By Michael D. Vogt, CGCS
The need to control golf maintenance expenses may finally get its due among golf club board members, managers and by default golf course superintendents. Let’s not begin cutting budgets before understanding an alternative budgeting process or the possible results.
The first thing needed to logically address golf course budgetary issues is a written standard of golf course maintenance. These standards must be concise at describing golf course conditions on a daily basis at each unique club.
The Standards
Standards are written guidelines for golf course maintenance minimums. These standards should be carefully drafted by the committee with major input from the golf course superintendent. The standards should include items such as follows:
ANY TOWN GOLF CLUB
GOLF COURSE MAINTENANCE STANDARDS
GOLF COURSE MAINTENANCE STANDARDS
2010
Any Town Golf Club is characterized by an extremely high level of grooming and manicuring with an emphasis on creating tournament conditions on a day to day basis. Any Town Golf Club’s standard of maintenance is very expensive and will be expected to be maintained on a daily basis throughout the season (April 1 – October 15)
The following are basic Golf Course Maintenance Standards. Your clubs standards should be very detailed leaving little to interpretation.
Greens
* Overview: All greens are to be smooth, uniformly turfed, firm but not hard, well defined and free of all major pest problems. Cups, poles and flags are to be uniform, clean and in excellent repair.
Mowing frequency Daily
Mowing equipment Walk Mowers (Type)
Cutting height 1/10 - 5/32 inch (weather dependent)
Daily Putting speed 10.0 - 11.0 stempmeter
Cups changed Daily prior to play
Ballmarks repaired Daily
Dew removal/whipping After mowing
Greens Amenities:
Tournament poles
Zinc cups / No Liners
Logo flags
Replace flags & cups 5 times per year
Tees, Collars & Approaches
Overview: Tees smooth, completely turfed, level, firm but not hard, clean, properly directed, with amenities in good condition and repair, consistent and uniform. Markers rotated consistent with cup rotation system and aligned with the line of play.
Tees
Mowing frequency 9 holes 5 x per week
Mowing equipment Walk Mowers (Type)
Cutting height 1/4-3/8
Greens Approach & Collar
Mowing frequency 9 holes 5 x per week
Tee markers changed Daily
Divots repaired (par threes) Daily
Divots repaired (par 4s/5s) 4 x per week
Amenities:
Ballwashers/trash containers - All Tees All holes
Benches Every Hole
Tee signage - Purchased Every Hole
Yardage monuments Every Hole
Divot buckets on Par 3's Every Hole
The above a basic set of standards and would be applied to every area of maintenance.
Once a set of standards are created routine job tasks can be timed, we refer to the time it takes to perform these routine tasks as cycle-times.
If the club establishes cycle-times for each routine labor requirement a labor budget can be formulated on this basis.
Our experience has shown that 55% to 65% of private club income was expenses incurred in operating typical private 18-hole golf or country clubs relate to turf maintenance. While these percentages sound excessive let’s examine the importance of the golf course facility to the club; the majority of members (Over 70%) stated that the main reason for joining the club was “For the High Quality Golf Course” :
• Country club courses are generally better maintained than public courses
• Play is usually faster, since the course is not clogged with beginners
• Since the monthly dues cover the cost of golf, it may be a good value for the person who plays golf often
• Golf outings and social functions may lead to job or business opportunities
• Families often enjoy the benefits of club memberships for health, well being and to associate with like-minded people in their community
The Zero - Based Budget
Starting with all line items being zero the budget exercise begins. Labor, based on predicted activities can constitute the beginning of the process. The standards and cycle-times should yield an hourly total for routine maintenance. Labor dollar amounts should be relatively simple to assign to job tasks; for instance, mowing greens would not require a high wage earner to accomplish, while applying fertilizers and chemicals to green surfaces will require a more experienced higher wage earner.
Advantages of Zero-Based Budgeting:
1. Efficient allocation of resources, as it is based on needs and standards
2. Drives managers to find cost effective ways to improve standards and operations
3. Detects inflated budgets
4. Useful for golf course maintenance operations where the output is difficult to recognize
5. Increases motivation by providing greater initiative and responsibility in decision-making
6. Increases communication and coordination within the club’s organization
7. Identifies and eliminates wasteful and obsolete operations.
8. Identifies opportunities for outsourcing.
9. Forces cost centers to identify their mission and their relationship to overall goals.
Disadvantages of Zero-Based Budgeting:
1. Must define standards and decision units, as it is time-consuming
2. Forced to justify every detail related to expenditures
3. Necessary to train managers. Zero-based budgeting must be clearly understood by managers at various levels to be successfully implemented.
4. The volume of information may be so large compressing the information down to a usable size might remove important details to middle and lower management
5. Honesty of the managers must be reliable and uniform. Any manager that exaggerates input information skews the results.
The wild card in any golf maintenance labor budget is weather and its related impact on dollars needed to provide standards that are acceptable to membership. During the course of the golf season weather and is unique impact on golf course maintenance and should be addressed to keep labor expenditures to a minimum. The superintendent must communicate with regular frequency and to the predetermined authority on additions to the allotted funds in each category of the maintenance budget. Hot humid weather can increase fungicide application rates and frequencies, or drought can increase power and water use. The superintendent has the training and expertise to make these decisions but must also be a good communicator when it comes to variances in budget forecasts.
Equipment maintenance and repair are often large additional expenditures incurred in the golf maintenance budget (3% - 7%). An examination of repair records should take place to arrive at a decision whether to keep or retire equipment before the cost of operation excides the cost of repair or/or inconvenience due to chronic equipment failures resulting in poor conditions and not achieving standards of maintenance.
Drilling down into each line item is necessary to establish a zero-based budget.
Historical or Incremental Budgeting
Incremental budgeting uses a budget prepared during the previous period’s budget or uses actual historical performance as a base. Incremental amounts are added for the new budget period as desired. The allocation of resources is based upon allocations and increases of the previous period based on increased activity. This approach is not recommended as it fails to take into account changing economic or operational circumstances based on proven methodology. Moreover, it encourages “spending up to the budget” to ensure a reasonable allocation in the next budgetary period. It leads to a “spend it or lose it” mentality.
Advantages of incremental budgeting:
1. The budget is stable and change is gradual, usually based on a global percentage
2. Managers can operate their departments on a consistent basis
3. The system is simple and easy to understand
4. Conflicts are avoided when departments appear to be treated similarly
5. Co-ordination between budgets is easier to achieve
6. The impact of change can be seen quickly
Disadvantages of incremental budgeting:
1. Assumes activities and methods will continue in the same way
2. No incentive for developing new ideas
3. No incentive to reduce costs
4. Encourages spending up to the budget so that the budget is maintained over subsequent years
5. The budget will become out-of-date and no longer relate to standards or type of output desired
6. The priority for resources may have changed since the budgets were originally set
7. There may be budgetary slack built into the budget, which is never reviewed.
8. Managers might have overestimated their requirements in the past in order to obtain a budget which is easier to work within, and which will allow them to achieve favorable results
Variable and Non-Variable Expenses
Many budgetary expenses are referred to as non-variable expenses. These expenses are considered mostly stable no matter how many rounds of golf are played. For instance, if a club has 10,000 rounds or 30,000 rounds, fungicide applications on greens will most likely remain the same. Conversely, the club that has 30,000 rounds is essential busy most of the day, labor hours to mow fairways can be expected to increase unless perhaps part-time labor is introduced later in the day, during a slow play period, to avoid overtime or increase cycle-time, running up the cost of labor to mow fairways. Variable and non-variable expenses should be considered when formulating budget forecasts. In the latter example, by using part-time and spit shift labor we may be able to smooth variable expenses and create a more stable labor expense in relation to increase rounds. Our goal is to identify variable expenses and control escalation during increases in usage.
Comparison of Expenses
Across the country, many superintendents have had their budgets frozen or reduced, which is likely why some clubs look to compare course operations and budgets with hopes of increasing resources.
An interesting question is perhaps golfer’s expectations and the related course maintenance to satisfy those expectations has gotten out of hand (standards). Is it time to scale back on items as bunker maintenance (variable expenses) which is fast becoming equal to cost of greens maintenance? Is out-of-play maintenance critical to the overall golf experience? Is a vast array of annual flowers superior to perennial plantings? The key is to document and communicate changes needed to sustain a healthy bottom line during difficult economic times.There are few reliable methods to compare golf course maintenance budgets, it is essential to point out that the validity of such comparisons is dubious, at best. The difficulty associated with comparing course operations can be attributed to such items as:
• Managed sizes of turf on greens, tees and fairways
• The number of sand bunkers and bunker design
• Number of annual rounds of golf
• Water and soil quality and inputs needed to achieve desired standards
• Geographic location of the club
Comparisons may be useful in certain circumstances. The list below provides a few indicators that can potentially be used to compare and contrast courses:
• Maintenance cost per acre
• Maintenance costs per hole
• Labor hours per week
• Labor hours per hole
• Maintenance dollars per golf round
• Percentage of variable and non-variable expenses of budget vs. total golf related income
In 2007 a major golf association studied the maintenance expenses of more than 66 private clubs in a major metropolitan area. Of the clubs surveyed in three distinct regions an 11% differential was observed in average maintenance budgets. In another 2007 set of country club statistics of major country clubs in a Midwestern metropolitan area the variation in golf course maintenance costs was just over 12% .
As we have continued to follow golf course maintenance expenses the trends in maintenance costs has generally increased well in excess of the increases in the Consumer Price Index.
There will be further pressures on expenses due to volatility in oil prices. The increases in oil prices will not only increase what is normally only 3% -5% of the typical budget, but will also increase the cost of most fertilizers and chemicals that are derived from petrochemicals and costs of delivery that will significantly impact budget line items.
Cost Control
Then there is the question of competition and the number of golf courses that have been added in the past decade. In the US, we have added over 20% to golf course capacity since 1988. While it is true that basic demographics relating to the aging of the “baby boom” generation will support some additional golf capacity, it will not absorb all the capacity that has been built. Reduction of pricing and the reduction or elimination of initiation fees has left many private clubs opening their doors to the public or enlisting the likes of manament companies or maintenance contractors to manage the golf course. These difficult management decisions are all part-and-parcel due to increases in operation expenses.
Over the years superintendent’s need for larger budgets was in order to keep pace with costs of maintaining status quo. What kind of help is the superintendent getting?
What can a golf club’s Manager or Board of Directors do to control costs?
• Become more knowledgeable about basic maintenance practices
• Ask for alternatives, generally more than one method or piece of equipment is available for specific tasks
• Demand cycle-time information
The real point of this article is not to ridicule the golf course superintendent, but to call attention to the fact that the actual assembly of golf course maintenance budgets is being neglected. What can be done to correct the situation?
• Superintendents need to start asking some new questions – How can we become more efficient?
• Equipment manufacturers need to get focused on creating more cost efficient and productive machinery
• Managers and Boards need to seek education on golf maintenance issues
• The USGA and GCSAA need to focus their efforts on providing increased education for General Managers and Boards
• Maintenance cycle-times and maintenance standards needs to become an operating “Best Management Practice”
Conclusion
Reinventing historic, incremental budgets must be accomplished if clubs are to stay competitive in the private golf market. Zero-based budgeting places the output desired first through carefully drafted standards and researched cycle-times, the resources are only appropriated after standards are met. To place restrains on a mangers and superintendents to reduce budget spending by an arbitrary percentage is unrealistic. With a zero-based budget a decision can be made to curtail or eliminate a job task and the dollars saved can be immediately identified.
Unitized cost of production is easily identified through zero-based budgeting. Cost controls are simplified once the budget is formulated. Fixed and variable costs can be identified through upswings in usage and relating operational costs. The zero-based budget makes sense for a troubled economy when cost controls and even budget cuts are the order-of-the-day. The process of zero-based budgeting helps to increase overall business acumen in your managers and will help everyone understand the complexities on forecasting golf course operational expenses.
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