The Clark Fitness Centre Group Management Essay

The Clark Fitness Centre FC group currently operates a HR strategy with a focus on the High Commitment Model with the inclusion of High Involvement Work System being central to this. This is evidenced by the MD, who has stressed to the staff of CFC his desire to see them view their jobs in a strategic sense and how their jobs contribute to CFC providing a superior product offering than that of their rivals. In this regard HR systems have been designed to improve the performance and rewards of employees of the CFC group, with HIWS being a key driver in the development of these systems.

Clearly the company is aware of the importance of these HR systems in creating core competences with a view to delivering a sustained competitive advantage for CFC, as it has created management positions within the HR department to specifically address HR systems such as:

Elliot Ryan: Manager of Compensation and Benefits

Ann O’ Byrne: Manager of Training and Development

Samantha Lake: Recruiting Coordinator

The company has the required HR systems in place that facilitate the implementation of the HR strategy throughout the company. However, poor customer service and below average retention rates indicate a failure within the HR department to deliver on the required objectives from the HR systems.

Therefore a HR plan that addresses these failures needs to be developed, and HR systems created, which will allow for successful implementation of the new HR plan throughout the company. Ideally, these systems should be designed in clusters, as a single system generally does not suit the various roles and personnel with the entire organisation.

Review of the Business Strategy in CFC

CFC Corporate Strategy from 2000 to 2008 has been one of rapid expansion and was revenue driven, which has resulted in a growth in market share. CFC opened 17 fitness centres in this period, but the expansion has now slowed. This slowdown in expansion has come about by a change of focus by the board of directors towards increasing profitability of each centre, as they wish to improve the bottom line performance of the company. Improved membership and retention will be vital to achieve this goal. This means that there has to be a change in the CFC corporate strategic thinking, and to achieve the new corporate aims, the SHRM strategies are going to have to be aligned to the business strategies.

CFC is clearly looking to implement a form of Best Fit HR strategy with organisational fit being the core of this strategy, which is the ability of management to mould their HR strategies to fit with other critical features of their particular business. A feature of this HR management relevant to this company is the notion that HRM varies across organisation life cycle stages, from birth, to growth, to maturity Baird & Meshoulam 1988. The change in Corporate Strategy from expansion (2000 to 2008) to a greater focus on profitability illustrates how companies change strategies depending on their life cycle, which is consistent with the research of Goldham & Descartes1997, (source).

Detailed below by Schuler and Jackson (1987) is a framework which links HR practices to the desired competitive position of the company. In looking to achieve a competitive advantage the company needs to develop the right mix from these variables.

Desired competitive strategy of the firm

(Cost leadership, differentiation or focus)


The required employee skills and behaviours

(extent of predictability in behaviour, degree of teamwork,

extent of concern for quality, propensity of risk raking)


The supportive HR practices

(Choices in staffing, appraisal, remuneration, training)


Expected HR outcomes

(Employee skills and behaviour relevant to desired competitive position)

Source: Adapted from Schuler and Jackson (1987

Porters ‘Focus Strategy’ (Source) is clearly in evidence here to help CFC achieve Competitive Advantage. The key issue is the organisational fit between competitive strategy and HR strategy, which has to be in line with their market position. CFC focuses on providing services to the whole family, so will provide services that cover different market segments.

Michael Porter’s typology of competitive strategies encompasses both aspects (Source), with cost leadership extolled by virtue of the decision to stabilise fixed costs and maintain low variable costs, and differentiation by the decision to strive for greater customer care and offer niche services.

Having examined the external environment, and completed a SWOT analysis and conducted market research into the Fitness Centre market – Appendix 1 for environmental analysis – it is clear that there has been a major shift in the fitness market in recent years. MDB Market Research Market Forecast 2011-2015 states that

“Between 2011 and 2015, the UK market for health and fitness is expected to increase, peaking at £5.18 billion (at 2010 prices) in the latter year.”

However, much of this growth has been in the budget end of the market as the Sunday Times (July 2012) reports.

“A surge in the number of low cost fitness clubs has led to the largest number of health clubs opening since 2007.”

Competition is clearly intensifying in the fitness centre sector, with most competition in the low cost sector, with providers such as Pure Gym, Fit for less, and Easy Gym driving down pricing in this sector.

The Sunday Times (July 15th 2012) also reports of new entrants into the up-market sector, with the news that US company Equinox, a chic US boutique gym chain, is planning to open a high end gym in Kensington London to cater for the luxury end of the market. The CEO of Equinox stated, “The luxury customer is still spending money”

As CFC has identified the upper end of the market as their target market, they need to adapt their HR strategies to reach this target market.

A starting point: Table Stakes

‘Table stakes’ which are defined as a “set of goals, resources and capable people that are appropriate to the industry concerned” (Hamel and Prahalad 1994) need to be attained at a minimum for an operation to be a viable. The Sunday Times market research reports show that it is easy to setup a low cost gym and attract the budget customer, and viability can be attained with a low cost, no frills strategy. However, as CFC does not operate in this end of the market, just attaining viability is not an option for them.

( Do we need another Heading here) (Competitive advantage)?

CFC will have to create a competitive advantage, which will differentiate them from competitors. To attain competitive advantage, CFC will have to develop HR strategies that will result in improved customer enrolment and retention. Buy in from General Manager’s is an essential part of the HR plan. Strategies developed at senior management level will have to be implemented locally by the GMs. Targets have to be realistic and realisable, as otherwise they will be doomed to fail.

However, the General Managers may have a difficulty here in that the strategic focus is on operating in a niche market, but at the same time attaining profitability and reducing costs. To achieve competitive advantage and reach the profitability targets, the focus in each gym will have to be on Customer Service and Customer Retention, and the HR strategy should be built around these aims.

A number of elements form the basis of the HR plan, and these are addressed in detail below.

Balanced Score Card

As CFC has multiple locations, and each gym has a local General Manager, the use of a business performance management tool is highly recommended to help the organisation reach its corporate goals. This measurement tool will give CFC senior and middle management more control over the running of the business, and therefore will make them better equipped to meet the strategic goals for each of the 17 gyms, which will in turn result in the attainment of their corporate goals.

The Balanced Score Card is a performance tool that could be used for this purpose by measuring both the company and individual gym viability and success. “What you measure is what you get” (Kaplan and Norton 1992)

The Balanced Score Card is a strategic planning and management system that aligns business activities to company goals, improves internal and external communication, usually through buy in, and monitors organisational performance verses targets.

Four perspectives of the Balanced Score Card, in order of priority to CFC

Learning & Growth: Staff focuses on customer service & retention

Customer: retention/usage

Internal process All-in-one family package, usages and retention alignment

Financial: Stable fixed costs. No further expansion, variable cost management, and bottom line management emphasis. Dual aspect, preparing for possible takeover target in the future

Prioritising these perspectives in importance CFC

alanced scorecard

Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996)

Under the balanced scorecard system it is evident that the performance drivers/leading indicators are all long-term outcomes, everything expect financial in this instance, as the financials are lagging /short-term indicators and possibly a fair reflection that shareholders are looking at a trade sale down the road.

So where is the balance? In this instance it is dual target, the financial bottom line and the learning and growth areas that are most important, and in both areas, employee skills and satisfaction are critical to customer satisfaction and financial outcomes. The learning and growth strategy requires that the intangible assets allow organisational activities and customer relationships to be performed at a higher level. This is based on three principals, strategic competencies, strategic technologies, and the cultural changes to allow the climate change.

The emphasis on the scorecard is to improve the quality of the implementation of a given strategy, but what about the concept of “Meta planning’? This is the ability to anticipate new environmental directions, and switch to new competitive challenges, which requires companywide flexibility (Source). Another option to consider is bench marking against industry norms or main competitors. This is clearly an issue that has been highlighted by retention rates falling 20% behind the industry norms.

Finally with any score card the whole emphasis is on the need to create a quality management team capable of implementing the company strategy. Recruitment, development, and team building need to be carefully managed. Management of the non-management workforce, creating a process of leadership, complimented by development with creative and flexible thinking will be critical to achieving this

Strategic Human Resources

An important element of a strategic plan for any organisation is the identification of the human resources that are core to the strategic competitive advantage of the company. One of the aims of the Human Resources Manager is to identify these people that are unique to the company by possessing a rare or valuable skill or knowledge. Strategies for retaining and involving these people are of paramount importance to the long term agility of the company.

Leepak and Snell (1997, 2007) (cited in Boxall and Purcell 2011, p. 115) in developing their ‘HR architectural perspective’ note

“That some forms of human resource advantage depend more on an elite group of employees than they do on the excellence throughout the workforce”.

The existing workforce is a fundamental strategic resource to the business. Hamel and Prahalad (1994) contend that this collective know how within a firm is deemed to be a core competence for the firm

Reward Strategy

A recognised strategy for improving customer service is a Reward Strategy. Employee and team rewards can result in significant successes in improving customer service. Each gym will have targets to reach as a team, based on the balanced score card, and should be rewarded as a team for being successful. This reward will be in addition to salary and could be bonuses, incentives or other benefits offered to employees.

A popular reward framework is the Star Model developed by Jay Galbraith in the 1960’s. The framework is made up of 5 categories of design policies to shape an organization and the behaviour of the people within it.

How the reward system is structured can have a major impact on employee performance, satisfaction and can even influence the belief the employee has in the value placed in them by the employer.

The reward strategy adopted should align with the corporate strategic goals and objectives. Therefore, CFC employees in each gym should be incentivised to offer high levels of customer service, with a view to acquiring new members and retaining existing members.

Performance Management

Performance Management will form a key element in the successful implementation of the HR plan. Performance can be seen as a factor of 3 elements, Ability, Motivation and Opportunity.

P = f(A,M,O)

Employees must first have the ability to perform the tasks required, they must be motivated to perform these tasks and they must be given the opportunity to complete the tasks. Performance of employees will be closely linked to the overall performance of the organisation and therefore the management of performance is vital to the overall success of the organisation in achieving the strategic goals.

Performance appraisal systems are formal methods for planning and evaluating employee performance. Having an effective performance appraisal system is a key component to managing performance effectively, as it acknowledges the development needs of individuals as well as the organisation strategic goals.

The balanced Score Card can be used as an appraisal tool, as the targets and aims will be built into the score card. If the employee does not know what is expected of them, they cannot be expected to perform effectively. Similarly, if the General Manager of the gym does not know what the performance indicators are, they cannot assess if the employees are meeting their targets.

The performance appraisal should also be viewed as a method for two way communication giving the employee the opportunity to express their views on their role and the organisation as a whole.

The performance appraisal should be carried out by the direct line manager for the employee and each manager is responsible for the performance of their direct reports individually and collectively.

Work practices

The MD has stated that he wants the staff to be strategic in how they approach their work by considering how their jobs contribute to CFC offering a more superior club experience than that of their rivals. This would indicate a High Commitment Model (HCM) is sought from the MD. To attain a HCM work system, which focuses on job enrichment, a high involvement work system (HIWS) would need to be developed. This would allow for the development of motivated employees, who would have an involvement in the design of work and implementation of these systems throughout the company. This would allow for employee knowledge to be used to improve work systems, which in turn would result in the development of work systems, which would be aligned to the strategy of the company.

Staff Training and Development

Member feedback has indicated that there is a problem with the quality and level of customer service being offered by the staff at the gyms. This issue needs to be addressed immediately as it is having an impact on how the business is being perceived by the customer and could have a major impact on the decision to renew membership for existing members. This is a major issue which could impact significantly on profitability. The MD has indicated that he is willing to invest in HR initiatives that show a return on investment. The training of staff in attaining high levels of customer service will achieve a return on investment. Exceptional customer service will add to the core competences of the company.

Initially an approach to training, which focuses on the ‘deficit model’, should be implemented. This model focuses on bridging the gaps in performance. This will assist in dealing with the customer service issue in a timely manner. However employee development should not be restricted to the deficit model over the long term, it should look to develop employee development and the firm’s agility over the long run (Dyer and Shafer 1999). Long-term development plans involve a more balanced mix of formal training and education and informal coaching and team building (Boxall and Purcell, 2011).

With this in mind the company should also look to the further development of executives, which equally add to the core competences of the firm. “The performance of companies tends to reflect the quality of their ‘upper echelons’” (Hambrick 1987, 1995, Norburn and Birley 1988)


Communication will very much be dependent on the type of management style which the company has decided to adopt. Purcell and Ahlstrand (1994:177) define Management Style

“As a distinctive set of guiding principles which set parameters for management action regarding the way employees are treated and how particular events are handled’.

As CFC is embracing HIWS, two-way communication from the company’s senior management, through to General Managers and individual employees in each gym, is going to be critical to the success of the strategic plans. It cannot be assumed that what top management seek in terms of management of employee voice will necessarily be enacted by middle and line managers (Boxall and Purcell, 2011). While CFC management may expect certain performance standards from employees, the General Managers may adopt a different plan, as they have to reach their individual targets. The role of the General Managers in bringing the strategic policies to life is increasingly recognised (Purcell and Hutchinson 2007) and this will be essential for CFC to meet their strategic goals.

Another area where communication can be of major benefit to CFC is communication between CFC staff and the customers. An area of concern for many Fitness Centres is Customer Retention, but CFC seems to have a higher than average turnover rate. Nuffield Health is a leading Fitness Centre organisation with 51 gyms throughout the UK. However, they suffered from higher than average turnover rates. Nuffield Health introduced a communication system between staff and customers that enabled them to reduce the turnover rate. ( As CFC’s turnover rates are 20% above average, a similar system could be introduced in CFC that has the potential to have an immediate impact on improving customer retention.


It is clear from the outset that CFC’s initial desire/requirement is to secure the primary order strategic goal of viability. This is clearly outlined by the expansion policy adopted since 2008 to ensure protection of the company bottom line and adds credence to the concept of a business preparing for a trade sale/amalgamation down the road. The business strategy outlined is clearly evidenced from The Schuler& Jackson model of cost management and enhanced quality.

CFCs HR strategy is presented relative to a high commitment model with engagement allowing for the cascading of strategy from management down, a high road model. Their stated outcomes/goals of a reversal in below industry average retention and increased usage is a clear reflection of high involvement work system, heavily reliant on staff buy-in from the cascading top end down communication strategy. The stated outcomes of retention, increased usage and superior service are further enhanced and reflected in their human resource systems.

CFC as an organisation has shown the varying cycles of the short and medium term of their business and are now preparing for a significant shift in strategy, which underlines the need to employ human resource management to align the HR plan with strategic goals. The perspectives employed, which lean strongly towards learning and growth, are based on the development of core competencies, ability to meet customer demands and to encourage usage and secure retention, with all of these elements leading to the primary perspective of financial viability.

Having considered viability and the strategic choices needed to secure same, it is then that we can consider the high-end strategy of sustained competitive advantage, upon which the business is pursuing a policy of differentiation. This, it is hoped, will secure a niche high end market position which allows CFC to best utilise the resources available to the business, the physical facilities, the advanced equipment available, the family package deal and the staff fully in line with both market and company demands.

Although evidence suggests that a best fit model allows the company the development of the connection, in this case between competitive advantage, employee behaviours and HR practices, we can take it one step further and break down the fit, examining the resource based view which will enable the firm to develop, integrate and manipulate resources, both human and non-human, to achieve profitability in a competitive environment. This perspective will outline clear focus on the quality of management process and workplace culture taking consideration of tangible and intangible assets. The introduction of the balance score card, allowing for performance management systems to be upgraded with the introduction of new KPI’s and the introduction of the short term deficit model will all have the desired effect of integrating HR strategy into strategic goals. Sources:

Boxall, P. and Purcell, J., (2011) ‘Strategy and Human Resource Management’

3rd Edition. Palgrave Macmillian

Dyer, L. and Shafer, R. (1999). ‘ Creating Organizational agility: implications for strategic human resource management’, in Wright, P. Dyer, L.,Boudreau, J. and Milkovich, G.(eds) Research in Personal and Human Management (Supplement 4: Strategic Human Resources Management in the Twenty- First Century). Stanford, CT. and London: JAI Press.

Organizational Design – Star Model

Higginbottom K. (2002) People Management

Purcell, J. and Ahlstrand, B. (1994) Human Resource Management in the Multidivisionsal Company,

Oxford: Oxford University Press.

Purcell, J. and Hutchinson, S. (2007) ‘Front -line managers as agents in the HRM- Performance causal chain: theory, analysis and evidence’. Human Resource Management Journal 17 (1) : 3-20.

Source: IBISWorld

Baird, L., & Meshoulam, I. (1988). Managing two fits of strategic human resource management. Academy of Management Review

Rutherford, Buller & McMullen 2003. Human resource management problems over the life cycle of small to medium sized firms. Human resource management

Appendix 1 – CFC Environmental Analysis

SWOT analysis


Well recognised and established gyms

Top class facilities available for members

Competitive membership rates

Personal Training & Exercise classes available

Modern and up to date equipment

Programmes to suit all people


Lack of membership retention/renewals

Poor attendance by customers

Poor customer service from staff


Continue to establish new gyms

Target more up market locations

Potential customers: target single people/Groups


Other Gym Competitors

Economic climate

Other alternatives for keeping fit (Home Fitness/Walking/Cycling)

PEST analysis


Government policy – health and fitness initiatives to increase activity

Tax relief, incentives or subsidies to increase participation



Location of Gyms

Luxury item?

Increased unemployment


Society’s attitude on their personal wellbeing.

Increased focus on health and fitness, with more personal responsibility


New technologies, online access, CRM.

Advanced gym equipment

Higher end Gyms need better equipment

Five Forces Analysis

Threat of New Entrants

The threat of new entrants is high in the gym industry for many reasons. Low cost budget gyms require little capital investment and depending on location this type of facility may suit the demographics of this area. There is no dominant player in the market and customer loyalty may not be high. New entrants can enter the market through acquisitions, privately owned gyms or a hotel gym. There are low switching costs involved for customers and also new entrants can get easy access to distribution channels.

Bargaining Power of Suppliers

The bargaining power of suppliers is relatively low as there are many players in the market supplying gym equipment therefore keeping the cost of equipment down. Customers are not fragmented therefore bargaining power is low from suppliers unless they are dealing in high tech equipment.

Bargaining Power of Customers

Customers can easily leave one gym for another depending on the cost and what suits their budget, therefore leaving some already struggling gyms exposed to closure.

Threat of Substitutes

The fitness industry faces competition from many substitutes as customers switch to alternatives such as home fitness, exercise videos, boot camps and running clubs.

Competitive Rivalry

Low cost budget gyms have increased in number and this segment of the market is very competitive. Competition in the higher end of the market is less intense, but the market is smaller.

Appendix 2 – Nuffield Fitness Centres

Success Story: Customer Retention at Nuffield Fitness Centres


Nuffield Health is one of the leading health organisations in the country, with 51 gyms throughout the UK. However, they suffered from a very common problem in the health and fitness market. Many of their members, having taken out an annual gym membership, lost motivation and ended their contract with only one month’s notice.

But, by identifying potential lapsers early on, a communications programme could be developed and an on-going relationship established, that would help them retain these members.


Our challenge was to:

Build a model to predict lapsing behaviour

Identify the members most in danger of lapsing

Provide useful statistics and descriptions on why a member was at risk, based on behaviour at gym, where they lived, type of contract, age, etc.

Identify the groups they should target for communications

Create a communications strategy based on the predictive model


We carried out a data audit of transactional information at all Nuffield gyms.

This looked at more than 20 variables – age, length of membership, gender, daily usage, contract type, etc – to identify the factors that most strongly indicated if a member was likely to lapse.

A score using the predictive model was reached for each individual, based on a combination of the most important socio-demographic, membership and transactional data sets.

A communications strategy – based on this score – with ideas on ways to keep members loyal, was then provided for the client to implement.


The model has an accuracy of a least 80% and helped to identify behaviour that indicated when a member might lapse.

Our innovative communications strategy helped to increase Nuffield’s member retention year on year by up to 5%. Nuffield Health was extremely happy with the results.

They said: We use the model to personalise our member contact strategy.

It enables us to tailor our messaging and offers depending on the member’s level of risk and likelihood to churn, and ensures we contact them at just the right time.

Services Provided by Nuffield Health fitness Centres

Gym classes







Cycle (Spinning)


Legs, Bums & Tums


Power Plate®







Class categoriesMuscular conditioning and toningAerobic fitness and calorie burning

Extend, relax and re energise

Express classes

Themed classes

Swimming pools

Personal training

Sauna, steam and spa



Free health MOT

Health assessments





Nutrition advice

Private doctor service

Weight management programme

Meal plan

Weekly journal

Terms & conditions

Relaxation spas

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