Table of contents. We exist to grow the game, maximising the benefits golf provides to current and future golfers and the community.

Transcription

1 One Golf SUMMARY

2 Table of contents PART A: Overview 1. Why are we at this point? What has occurred to this point? What issues need to be addresses under a new structure?...8 PART B: Benefits 4. Cost saving & efficiency analysis Maximising revenues Aligning programs & strategy Combined benefits PART C: Allocation & Structure 8. What this means to golf Proposed model Timeline...34 We exist to grow the game, maximising the benefits golf provides to current and future golfers and the community.

3 PART A 1 Overview Why are we at this point? Golf is, without doubt, one of the most fragmented sports in the country in terms of its administration. We exist to grow the game to maximise the benefits golf provides to current and future golfers and the Australian community. While there has been a concerted effort by many parties within the sport to work cooperatively and collaboratively to achieve this goal, we are still hampered by a structure that places limits on golf s potential to grow and prosper. It is a common refrain within the golf industry that if you were starting the model from scratch you would never propose to implement what we currently have in place. In terms of our internal structure i.e. Golf Australia and seven State/Territory Associations, we are effectively running eight different companies to deliver something that could be delivered by one company. The One Golf project arose out of a general belief that we should at least explore some other options about how Golf Australia and the State/Territory Associations function and the collective structure we employ. In the past two years a large amount of work has been done to understand the areas that needed to be addressed and the structure that could do this, the benefits that could be achieved and the process that could be undertaken to see a new structure implemented. The One Golf project has benefited from independent and external advice from KPMG, Bastion EBA and Gemba along with the Australian Sports Commission. Findings from the consultants reports are included in this document. Sport takes guidance from the business world and the clear principle that exists in corporate life is that inefficiency, duplication and misalignment must be eradicated to stay ahead of the competition. Clearly this is the challenge that Australian golf faces at this time. 3

4 2 What has occurred to this point? Discussion on the governance of golf has been occurring at various levels for a number of years. In terms of the state and national governance issue, discussion became more focused at the 2012 Golf Australia AGM and Member Forum, when the fragmented governance structure was identified as a major issue by both Member Associations and Golf Australia. Golf Australia was subsequently requested to investigate potential governance reform. Golf Australia formed a Governance Sub-Committee to identify the issues that needed to be addressed and to outline the imperatives of any new governance model. This subcommittee consisted of John Karren, Malcolm Speed, Jill Spargo and Stephen Pitt. The Guiding Principles of Reviewing Governance were also drafted and a final version of these was developed through input from the Golf Australia Board and the Governance Advisory Committee. As a starting point Golf Australia received some pro-bono assistance from Accenture to understand the scope of the project and to get some clarity around options and opportunities. Golf Australia also worked closely with the Australian Sports Commission to identify the work that needed to be undertaken to progress the project and the Commission s other sport knowledge and financial assistance was extremely valuable. Consequently, Golf Australia commissioned three independent pieces of work to assess the potential benefits of an aligned model featuring: One organisation; A single national strategy delivered locally; and All staff employed by Golf Australia. Note: A detailed analysis of the One Golf model is included in Section 9 4

5 PART A If you were starting the model from scratch you would never propose to implement what we currently have. 5

6 This summary document consolidates the work undertaken to articulate the combined benefit to golf and highlights the key findings: 1. Cost savings & efficiency analysis KPMG refined the operational structure and valued the cost savings from eliminated duplication of functions, inefficient use of existing resources and increased costs from limited scale; 2. Maximising revenue Bastion EBA valued the opportunities to increase the overall value of sponsorship assets sold by Golf Australia and Member Associations by increasing the exclusivity benefit to partners and delivering packages with a critical mass of benefits that attract the investment of national partners; and 3. Aligning programs & strategy Gemba assessed the increased participation in programs and club membership that will result from aligned programs and promotion of golf through a One Golf model. A Governance Advisory Committee, consisting of Golf Australia board members and state representatives was formed in the second half of The full committee was: Ian Crockett Golf WA Board Member John Robinson Golf NSW Board Member Stephen Spargo Golf Victoria Board Member Matthew Toomey Golf Queensland Board Member Carmel Smith Golf Australia Board Member Malcolm Speed Golf Australia Board Member Gerard Kennedy Golf Australia CFO Stephen Pitt Golf Australia CEO The Governance Advisory Committee has acted as a sounding board and provided a state perspective to a range of discussion points and issues. The Governance Advisory Committee also agreed the Guiding Principles of Reviewing Governance. Golf Australia has also continued to analyse and evaluate the One Golf model including work to refine the role of the State Board in the One Golf model to ensure local ideas, energy and innovation are retained. The previously mentioned Guiding Principles of Reviewing Governance are listed below. These principles have been provided to each consultancy firm for reference while conducting their work and have also been used by the Golf Australia Board, Governance Sub-Committee and management as a reference to ensure any proposed reform is in the best interests of the game. 6

7 PART A GUIDING PRINCIPLES OF REVIEWING GOVERNANCE 1. All parties must put the good of the game ahead of individual interest and be committed to helping golf fulfil its potential; 2. Any change must provide benefit for each State and the Nation as a whole; 3. Golf should have the explicit aim of having the best governance structure in Australian Sport; 4. We must not lose local ideas, energy and innovation; 5. Local delivery and contribution is critical to the success of Australian golf; 6. Reduction of fragmentation and duplication will strengthen Australian golf; 7. Any changed model must deliver increased financial resources that assist our sport to reach its potential; 8. Any change must not disenfranchise clubs or their membership; and 9. The benefits of this process must be able to be clearly defined and understood by the relevant parties. 7

8 3 What issues need to be addressed under a new structure? One of the major tasks undertaken by the Governance Sub-Committee was to assess and define the major issues that needed to be addressed under any new structure. This followed on from discussions from the 2012 GA AGM / Forum and also earlier discussions that formed part of the Golf Australia strategic planning process in August The Governance Sub-Committee assessed that there are essentially three main issues that need to be addressed namely; 1. Financial resources are wasted through duplication & inefficiencies Under the federated model there are multiple roles producing identical output creating duplication and waste. Fragmented control also reduces scale benefits in the procurement process. 2. Commercial revenue is not maximised Local sale of sponsorship dilutes the overall value proposition and reduces the value of commercial assets ultimately reducing the commercial revenue they generate. 3. Strategy, programs and communication are not aligned Currently we have eight different strategic plans in place and while alignment within the plans has improved it remains far from optimal. We are in effect trying to promote eight different brands and marketing approaches are not unified. There are inconsistencies across nationwide programs and initiatives that compromise our ability to grow participation. 8

9 PART A 9

10 4 Cost saving & efficiency analysis 10 Purpose It is logical to assume that operating one organisation as opposed to eight should result in overall cost savings. KPMG were engaged by Golf Australia and the Australian Sports Commission to assess the underlying cost savings that could be realised for golf through undertaking this process by implementing the change to a One Golf model. Process In order to accurately assess the potential cost savings of the One Golf model KPMG undertook the following approach: 1. Current State Assessment Reviewing the following information for Golf Australia and each Member Association allowed KPMG to determine the current combined strategic objectives, operational capabilities and financial model to develop a sound understanding of the current state: Area of Analysis Data Point Source Business Strategy Financial Performance Governance & Operating Model Organisation Information Core Infrastructure/ Assets Relevant Existing Work Strategic Plans Constitution Annual Financial Reports Annual Financial Report and Trial Balances Golf Australia and State MoU Structure, roles and responsibilities Organisation Structure Asset Listing Bastion EBA & Gemba Reports Golf Australia (GA) provided published Strategic Plans where available and overview Strategic Direction obtained directly from Golf NT and Golf Tasmania where Strategic Plan was not finalised GA provided copies of Constitution for each body GA provided the Golf NSW Financial Report as included in 2012/13 Annual Report GA provided the Golf WA Financial Report as included 2013 Annual Report GA provided the Golf NT and Golf SA Financial Reports as included in 2012/13 Annual Reports and supporting detailed trial balances and financial statements provided by Golf NT and Golf SA. GA provided the Golf Queensland, Golf SA and Golf Victoria Financial Reports as included in 2013 Annual Reports and supporting detailed trial balance provided by each State. GA provided Golf Australia Financial Reports and supporting trial balances for 2010/11 to 2013/14. GA provided copies of current MoU s between GA and each State/Territory. KPMG also conducted interviews with Lindsay Ellis, Chris Luz-Raymond and Simon Brookhouse GA provided a summary of staff and position titles for all organisations. The majority of this information was obtained from listings on State/Territory websites. GA provided balance sheet information as part of financial reports. Given the lack of operating assets further detailed information was not required by KPMG. Reports were provided to KPMG

11 PART B 2. One Golf Model Understanding KPMG then worked with Golf Australia to understand and refine the One Golf model, including the: Planned governance framework; Planned operational and administrative structures; and Planned functional processes. 3. Assessment of One Golf Benefits By comparing the current state with the One Golf model KPMG assessed the potential value of One Golf from: Cost savings that eliminate duplication; and Opportunities to improve efficiency and benefit from leveraging economies of scale. Note: KPMG s report also included references to revenue growth potential including expanded sponsorship opportunities. This work was conducted by Bastion EBA. Findings KPMG s assessment of the current state identified that the current fragmented structure for the governance, management and delivery of golf results in: Strategic and execution misalignment, confusion and duplication which dilutes focus and creates waste as resources are not invested in a coordinated manner; Duplication of effort and processes creating waste; Procurement of services and supplies conducted separately limiting the opportunity to benefit from collective economies of scale; and Various IT systems and applications in use which increases costs and limits the ability to benefit from improved information sharing. The change to a One Golf model addresses each of these issues: A single governance structure ensures strategic alignment and efficient, focused investment of resources to a common set of organisational objectives; A national approach removes duplication across a number of corporate functions such as accounting, audit, legal, IT, websites and strategic planning; A national approach removes duplication from core functions such as game development and marketing and allows the current State/Territory investment in these areas to be leveraged into a National program; Greater scale from a national approach improves ability to negotiate improved rates in the procurement process in areas such as IT, telecommunications, printing and signage, airlines and accommodation; and A single IT platform that creates efficiencies and improves information sharing. KPMG assessed a financial benefit to golf of $1.2m to $1.6m per annum from One Golf once the identified changes have been implemented, (detailed in the following pages). 11

12 Total expenditure savings ($) Element Base ($) Stretch ($) Assumptions ORGANISATIONAL SYNERGIES Admin Resources $225,000 $295,000 Consolidation of state administration functions into the national function will result in a reduction in duplicated activity and resource requirements by estimated 4 FTE (base) and 5 FTE (stretch). Finance Resources $358,000 $358,000 Consolidation of state Finance/ Legal functions into the national function removes duplication and therefore finance/ legal resource requirements. Based on review of current roles, this is expected to reduced requirements by an estimated 4.2 FTEs across all states, with redeployment of some existing state finance/ legal resources into the national function. Commercial/ Marketing Resources $255,000 $255,000 Consolidation of state Commercial/ Marketing functions into the national function will result in a reduction in related activity and therefore Commercial/ Marketing staff resource requirement. Based on review of current roles, this is expected to reduce staff requirements by an estimated 3 FTEs across state associations, with the redeployment of some existing state Commercial/ Marketing resources into the national function. OTHER COST SAVINGS Consulting Fees $121,000 $181,000 Reduction in costs of 20% - 30% attributable to removal of duplication of strategic plan preparation, improved allocation of internal resources replacing spend on consultants for various roles, and leveraging increased scale/ improved supplier arrangements. IT & Telecoms $45,000 $58,000 Reduction in costs of 2% - 5% attributable to procurement benefits from leveraging increased scale/ improved supplier arrangements. An additional 10% -17% reduction driven by IT & Telecoms requirements due to resource synergies on consolidation of the organisations. Printing & Stationery $18,000 $23,000 Reduction of between 2% - 5% attributable to procurement benefits in leveraging increased scale/ improved supplier arrangements as well as an estimated 10% - 17% reduction in organisation requirements. Travel & Accommodation $83,000 $124,000 Reduction in state costs of 10% - 15% attributable to procurement benefits based on corporate discounts from key suppliers - Qantas and Accor Hotel (10% and 15% respectively). Other Admin $18,000 $45,000 Reduction in costs of 2% - 5% across ad hoc administration expenditure (i.e. Postage, etc) attributable to procurement benefits from leveraging increased scale / improved supplier arrangements. Audit Fees $40,000 $60,000 Reduction of $40,000 - $60,000 per year (FY13 consolidated fees were $132,255, with GA $35,000) based on assumed reduction of audit requirements under One Golf. Legal Fees $3,000 $6,000 Reduction of 5% - 10% attributable to the standardisation and reduction of contractual arrangements on consolidation. Website Consolidation $40,000 $60,000 Reduction in costs of $40,000 - $60,000 from the consolidation of state websites into one website and technology platform. National & State Champs $47,000 $118,000 Reduction in costs of 2% - 5% attributable to procurement benefits from leveraging increased scale / improved supplier arrangement. TOTAL $1,253,000 $1,583,000 12

13 PART B Associated findings KPMG s assessment of the current state also identified that the: Current fragmented model does not provide scale for maximising sponsorship revenue; and Approach to development and promotion is in some cases fragmented. The change to a One Golf model addresses each of these issues by: Improving the ability to attract higher quality national sponsorships; Ensuring consistent brand and marketing messaging delivering a greater impact; Creating opportunities to leverage combined marketing resources and cross-promotional activities nationally which improves awareness; and Ensuring a National approach and common set of priorities increasing the efficiency of resources invested KPMG did not attempt to quantify the impact of these improvements as it was outside their scope. However these findings support the findings of Bastion EBA and Gemba. 13

14 5. 5 Maximising revenue Purpose Bastion EBA were engaged by Golf Australia and the Australian Sports Commission to assess if the collective value of sponsorship assets increases when they are aggregated and sold by one organisation. Process Bastion EBA assist both corporations that sponsor sports and entertainment properties to value these assets and sporting clients to help them maximise the value of their commercial assets. This work provides them with a unique insight into the value of sponsorship assets which has been applied to the following process: 1. Inventory Analysis & Valuation Bastion EBA conducted an independent review of each sponsorship asset of Golf Australia, Golf Victoria and Golf SA. This review included meeting key representatives from each entity and reviewing current sponsorship inventory and agreements for sold properties. This work allowed Bastion EBA to assess the current value of sponsorship inventory for each entity by considering the distribution and reach, asset quality, market value and media value of each asset. Note: Details of individual sponsorship included in the attached Bastion EBA report are commercially sensitive and have therefore been redacted. 2. National Extrapolation The sponsorship inventory values determined for Golf Australia, Golf Victoria and Golf South Australia were then benchmarked against other states and extrapolated to obtain a national inventory value using the following factors: Number of golf members Economic contribution Number of clubs Existence and scale of Australian Open and State Open Championships Number of sponsors in each state (provided by Golf Australia and checked against desktop research of State websites) Declared sponsorship revenue (provided by Golf Australia from the financial information that was also provided to KPMG) Bastion EBA value the total inventory of Golf Australia and the States at $8.1m. This is the value obtained by the sponsor investing in our assets. Market analysis indicates that golf sponsors obtain an ROI of 2x to 4.5x for their investment. This factor is used to discount the inventory value to obtain the price a sponsor would pay. 3 One Golf Valuation Bastion EBA then calculated the additional value of the national inventory of sponsorship assets when sold collectively under One Golf by applying their market knowledge to assess the impact of the increase in exclusivity and critical mass. 14

15 PART B Findings Working with both corporations that sponsor sports and entertainment properties and sporting clients, Bastion EBA have encountered the following difficulties that arise for a sport with a federated organizational structure: Separate state governance increases complexity and multiple stakeholders can lead to conflicting priorities impacting the value of sponsorship assets; Inconsistencies in the development, rollout and implementation of national programs and initiatives; and Separate sponsorships with competing brands that devalue sponsorship assets. Bastion EBA assessed the current structure and process of Golf Australia and each State and Territory selling individual sponsorships as fragmented and broken: Golf has 96 individual sponsorships in place across 33 categories Instances where States share common sponsors through individual agreements Multiple instances of agreements with competing sponsors in a category No national deals in valuable categories such as energy, banking and private health insurance. This approach reduces the value of sponsorship assets as even where national brands such as Mazda and NAB are investing in a state it: Is typically funded by smaller franchise or local budgets which do not include leveraging or activation spend Prevents the sponsor from truly maximizing the value of the partnership by owing the sport and aligning with its values Can act as a deterrent for sponsors in the same category when approached to sponsor larger national properties The One Golf model will address the factors and increase the value of sponsorship assets by creating a critical mass and providing exclusivity, these two factors are explained in detail: 15

16 1. Exclusivity The impact of providing a sponsor with exclusivity has an incremental benefit of alignment - a brand associating exclusively with a sport in a recognisable fashion allows the values and success of that sport to transfer to the brand. Sponsors rank exclusivity as the most important factor when considering a sponsorship deal. The current structure is cannibalising the potential benefit any sponsor may get from a positive association with golf due to the existence of competing sponsors. Bastion EBA estimated exclusivity to be worth between $395k and $890k per annum. 2. Critical Mass Ultimately brands utilise sponsorship as a means to sell more stuff, to do this they require engagement with the final consumer. One Golf provides this engagement as integration increases the overall pool of golfers and with it the potential to talk to previously closed categories, such as Energy providers. Holistic packages with annual and national exposure are also of more relevance to national and multinational businesses which will allow golf to increase the value of sponsorship agreements by accessing dedicated activation and leveraging budgets. Bastion EBA estimated critical mass to be worth between $705k and $1.3m per annum once the model is established which they estimate to be a 3 year time frame. The combined impact of exclusivity and critical mass to sponsorship income under One Golf is estimated to be between $1.1m and $2.2m per annum once established.

17 PART B ONE GOLF Vertical Integration Exclusivity Incremental Alignment Value Creating Critical Mass Platform Builds Value Proposition Associated findings Bastion EBA also identified that the high number of smaller sponsorship packages increases operational costs and creates inefficiency as the deals can be relatively time consuming to sell and service when compared to larger deals. While this was not factored into the above calculations this finding is consistent with the findings of KPMG that highlighted that the duplication of effort and processes is resulting in waste. Golf Australia assessment Placing a value on the opportunity to maximise revenue through increased sponsorship is inherently more difficult than valuing cost savings as it requires a greater level of assumptions and estimates. The logic of the Bastion findings that revenue will increase due to national exclusivity increasing the value of our current assets and critical mass driving new sponsorship opportunities with categories that are not currently represented is sound and easily understood. To test the resulting valuation we have incorporated the Bastion findings into a National commercial strategy to demonstrate how this increase could be achieved. Current State Uplift in Sponsorship New Markets At present the combined current GA and State/Territory sponsorship income from properties is $2.7m, consisting of: State sponsorship income (excluding GA distributions of National agreements) of $1m-$1.2m; and Greater Commercial Value Golf Australia sponsorship income of $1.6m from 4 Major Partners and 6 Official Suppliers. 17

18 One Golf National commercial strategy As displayed opposite, successful implementation of a National commercial strategy of a portfolio of 6-8 Major Partners and 8 Official Suppliers receiving exclusivity and critical mass is expected to increase sponsorship income from $2.7m to $3.4m: National Major partners investing a combined $2.2m (currently $800k) -- $650k increase across the 4 existing National Major Partnerships through exclusivity -- $800k increase through the sale of 2-4 new National Major Partnerships using assets such as MyGolf, a National Digital Platform and other Participation Programs as they are developed. National Official Suppliers investing a combined $1.2m (currently $800k) -- $400k increase through the sale of 2-4 new National Official Supplier Partnerships in categories such as beer, wine and apparel. exclusive categories of National Partners would provide further additional revenue. Under the One Golf commercial strategy National Major Partners will own a specific Golf Australia asset or program and also have involvement in the Women s Australian Open & State Opens allowing partners to annualise their investment in golf and increase the value they obtain from the partnership. Similarly National Official Suppliers will partner all National and State events providing exclusivity and increased exposure for the Sponsor. The appeal of this strategy for sponsors has been proven, for example the National Host Plus agreement was increased by over $100k for the recent inclusion of State assets. This increase was obtained in spite of the fact that were no guarantees of true national exclusivity and the partner knew that NSW and Queensland support would be difficult to secure. Gemba also provided a valuation for the commercial rights to participation programs as part of their One Golf analysis. Gemba valued sponsorship of MyGolf at $350k when sold under a One Golf model. Ability for additional specific investment in State Opens provided this does not conflict with 18 v

19 Major partners PART B NATIONAL SPONSORSHIP ASSET SOCIAL GOLF AMATEUR SERIES CLUB SUPPORT PLAY GOLF WEEK MY GOLF SWING FIT ORG.AU MAJOR PARTNERS Vacant Vacant Vacant CATEGORY Airline & Loyalty Program Motor Vehicle Superannuation Golf Equipment Retailer Vacant Vacant Vacant COMMON PLATFORMS STATE OPEN CHAMPIONSHIPS ONE GOLF INCREASE Increase investment of current partners by $650,000 $800,000 of new investment from new major partners Offical suppliers NATIONAL SPONSORSHIP ASSET OFFICIAL BEVERAGE SUPPLIER OFFICIAL APPAREL SUPPLIER OFFICIAL ACCOM. SUPPLIER OFFICIAL SUPPLIER OF HIGH PERFORMANCE WAO FOREIGN TV RIGHTS OFFICIAL TIME PIECE OF WAO OFFICIAL BEER SUPPLIER OFFICIAL WINE SUPPLIER PARTNERS Vacant Vacant COMMON PLATFORMS STATE OPEN CHAMPIONSHIPS ONE GOLF INCREASE $400,000 increase from new National Official Supplier partnerships in categories such as beer, wine & apparel (upgrade) 19

20 6. Aligning programs & strategy 6 Purpose KPMG identified the following benefits of One Golf: Consistent brand and marketing messaging delivers a greater impact; The ability to leverage combined marketing resources and cross-promotional activities nationally improves awareness; and National approach and common set of priorities increases the efficiency of resources invested. KPMG does not possess the market knowledge to quantify the potential value of these benefits through the impact on participation. Therefore Gemba were engaged by Golf Australia and the Australian Sports Commission to evaluate and quantify the participation outcomes that flow from the above benefits. Process Gemba have worked extensively with a number of sports in Australia in designing and commercialising their participation programs. As a result they have extensive knowledge of this market and performance of different programs. Their insights and data demonstrate that the market leading sports for participation capitalise on aligned behaviour and centralised operations. While this has typically been achieved through top down funding financed by broadcast revenue the resulting increase in alignment is a critical factor. Gemba reviewed the current state and assessed the One Golf model and determined that it will deliver aligned behaviour and centralised operations to golf. Given this assessment Gemba then modelled the increase in participation and club membership that would result from golf achieving conversion, acquisition and retention rates of the market leading sports that also benefit from aligned behaviour. Gemba s method included adjusting for the impact that the extensive television coverage of programs such as Auskick has on participation and commercial value. Findings Gemba identified the following issues that compromise the performance of participation programs for golf: Fragmented product offerings for juniors and social players create competition in these markets which reduces the conversion rate to National programs. Misalignment results in multiple go-to-market strategies diluting the investment in product development, delivery and supporting systems. No single means of effective communication with grass roots participants and delivery partners reduces the brand awareness for programs. Gemba assessed that the One Golf model will lead to increased participation through: Enhanced ownership and control of the entire golf pathway; Consistent branding, go-to-market strategy, programs, events and communication; and 20

21 PART B The creation of national programs that provide single points of entry, reduced confusion and clutter within the market and the opportunity for golf to capture a larger proportion of the participant pool. Assuming these factors allow benchmark conversion, acquisition and retention rates of the market leading sports, One Golf would lead to the following participation outcomes: Participation in national programs increasing from 144,000 to 189,000. Associated findings Gemba conducted additional analysis to value the potential sponsorship income of these improved participation programs which they valued at $400k. If realised this income would most likely come from the sale of participation programs such as MyGolf and SwingFit to the categories of sponsors seeking critical mass identified by Bastion EBA. As such this value has not been included in the overall figure but supports the findings of Bastion EBA. An additional 14,000 club members increasing affiliation fee revenue by an estimated $500k per annum. 21

22 One Golf will provide a financial benefit of between $2.8m and $4.3m 22

23 PART B 7. Combined benefits 7 The cost savings, value of sponsorship assets and participation outcomes of One Golf were evaluated independently to ensure experts in each field were used. Bringing together all the assessed benefits, One Golf will provide: An annual financial benefit of between $2.8m and $4.3m Increased participation in national programs from 144,000 to 189,000 An additional 14,000 club members In reality the benefits of One Golf cannot be achieved in isolation of each other as they are all inter-related and dependant on the aligned behaviour that only a single governance and management structure can provide, for example: The assessed cost savings require a single governance structure to allow the full consolidation of functions such as accounting, legal and HR. Simply centralising these back office functions does not reduce the duplication of tasks to the same extent. commercial sales which is also a critical factor in increasing the value of commercial assets as it will ensure exclusivity can be guaranteed to sponsors. The assessed cost savings from the removal of duplication and efficiency includes the consolidation of IT systems which are used to support participation programs. This is more easily achieved and offers a greater saving where programs requiring support are also aligned. A National approach and common set of priorities increases the efficiency of resources invested which will improve the quality of participation programs underpinning the assessed participation increases. Ability to leverage combined marketing resources and cross-promotional activities nationally improves awareness but requires central control to ensure consistency. Sale of sponsorships at a national level improves the value of sponsorship income particularly when sponsors can be provided with access to a single National brand or program to align with. $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- Cost Savings Sponsorship Affiliation Fees Benefit Summary Breakdown, Lower & Upper Estimations Range Source: Gemba, Bastion EBA & KPMG Lower Upper The assessed cost savings from the removal of duplication and efficiency includes the consolidation of 23

24 8 What this means to golf Club Support One Golf is the single biggest opportunity to grow our capacity to invest in the sport and it is totally within the control and influence of golf to achieve. Effective investment of this benefit will be the catalyst to grow the game and provide an enduring benefit to the future health of Australian golf. The following outlines how the assessed benefits of One Golf could potentially be invested to help grow the sport. Current issue The long term trend of declining club membership is placing increasing pressure on Club viability. There is also a decline (across all sports) of the number of volunteers willing to be involved on club and district committees. Areas where additional resources will significantly help: Club volunteer education and training program $150k p.a. Intensive Club Development Program 12 month program for a smaller number of clubs (i.e ) that allows them to be more effective in the long term $150k p.a. Significant increase of field officers (8-12) to be based in specific regions and work directly with clubs providing professional expert advice in strategy and governance, financial, facility and workforce management and membership and marketing strategies, including National participation programs. $700k p.a. Total investment: $1million p.a. 24

25 PART C Implementation of MyGolf Current issue Research across all sport consistently shows that participants are more likely to consider a sport later in life if they have been exposed to the sport from an early age, junior participation is critical to the future health of the game. Whilst the Joint Venture with the PGA has been effective to a point, barriers remain that we need to address for the program to grow to the desired levels: Awareness of the MyGolf brand is poor, just 8% or parents are aware of the program compared with 70%+ for market leading programs such as Little Athletics, Auskick and Learn to Swim. The cost of kits to schools and clubs is dampening the growth of the program. Market leading programs such as Auskick and In2Cricket provide free kits and deliverer training allowing them to dominate the delivery channel. Areas where additional resources will significantly help: Increased marketing support for MYGolf - $250k p.a. Provision of free/subsidised school kits - $75k p.a. Provision of free/subsidised club kits - $75k p.a. Implementation of a National MYGolf Drive, Chip and Putt championship in conjunction with Augusta National Golf Club - $100k p.a. Total investment: $500k p.a. 25

26 Whole of game & membership promotion Current Issue There is a need to increase the marketing of golf in Australia and to raise its profile. A common refrain heard from clubs by GA and State Associations is that we as governing bodies must do more in these areas. Some key examples are: We are not financially equipped to fully capitalise on special events such as Adam Scott winning the Masters Tournament and we need to collectively be able to make better use of these opportunities. Areas where additional resources will significantly help: Increased general game marketing support - $500k p.a. Increased PlayGolf Week marketing support - $200k p.a. Increased marketing support for programs - $100k p.a. Total investment: $800k p.a. We do not put an adequate level of marketing support behind our programs that restricts their ability to grow. Initiatives such as Playgolf Week would strike a far bigger resonance with clubs and potential golfers with greater marketing support 26

27 PART C High Performance Current Issue The two major areas where additional resources would significantly strengthen our High Performance program are talent identification and the network and access we have to our High Performance coaches in Australia. While we have had a successful program over a period of time an organised well-structured and resourced talent identification program would pay enormous dividends. Operating more far reaching talent identification programs and creating a broad based junior squad of players that receive opportunities to improve and stay in the game before they get to State and National Squad programs will: Areas where additional resources will significantly help: Increased resources for Talent Identification and the creation of a broad based junior squad - $200k p.a. Additional resources to cater for greater employment of coaches and other essential support staff providing more regular and consistent access to elite players giving them the greatest opportunity to realise their potential. - $250k p.a. Total Investment: $450k p.a. Help us greatly strengthen the depth of elite players and ensure golf has a high performance pathway that is able to compete with other sports and retain our best players. Importantly it will allow us to significantly increase the depth of our female players which will deliver significant benefits to Australian golf. We currently have some of the best coaches in the world, but unfortunately we do not have adequate resources to have the desired access to these coaches. Sadly many of our top high performance coaches spend more time coaching non-elite club golfers than our future champions. There is also a lack of female coaches in the High Performance program and this needs to be addressed. 27

28 Championships Current Issue Our Amateur and Professional Championships are important for the profile of the game and play a critical role in player development. These championships, particularly the Australian Amateur Championship and our State Opens would benefit from some additional investment: The presentation and scale of the Australian Amateur Championship could be improved markedly with a small investment which could in turn increase some commercial opportunities around the event. Areas Where Additional Resources will Significantly Help: Increased investment into existing Amateur Championships - $100k p.a. Increased investment into existing and new State Opens - $550k p.a. Total Investment: $650k p.a. The opportunity exists to secure and bolster existing State Opens and increase their profile and playing fields. Potentially the opportunity exists to revive and regenerate State Opens not currently being held. 28

29 PART C The combined allocation of the $3.4m One Golf dividend in this manner will deliver: Effective investment of this benefit will be the catalyst to grow the game and provide an enduring benefit to the future health of Australian golf. Improved club training and development programs Fulltime professional resources based in regions providing expert assistance to clubs. MyGolf operating as the true nationally recognised program for junior golf. Cost Savings $1.2-$1.6m ONE GOLF BENEFITS Sponsorship $1.1-$2.2m Affiliation Fees $500k Effective national marketing strategy increasing participation and delivering new members to Clubs. Fulltime High Performance coaches based in each State to improve the identification and development of elite players. Increased investment in programs Additional investment in Australian Amateur Championship and our State Opens to promote and showcase the game. Larger participation base increases the value of sponsorship assets Effective program investment increases participation 29

30 9 Proposed model The major components of the One Golf model are as follows: All staff in Australia employed by Golf Australia Limited initial staff changes except for re-deployment in centralised functions i.e. finance. Refinement would occur over time as the organisation evolved State CEO s would be on One Golf Management Team and report to One Golf CEO One centralised revenue process. i.e. all revenue to be collected by Golf Australia Corporate functions such as accounting, legal and HR performed centrally State organisations remain in place as shell companies that retain existing assets Income from retained State assets would be focused on each individual state to use to progress National strategy or specific state priorities, as per the State Board directions. State Boards would remain in place with defined responsibilities. State Boards would continue to elect the GA Board Constitutional changes required for States and Golf Australia One National Brand i.e. Golf Australia with state divisions sitting underneath i.e. Golf Australia Queensland Division Only national programs in place, with some state customisation possible. An analysis of the role of State Boards is provided on the following page 30

31 PART C G O V E R N A N C E National rules and behaviours Common set of rules & GA Board State Board behaviours across all MA s Aligned to One Golf strategic goals CEO S E N I O R M A N A G E M E N T State Management National governance structure Limited change to current Golf Development & Marketing C O R E F U N C T I O N S Local GD governance structure State Boards role detailed on page 32 High Performance Local HP Rules & Handicapping Digital & Comms Local Rules & Handicapping Local Comms State Management oversight Core functions Managed nationally Delivered locally Championships Local Championships Australian Opens Commercial Finance, Legal & HR C O R P O R A T E F U N C T I O N S National corporate functions Nationally consistent Nationally managed & delivered 31

32 State Board Role Role/ Function Current Model One Golf Election of Golf Australia Board Election of the GA Board Yes Yes Formulate National Strategy Formal process for input into National Strategy (note 1) No Yes. 1 2 times per year Level of State input into National Planning and Programs (note 2) Low Medium High Implement National Strategy Employment of Staff (note 3) Yes Staff employed by GA States involved in selection process and annual review of key staff Directing/ Supervising Staff (note 3) Yes No Review and Monitor Ongoing National Performance Keeping the GA Board accountable Yes Yes Providing formal feedback/advice to GA on performance in the State (note 4) N/A Yes to be provided on a quarterly basis with an detailed annual review GA Board Meeting with State Board on annual basis Yes Yes Monitor Ongoing State Performance State Board meeting schedule 5 12 meetings per annum Approx. 4 meetings per annum Providing formal and informal feedback on State staff to GA (note 3) No Yes CEO Presenting information to State Board (note 5) Yes Yes at board meetings Overseeing State assets Yes Yes Legal responsibility for State operations Yes No Other State Functions Connection with Clubs/ Districts Yes Yes State Teams Preparation Yes Yes State Ceremonial Duties Yes Yes 32

33 PART C Notes As stated in the Guiding Principles of Governance Reform we must not lose local ideas, energy and innovation. State Boards are essential in providing a local contribution that ensures local nuances are taken into account and the game of golf grows throughout Australia. Note 1: - National Strategy/Annual Conference While Golf Australia and the States have been able to improve the alignment of our strategic plans this has been achieved through an ad-hoc process and differences remain. Under the One Golf structure there will be greater State Board input into the planning of the Nation Strategy which will occur through: National Strategic Planning Conference would be held annually over a two day period. Conference will go beyond just State Delegates and CEOs and it is expected that 4-6 people from each State will be in attendance. Opportunity for State Board input into the National Strategy and in particular: provide advice about local issues/nuances outline areas of State priority Promotes increased understanding of both strategic and major operational objectives by State Boards. Note 2: - State Board Input into National Planning & Programs A requirement of the new structure will be that there needs to be greater State Board input into the planning of the programs and activities that support the National Strategy. The practical mechanisms to ensure this occurs are: Golf Australia and State Boards to meet annually to: establish performance targets in the state which will also be included in key State staff KPI s to ensure accountability evaluate existing and new initiatives provide feedback about the views of clubs and districts Note 3: - Staff Employment, Supervision and Evaluation Ultimately all staff will be employed by Golf Australia and subsequent direction and supervision will be the responsibility of the Golf Australia CEO. However, State Board involvement in the employment process for agreed key State staff and ongoing involvement in setting their priorities through agreed KPI s and assessing their performance against these (and by extension performance of the State branch in these areas) is a critical component in ensuring these key appointments have the required local knowledge to provide the appropriate local contribution. The practical mechanisms to ensure this occurs are: State Board representative on the interview and selection panel. State Board to nominate local priorities which will be included in KPI s and targets provided these priorities do not conflict with the agreed National strategic direction. State Board to provide input into the performance assessment of agreed key staff. State Board performance assessment input to be a component of salary reviews. Note 4: - Review of Performance in the State A key role of the State Board will be to monitor and assess performance within the State. This process would occur biannually with the State Division Board, and GA Board & Staff. The timing of this is yet to be finalised, although one of the sessions would be included in the National Workshop. Note 5: - Information Presented to State Boards The following information will be provided to each State and reported by State CEO s at State Board Meetings: Divisional Profit & Loss Statements for each State detailing financial performance. Performance against key strategic issues Participation numbers across all programs. Other State specific information as directed by State Board to support State Functions outlined above. 33

34 10 Timeline To date The following work has been conducted to this point: Governance Sub- Committee Formed to identify the issues that needed to be addressed and to outline the imperatives of any new governance model. Operating Model Accenture provide probono assessment of the Operating Model and potential benefits of change. Operation KPMG brought into investigate cost savings and efficiency analysis between GA & MA s. Governance Advisory Committee Formed to provide advice and a state perspective evaluation of reports. Aggregation Golf Australia evaluates & aggregates all the work into a consolidated document AGM GA was requested to investigate potential governance reform. GA Board Commissions three pieces of work, whilst having ongoing involvement and consultation with the ASC. Participation Gemba engaged to look at the impact of One Golf on participation. Commercial Bastion EBA engaged to evaluate the commercial upside of One Golf. 34

35 PART C Future Subject to the endorsement of State/Territory boards Golf Australia anticipates the following indicative process: Presentation Golf Australia presents One Golf model findings to each of the seven MA s. Endorsement State Boards will make their decision on the model. Released State One Golf information published and released to Clubs. Implementation Planning Golf Australia to develop detailed Implementation Plan which will involve ongoing consultation with MA s. Implementation Subject to approval and the final agreed Implementation Plan the integration process will begin Feedback Golf Australia collects feedback from MA s. Further discussions undertaken. February to June Engagement with MA s Golf Australia will work with Member Associations in the broader engagement phase with Member Constituents 35

36 Stephen Pitt CEO, Golf Australia Gerard Kennedy CFO, Golf Australia ABN Level 3, 95 Coventry Street, South Melbourne, VIC 3205