I think it’s fair to say that many of us on TWG2 have found the experience both fascinating and – at the same time- frustrating. While almost everyone — Board, member and management included — individually recognize that we need to change the way the way we operate, there seems to be great difficulty actually doing it. Ironically, transformation is dependent on those dysfunctional mechanisms we seek to reform. It will be important going forward for all members to stay actively involved and to keep up the pressure for reform. The potential for backsliding once the short term financial pain is deferred remains a clear possibility.
We recently spoke to the Board about the twin missions driving TWG2 – the need for short-term measures to address the DSCR concerns, and longer-term actions to address the root causes of the Club’s tightened circumstances.
Short-Term Measures: We explained that we believe that it is possible to remove considerable expense from the Club’s operations without impacting services to members. Working closely with the Finance Committee, we are confident that we can recommend a budget that meets the current situation realistically and head-on. We have also recommended some changes to the management structure that help deliver on the four strategic issues below.
Strategic Issues: At the same time, we’ve pointed out that there are four key issues that need to be addressed to effect the transformation that will ensure our long-term success:
1. First, we believe there is a fundamental problem with the governance of the Club. Mostly, that’s our fault as members … but we have to put in place an effective and active governance structure that determines the strategic objectives of the Club and helps oversee management in the delivery of those objectives. It’s great to see that the BoG agrees with this perspective and has launched a Governance Committee charged with making changes.
2. Second, and a necessary consequence of the first, is the need to develop a strategic plan that gives clear direction on what’s important to the club as a corporate entity and the aspirations and expectations of its members. 3. The third plank follows the second – a need for a clear understanding of the Club’s brandand the mechanisms to market that brand among the existing and prospective membership. The Membership Committee is potentially going to take this challenge on board with pro bono help from members who are professionals in this area.
4. The final element is transparency and accountability mechanisms, reviewed regularly by the board andreported to the members. A performance dashboard comes to mind, and we’ve made some suggestions about what this might look like.
These four challenges make for much more difficult conversations: many people have opinions on each of these issues and the unfortunate result can be that the status quo emerges as a compromise. That’s the frustrating part.
To be sure, measurable progress has been made to date. Not least, management has been given more and tighter guidance by the board in the budgeting process. Budgeting to lose a major portion of our remaining equity and basking in self-satisfaction when we lose a lesser amount is now, hopefully, a thing of the past. Executive compensation is in the cross-hairs and governance per-se is finally attracting a measure of attention.
I’d love to get feedback and comments … all reasonable opinions sought and welcomed!
The critical issue, and I would put this ahead of all the discussions of structure, transparency etc is what precisely is the financial position of the club as of today?
The last set of accounts available is for the half year to May 2010. The balance sheet is jigged to drip feed the kenrikin into the P&L. This seems to be advantageous to the tax position but it does put the EBITDA on steroids and distorts the real position.
The truest measure of financial condition should be the FREE CASH position, calculated as operating cash flow minus capital expenditures.
Earnings can often be clouded by accounting gimmicks, but it’s tougher to fake cash flow. FCF gives a much clearer view of the ability to generate cash (and thus profits).
Whilst some may say that negative free cash flow is not bad in itself.It could well be a sign that a company is making large investments (certainly true in the case of TAC).
If these investments earn a high return, the strategy has the potential to pay off in the long run. I am not sure that this is the case for the club.
I assume that TWG2 looked at the finacials in detail.
What then is the Free Cash position of the club? Can someone answer this simple question?
Tic Toc Tac
One other small item has been gleaned from an otherwise incomprehensible set of minutes from the Finance Ctte Mtg of 25 August.
On Page 4 it states that there are two major additional costs that have not been planned for. It mentions a figure of Yen 266 million for insurance and taxes.
Is this a mistake? Surely and expense of this magnitude could not have been overlooked?
Terry
Good update. I think you have summed up the position succinctly.
Basically nothing has been done since the levy proposal failed muster.
There is still no sense of urgency but believe me when I say this, dead businesses do not get a death certificate issued until well after the heart stops beating. When the end comes it comes in the blink of an eye.
The real problem is that the Board remains intractable and to a man and woman believe that once the doors open at the new club, all the troubles will magically disappear. You may have a view on this and perhaps I am a glass half empty kind of person but anyone who believes that the club can trade its way out of the current mess with a Peter Pan F&B Plan is not living in same Japan that I am living in.
Staff costs should have been cut by 25% as soon as the levy failed.
What has actually been done apart from powerpoint presentations?
Basically nothing because the board still does not get it.
Greg is absolutely on the money. Lance, Dan et al have failed dismally in their ‘self-assumed’ duty of care. Pro-bono or not they took on those roles for some kind of self-gratification, they must therefore wear the brown smelly stuff when it is dished out.
Democracy is a great institution in a sea of liquidity, it is a real incumbrance when the tide recedes.