The Sunnyhill Health & Racquet Club (SHRC) is a private, 400member, not-for-profit tennis and social club located on an attractive piece of land in Sunnyhill Township, Massachusetts. Sport facilities at the club include three tennis courts: a recreational baseball diamond, beautiful open greenspace, and a modest-sized, though wholly unexceptional, clubhouse (see Figure 1 for the club's grounds). For nearly 75 years, club members have organized and enjoyed social events and tennis celebrations at SHRC; however, the club's management has made only a few cosmetic changes to the clubhouse and has otherwise left the surrounding property untouched since 1946. As the clubhouse is showing significant wear and tear, given its age, it is due for some mandatory maintenance (i.e., roof replacement, window repair, updated HVAC system). Furthermore, high priority repairs are needed for the aging floor and a reengineering of the staircase. Discretionary improvements for the clubhouse are also being considered, which, according to many younger member factions, are enhancements that are long overdue.

Case Background

Formerly a Senior Vice President within Boston's financial district, David Wilson reflected on his first few months as the President of SHRC. Wilson believed being elected as club President would serve as a perfect transition from being employed in the banking sector into an early retirement; a transition, he felt, had been going relatively smoothly. On this late April night, however, he seriously questioned his decision to take on the

President's role at SHRC.

Sitting in his office, Wilson reflected upon the town hall meeting that had unfolded earlier that evening. It was during this meeting that Wilson thought he would have successfully communicated to club members his vision for improvements to the club. He grimaced, however, when he recalled the scene as it actually unfolded. Rather than those present endorsing his ideas, Wilson witnessed members, neighbors, and community stakeholders become progressively frustrated and dissatisfied over the course of the meeting. When reflecting upon his entire banking career, he had never been accused of being a nebulous, incompetent, or vague manager; at this one meeting, however, he was criticized to these ends at least three times! As he thought about the events that unfolded, he could not understand why members disliked his plan so much.

Two Weeks Prior

While David Wilson and the busy volunteer Board of Directors knew changes to the SHRC clubhouse were necessary, questions persisted as to what the membership actually wanted from the club. According to some members, if the needed upgrades were completed on all current issues (i.e., roof replacement, window repair, updated HVAC system), the clubhouse would still simply be "adequate." In fact, these changes would only impact an improvement to the upper level of the clubhouse, leaving the basement in its current, bleak condition. A group of the Board's membership, including Wilson, believed potential existed to make SHRC a unique and special club through some specific, yet significant changes. While this change-oriented group existed at SHRC, another group of Board members strongly opposed any changes, given their belief that everything was "just fine" in its current condition. This divide at the Board level was echoed among the membership at large, as the uncertainty on needed and/or desired change was the most divisive element for the club, and by default, for Wilson!

In his professional life, Wilson had experienced change initiatives on many occasions while working alongside leaders he considered to be significant change agents. That said, Wilson realized he had never instigated nor led any change initiatives of his own. However, given Wilson had never backed down from past trials, he dove into the present challenge of creating a more modern and upgraded facility that all members could enjoy for many years to come.

Knowing the club was divided on this issue, Wilson began to carefully evaluate SHRC's current financial position to understand what sort of transformation the club could support financially. Certainly, a range of change options existed, from necessary safety and functionality modifications to a grandiose overhaul and expansion of the structure entirely. Wilson recommended to the Board that he would create a proposal designed to enhance the future of the club. Once created, Wilson would have Board support to present the proposal to the wider membership during a meeting where all could ultimately support or deny the plan. Before Wilson started the proposal, Nicky Iandoli, one of the club's elder statesmen and Chair of the SHRC Board, made it very clear to him that a proposal necessitating the SHRC take on "considerable debt" would not be appetizing. "Clearly, a reasonable loan may be needed to fund some up-front expenditures" Iandoli stated, "but having a club that is owned by the bank is of no appeal."

To be sure, the financial recession of the 1970s had forced numerous businesses into foreclosure, including the old croquet club in the next township. The lessons learned from that crisis, including managing debt service and avoiding leverage wherever possible, had been a beacon for SHRC Board management in ensuing decades; indeed, exercising such caution had enabled SHRC to safely weather all subsequent financial crises, while remaining a modest club. Furthermore, Iandoli expressed to Wilson that the Board did not want to lose the club's unique culture, established over generations of its existence; becoming a snobbish country club was simply unacceptable. Finally, while unspectacular, the club's upper level was in decent shapethough not of the quality to command even modest rental revenueswhile the basement was in a more dire state. "Having a piecemeal clubhouse isn't really a great proposition" Iandoli stated. "Any plan might best deal with the upstairs and then make changes downstairs." Wilson knew he had his work cut out for him!

President's Wilson Plan

Wilson went to work formulating a proposal to overhaul SHRC. As he began to dig into the club's financial history, he discovered that the club operated with razor thin margins; excess cash was nonexistent. Furthermore, when he considered contributions to the bottom line, it seemed that the Board had no frivolous expenditures. On a positive note, the club was essentially debt-free; the small amount the club owed to a couple of suppliers was inconsequential to its financial stability. Finally, Wilson discovered a legal title granting the club rights to subdivide two greenspace lots from the existing SHRC property; clearly, the club had considered selling land in the past (see Figure 2). The more he dug into the club's finances, the more excited he became about the potential of SHRC's future. Although he recalled the Chair's specific articulations and reservations around debt, he found no documentation, nor official governance forms, that detailed anything about specific debt capacities or ceilings at SHRC.

Fueled by inspiration and excitement, Wilson realized that he could completely reinvent the SHRC with an overhaul of the current, unexceptional building and significantly renovate it to create a new facility. Leading such a transformation would provide a plethora of benefits to SHRC and its members. First, this newly remodeled building would certainly address the current issues plaguing the existing clubhouse. Additionally, in developing this remodeled facility, Wilson realized ample potential existed to attract new members from the Sunnyhill Township and beyond. Finally, Wilson also knew planning for a renovated and expanded clubhouse would create a legacy for his own term as President and would allow succeeding Presidents to continue pro viding exceptional quality and value to club members.

Specifically, Wilson's grandiose plan would provide SHRC with a new roof and windows, an updated HVAC system, and a new modernized look on the upper and lower floors with a new, safe, and fully operational staircase. The plan outlines for this building also included a yoga studio, spa facilities, a designated workout space, and the purchase of aerobic equipment (i.e., spin bikes, ellipticals, treadmills) for the space, all of which would be new. Additionally figured into the plan was updated badminton equipment (i.e., racquets, nets, birdies). As if those changes were not enough, Wilson envisioned the building would be equipped with cutting edge kitchen facilities, and a new dining room, plus updates to the locker room, and shower facilities. To finish the plan, the remodeled clubhouse would include two championship squash courts, necessitating a complete structural reengineering to the existing building, and a grand addition to house the squash facility

While Wilson knew Sunnyhill Township had not seen an addition to the community like this in decades, he also realized a prolific overhaul of this kind would require SHRC to double the modest membership dues, for both existing, and new members. As well, Wilson knew the club would need to be available to host regular public events for the foreseeable future to generate an attractive revenue stream through facility rentals. Wilson also factored that the two greenspace lots would need to be sold to help pay for the renovation and keep debt at a "reasonable" level; the bank would not "own the club" under his watch! To completely fund the project, SHRC would need to borrow up to $1 million from a credible financial institution. Wilson felt the number would be agreeable to the membership, as this amount was less than some members' personal mortgages. After finalizing his master plan, Wilson was ready to bring these ideas to the club's members; in fact, this plan excited him.

David Wilson's next step was to bring together all SHRC members and any community members potentially affected by the plan in a Town Hall meeting to present his thoughts to these stakeholder groups. Wilson sent email and paper communications to these groups, in which he announced the meeting at SHRC for the following Friday and invited guests to arrive by 6 p.m. that evening. At the meeting, Wilson took the podium at 6:30 p.m. and began by thanking everyone for attending. He immediately got to the point to outline myriad shortcomings existing within the club and spoke about the priority projects that needed attention.

The President also highlighted how he would resolve these challenges at SHRC by essentially creating a new building. In Wilson's mind, he believed his ideas for change were in the best interest of allSHRC members. Wilson noted the need for a price increase, then abruptly mentioned that the greenspace was not a necessity for SHRC; in fact, keeping the greenspace really signified maintenance responsibilities for the club. Wilson reflected that it was sensible for SHRC to sell the land and use the proceeds to partially fund the proposed facility project. He continued by explaining the details of creating a newly designed building and the financing needed to bring this to fruition; he lauded how incredible it would be for the members, the township, and the surrounding area. Finally, a club everyone could be proud of!

Wilson confidently ended his speech asking those present if they had any questions, naively expecting the group to be delighted and conform quickly to the plan. To his surprise, Wilson immediately felt a frustrated and tense kind of energy arising from members and community patrons, which was followed with a barrage of questions; Wilson soon realized that no one was pleased with his proposal. From the ensuing questions and the terse discussion that emerged, it appeared as though older members were horrified at the perception of their conservative community-based club being recalibrated into an "elitist organization," other members jeered at the "sizeable debt" Wilson proposed to afford changes of this magnitude. Given Chair Iandoli's warning that "debt is a bad word around here," Wilson quickly learned how bad a word it was. Even when he attempted to speak to answer the endless stream of questions, more members interrupted him by voicing their displeasure with his proposition.

Most members were not in favor of paying more toward annual membership fees, only to have the clubhouse rented to the public. In paying any annual fees, members believed the club was theirs and theirs alone. With Wilson's proposal, they felt it was untenable to stand by, just to watch it be enjoyed by nonmembersthey would not have it! Others put forward another argument that a newer facility would create a swell in membership, which would result in having longer standing members fighting for court times and access to other amenities.

As Wilson withstood the growing tension among those assembled, he increasingly felt his back against the wall. While he desperately hoped things would improve through the discussion, the friction only increased with each passing minute. Local community members began demanding that the greenspace be "left for all in the community to enjoy," just as they had for over 75 years. They continued to complain with frustration about the pending noise and inconvenience presented by constructing a significantly renovated facility. This small but extremely vocal group stood firmly against such a project being completed.

Overwhelmed by negative responses by both SHRC members and the attending community group, Wilson thanked everyone for listening and quickly retreated to his office. While he sat in silence, he wondered what went wrong; Wilson could not understand why those assembled could not see the long-term value in his proposed project. Indeed, he found himself exhausted with no future direction; he thought, in the end, maybe it would be better to leave the club in its current physical state. As he rummaged around his office, he heard an email notification on his desktop computer. Seeing an incoming communication from long-time member Andrea Fisher, he sat down to read the message

(Box 1)

Andrea Fisher's Email to David Wilson After the Meeting

Mr. Wilson,

My name is Andrea Fisher, my family and I have been members of the Sunnyhill Health & Racquet Club for many years; in fact, my grandparents, Jack and Darlene Fisher, were founding members. I have fond memories of coming to club events as a child and I really feel at home there.

Like you, I also believe much can be improved at our club. I personally can see what you are trying to accomplish! That said, I also recognize that many, if not most, of the members don't really "get" your plan and are having a hard time understanding why so many changes are being proposed. I'm here to offer you my help.

Professionally, I am a partner in a management consulting firm. My job is to help those in organizations enact major changes and innovations to their operations. In addition, I sit on the Advisory Board of State University's Sport Management program. Here, we have recently introduced a Sport Management Partner Program (SMPP) where we conduct consulting engagements with community partners, utilizing sport management students, free of charge. We follow a defined process/framework to aid organizational leaders with their decision-making. The program is wildly oversubscribed, but given my strong ties to the club, I can surely get SHRC on the list; my only condition is that you take my advice and direction seriously and be prepared to start immediately.

The club's continued existence and growth are in both my own and my family's best interests and I will not stand by and watch the members bicker and fight over what should be done, and then finally succumb to inaction and complacency, as the history involving club members would suggest.

As you are the President, it is up to you to rectify this new problem. I am here to help you, should you choose. Given the results of tonight's meeting, I hope to hear back from you soon.

Sincerely,

AF

Note. SHRC = Sunnyhill Health & Racquet Club.

Wilson swallowed hard and immediately felt a sharp stab of humility flow through him, followed by a deep sense of relief. He considered Fisher's proposal for a moment and ultimately followed his intuition by quickly responding to her message, requesting a meeting date and time at her office the following week. Wilson then decided he would take a few days off over the weekend to collect his thoughts.

Receiving a Helping Hand

While meeting with Andrea Fisher the following week, she got straight to the point commenting to Wilson, "You can't assume that people will automatically understand your vision." She continued, "You know most of the older members have a difficult time seeing change, let alone dealing with any kind of significant change. They have been living the same culture and habits for years and for you to present such a drastic transformation is enough for them to completely lose faith in you."

Wilson immediately felt uneasy taking such pointed guidance. Fisher continued, saying "First and foremost, Mr. Wilson, this club belongs to the members, irrespective of any individual's title. Although you are the President and you have a lot of influence, the members possess the authority on every major decision that is made in this club." Next, Fisher explained that one of the main reasons that members did not understand the long-term benefits of his proposal was that Wilson had not shared how this plan, and the guiding philosophies behind why these changes were necessary, would align with the club's existing vision, mission, and values.

Wilson continued to feel uneasy and tense while sitting in the chair; he realized that he himself did not actually know much about the club's vision, mission, and values. He was brought back to his time as a junior employee in the banking industry, feeling overwhelmed as his then boss interrogated him about a basic error he had made. Now hearing Fisher's words, he felt both ashamed in realizing that he made a similarly elemen tary mistake and open to hearing more. Fisher continued, "Luckily for you, Mr. Wilson, I have worked with more challenging situations than what we have here, and the Sport Management Partner Program is going to grant you access to some extraordinary young students who follow a strict framework we use in our consulting practice" she said with a smile. Wilson felt her tone lighten and in turn, began to feel more at ease and optimistic.

Fisher opened her laptop and began to type, "Tell me Mr. Wilson, did you create a list of items, or changes, that could improve the club?"

Wilson opened up his notepad to a page filled with some scribbled notes and responded, "Well, I came up with 16 potential improvements within five overarching categories representing progressively greater change."

"Excellent!" Fisher exclaimed as she typed on her computer, "given this past meeting was a complete disaster, I am confident that the Board and members will want to bring the final decision to a vote. With the currently limited information, if the members only have the choice between voting for this extreme plan of yours, or no changes at all, then they will vote for no changes."

Deep in thought, Wilson responded intuitively, "I see what you're saying, we should offer more plans for them to choose from!"

Fisher smiled and commented, "Precisely! As we create options for change, we can direct their attention toward the different possibilities so that we may ultimately avoid complacency and inaction." As she continued to type her thoughts, she said, "Another problem I see is that since the members have lost some faith and confidence in you, some may simply refuse to support any plan you develop, just because they don't like you. To mitigate these possible issues, we're going to pull you away from these plans a little bit and use the students from the SMPP [Sport Management Partner Program] to refine and present the available options. Having third parties present the plans may eliminate some predisposed biases and show the members that there is no 'preferred plan.' Indeed, we'll have five well developed plans from which they may choose."

Fisher turned her laptop toward Wilson to show him data from her firm and noted, "We will send a newsletter to all club members announcing that you have enlisted my company to oversee the SMPP, to evaluate and develop different plans to innovate SHRC. Here, we'll hope that the members will move their attention from you and more toward what needs to be done." She pulled her laptop back to herself to continue capturing her thoughts and stated, "then we will hold another Town Hall meeting, have the SMPP analyst teams present each plan to the members, and lead them to a final vote."

For the first time in the last few days, Wilson felt his body relax. While he could clearly see how Fisher's strategy was to his advantage, he still harbored some concerns. Wilson asked, "What if, after all of this work, the members choose to vote for no discretionary changes to the club?"

Fisher shrugged her shoulders, "Well, then that's the will of the membership and we make no changes. But at least that will be an informed outcome, versus a rejection derived from misinformation or a lack of understanding." She added, "By giving the members a spectrum of choices, at least you will have a way forward, even if it's not the grandiose vision you would like. At the end of the day, any progress is good progress for this club."

After Wilson left his meeting with Fisher, he realized he was extremely satisfied with the outcome. Buoyed by the alterations in his original direction, sourced by Fisher's confidence and her superb advice, Wilson felt renewed confidence in his ability to lead the club. Wilson drove straight to his office and sent Fisher the list of potential changes, starting with a plan for necessary maintenance only (i.e., new HVAC, windows) for the SHRC (see Box 2) and began to properly assemble the five main plans for Fisher's SMPP student-colleagues. Meanwhile, Fisher quickly assembled five analyst teams, choosing the best students from the SMPP to take on development of the proposed plans, upon receiving them from Wilson. Here, each team would develop the content and present their respective plan. Fisher and Wilson agreed that the plans should be presented with all of the identified options, within a particular plan, included. Here, offering an a la carte menu of alternatives would be overwhelming for members to process and, importantly, Iandoli had clearly articulated that any changes of a piecemeal nature would be unwelcome. Finally, they estimated that the SMPP analyst groups would need approximately 2 weeks to collect and analyze data, and finalize the work on all five plans. As such, they scheduled a town hall meeting with the SHRC Board of Directors and club members to coincide with the timeline for completing their work.

Box 2. Proposed Enhancement Plans for the SHRC

Plan A. Necessary maintenance only

• New roof
• New windows
• New HVAC

Plan B. Esthetics/contracting (plus items in Plan A)

• New floors
• Redesigned staircase
• Design/cosmetics

Plan C. Dining amenities (plus items in Plans A and B)

• Kitchen Renovation
• Dining room renovation
• New tables and chairs

Plan D. Health activities/club activities/amenities (plus items in Plans A, B, and C)

• Yoga studio
• Spa facilities
• Juice bar
• Gym space
• Gym equipment purchases
• Badminton equipment
• Update shower areas
• Update locker rooms
• Install co-ed sauna

Plan E. Squash courts and building overhaul (plus items in Plans A, B, C, and D)

• Install squash courts
• Total overhaul of the clubhouse maintaining only structural elements of original building

Note. SHRC = Sunnyhill Health & Racquet Club.

Finding the Solution

A few days later, Wilson met with Fisher and her five SMPP analyst teams. He began the meeting by sharing how grateful he was for everyone's support and efficiency in the endeavor. Wilson commented, "Here are the five proposed plans for SHRC," as he distributed documents to all in attendance. He further noted, "Each of these plans vary in terms of their cost, benefits, and necessary work to complete. Although these plans are different, they should demonstrate alignment with SHRC's vision, mission, and values, all of which are found outlined on page 1 of your documents" (See Box 3)

Box 3 SHRC Vision, Mission, and Values

Vision statement

To be the pride and legacy of the Sunnyhill community.

Mission statement

The Sunnyhill Racquet Club serves as both a second home to its members and as a beacon to the Sunnyhill community. As a club, our mission is:

• to create and maintain a family-centric space of leisure and comfort for our members

• to promote a healthy lifestyle to our members
• to grow a united community
• to ensure the lasting legacy of the club within the Sunnyhill community
• to operate in a sustainable manner.

Values

• Family: As members we stand together as a family
• Health: We value and promote a healthy lifestyle for all our members
• Respect: We respect all individuals, lands, and amenities of the club
• Legacy: We continuously create a lasting legacy, linking the past to the future
• Sustainability: We value social, environmental, and financial concerns of SHRC.

Note. SHRC = Sunnyhill Health & Racquet Club.

As Wilson scanned his notes, Fisher jumped into the conversation and advised, "It is crucial that any plan aligns with the SHRC's vision, mission, and values. These are the guiding principles that are supposed to direct the club. If these tenets are to be more than just words on the wall, we must align any decision with these fundamental doctrines. In addition, she continued, "we need to make the process uniform and easy to understand, for all the members. To do this, we will utilize the DECIDE decision-making model that we employ with our clients. We have adapted it to the current context at Sunnyhill. Each of the SMPP teams will present using this framework for consistency," she noted as she handed Wilson a sheet with the framework displayed (see Figure 3). "Specifically," she emphasized, "we will be focusing much of our energy on Step 3."

Figure 3. Decision-making model for the current challenge at Sunnyhill Health & Racquet Club.

Adapted from "A Decision-Making Model for More Effective Decision Making by Health Care Managers," by K.L. Guo, 2008, The Health Care Managers, 27(2), p. 120.

Wilson scanned the sheet and then jumped back into the conversation explaining to the group that he and Fisher agreed that the most effective way to find consensus among all members and any factions within the larger member group would be to create a spectrum of proposals. The base plan would simply include completion of necessary maintenance on the roof, windows, and HVAC system. Beyond this base plan, four additional plans were to be developed to create a span of options for the members to choose. The plans that would fall mid-spectrum would provide some common ground between the two ends of the spectrum. See Table 1 for details of the five plans and their major financial impacts, including each group of itemized improvements, cost of the itemized improvements, total cost needed, and total cost including 6.25% Massachusetts sales tax.

Itemized improvements	Cost	Total funding needed	Total funding with 6.25% tax
A. Necessary maintenance only	$167,000.00	$167,000.00	$177,437.50
B. Esthetics/contracting	$230,000.00	$397,000.00	$421,812.50
C. Dining amenities	$225,000.00	$622,000.00	$660,875.00
D. Health activities/club activities/amenities	$325,000.00	$947,000.00	$1,006,187.50
E. Squash courts and building overhaul	$800,000.00	$1,747,000.00	$1,856,187.50

Finally, the five analyst teams looked enthusiastically toward Fisher, waiting for the opportunity to put their creativity to work. At this point, Wilson gave the final piece of information that would shape their presentations, pertaining to the revenue generation opportunities available at SHRC. Here, the somewhat limited ways to generate income to pay for changes at SHRC were both a blessing and a curse. Indeed, within Table 2, the impacts and implications of the various financial options available to the club's members are highlighted, including options such as a membership price increase, or club rentals to nonmembers; at this stage, Fisher and Wilson promoted the idea that every option was on the table.

Table 2. Revenue Generation Sources/Impacts With Considerations
Revenue generation sources	Financial impacts	Considerations
Sell lots	$500,000 (after tax) per lot (two available)	Decision is permanent; pushback from community stakeholders
Membership price increase	Current annual dues$500/family; $100 for seniors	Pushback from members (seniors and families)
Event revenue from club events	Currently, approx. $1,200 per event generated with existing, modest clubhouse	Currently, approx. 1 event per month
Outside rentals	Approx. $500 per outside rental with existing, modest clubhouse	Currently, approx. 1 event per month
Increase membership	Each family would add $500; seniors $100 at current rates	400 families; 100 seniors... at what level does the club become too crowded
Debt financing information	Rates and term	Considerations
$0-$1,000,000	4% interest rate	Size of loan could dictate term
$1,000,001-$2,000,000	5% interest rate	Size of loan could dictate term

The Next Steps

Armed with their respective plans and a clear sense of the SHRC's mission, vision, and values, the next steps for each of the analyst teams was to: Wilson requested that each of the five SMPP teams be as creative and engaging as possible in their presentations, while exerting caution in avoiding overselling the plans and making empty promises. Each team was given just under 2 weeks to complete their presentations, after which time the members would render a final decision on what would happen to the SHRC.

Answer the following.

1. What is the role/existence of different customer segments to a business.

a. What is your perspective of the SHRC's segments?

b. What are the "tension" around the different segments (customer value going forward vs. customer loyalty from past purchases).

2. What are the biggest risks to the club taking on debt?

3. How might you prioritize the list of offerings the club is considering in its potential renovation plans?