Breaking Down the GM/COO Model of Management
With Insights from Industry Expert Dick KopplinRead More
It’s certainly no secret that politics are a point of contention for many, especially in the wake of the controversial 2016 presidential election. But when you look beyond the divisive figureheads, dizzying rhetoric, and party politics, you’ll ultimately find that what happens in D.C. has resounding effects on our nation’s businesses — private clubs included. It’s important to stay informed on how political tides will impact not only you as a general manager or club leader, but also the employees that depend on you and the club members that you serve.
Of course, no one said that navigating this world was easy. You have to not only understand the jargon and terminologies, but also wrap your head around complex policies and see how their mandates impact not just day-to-day club operations, but the economy at large.
Recently, the American Health Care Act was withdrawn from consideration after it unexpectedly failed to gain support from the Republican majority in the House of Representatives. For many in the private club industry, this was a monumental loss. But why?
In truth, there’s no better person to explain what this means for clubs than Brad Steele, the Vice President of Government Relations and General Counsel for the National Club Association (NCA), the trade association for the private club industry. He’s one of the voices on Capitol Hill that help Congress members better understand private clubs and how their policies impact the industry. Steele has deep roots in Washington. In addition to his current role as a lobbyist, he has also served as a judge and worked for the Vice President’s Office. He has even run for Congress — against Mike Pence no less! On a more personal level, I’ve known Brad for over 11 years and I can say that he is well liked by club managers across the nation for being an industry advocate.
In this interview, I asked him share his insights into why the fate of this bill matters for private clubs and how the happenings in Washington impact the industry at large.
Skip: Can you tell us a little bit about the American Health Care Act and what its significance was to the private club industry?
Brad: The American Health Care Act involved repealing Obamacare and most of the damaging aspects that affect clubs, which would have provided some great benefits for the industry – specifically, it would have repealed a number of taxes not only on private clubs but their members as well. The withdrawal of this bill was a huge disappointment for the private club industry. For the NCA and many of our allies, who have been working to make fundamental changes to Obamacare for the last seven years, this was somewhat of a gut punch.
Skip: If it passed, how would that have affected club managers?
Brad: Under Obamacare, we have a medical device tax, a drug manufacturer’s tax, and a tax on health insurance policies sold. Those costs aren’t absorbed by the medical device makers, drug manufacturers, or health insurance companies — they are passed on in the form of higher premiums. When this was passed, private club general managers didn’t get more health insurance to offer their employers — they were simply asked to pay a higher premium thanks to these additional taxes. The American Health Care Act would have removed that burden.
Most importantly, there are two specific taxes that are placed directly on private club member. One is a net investment tax and a hospital tax that deals specifically with those that make over $250,000 or more — in other words, private club members. These two taxes are placed specifically on our club members, which obviously has an impact on the bottom line of clubs and the general managers. Those taxes would have been gone had the American Health Care Act passed.
Also, this bill would have phased out Obamacare’s Employer Mandate. NCA has fought against this since its inception because it requires things like classifying an employee as full-time if he works 30 hours per week. You have to go through the process of determining if your club has 50 or more full-time or full-time equivalents during the last year to see if you fall under the law. You are also required to distinguish between “seasonal workers” and “seasonal employees.” They are exactly the same kind of employees to a club general manager, but they’re two different terms under the Employer Mandate. That is an issue for clubs because they want to ensure that they have compliance satisfied without making mistakes.
General managers have been saying that this needs to change for the last seven years. We had it right in the palm of our hand and, unfortunately, we were not able to get it moved through the House. It’s really unfortunate to say the least.
Skip: As a general manager, we also want to consider our employees and what kind of impact this legislation has on their work. How does the withdrawal of the American Health Care Act affect club employees?
Brad: Obamacare actually hurts the people it is hoping to help. A great example of that in the industry: Let’s say someone is working 35 hours at a club. Under Obamacare, the requirement was that if someone is working 30 hours or more, then you have to offer the health insurance benefit. On average, the club’s contribution to the premium of a self-only plan is about $6,000. If I have 10 employees who work 35 hours a week and didn’t receive the health insurance benefit prior to Obamacare’s implementation, I now must give that offer of health insurance to all 10 of these employees. That means the club has another $60,000 it has to pay for — and there’s not one general manager of a club that can simply say “I’ll just take the $60,000 extra I have here in the bottom desk drawer.”
In this case, that means that more burden is placed on the members to make up for that cost, as well as the general manager to determine how to pay for that cost if the members aren’t willing to make up the difference. Ultimately, these employees may see their hours drop simply because it may be cheaper. The club will then hire others to work a minimal amount of time — maybe 20 hours per week — to fill the void. That doesn’t help the person who comes in for a small amount of time and it certainly doesn’t help the employee who was working more hours before.
Skip: A smart manager could even find that it’s easier to hire two more people than it is to keep one person on full-time. Unfortunately, this hurts the overall operations as well, because you can’t do more ambitious projects. You just don’t have enough hands — especially on the golf course. It can also cause training and service consistency issues.
Brad: This can also present problems. Every single club in the U.S. has to have additional seasonal staff. The problem is that if a club hires seasonal staff that’s on property for more than four months, they must be counted to determine if you reach that 50 threshold where you fall under Obamacare. This means clubs potentially have to offer health insurance to many seasonal workers. Again, that’s an average $6,000 per employee that the club has to pay — and that’s just for the self-only plan.
Because of this, many clubs are starting to reduce the number of months that they have seasonal workers on board. They wait to start them and just make up the difference by giving overtime to full-time employees. Again, this hurts those seasonal workers who are losing out on months of work and wages.
Skip: I think general managers have to realize that these policies affect so many things. Maybe not in our day-to-day operations, but when you’re looking at job growth and relaxing regulations to put money back into growth and infrastructure, that affects the economy. It affects membership because more people are making money, allowing more people to join clubs, and ultimately have a better member experience. We’re in the dues business, after all. The only way you can collect dues is if you’re relevant to your members’ lives — and one way you can be relevant is by offering services and amenities that they need. Ultimately, making decisions like this negatively impacts the member experience in the long-term.
Brad: Exactly. We believe that a rising tide will lift all boats. We understand that we are successful when everyone is successful. If one person is successful, then that means they get pay raises. With these pay raises comes the opportunity to join clubs or more disposable income to spend at clubs. All of this requires a growing economy, so we look at all policy issues that are coming out of D.C. Not just those that affect private clubs — like removing Obamacare, the Employee Mandate, or tax reform — but also broader issues. At the end of the day, everything that allows business to succeed allows employees to succeed, and when employees succeed, they join private clubs. That’s the key.
Skip: On that note, clubs and their members need to pay attention to being part of the community they’re physically in and being a good civic partner. How can individual clubs in their communities have a positive effect? We both know that true change comes at the local level. How can a club do that without being overly political, but yet playing a role within the community in itself?
Brad: The folks who are part of private clubs are usually the movers and shakers in a community. It is incumbent upon those members — regardless of political affiliation — and potentially the general managers to ask if there are more opportunities to communicate with our representatives in Washington D.C. and the lobbyists like me who are there all the time. Club members are the kind of people that have the ability to sway those Congress members because they’re the constituents.
There needs to be advocates for the industry. That voice can come from members and general managers who tell them that they’re being affected. General managers are the ones who have to worry about counting up their employees, figuring out who is working 30 hours or more, who is seasonal worker, who is a season employee when they’d much rather be dealing with other administrative issues. In that way, general managers and members can be an essential part to the political process.
Skip: Since there are such split feelings about President Trump, and he has been a big part of the golf industry for many years, how do you think the industry as a whole — not just private clubs — will be affected?
Brad: When I go up on Capitol Hill and talk to members, we don’t really talk about golf as much as we talk about the business of golf. It’s not about golf so much as it’s about those employees who work for the general manager and how that club can succeed under the regulatory burdens that are out there. We’re able to remove the concern of it being a private club — it’s golf. Likening it to golf is a good way for us to make the administration aware of some of the industry’s nuances and the issues affecting us. Because he used to be a CEO, President Trump doesn’t see all of the minutiae, but this is an issue that should catch his attention. Some of his club GM’s are very supportive and good friends, so I think it’s positive for us to have that network inside the Trump administration because of his history as the operator and creator of golf courses and private clubs.
Skip: No matter where you stand on the political spectrum — whether far right or far left, somewhere in the middle or in a place of apathy — it’s vital that we stay on top of the latest policies shaking up D.C. and voice our interests. The members of Congress can only advocate for the industry if we let them know that we care. To get more involved with NCA, take a look at their website for more information.
What kind of policies impact your Club’s bottom line? Tell me in the comments below or send me an email.