and implement a formal business model/plan but know that inevitable environmental change is likely to dictate adaptation of the model over time. 

Thank you Dr. Connell for sharing the MCC story with Midwest Entrepreneurs students yesterday!

Regards,

Prof. Gabel

Note: Portions of this post are adapted from a 25 April 2011 blog post authored by Don Capener regarding a previous presentation in Midwest Entrepreneurs class by Dr. Mike Connell.