General managers’ and chief operating officers’ evaluations of private club boards of directors

International Journal of Hospitality Management 32 (2013) 245–253

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International Journal of Hospitality Management journal homepage: www.elsevier.com/locate/ijhosman

General managers’ and chief operating officers’ evaluations of private club boards of directors JaeMin Cha a,∗ , SeungHyun Kim b,1 , Ronald F. Cichy c,2 , Miran Kim d,3 , Julie L. Tkach d,3 a

234 Eppley Center, The School of Hospitality Business, Michigan State University, East Lansing, MI 48824, United States 204 Eppley Center, The School of Hospitality Business, Michigan State University, East Lansing, MI 48824, United States c 231 Eppley Center, The School of Hospitality Business, Eli Broad College of Business, Michigan State University, East Lansing, MI 48824, United States d 423 Eppley Center, The School of Hospitality Business, Michigan State University, East Lansing, MI 48824, United States b

a r t i c l e

i n f o

Keywords: Private club governance Resource dependence theory Member-owned clubs Board performance General manager’s satisfaction with the board Board contribution Board development program

a b s t r a c t Boards of directors play important roles in private clubs, especially in member-owned clubs. Resource dependence framework views the club board as an important provider of resources, knowledge, and support. Using a sample of 286 general managers (GMs) and chief operating officers (COOs), this study examined the relationships among a club’s board development program, the GMs’/COOs’ perception of board performance, and the GMs’/COOs’ satisfaction with the boards of directors. This study also found that a second-order three-factor model of club board performance, consisting of strategies and policy making, external relations, and stewardship, was the best fit to the data. All hypotheses from the proposed model were supported, showing that a board development program influenced club board performance directly. Board performance also had direct and positive influence on the GMs’/COOs’ satisfaction with the board. © 2013 Elsevier Ltd. All rights reserved.

1. Introduction 1.1. The private club industry and the roles of club board members The private club industry has a long and rich history as one of the most well-established segments of the hospitality industry. This segment and its history allows members to satisfy their social, recreational, sporting, political, professional, or other needs (Pizam, 2005). The private club industry occupies a unique niche within the hospitality industry in terms of its operational structure, membership ownership, members’ involvement, and economic impact. Private clubs, many of which are tax-exempt, are owned by some or all members. Some club members may also serve on boards of directors and/or as committee members in volunteer leadership positions. A recent study conducted by the Club Managers Association of American (CMAA) clearly shows evidence of the economic impact of this important segment. For example, 1.8 million club members

∗ Corresponding author. Tel.: +1 517 353 9211. E-mail addresses: [email protected] (J. Cha), [email protected] (S. Kim), [email protected] (R.F. Cichy), [email protected] (M. Kim), [email protected] (J.L. Tkach). 1 Tel.: +1 517 353 9211. 2 Tel.: +1 517 355 5080. 3 Tel.: +1 517 884 1590. 0278-4319/$ – see front matter © 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.ijhm.2012.07.001

nationwide are served by CMAA member-managed clubs, and facilities managed by CMAA members employed over 290,000 people. CMAA member-managed clubs also generated gross revenues of almost $13 billion in 2008 (CMAA, 2008a). While the private club industry has unique characteristics within the hospitality industry and results in important impacts for members, relatively little academic research has been conducted about this industry as compared to other segments of the industry (Bodman, 2010; Cha et al., 2011). While the private club industry has grown rapidly in the number of clubs and the size of memberships since the 1980s, this industry has undergone significant changes and challenges during the last several years due to dramatic increases in competition and fluctuating economic situations. In 2008, Professional Club Marketing Association (2008) indicated that communities seem to have a greater supply of private clubs than club member demand. According to the 2011 edition of Clubs in Town and Country, which surveyed more than 250 clubs for the operating year October 2009 through September 2010, club memberships in country clubs and city clubs dropped about three percent and two percent, respectively, for the second year in a row (i.e., 2009 and 2010). This means that both country clubs and city clubs decreased their memberships almost ten percent over the last five years (i.e., 2006–2010). As the current economic struggles continue in certain geographic areas, private clubs can benefit from utilizing board members for their advice, guidance, insights, and resources.

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In light of the challenges being faced by private clubs, the need for strong leadership is essential for future success. The resource dependence theory emphasizes that the board members should be viewed as providers or resources and supporters, rather than in control or monitoring roles (Hillman and Dalziel, 2003). Board members are volunteer leaders in private clubs. Depending on the composition of the board, each board of director is most likely to bring his or her unique kinds and types of business experience, knowledge, and expertise that can support the private club functions (Coleman, 1988). Especially, when boards of directors possess any particular technical competencies, these competencies also are expected to provide strategic direction and contribute to important decision-making for the organization (Brown, 2005). 1.2. Identifying research gaps Overall, research on the topic of volunteer board members is quite limited in the hospitality industry. Organizational researchers tend to focus on investigating paid employees’ or leaders’ contributions to the organization’s success (Riketta, 2002), while volunteer leaders such as board members can also contribute to the organization’s success. Researchers recently acknowledged the need for further investigating and understanding of the roles of board members in the organization (Kreutzer, 2009). Previous research frequently identified that staff members’ performance was improved when the organization provided them with supportive and developmental systems such as training, education, evaluation, and orientation (Beal, 2003; Parboteeah et al., 2005). However, there were limited empirical findings showing the effects of a board development program on influencing board performance, in general, and within the hospitality industry, in particular. Academic research on board members’ performance has been largely focused on using a self-evaluation tool and the researchers noted the problem of using self-evaluation when evaluating performance (Herman and Renz, 2000; Holland and Jackson, 1998; Mwenja and Lewis, 2009). The evaluation of board performance by GMs/COOs is important for successful private club governance. They also closely work with board members to make important strategic and operational decisions that affect club members. Research dealing with volunteer leaders, such as board members evaluated by GMs/COOs, is also sparse in both the broad hospitality industry and the private club industry. Cha et al. (2011) recently recognized the need for further investigation identifying important resources and functions that volunteer board members can contribute to the private clubs. Bodman (2010), in particular, emphasized that private club GMs/COOs should develop an action and development program to improve club governance through understanding of the valuable resources available to the club from its board members. This research responds to these several research gaps identified in the context of the private club industry by exploring the relationships among board development, the GMs’/COOs’ perception of board performance, and the GM’s/COO’s satisfaction with the board of directors. 1.3. Study objectives The primary objective of this study was to define the concept of board performance and explore dimensions of board performance that are more relevant to the private club industry. In combination with this role-related board performance exploration, another important goal of this study was to validate the factor structure of board performance for the private club industry. A third purpose of this study was to test the proposed structural model in respect of the relationships among club board development programs, board

performance as perceived by the GMs/COOs, and GMs’/COOs’ satisfaction with the board.

2. Research framework and proposed conceptual model 2.1. Private club governance It is important to note that private club governance is unique compared to other hospitality organizations. One of the unique structures in private club governance is that a private club is owned by its members and depends on its volunteer leaders, such as a board of directors consisting of members elected by their own club members. For example, Perdue (2007, p. 53) observed that “two critical pieces of a club’s puzzle are the club’s board and its general manager.” Board members in private clubs have unique and important roles, and effective board members are volunteer leaders who contribute to the club’s success. Volunteers, while are usually not involved in actually operating the clubs; however, board members volunteer their time to work on establishing strategies and policy making, representing clubs to others externally, supporting GMs/COOs in maintaining and updating long-range plans, as well as monitoring the club’s financial status (CMAA, 2008b). The board is frequently in charge of hiring the GM/COO and involved in the hiring and firing of other top management while they do not directly supervise staff members nor interfere with the day-to-day operations (Redman, 1997). Attracting and retaining competent and capable board members are vital because they can bring key resources, such as knowledge, skills, relationships, and money that strengthen the organization (Brown, 2005). Some studies emphasized specific financial activities including overseeing the financial management of the organization, ensuring the organization has adequate financial systems and procedures, and monitoring organizational performance and taking action when required to protect the interests of shareholders (Cornforth, 2001; Garratt, 1997; Hillman and Dalziel, 2003). In many organizations, both in the corporate and non-profit sectors, there are increasing demands to link board performance with the financial performance of the organization (Cornforth, 2001; Kiel and Nicholson, 2005). Club members are much more cautious in both the organization’s spending and their personal spending. They are concerned about the financial management of the club as the private club industry has undergone significant changes and challenges with continuously increased membership dues, dramatic increases in competition, and members’ demographic changes and lifestyle issues over the past 20 years (Professional Club Marketing Association, 2008; York, 2002). Also, members could be very sensitive to requests for additional funds in the way of ‘special assessments’ which may be added to their regular dues if the club needed to cover increased operating costs or unbudgeted debt. Therefore, the board’s role of monitoring the club’s financial performance becomes a more vital element. While each club’s board structure is somewhat different, depending on the size, ownership, and type of club, a club’s board of directors usually consists of a president, vice president, secretary, treasurer, and the various chairs of each committee, as determined by each club’s operations and facilities (Perdue, 2007). Board members are often accountable for the club committees’ activities, depending on their business expertise, where the board members might serve as the committee chair. Most members of boards of directors are successful in their own businesses or careers, which allows them to bring valuable experience, knowledge, and expertise to the club (Redman, 1997). Thus, Henderson (2007) emphasized that the ideal board member should chair at least one

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committee function and activity in striving for successful board governance. 2.2. Resource dependence theory This study utilized the resource dependence theory (Pfeffer and Salancik, 1978) to understand the importance of volunteer leadership resources from board members in the private club industry. While the resource dependence theory had not been previously used to explain private club governance, this theoretical framework has been applied to other nonprofit organizations (Brown, 2005; Herman and Heimovics, 2005; Mwenja and Lewis, 2009). Herman and Heimovics (2005) explained that more effective executives tend to engage in board-centered leadership and resources to improve the organization’s effectiveness. They argued that “the board-centered executive is likely to be effective because he or she has grasped that the work of the board is critical in adapting to and affecting the constraints and opportunities in the environment” (Herman and Heimovics, 2005, p. 159). Hillman and Dalziel (2003) noted that a board member brings both human capital resources and relational capital to the organization. Human capital includes items such as ability, knowledge, and reputation, while relational capital involves personal and professional networks and connections. It is plausible to apply the resource dependency theory to private clubs, when understanding the club board’s unique functions and roles that are different from paid leaders. While the volunteer board members are developing policies and long-term strategies, the GMs/COOs are the ones who make all operational decisions (Kopplin, 2007). The board serves as a strategic link between the organization and sources of the necessary resources (Mwenja and Lewis, 2009). 2.3. Relationships among Club Board Development Program, the GMs’/COOs’ perception of board performance, and the GM’s/COO’s satisfaction with the board The influence of the GMs’/COOs’ strategic leadership depends upon his or her skills and any other available resources, including boards of directors and volunteer leaders. Club boards can bring into the organization different kinds of expertise that are beneficial to the private club. Weiner (2009, p. 22) discussed a board’s 17 best practices for successful private clubs and observed “the board decides what is right and management determines how to do it right.” It is essential to understand important board functions that represent club board performance to fully maximize board resources. One of the most commonly used methods for evaluating board performance is to review a series of activities, roles, and functions that the board must perform (Mwenja and Lewis, 2009). While there are numerous functions that are important for club board performance, club board industry articles and other board literature (Brown, 2005; Cornforth, 1996, 2001; Green and Griesinger, 1996) suggested the three most important and significant dimensions of club board performance: strategies and policy making, stewardship, and external relations. In general, strategies and policy making are recognized as one of the major roles of the board (Brown, 2005; McNulty and Pettigrew, 1999). GMs and COOs should not develop all the strategies and policies without collaboration with the club board: A key function of a board of directors should involve taking on an active strategic role in collaboration with executives (Siciliano, 2005). Boards can contribute to strategies and policy making based upon their knowledge, expertise, and skills. Due to dramatic increases in competition and the challenging economic situation, the function and roles of board members relating to strategies and policy making can be valuable resources. That

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gives the private club a competitive advantage. Stewardship is an important area of evaluating club board performance. Stewardship behaviors are rooted in a sense of psychological ownership (Wasserman, 2006), implying that club boards feel psychologically tied to their clubs. Stewardship behaviors allow board members to place the long-term best interests of club members ahead of their own personal goals and needs. In this study, stewardship focuses on the internal relationships within the club. In fact, the perspective of resource dependence theory emphasizes the role of communication in internal relations by providing advice and counsel through board members’ professional and personal qualifications (Carpenter and Westphal, 2001; Hillman and Dalziel, 2003; Huse, 2005; Judge and Zeithaml, 1992; Lorsch and Maclver, 1989; Mintzberg, 1983). External relations should be recognized as one of the important board roles in the private club. Board members often represent their club externally through their personal and business networks. These networks and social relationships can help recruit new club members and secure funds for specific events, which often results in improving the financial status of the private club. In evaluating voluntary board members for nonprofit governance, Brown (2007) identified three main areas – recruiting and selecting future board members, orienting new members, and evaluating the performance of the board – as a way to nurture and strengthen the board. They found that orientation (as part of board development) positively influenced board performance. Herman and Renz (2000) also found that written expectations of board members had been developed for most effective boards. Holland and Jackson (1998) also found that a board development program improved board members’ performance. Through a quasi-experimental study, they showed that participants who were involved in board development programs strengthened the performance of participating boards more than participants who were not involved in such programs. According to Green and Griesinger (1996), boards of effective organizations were more actively engaged in training new board members, setting specific duties of board members, and evaluating board performance than were boards of less effective organizations. When it comes to linking board performance with the GMs’/COOs’ satisfaction with the board, Nobbie and Brudney (2003) found that there is a significant relationship between the degree of a board’s job performance and the CEO’s job satisfaction. They found that CEOs also feel to a great extent that they can make reasonable interpretations of the board’s policies, and that they have the information to effectively manage the organization. Furthermore, Nobbie and Brudney (2003) noted four areas where CEOs are likely to be highly satisfied with policy governance practices: (1) the amount of authority and responsibility delegated to them by the boards; (2) the opportunities they have to do creative work in management and structure; (3) the discretion they have to solve problems; and (4) the delegation of responsibilities between management and the board. While there is limited research linking board performance and the GMs’/COOs’ satisfaction with the board, other related studies showed that a staff member’s performance affects the supervisor’s satisfaction with that associate’s performance (Chaleff, 2003; Rich, 2008). If GMs and/or COOs perceive that board members engage in functions and areas that they are expected to perform, it is reasonable to expect that their overall affective feelings for the board will be positively influenced. The following conceptual model was developed. The proposed model (Fig. 1) posits that the club board development program is expected to influence, positively and directly, club board performance as perceived by GMs/COOs (Hypothesis 1). In turn, their perceived level of board performance is expected to influence GMs’/COOs’ satisfaction with their boards (Hypothesis 2).

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e1

BD1

Board development e4

H1: +

Board performance

H2: +

e18

e20

SAT1

SAT3

GM/COO satisfaction with the board

BD4

Strategies/ policy making

External relations

Stewardship

SP1

SP4

STW1

STW5

ER1

ER4

e5

e8

e9

e13

e14

e17

Fig. 1. Proposed model (n = 282).

3. Methods 3.1. Sample and data collection

Table 1 Comparison of demographic and club characteristics of sample and 2011 CMAA member survey participants. Variables

Research participants were COOs and GMs of private clubs who were members of the Club Managers Association of America (CMAA). Data were collected mainly through a web-based survey between July and September 2009. The online survey link also included an option to print the hard copy and send it to the researcher’s mailing address. The president and chief executive officer (CEO) of CMAA sent an invitation directly to 2324 addresses, consisting of CMAA club executives. Two reminder emails were sent at two-week intervals, and 343 participants responded to the survey. While an e-invitation letter was sent out to all CMAA members via a list, only member-owned clubs were selected for further data analysis, since these clubs are usually governed by a board of directors or board of governors (Perdue, 2007) who typically set policies and procedures. In fact, the majority of the clubs of the respondents were member-owned (85.6%), compared to developer-owned (6.1%) and corporate-owned (5.4%). The final usable number of member-owned clubs used for further data analyses is 282 respondents. 3.2. Sample characteristics The majority of respondents were male, totaling 91%. The majority of the age range of respondents was between 46 and 55 years and under 46 years, comprising 41% and 35% respectively, while the average age was 48 years old. Approximately 63% of respondents had earned a baccalaureate degree or higher, followed by 34.6% who had some college or an associate degree. In terms of club information, the majority of the total respondents were from golf and/or country clubs (62%), while yacht clubs, city and/or athletic clubs, and golf only clubs were 8%, 10%, and 11%, respectively. 54% of respondents were certified club managers. The total number of full and active club members was 689 on average, while the average number of club staff members in-season was 143. The non-response bias can occur when a significant number of respondents in the survey fail to respond and have relevant characteristics (i.e., club and demographic characteristics in this study) that differ from those who respond (Dillman, 2000). Thus, population demographic information was available from CMAA’s 2011 Compensation and Benefit report (CMAA, 2011) and was used to compare the sample population to the overall population of the CMAA in terms of gender, age, and number of club members. Table 1 displays the results of these comparisons. While the number of club

Gender Male Female Age Under 46 46–55 Over 55 Number of club members (median)

Sample

2011 CMAA member survey participantsa

91% 9%

92% 8%

35% 41% 24% 490

25% 50% 25% 634

a Source: “CMAA 2011 Compensation & Benefits Report”, 2011 CMAA member survey, Club Managers Association of America.

members (490) in our study sample was smaller compared to that of CMAA’s 2011 Compensation and Benefit report (634), there is only one percentage difference in terms of gender distribution (91% of males for our sample vs. 92% of males for the CMAA data), and age distribution appears quite comparable between these two samples. Thus, overall results indicate that the sample was representative of the population from which it was drawn. This supports a conclusion that generalizability of results is unlikely to be problematic, since there is no evidence of a non-response bias. 3.3. Instruments All theoretical constructs – club board development, the GMs’/COOs’ perception of club board performance, and GMs’/COOs’ satisfaction with the board – were measured using multiple items to measure the construct validity. All scales used in this study were adapted from general non-profit and corporate board literature, and then modified to reflect the context of the private club industry by referring to the club industry journals. Club board development was measured with four items, using a five-point Likert scale of strongly disagree (1) to strongly agree (5), which was modified from Cornforth’s (2001) board development scale to reflect the context of a private club. An example of a club board development construct item is: “Our club provides a comprehensive orientation program for new board members.” GMs/COOs were asked to evaluate board members’ performance, using a five-point Likert scale of nothing done (1) to much done (5). That is, club board performance was measured with 13 items, consisting of dimensions of strategies and policy making (four items), external relations (four items), and stewardship (five items). These items were developed and modified from several general board practices and club board

J. Cha et al. / International Journal of Hospitality Management 32 (2013) 245–253

literature sources such as CMAA’s 2007 National Survey on Governance (McCoy, 2008), and Cornforth’s (2001) board performance scales. A sample item for each construct is as follows: “Our club board sets/develops the club’s mission, values, and goals” (strategies and policy making); “Our club board monitors club performance and takes action when required” (stewardship); and “Our club board represents the club externally” (external relations). GMs’/COOs’ overall satisfaction with the board was assessed with three items. An example of this construct was: “I am very satisfied with the composition of our board.” 3.4. Data analysis Utilizing the program AMOS 19, structural equation modeling (SEM) was used to test the measurement model by assessing convergent and discriminant validity and the structural model by evaluating the hypothesized relationships. Based on the recommendation of Anderson and Gerbing’s (1988) two-step approach, the full measurement model was evaluated and refined using confirmatory factor analysis (CFA) prior to testing the estimation of the structural model and hypotheses. Structural equation modeling is a priori indicating that “the model is a given at the start of the analysis, and one of the main questions to be answered is whether it is supported by the data (Kline, 2010, p. 8).” 4. Results 4.1. Testing the factor structure of club board performance and full measurement model Table 2 shows the comparisons of overall fit indices for alternative measurement models of club board performance. According to overall fit indices, an initial first-order three-factor model did not produce a good fit with the data: 2 (62) = 186.62, p < .01 (2 /df = 3.01, CFI = .91, NNFI = .89, RMSEA = .09). When observed variables had low factor loadings (e.g., factor loadings less than .5), significant cross-loadings (factor loadings larger than .4), and large residuals (e.g., the modification index should not exceed 100), the items were dropped, based on Kline’s (2010) recommendations. After eliminating the observed variables with these criteria, the goodness of fit indices (CFI, NNFI, and RMSEA) were iteratively used to determine how well the full measurement model fits the data. During this process to evaluate the model fit, four items were dropped from the initial full measurement model. After deleting these four variables, the revised first-order three-factor model of club board performance was a significantly better fit than the initial first-order model: 2 (24) = 71.87, p < .05 (2 /df = 3.00, CFI = .93, NNFI = .90, RMSEA = .08). Next, the revised second-order three-factor model with the remaining nine items was compared to the revised first-order model of club board performance. The second-order three-factor model showed further significant improvement in fit: 2 (2) = 49.25, p < .01 (2 /df = 1.03, CFI = .98, NNFI = .97, RMSEA = .01), compared to the revised firstorder three-factor model. After confirming the factor structure of club board performance, the full measurement model consisting of 16 items (out of 20 items)

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was tested for measurement validity. All measurement model estimation revealed that the hypothesized model produced a very good fit to the data: 2 (95) = 187.91, p < .01 (2 /df = 1.98, CFI = .94, NNFI = .93, RMSEA = .06). Convergent validity evaluates the degree to which a measure correlates highly with other measures designed to evaluate the same construct (Anderson and Gerbing, 1988). As shown in Table 3, all factor loadings were high and statistically significant at p < .01. Fornell and Larcker (1981) suggested that average variance extracted (AVE) should be at least 0.5. All AVEs are higher than 0.5, which satisfies the criteria for convergent validity. Discriminant validity was examined by the pairwise correlations between latent variables to evaluate the distinctiveness of the factors measured by different sets of indicators (Kline, 2010). As a rule of thumb, Kline (2010) suggests that each pairwise correlation between latent variables should not exceed .85. As shown in Table 4, the pairwise correlations range from .15 to .59. Fornell and Larcker (1981) recommend that the largest squares of correlations (.35 in this study) should be smaller than the lowest variances extracted (.60 in this study). These data pass the discriminant validity criterion of Fornell and Larcker (1981). For reliability, according to Bagozzi and Yi (1988), composite construct reliability (CCR) values should be higher than .60, and all six CCR values were higher than this recommended value. A Cronbach’s alpha should be .7 or higher to be judged reliable, according to Nunnally (1978). All scales, except external relations (one of the club board performance dimensions), were shown to meet this guideline. Overall, all scales demonstrated generally good reliability. 4.2. Testing hypothesized relationships The proposed structural model adequately fits the data: 2 (98) = 219.66, p < .01 (2 /df = 2.24, CFI = .93, NNFI = .91, RMSEA = .06) as shown in Fig. 2. The sizes of standardized coefficients linking board development programs with the GMs’/COOs’ perception of board performance (ˇ = .71) and the GMs’/COOs’ perception of board performance with GMs’/COOs’ satisfaction with the board (ˇ = .72) were both statistically significant and positive at p < .01, supporting both hypotheses. The R square statistic indicates that 50% of the variance in board performance was explained by club board development programs, while 51% of the variance in GMs’/COOs’ satisfaction with the board was explained by board performance. 4.3. Testing alternative models Evidence for the validity of the theoretical model depends on the fact that the hypothesized model cannot be falsified (Raykov and Marcoulides, 2006). In the structural equation modeling, it is common and appropriate to analyze several competing models and compare the results, when even the proposed model fits the data well. Two alternative models were compared to the proposed model. The first alternative model included an additional direct path between board development and GMs’/COOs’ satisfaction with the board. While the sizes of fit indices were

Table 2 Comparison of overall fit indices for club board performance (n = 282). Models

2

df

2 /df

NNFI

CFI

RMSEA

2

Initial first-order three-factor model Revised first-order three-factor model Revised second-order three-factor model

186.62 71.87 22.62

62 24 22

3.01 3.00 1.03

.89 .90 .97

.91 .93 .98

.09 .08 .01

– 114.75* 49.25*

Notes: NNFI, non-normed fit index; CFI, comparative fit index; RMSEA, root mean square error of approximation; 2 = 2 difference between two models. * Significant at p < .05.

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Table 3 Confirmatory factor analysis results: full measurement model (n = 282). Constructs and items Board development BD1 BD2 BD3 BD4 Board performance Strategies/policy making Stewardship External relations Strategy/policy making SP1 SP2 SP3 Stewardship STW1 STW2 STW3 External relations ER1 ER2 ER3 Satisfaction with board SAT1 SAT2 SAT3

Standardized loadinga

AVE

CCR

.68

.77

˛

Item-to-total correlation

.77

.72 (6.80) .69 (7.17) .68 (fixed) .58 (8.05)

.63 .59 .55 .50 .81

.82

.83

.95 (fixed) .83 (6.30) .97 (8.18)

.76 .72 .79 .70

.71

.73

.79 (12.13) .75 (10.40) .64 (fixed)

.62 .59 .49 .69

.73

.71

.75 (9.83) .71 (fixed) .61 (7.33)

.59 .56 .50 .60

.68

.65

.73 (7.76) .59 (fixed) .50 (6.13)

.55 .48 .45 .86

.89

.89

.89 (fixed) .83 (16.13) .76 (14.54)

.78 .76 .70

Goodness-of-fit indices of full measurement model. Goodness-of-fit indices: 2 = 187.91 (df = 95), 2 /df = 1.98, NNFI = 93; CFI = .94; RMSEA = .06. a Factor loadings were all significant at p < .001.

R2=.50 Board development

.71* .95*

Strategies/ policy making

R2=.51

Board performance .83*

.72*

GM/COO satisfaction with the board

.97*

Stewardship

External relations

χ2 = 219.7, df= 98, χ 2 / df = 2.24, NNFI=.910, CFI=.926. RMSEA = .06. * p<.01 Fig. 2. Results of obtained path analyses (n = 282).

similar to the proposed model, a chi-square difference test was not statistically significant: 2 (1) = 4.67, p > .05 (2 /df = 2.22, CFI = .93, NNFI = .91, RMSEA = .07). The non-significant result of the chi square difference test indicates that the alternative model should be rejected as the proposed model fits the data better. This means that adding a direct path between board development and GMs’/COOs’ satisfaction with the board did not cause the more complex model to have a better fit over the proposed structural model. Furthermore, the path coefficient between board development and GMs’/COOs’ satisfaction with the board was only ˇ = .08, indicating that the proposed model is more efficient than the first alternative model. The second alternative model indicates that the GMs’/COOs’ perception of board performance influences the board development. When comparing the model fit between the proposed structural model and the second alternative model, the findings supported that the overall fit indices were better for the proposed structural model than for the second alterative model, indicating that the GMs’/COOs’ perception of board performance influences the board development. Furthermore, the size of the path coefficient from board performance to satisfaction with the board (main out-

come variable) in the proposed model was ˇ = .72, while the size of the path coefficient from board development to satisfaction with the board in the second alternative model dropped significantly to ˇ = .12. The R square statistics of the main outcome variable for the proposed model and the second alternative model were .51 and .17, respectively. The higher overall R square statistic measure for the proposed model, when compared to the second alternative model, indicates that the proposed structural model had the better explanatory value for the outcome variable. All of the evidence shows that the causal relationships in the proposed structural model may be supported.

Table 4 Correlations estimates (n = 282). 1 1. Board development 2. Board performance 3. GMs/COOs satisfaction with the board *

p < .05.

2

3

Mean

SD

1

3.81 3.23 3.79

.59 .41 .86

1 .59* .15

1 .52*

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5. Discussion and conclusion While the private club industry is an integral segment of the hospitality industry, there are limited studies that examine research topics for this industry, especially using theoretical frameworks and valid and reliable measures. This study used the framework of resource dependence theory (Pfeffer and Salancik, 1978) to make the argument that the club board serves as a strategic link between the private club and their available human and relational resources such as abilities, knowledge, reputation, and personal network. These resources can be used to perform board roles such as strategies and policy making, external relations, and stewardship. Drawing from this theory, this study proposed a conceptual model investigating the direct and indirect role of club development programs on board performance, evaluated by GMs/COOs, as well as GMs’/COOs’ satisfaction with the board. The structural equation modeling showed that the measurement models used were generally valid and reliable, and both of the hypotheses linking board development with board performance and board performance with GMs’/COOs’ satisfaction with the board were supported. 5.1. Implications Findings of this study are expected to contribute to the private club industry and, perhaps, to other segments of the hospitality industry which utilize volunteer board members. Herman and Heimovics (2005) argued that the effective executive understands that leadership is not solely an internal activity. Rather than focusing on the important roles of paid leaders (GMs/COOs) exclusively, this study addresses the important roles of volunteer leaders who are members of boards of directors. McCoy (2008) presented several key trends in club governance from the findings of the 2007 National Survey on Governance. He reported two of the key trends were related to club board development. Apparently, in addition to developing training programs for staff members, GMs/COOs in the private club industry should pay attention to creating programs to help develop their volunteer board members. Based on the mean score of the club board development program construct (M = 3.78; when 5 = strongly agree), the private club industry may need to do better at creating and implementing board development programs regarding orientation, training, performance evaluation, and other expected performance areas. The club industry may need to identify the components of board development programs that can lead to adopting quality governance practices that help continuously improve the private club. As resource dependence theory dictates, it is important to understand the unique resources and contributions that board members can bring to the private club industry. Without receiving any monetary rewards or remuneration and with most having additional professional duties and roles at their own places of employment, boards of directors tend to give of their resources, time, and talents each year to provide governance at their private clubs (Cichy et al., 2007). Furthermore, board members in the private club should not be treated the same as the occasional volunteers in volunteer organizations. Although occasional volunteers contribute to organizations, they may have minimal understanding of the broad issues of the organization and may have infrequent contact with the senior members of the organization in which they volunteer (Boezeman and Ellemers, 2008). In contrast, effective board members in private clubs are usually not involved in the day-to-day operations of the club, but are required to understand their own clubs’ key issues. They have additional responsibilities to understand the concerns of their constituents as board members. These volunteer leaders are usually active members of private clubs and owners by retaining their memberships through the payment

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of dues and the sponsoring of others to join through developed relationships. Indeed, they may be part of a legacy of membership spanning generations of their family in their club (Cichy et al., 2007, 2009). Thus, understanding the scope of board performance and issues of board development is important to both researchers and practitioners. It is important to observe that boards of directors almost act as the GMs’/COOs’ boss, since the club boards of directors are often involved in selecting and reappointing the GMs and COOs. Thus, GMs’/COOs’ satisfaction with the board is important because GMs and COOs play essential roles in guiding the direction and performance of the club in conjunction with the club board of directors. Both of volunteer and paid private club leaders should work together for a club to be successful. While this study did not focus on exploring a link between GMs’/COOs’ satisfaction with the board and their job performance, GMs’/COOs’ satisfaction with the board is expected to influence their job performance in the private club. Besides practical implications, the findings of this study also have important methodological and theoretical contributions. A series of confirmatory factory analyses showed the valid and reliable construct of club board performance that represents the three main functional areas of strategies and policymaking, stewardship, and external relations. In an effort to prevent the self-evaluation bias, rather than relying on the perception of board members’ assessments of their own performance, this study utilized the GMs and COOs to evaluate the board as a group (not individually) in terms of club board performance. Green and Griesinger (1996) found differences of judgment among the CEOs and board members. In their study, they had two sets of measurements for board performance: board self-reports and CEOs’ assessments. Both sets of measurements showed that there is a correlation between board performance and organizational effectiveness. However, the CEO data were stronger and statistically more significant suggesting higher validity than the boards’ self reports. Furthermore, the CEOs were in a better position than individual board members to assess the diverse contributions of the entire boards, and showed less possibility of self-reporting bias. Any comparison of board governance from those studied here to other organizations with a board of directors must be made cautiously as the guiding principles and policy implications could, ultimately, be very different from those of private clubs. 5.2. Challenges and directions for future research As pointed out previously, because of the lack of research in the areas of private club governance and private club board development, one major challenge of this current study is identifying dimensions and scales of board development programs and board performance applicable to the private club industry. This current study proposed one dimension of board development and three dimensions of board performance, consisting of strategies/policy making, stewardship, and external relations. It should be noted that the reliability of external relations was relatively low, representing ˛ = .64. While the scales used in this study were modified to reflect the context of the private club industry from general non-profit and corporate board literature, it may be beneficial to combine these with a qualitative approach by conducting interviews with private clubs’ GMs/COOs or analyzing the content analysis of existing club board development and performance documents. This qualitative research may be helpful in identifying additional important dimensions of board development and performance that are unique and essential to the private club industry. The interpretations of a cause–effect relationship among the three theoretical constructs in this study need to be made with caution, since all variables in this cross-sectional study were measured at the same time. A temporal order is an essential component

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of causal inference. That is, the temporal order should indicate that the board development precedes board performance in time, and later causes the GM’s/COO’s satisfaction with the board, however, this study measured all variables at the same time. Bullock et al. (1994) provided an in-depth discussion of causation issues related to the structural equation modeling research. Schumacker and Lomax (2004) also observed that the structural equation model’s approach best depicts a causal assumption, arguing, “In structural equation models, the amount of influence, rather than a cause-andeffect relationship, is assumed” (Schumacker and Lomax, 2004, p. 52). Another challenge concerns the future investigation of a causal relationship between an effective board and an effective club. Previous research provided strong support for the idea that effective boards are related to effective organizations (Herman and Renz, 2000; Holland and Jackson, 1998). Herman and Renz (2000) questioned the causal relationship between an effective board and an effective organization. While this study does not propose a link between board performance and organizational effectiveness, this possible link should be further explored using a sample of club boards and GMs/COOs. A longitudinal study may be necessary to investigate the causal relationships between these two constructs. It is important to observe that this study used the perceptions of GMs and/or COOs as they evaluated all of the constructs. The measurement of board performance could have been ideal if the three dimensions of board performance were evaluated by the club members who elect and/or vote for them or if former board members rated the current board members. It would also be interesting to compare the board performance evaluated by current board members (i.e., self-rating) and evaluated by GMs/COOs. Furthermore, other measures such as board turnover, length of service term, and number of times served on the board could be used to evaluate the board performance. Due to the confidentiality of the data collection process and limited access to actual club members, this study has the limitation of collecting all of the three main constructs from the GMs and COOs, which is likely to cause a common method bias. The common method bias refers to the variance that is attributable to some method effects due to the commonality of a single type of methods (Lance et al., 2010; Podsakoff et al., 2003). While this common method bias is problematic and often known to cause an inflated relationship, this issue seems less critical in our study since the GMs/COOs did not measure their own performance or the board’s internal attitudes, and behaviors, but evaluated board performance. Researchers agree that the common method bias is more critical when the self-report is used in evaluating the respondents’ own attitudes and behaviors. Chang et al. (2010), on the other hand, observed that the common method bias has not been addressed as often, while researchers have been concerned about common method bias, since the early 1980s. Some studies suggest that using multiple methods provides researchers with a mechanism for controlling the potential common methods bias to avoid confounding the correlations among the constructs (Chang et al., 2010; Podsakoff et al., 2003). For example, using different measurement techniques, different data sources, and time intervals between data collection periods will increase the divergence among methods (Doty and Glick, 1998; Podsakoff et al., 2003). The relationship between GMs/COOs and boards of directors is of central importance in private club governance. This particular study, however, did not examine how the quality of relationships or social ties between GMs/COOs and their boards makes a difference in the evaluation of the boards by of GMs and/or COOs. Furthermore, it would be interesting to examine the possible influence of the GMs/COOs-board relationship on the private club’s performance. In addition, future research may focus on identifying factors in developing an effective relationship among GMs/COOs and boards of directors in the private club industry. As noted in the demographic profile, 54% of GMs/COOs surveyed in this study were certified club

managers (CCMs). It also would be interesting further to examine whether the certified club managers (CCMs) evaluate board performance differently compared to non-certified club managers. The CCM designation is known as the hallmark of professionalism in club management, representing professional development, and it is plausible to presume that a CCM may evaluate the current status of board development programs, which may influence board performance, differently. While this study did not include the private club’s organizational performance or effectiveness, it would be interesting to explore the relative importance of specific dimensions of board development on the private club’s organizational performance and effectiveness. This identification will help clubs stimulate their boards to address the most critical issues facing clubs. Another area for future research is how the size of a club may influence the GMs’ and COOs’ views in terms of board performance. While the main board members’ roles are not related to operating clubs, it should be cautiously interpreted that board members in some small clubs may be involved in other roles that board members are not typically engaged in large clubs. Perhaps, a qualitative approach analyzing an open-ended question could be beneficial to understand this research gap. Appendix A. Description of constructs and observed variables in the proposed model (n = 282) Constructs

Variables

Items

BD1

The roles and responsibilities for our club’s board members are clearly described in writing. Our club evaluates the performance of the board members annually. Our club provides a comprehensive orientation program for new board members. Our club’s board periodically reviews their own performance.

Board development program (BD) BD2 BD3

BD4 SP1 Strategies/policy making (SP)

SP2 SP3 SP4a STW1

Stewardship (STW)

STW2

STW3 STW4a STW5a ER1 External relations (ER)

ER2 ER3 ER4a

Satisfaction with the board (SAT)

SAT1 SAT2 SAT3

a

Our club’s board sets/develops the club’s mission, values, and goals. Our club’s board knows the operations and business of the club. Our club’s board reviews and decides the club’s strategic direction. Our club’s board shares a common vision of how it should go about achieving its goals. Our club’s board supports and advises management. Our club’s board monitors club performance and takes action when required. Our club’s board oversees the financial systems and procedures of the club. Our club’s board selects and monitors the club’s GM/COO and senior staff. Our club’s board has knowledge of internal controls of the club. Our club’s board ensures accountability to the club’s stakeholders Our club’s board helps to raise funds or other resources for the club. Our club’s board represents the club externally. Our club’s board ensures that the club fulfills its legal obligations. I am very satisfied with the performance of board of directors. I am very satisfied with the composition of our board. Overall, I am very satisfied with the presence of our board members.

Variables removed from the proposed model.

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