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At Arm’s Length

By David Gould

Many owners find outsourcing allows them to escape the tedium of daily operations and focus on the core mission of growing their business. Can it work for you?

Recognizing that Tuesday afternoons were a dead spot on their weekly tee sheet, managers at Terra Verde Golf Club in Hockley, Texas, turned to a marketing company for help.  The vendor they selected, Austin-based CourseTrends, revved up a "Wine and Nine" e-mail promotion from its library of pre-fab marketing tools. Designed to target female patrons via e-mail lists, the tactic has a fine hit rate in the right markets.

"It only took a single e-mail blast to yield a turnout of 40 players," explains Alan Stalcup, company founder. "At a $40 per-player rate for nine holes, that was $1,600 in 'found' dollars." His client ran the promotion three more times that season and experienced comparable results.

Given the tech-driven way in which CourseTrends and other contract marketers attack a demand problem, most courses needn't feel guilty that they aren't handling that task with in-house personnel. For many, that takes the sting out of the trendy term "outsourcing." Yet for course operators who view themselves as the jack-of-all-trades type, the word connotes sophistication and surrender at the same time. But in the 21st century of golf course management, you sometimes have to get past your pride and make a candid calculation.

Take, for instance, pond management. In another era, golf operators would have battled a scummy, algae-rich pond themselves or else lived with it. Today, the best practice is to bring in a specialist in pond ecosystems-even if only periodically.

"Most of our golf clients will start by outsourcing to us," says Kevin Patterson, co-owner of North Carolina-based Southeast Pond Stocking. "Eventually, their crew will earn the necessary aquatic herbicide license so they can do their own maintenance." When the solution involves stocking a pond with fish (typically grass carp, which feed on submersed weeds), Patterson's company will deliver and release the fish.

In short, Patterson-like most third-party contractors-will do whatever the client needs, as long as it falls within their realm of expertise.


A Proven, Yet Emerging, Solution

Outsourcing is far from a new phenomenon in the golf industry; course owners have long farmed out their operations to third-party companies who specialize in the golf course business. One only need look to the proliferation of course acquisitions and management contracts being signed in recent months for proof that outsourcing will remain a viable strategy for years to come.
With entire golf operations so commonly sourced out to contract management companies, smaller doses of outsourcing shouldn't be unnerving. Except that it's often municipalities and abandoned homeowners' associations-not the serious daily fee owner-that hire all those lessees and management groups. Quite often, owner-operators prefer to build a team with skills in every area. All well and good, but in, say, the shop merchandising category, you could do worse than to outsource to someone like Vicki Bernstein, one of the golf apparel industry's most recognized consultants.

"My primary contributions are providing the vendor matrix, building vendor relations, goal-setting and guidance on analyzing results," Bernstein says. "These are areas staff people need help with. But they pick it up pretty quickly." 

When contracted by a club, Bernstein works with the on-site staff to establish a model inventory program that departmentalizes the product offerings-balls, bags, shoes, clubs, and men's and ladies' apparel-and stocks them according to how big a contributor to gross and net sales each is expected to be. She returns to monitor results and make minor adjustments. One of the areas Bernstein often has to tweak is the shop's inventory of equipment and hardgoods, which are frequently overstocked by PGA professionals. "It's common in retailing-if you know a category, you overbuy in it."

To work against these unconscious errors, Bernstein and other contract merchandisers continually introduce guiding ratios and equations. "We want people to know how much they have in inventory at any given time and how fast it turns," she says. "When we show them on paper that they have 20 percent of their inventory invested in a category that doesn't provide anywhere near 20 percent of their return, they understand it's time for an adjustment."

Retail operations aren't the only areas where consultants are commonly used. Most revenue-generating business segments are more amenable to outsourcing than non-revenue-generators. That's because golf operators often ask how the customer's experience would be affected.

Todd O'Neal, general manager and head professional at Emerald Valley Golf Club in west central Oregon, recognizes he isn't qualified to be a restaurant manager or a course superintendent. Although he admits he wouldn't bring in a food and beverage management group to run his f&b business, he could envision contracting his course maintenance operation.

"The food-and-beverage function can be leased out to people trained in that discipline, but will they be golf-savvy?" O'Neal says. "We tried it once and it didn't work, precisely because the lessee didn't understand the needs and patterns unique to the golf environment."

At least one f&b outsourcer, ZGolf Food & Beverage Services, is not just golf-savvy but downright golf-exclusive. The California-based company, run by one-time hotel executive John Zaruka, recently unveiled a concept restaurant for golf courses called the 19 Pub & Grill. One of its core services is closer to the consulting paradigm than to actual outsourcing. ZGolf goes through a course's entire food-and-beverage operation and conducts a best practices review geared toward redesign work and a target profit increase in hard dollars. Zaruka has honed a formula for success over the years and avoids straying from it.

"We know the golfer's preferences and we keep our eye on that," he says. "What the golfer wants is good food that is served fast and friendly. He doesn't want a restaurant-type experience with a big menu and long discussions about what to order."

According to Zaruka, once an owner understands the 19th-hole customer and how to satisfy him or her, the daily f&b business hums along nicely-even though it typically doesn't generate major profits. Instead, the banquet business that operators can conduct out of the golf facility yields the large returns.
"If you can take good care of the golfer, that puts you in the position to develop your banquet business, which is where you make money," Zaruka says. "The golfer is the key to it."


A Source of Efficiency

Truth is, the key to any outsourcing arrangement-regardless of the club function being farmed out-is a clear understanding of each party's role. When Scott Zakany, executive vice president of IGM, sits down with a daily fee course owner to discuss taking over course maintenance, he often finds that the operator fears ceding control of part of his business because he's placing an intermediary between himself and his course superintendent. Ironically, Zakany contends that intermediary is often the catalyst to clearer and more honest communication between the two.

"Usually when we come in, the superintendent stays," Zakany says. "What we'll find is that, before we got there, the owner was concerned about ticking off his superintendent. Now, with a knowledgeable third party in place, the owner can be more candid and ask more questions."

When a company such as IGM comes in, one of the key negotiating issues is whether the current superintendent's compensation is in sync with the job and the market. For example, if the superintendent were to quit, the operator and outsource company should know what it would take to attract someone of at least equal ability and experience. Zakany admits, however, that one of the ideal situations for an outsource turf maintenance company involves a still-learning assistant who gets promoted to the head job after his boss has been hired away.

"This guy has the ability and he's managing to stay afloat," Zakany says. "But if he's going to get a real hold on things-and solve a major problem should one arise-he could really use the support we're able to provide." Meanwhile, should the on-staff superintendent elect to stay, he becomes an employee of the outsource company. "We give him what he needs to thrive," Zakany adds. 

When Tim Loidice arrived at Wildcat Golf Club in Houston (Texas) three years ago to take over as general manager, turf and course maintenance were already contracted out to ValleyCrest Golf Course Maintenance. He believes coming in after the decision made it easier to judge the arrangement objectively. The verdict: Loidice could probably spend marginally less to take course maintenance back in-house, but in so doing he'd be reloading a host of headaches and distracting himself from the managerial task of building Wildcat's open-play and tournament business.

"I didn't like it at first, but I didn't have anything to base that on," Loidice says. "There are some obvious advantages. It reduces your exposure. There are a lot of employees and equipment that you suddenly don't have to worry about. You get the chance to study your operation more closely and determine what it needs to improve and grow."

Although Wild Cat's course superintendent doesn't report directly to Loidice, the outsource company that holds the maintenance contract is motivated to maintain good relations with the client to retain the contract. "The superintendent and I communicate closely," Loidice says. "We ride the course every week. There's never been a problem or a conflict over standards or what needs doing."


Evolving Needs

In the past, the primary reason companies outsourced was to realize cost savings. That rationale, like the entire golf industry itself, has evolved.

"While the focus years ago was on saving an operator money versus his prior expenditures, now the focus is competitive," explains Greg Pieschala, vice president of ValleyCrest, which currently has 45 courses under contract. "Course owners want to improve their product."

That said, Pieschala's team often finds that the budget and expenditures for turf care aren't always well-defined and accurately recorded. Nor are the trouble spots and capital-improvement tasks approached in a systematic fashion.

"We understand that it's their course," Pieschala says. "We give the operator the facts. It's not our role to make a decision for them. But at least they'll have a solid long-term plan for capital replacement. We don't do complete renovations, but we will help them contract it and help them execute it."

Meanwhile, a growing number of operators are outsourcing areas of the operation that have long been considered the purview of the head professional. Wildcat Golf Club, for instance, farms out its golf instruction. Staff professionals concentrate on management, while a contractor, the Matt Swanson Golf School, handles private lessons, clinics, group instruction and range attendant duties.

"We wanted to have a strong teaching program," Loidice says. "It's labor-intensive if you do it right."
Under their arrangement, Swanson pays Wildcat Golf Club a monthly fee and provides four to six instructors. Loidice says that the Swanson school has "helped Wildcat with player development and added some spark to the operation." The presence and success of the program has also prompted the construction of a new teaching facility. Loidice and company anteed up for half of the cost of the building-even though they weren't obligated to-because, as he says, "it gives us uniqueness."

O'Neal, on the other hand, has strong feelings about instruction outsourcing. He understands there are quality public golf facilities where the assistant professionals are burdened with in-shop and first-tee duties-to the point where trying to build and maintain a teaching practice seems impractical-but given responsibility for that operation, he would restructure it so that staff professionals were the teachers and promoters, not a lessee.

"As a golf professional, your job is to promote," says O'Neal, "and a vital part of that is helping people learn to play. I tell my assistants a crucial fact about people who already know how to play golf and don't need instruction-they eventually die. Then what do we do?"
Given the multitude of perceived benefits for course operators, the logical question, of course, is how an outsourcing company receives compensation for its services. Obviously, most are paid a consulting fee, but in the case of course maintenance outsourcers such as IGM, the company often earns its return primarily by leveraging economies of scale on equipment and materials. "We're buying in volume-buying cheaper-and that savings basically provides us our return," says Zakany, who trained in agronomy and turf and whose first job out of college was working for a contract landscape management company.

In the end, it comes down to basics and understanding that running a golf operation is no different than running any other business.  "Knowing how to play and how to teach doesn't make you an effective manager," O'Neal says. "If you don't understand that golf is a business, you won't get very far."

Then again, there are downsides to treating the game so much like a business that there's no excitement or promotion. "It's hard to do a great managing job when there's no demand," O'Neal adds. "If you're not getting people excited about the game, you're certainly not building your business."

David Gould is a Connecticut-based freelance writer.
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