Silence of the Clams
To anyone who cares about TAC's future, I hope this blog is profoundly disturbing.
The dilemma we find ourselves in is that we have sincere commitments based on foolish assumptions and a complete disregard for historical fact.
To coin Robert Samuelsen's statement about advanced economies...'political commitments outstrip the economy's capacity to deliver'.He is making the sound argument that lacklustre and profligate economies seem unable to make the hard economic decisions required today in order to guarantee a viable future. Not unlike the high-risk heart patient who continues to order fries in the hope that there will be a miracle silver-bullet to save him when the inevitable stroke or heart attack happens.
In simple terms, YOUR club has severely damaged financial arteries due to years of short-sighted financial management and a credit card approach to the balance sheet.
The lawyers, architects and PR agencies can produce the powerpoints for tomorrow but they are all being built on a mound of sand and freakonomics.
For many years now YOUR CLUB has been running pretty-much cash neutral, paying off the credit card but nothing more. This on a zero rent model with a significant cashflow. A Club Med for management if you will.
In round figures YOUR club has USD30m coming through the door each year in the form of DUES USD13m, FEES USD7m, F&B USD10m. In addition it has CASH&INVESTMENTS of about USD25m plus the land and buildings. The Azabu Towers investment is external to this but fully financed and guaranteed by TAC.
SALARIES & BENEFITS (staff costs) chew up and amazing 70% of the USD30m.
The balance goes in OTHER expenses for the various operating cost centers of USD 5m plus USD 1.8m for electricity USD1m for insurance and USD 2m for depreciation.
Of this figure a lousy USD1m is spent on Repair and Maintenance and House and Grounds
Imagine what the Club would be like if just another USD1m was spent in this area instead of in staff costs.
Imagine how much of a fighting fund would be available if USD2m had been allocated to a sinking fund over the past 10 years.
There is an argument being mountedby management and the board that the re-location will provide an opportunity to address the staffing costs. This is tantamount to saying we will fix the leak in the boat once we get out to sea .... and by the way we have sold half the boat to finance the voyage.
The past is the past and no amount of gnashing of teeth can bring back the millions of dollars wasted, and as alluded to, passed to those closer than arm's length.
Those millions should have put your CLUB in a more seaworthy state to tackle the proposed voyage. It is not too late to get the boat seaworthy but it surely will take a change in attitude from those that are never wrong or are too proud to admit it.
We need more excel spreadsheets not powerpoints please....and as always...
This blog is open to all comments.
posted by Unlock at 9:40 PM
10 Comments:
Thank you for those elucidating and astute comments.
I AM WORRIED.
The LRPC and the Board have MUCH to answer for in this relocation folly.
A prudent owner would first focus on reducing payroll to Y1.5Bn.which is about 50% of Op.Rev. versus the 2006 budget of Y2.2Bn.which is 70% of OR, before embarking on what can only be called a diversion and risky. Reducing payroll plus using Azabu Towers as a cash cow for the next 5 to 10 years would allow TAC to go it alone on a rebuild. The rush to rebuild is indeed puzzling as is the hiring of a PR company to propagandize the members to vote for the rebuild and the move to Takanawa. Misguided and reprehensible are stronger words.The case for renovation has not been fairly presented since the income from Azabu Towers would finance just about any renovation whereas the rebuild eliminates the revenue from AT and requires a large loan repayment which will require bank financing.
TAC continues to operate as a large F&B establishment while the marketplace now fills that role better and cheaper. 15 and 20 years ago TAC had a much bigger F&B business with far fewer members and with just one expat who happened to the transient GM. Now if you look at the sea of expats you will see careless cash in action.
Maybe the PR company can launch a contest for naming the new club. The winning name might be "TAC`s Folly". That gets everyone involved off the hook from this perilous sea journey.
Interesting to note that in the latest edition of iNTOUCH, the GM of TAC exhorts members to encourage "other people" to join : "Bringing in new Members not only improves the financial position of the Club......the more Members the Club has and the more each Member uses the Club, the more affordbale services and facilities become."
Read that again.
Once more in case you need to.
So, under this GM's enlightened financial management, the addition of new members to create more members overall will equal lower charges i.e. "more affordable services" for all. More revenue equals lower charges ? Is this in the charter somewhere ?
How about creating efficiencies that lead to lower operating costs that create stronger margins that may allow for lower charges to members, which would make TAC more competitive in F&B for example.....and how about making that a stated aim of management for publishing in iNTOUCH ?
Nope, that might mean some tough decisions : just need more membership admission and transfer fees to shore up the lacklustre financial performance of TAC and to support the strategy of adding more costly expatriate managers and enlarging the empire : after all, if you are to redevlop to create "the premier club in Asia" you will need plenty of top notch managers to run it.
[Wait a minute - that gives me an idea......memo to BofGs - need better management soon.....]
What are they putting in the water coolers in the management office at TAC, and where is the Board of Governors in all this ?
The GM is the new star of Back to Future...selling tickets on the Titanic after having a rpeview of the voyage.
The charade that passes as a screening process for enrty has been totally disbanded in a mad scramble to grab cash from the unsuspecting public.
Shuffling the deck chairs will not change the outcome of the voyage.
members should continue to demand greater financial transparency and also the posting of results of any voting that takes place in the club. The last President with a substantial mandate was burned at the stake as a heretic and the club continues the charade of democracy....
I'm seasick already and we haven't even set to sea.
The Owl and the Pussy-TAC went to sea
In a beautiful me-greed boat:
They took some honey,
and others' money
Wrapped up in a five-pound note.
The Owl looked up to the stars above,
And sang to a small guitar,
"O lovely Pussy, O Pussy, my love,
What a beautiful Pussy you are,
You are,
You are!
What a beautiful Pussy you are!"
Pussy said to the Owl, "You elegant fowl,
How charmingly sweet you sing!
Oh! let us be married;
too long we have tarried:
But what shall we do for a ring?"
They sailed away, for a year and a day,
To the land where the cash free-flows;
And there in a wood a Piggy-wig stood,
With a ring at the end of his nose,
His nose,
His nose,
With a ring at the end of his nose.
"Dear Pig, are you willing to sell for one shilling
Your ring?" Said the Piggy, "I will."
So they took it away, and were married next day
By the Turkey who lives on the hill.
They dined on mince and slices of quince,
Which they ate with a runcible spoon;
And hand in hand on the edge of the sand
They danced by the light of the moon,
The moon,
The moon,
They danced by the light of the moon.
With apologies to Edward Lear. I leave you to do the casting.
FRIENDLY FIRE
This project has all the makings of a hunting trip with Dick Cheney.....but at least that only ended up with a wounded lawyer!
All I am waiting for is the Col Nathan R. Jessep defence from a Few Good Men!
Bumgardner is no Jessup!
We are still to see any cash flow forecasting for various scenarios.
Would it be unrealistic to assume that gross income would drop by 50% for the time at Takanawa?
F&B would track toward zero very quickly as would fee income from new members or transfers.
So we have a club spending over USD20m on salaries with a gross income of closer to USD15m than USD30m.
Average cost of front-line full-time staff is about Yen 6m. Therefore 100 go???
Or does one go further up the food chain and get rid of far more expensive non-front-line staff and the raft of consultants travelling the world at the club's expense tasting wine, auditing IT or producing propoganda??
If the club is really serious about turning itself into a competitive establishment, shut the place down for two years, pay the members a dividend, get rid of most of the staff and start again from the basement up.
Wonder how much support that would get from management??
Well put! couldn't put it better myself.
I have recently heard from a certain source in a place of knowledge that the architects are flying in from the States first class and staying at the new Mandarin Hotel in Tokyo, at our expense, of course. I have also heard that there are some very nice relationships being made with these individuals by the board members directly responsible for looking after our INTERESTS!
Excuse me, did someone let one go just now or does it just smell bad?
Sincerely,
Paul Marques
C'mon Paul, be re4asonable.
You can't expect world class architects (who are doing us a favor by taking the job) to travel business class or stay at the Grand Hyatt...especially when the bill is being paid by a bunch of sycophants.
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