Gradually, then suddenly

I wasn’t too happy to read about the closing of the Spectrum Health Club in my local newspaper, The Santa Clarita Valley Signal. However, I was not surprised. For many months my wife and I had been discussing the likelihood of it happening.

There is a quote attributed to Ernest Hemmingway on bankruptcy. When asked, “How did you go bankrupt?” He replied, “Two ways, gradually and then suddenly.”

The CEO of Spectrum Health Clubs said in an email to club members that the increase of the local competition was a main reason for the closing. Spectrum CEO Bud Rockhill, in an interview with The Signal, when asked about the location of the Valencia facility, said, “it was not an optimal location as far as visibility.”

I think the closing is in some part due to competition but I believe the location of this club is an asset. For years Spectrum had no issue attracting and retaining members and suddenly, after 15 years, the location is at fault?

The location is surrounded by thousands of potential clients living within walking distance; it is located just half a block away from a Hyatt Regency hotel; two free, covered parking lots are within 150 steps to the front door of the club and is it is the center of the third largest city in Los Angeles County.

The real issues, the ones the CEO did not talk about behind Spectrum closing this location, are internal, not external.

I have been a member for years and have witnessed first-hand the treatment of the facility, staff and clients and the dereliction of management responsibilities.

In any organization, successes and failures start and end at the top. Despite the desire of many who lead organizations to have others deal with the details, any person who wants to run a first class organization cannot neglect the details.

These details are what Jim Collins in his best-selling book Good to Great calls “the brutal facts of your current reality.”

I visited LEGOLAND for the first (and likely last) time this past summer, and watched the leadership team walk around with clipboards and pens, ignoring what was right in front of them: dirty, cracked concrete, litter, shabby food and retail facilities with a disengaged staff.

My experience was less than I desired so on leaving I thought (briefly) about writing a letter with a list of issues and recommendations but determined I would not waste my time when it was clear that those in charge cared less about LEGOLAND than I did.

At Spectrum, as a dues-paying member, particularly on weekends, I dealt with workout machines that were out of order; empty clean wipe dispensers; disengaged front desk staff giving half-hearted welcomes to members. Emails to management were not responded to. There was a lack of enforcement of posted rules in workout areas.

Most of this stemmed from one ill-suited club manager. During my one brief encounter with him I quickly realized that he did not like people nor did he want to have to deal with the issue I brought to him about getting a guest pass for our son.

Around this time, several new, competing clubs opened at lower initial prices, a standard tactic to gain volume (membership) in a market. The first thing that happened was that many of the Spectrum staff left. They left in a rush; no goodbyes, no mention of the mass departure.

This indicated to me that the manager lacked the respect and engagement of his team.

The second thing that took place was that Spectrum made a decision to hold and in some cases, increase prices.

When there is advertised value for this kind of pricing and profit strategy and it is understood by paying clients, it usually well received and accepted. There may be some price sensitivity but the increased revenue offsets the loss of membership volume.

But there was no plan to add more value to the membership.

There was no plan to add new members to the club.

There was no plan to retain current members from defecting to the new competing clubs.

This is a complete failure of leadership.

There are lots of lessons to be learned for every business with this story. The one I would like to pass along is this: one bad employee or a manager can start your company down a path that you may not be able to recover from.

Do you have a manager like this on your payroll? Or perhaps, another employee?

What are you going to do about it, and when?