Town Hall Meetings
The meetings seemed to raise more questions than they answered.
TWG recommendations still seem blindly oblivious of prevailing market sentiment, being almost totally reliant on revenue enhancement as opposed to an aggressive re-structure.
Since the move out of Azabudai to Takanawa, labor costs have been reduced by approximately 5% and remain at approximately Yen 1.87 billion yen. The mix of full-time to part-time employees has been adjusted to 25%/75% but this has had little impact. Whilst there remains no transparency on management share of the Yen 1.87 billion, members should rightly be sceptical.
The chart at the bottom shows some of the key indicators over the past 26 years. During that time (not accounting for the most recent trends) it shows that per member F&B spending in the club has declined precipitously from just under Yen 500k to approximately Yen 200k per annum.
Attracting new members using the 'fees are increasing by 30%' slogan does seem a bit dis-ingenious to say the least.
There was no thought given to outsourcing real cost areas such as engineering, IT and even the whole F&B function. Instead we have a proposal to save Yen 10m per annum by outsourcing the staff canteen.
Until the big cost items are addressed and the payroll is reduced by another 20-30%, the cost structure of the club will never make it a competitive proposition.
At least the TWG has recognised TAC is a service organisation that should provide value for money. It is a pity they have no idea how to go about it and remain mired in well-intentioned but outdated thinking.
I am afraid a few bandaid proposals will not work when the survival plan is based on nonsense projections on the revenue side and an unrealistic approach to re-structuring.
Membership has tracked down to about 3,000 and there seems to be no idea of how to stem the outflow of US members.
The Club has to learn how to cut its cloth and not continue to rely on joining fees to mask the underlying inefficiencies and high cost structure. The TWG has failed by not addressing this fundamental imperative.
More and more it is members' personal income not corporate packages that pay for the Club. Why then has the Board, management and the TWG failed to make this the basic platform to analyse the problems.
We are saddled with the high capital costs of the new club. At Yen 5m per tsubo this is nearly 3 times current market for a comparable structure. The finest club in Asia it may well be, but it may not be your club for much longer
Key:
Payroll, F&B Rev in Yen billion
Membership in thousands
Per capita F&B spending in Yen 100,000
posted by Unlock at 7:44 PM
14 Comments:
At Friday's Town Hall meeting it could be inferred from at least two separate impassioned statements by members of considerable seniority that there were two distinct constituencies of members in attendance : those who volunteer and contribute to the running of TAC [the good guys and gals], and those who do not [and who, by implication, should have less importance attached to their plaintive cries for disclosure and transparency].
That said, what was broadly apparent was a common position shared by all members who were there : they care about the club and what is happening to it.
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There are two groups of employees in TAC :- management and staff, and never was it more apparent how distinct and separate they are.
Against the impassioned views and concerns of the members, on Friday the few words from management were anodyne by comparison.
Fine you may think - they are but the professionals whose job it is to implement policy and directives from the B of Gs and various expert committees of seasoned volunteers: after all, they are running what is merely a hotel without bedrooms, plus a sizeable gym, a swimming pool and parking lot - how difficult can that be ? How well rewarded can managing that be ?
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And yet the deeper issue at stake is existential : if these trends continue there will be no club to worry about.
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Would it be too much to ask the "management" to step forward and to volunteer transparency about their employment terms, for management to say in effect that they too feel they belong to the club [just as members choose to do with their voluntary action, or their wallets, or both], and that management are and would be willing to do something sensible and practical towards reducing costs and relieving the cash flow crisis being addressed by the TWG ?
Something more significant and consequential than what appears to be a reduction of 2% to employment costs worth a paltry Yen 40 million in a cash shortfall of Yen 800 million.
A sensibly structured approach could lead to recovery of such voluntary cost savings in later years of employment, if and when the corner has been turned.
Such voluntary action certainly could suggest that management, the senior division leaders, have the best interests of the club at heart.
If they do not - if this would be a step too far for them - then at least the Board of Governors would know this and could take it into consideration in future dealings.
After all, with all the HR skill and volunteerism in the various committees and B of Gs, it must be the case [emphasis MUST] that all the terms of employment at TAC have been benchmarked thoroughly within the appropriate industry and against similar organisations, therefore surely it cannot be [emphasis CANNOT] that any of the management staff enjoy terms that might be an embarrassment to anyone if they were to be revealed by way of a policy of transparency.
Either embarrassingly below or above the norms for a membership club.
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Or am I being naive ?
Don't answer that......
At the session I attended, the question of what happens when banking covenants are breached was raised. It was likely raised at all the sessions.
It seems re-negotiation is underway to squeeze out an extra year before these are triggered. This however did not really answer the question. I for one want to know what happens when these covenants are actually broken and the bank is forced to move on the club.
In fact it may not even be the worst option so why not disclose what will happen?
Yes, I also thought the option of outsourcing the staff catering was more than a little weird. How can the club, which has all the overheads in place, and no doubt a lot of food that goes to waste, credibly stand there and say it is Yen 10m a year cheaper to get in an outside caterer?
As Spike Milligan wanted put on his tombstone....... ' I told you I was ill'.
I am not a lawyer but I would think that selling memberships in the current situation without full disclosure of the potential impairments would be tantamount to fraudulent misrepresentation, exposing the BOG as individuals to potential legal action.
This comment has been removed by the author.
I did say, in perhaps inappropriate terms, that TAC does have adequate legal advice so that they never would put themselves in that kind of a situation.
I think the word you are looking for in the third paragraph is
"precipitously" not "precariously"
Real problem is that they still have too many layers of management. Everyone managing upwards and no-one knowing what they are meant to be doing.
Why does the Club still have an Assistant GM? Why the layers of middle management? Why wasn't this fixed when the Club moved out of Azabudai?
It is a bit late to come back now some years later and cry.
No is my answer.
The salary figures don't add up. If 75% of the employees are temps how can the bill still be USD 20m. Without complete disclosure, I sure as hell am not going to give them another USD10K
Does 'Full Time Employee' also include the most senior management on contracts or they separate again?
Sceptical in Tokyo
In answer to the precceding question, it appears that the use of FTE excludes the top 20 or so managers who are on one year contracts. Thus the Y6.5 million average for the 150 FTE staff means there are some highly paid old timers pulling down Y10+ million. The median would thus be abut Y4 million. The total staff at about 300 would mean that half are part timers, haizen and keyaku staff. They would be pegged around Y500 million with another Y500 million going to the 20 or 30 fat cats at the top of the pyramid -- the lottery winners.
Even without transparency, I think the salary situation can be worked out by a process of deduction.
Dan Thomas said that management would take a 7.5% or Yen 12m cut in remuneration as part of the TWG proposal.
Therefore the basic payroll of the ten listed as management is approx Yen 160m.
Onto to this you need to add the housing, schooling and other ex-pat paraphenalia. This is likley to in the vicinity of Yen 100-150m per annum.
Thus the average cost of management is Yen 30m per annum per head.
TOTAL Yen 300m.
There are 150 other full time staff costing approx Yen 1bn per annum, or Yen 6.5m per head.
TOTAL Yen 1,000m
Then there are the approx 250 part-timers who average approx Yen 2m per head if the Yen 1,100 per hour quoted by the GM is correct.
TOTAL Yen 500m
GRAND TOTAL Yen 1,800m
The figure quoted for full-time staff costs does not therefore include management costs.
Dan also mentioned that management means 10 people which based on the above calculation menans Y30 million per manager. The average Y6.5 million for the 150 FTE is high and means the median is about Y4 million with a number earning over Y10 million.
The Club is what it is, so there is no use trying to apportion blame for the position it finds itself in.
With the benefit of hindsight, setting off into the unknown in 2006 was always going to involve risk. The Impaired Case scenario in the original prospectus did actually have an implied dues increase in the numbers even though this was not explicitly stated.
The TWG has put in a lot of hard work and for that they should be applauded.
The biggest single issue seems to be that there has been a basic structural change in membership that has not been addressed in the forward projections. There is a structural cash shortfall of approx USD6m per annum, due primarily to the huge debt taken on to fund the project.
If the thrust is primarily on the revenue enhancement side, where is the Club going to find another 500 members? How is it going to double F&B spend per member back to the level it was at 25 years ago?
I guess the simple answer is that noone can answer that question?
I can live with the levy but I cannot see how the structural deficit can be reduced to workable levels. The Club's assets are totally impaired which makes it absolutely imperative that cost structure is addressed as soon as possible.
All good points from those who are less than impressed by what has been put forward as having been unanimously agreed by the TWG and the Board of Governors.
Now is the time to vote 'NO' to the proposed levy of Yen 9,500 per membership per month.
Vote NO and seek more transparency and disclosure about costs in F&B and management employment : after all, if the club is as well administered and managed as is suggested [using best practice and benchmarks], then who could have any objection to transparency ?
The NO case is compelling to me for the following reasons:
- The TWG revenue enhancement projections are pie-in-the-sky, being totally premised on increasing membership numbers substantially against a long-term downturn in the economy that is only going to continue to spiral downwards. Add to this the levy and how does one realistically expect to increase member numbers? Condo recruitment?? How many of the condos have actually been sold?? Does anyone know??
- Management re-structure put off until FY 2012. Why wasn't it done when the club left Azabudai?
-There is a structural deficit of USD6-7m that will exist well into the future. A one year levy will only delay the inevitable.
- F&B is the last straw. No talk on getting per capita spending up. If the cost saving in the TWG projections are correct then it is obvious the club has decided that F&B spending is a dead duck. If that is the case the logic doesn't gel with the projected membership increase.
The levy will at best delay the inevitable for 12-18 months.
This is a replay of the US housing market where TAC has been steadily withdrawing equity to fund lifestyle. Now that all the equity and more has been used, members are being asked to fund the shortfall against what is plainly a flawed business model.
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