HB SP Product Number TCG 213 II-II: CRIMSON PRESS CURRICULUM CENTER THE CRIMSON GROUP, INC. Harlan Foundation Harlan Foundation was created in 1953 under the terms of the will of Martin Harlan, a wealthy Minneapolis benefactor. His bequest was approximately $3 million and its purpose was broadly stated: income from the funds was to be used for the benet of the people of Minneapolis and nearby communities. In the next 50 years, the trustees developed a wide variety of services. These included three in- fant clinics, a center for the education of special needs children, three family counseling centers, a drug abuse program. a visiting nurses program, and a large rehabilitation facility. These services were provided from nine facilities, located in Minneapolis and surrounding cities. Harlan Founda tion was affiliated with several national associations whose members provided similar services. The foundation operated essentially on a break-even basis. A relatively small fraction of its revenue came from income earned on the principal of the Harlan bequest. Major sources of revenue were fees from clients. contributions, and grants from city. state, and federal governments. Exhibit 1 is the most recent operating statement. Program expenses included all the expenses associated with individual programs. Administration included the costs of the central office, except for fund-raising expenses. Seventy percent of administration costs were for personnel. The remain- ing 30 percent included depreciation on administrative equipment, supplies, rent, utilities, postage, and similar items. During the upcoming year, the foundation had decided to undertake two additional activities. One was a summer camp, whose clients would be children with physical disabilities. The other was a seminar intended for managers in social service organizations. For both of these ventures, it was necessary to establish the fee that should be charged. CAMP HARLAN The camp, which was called Camp Harlan, was donated to the foundation last year by a person who had owned it for many years and who had decided to retire. The property consisted of 30 acres, with considerable frontage on a lake, and buildings that would house and feed some 60 campers at a time. The plan was to operate the camp for eight weeks in the summer and to enroll campers for either one or two weeks. The policy was to charge each camper a fee sufficient to cover the cost of operating the camp. Many campers would be unable to pay this fee, and financial aid would be provided for them. The financial aid would cover a part, or in some cases all, of the fee and would come from the general funds of the foundation or, it was hoped, from a government grant. As a basis for arriving at the fee, Henry Coolidge, the foundation's financial vice president, ob- tained information on costs from the American Camping Association and from two camps in the vi- cinity. Although the camp could accommodate at least 60 children, he decided to plan on only 50 at a time in the first year, a total of 400 camper-weeks for the season. With assured financial aid, he believed there would be no difficulty in enrolling this number. His budget prepared on this basis is shown Exhibit 2. Mr. Coolidge discussed this budget with Sally Harris, president of the foundation. She agreed that it was appropriate to plan for 400 camper-weeks and also that the budget estimates were rea- sonable. During this discussion, she raised some questions about several items that were not in the budget. One such item was the foundation s central off1ce, which would continue to plan for the camp, provide the necessary publicity, screen applications, make decisions on financial aid pay bills and do other bookkeeping and accounting work. There was no good way of estimating how many full time equivalents this work would require. HARLAN FOUNDATION Exhibit 1. Operating Statement For the Most Recent Year Ended June 30 Revenues Fees from clients $1,024,437 Grants from government agencies 1,899,543 Contributions 790,277 Investment earnings 24,553 Total revenues $3,738,810 Expenses Program Expenses Rehabilitation $1,449,667 Counseling 157,621 Infant clinics 312,007 Education 426,234 Drug abuse 345,821 Visiting nurses 267,910 Other 23,280 Total program expenses $2,982,540 Support Expenses Administration (1) $480,326 Dues to national association 24,603 Fund raising 182,523 Other 47,862 Total support expenses $735,314 Total expenses 3,717,854 Net Income $20,956 Note 1 Divided 70%!30% between salaries and other administrative expenses. Salaries are for Ms. Harris, Mr. Coolidge, and ve staff members. Ms. Harris earns a salary that is 50% higher than Mr. Coolidge. Exhibit 2. Budget for Camp Harlan Staff salaries and benets $90,000 Food 19,000 Operating supplies 4,000 Telephone and utilities 9,000 Insurance 15,100 Rental of equipment 7,000 Contingency and miscellaneous (5%) 7,200 Total $151 ,300 -'r'- UV0309 Schmidt replied, somewhat tentatively, \"I thought this store was too rich for our blood. Besides, its growth rate has peaked out, and it already carries a line competitive with ours." Rhoads was now considering four alternatives: 1. Take Schmidt to dinner and afterwards give him a stern lecture about his performance and what he would have to do to shape up. 2. Same as option 1, but place him on 90-day probation as well. Recall him to Charlottesville for additional intensive training. 4. Terminate his services. The Problem of the \"Missing Salesman\" Paul Irons had been a Battlefield agent for two and a half years. Before joining Battlefield, he had been a furniture buyer for a department store in Philadelphia, Pennsylvania. The president of Battlefield had asked him to leave that position to become Battlefield's agent in New England, a territory then producing almost no sales volume for Battlefield. Because of the extensive sales- development work required in the six New England states, Irons was given a \"guaranteed draw" of $8,000 a month against his commissions. Irons was an exceptionally handsome man, and he had a reputation for \"walking the straight and narrow path\" and for being a very religious and family-centered man. He did not drink, smoke, or swear. He was 35 years old, a college graduate, and the father of ve children. Shortly after taking over as national sales manager in July 2000, Rhoads received a telephone call from Irons, whom he had not yet met. Irons told Rhoads that marital difficulties were detracting from his job performance, and he asked Rhoads to be patient with him for a few weeks until he could resolve some of his personal problems. In late August, during a routine review of sales trends by accounts, Rhoads was alarmed by the situation with Irons's largest account. He detected that that store, one of the largest and most prominent in New England, showed a steady decline in Battlefield sales during the past year. Rhoads's 2000 sales projection indicated a $250,000 decrease in this account from the actual 1999 sales volume. In September, Rhoads and Irons visited this store together and had a long discussion with the buyer, Ken Smith, about the Battlefield line. Smith, indicated that he was attempting to work his way out of an extremely heavy inventory position on some ofhis other lines and that, as soon as he had cleared up this problem, he would focus his attention on the Battlefield line. Smith readily admitted that he had been letting floor display and retail-training efforts on the Battlefield line go by the board while he concentrated on moving out his overstocked lines. 'I. What qualitative ( nonnumber; political ethical, organizational culture) analysis should be done? . What quantitative analysis needs to be done? . What other data would have been helpful for this case? 4. If you were the decision maker, would you proceed with the summer camp & seminar? Or what would you decide to do and why? Five staff members worked in the central office administration. earning an average annual salary of about $36,000. As a rough guess. about half a person-year might be involved in these activities. However, there were no plans to hire an additional employee. The workload associated with other activities usually tapered off somewhat during the summer, and it was believed that the staff could absorb the extra work. At the camp itself, approximately four volunteers per week would help the paid staff. They would receive meals and lodging. but no pay. No allowance for the value of their services was in- cluded in the budget. Finally. the budget did not include an amount for depreciation of the camps facilities. Lake- front property was valuable. If the camp and its buildings were sold to a developer. perhaps as much as $500,000 could be realized. THE SEMINAR The foundation planned to hold a one-day seminar in the fall to discuss the effect on social service organizations of some recent changes in income tax legislation and other regulatory devel- opments. (Although these organizations were exempt from income taxes, except on unrelated busi- ness income. recent legislation and regulations were expected to have an impact on contributions. investment policy, and personnel policies. among other things.) The purposes of the seminar were partly to generate income and partly to provide a service for smaller welfare organizations. In early spring. Ms. Harris had approved the plans for the seminar. The following information is extracted from a memorandum prepared by Mr. Coolidge at that time. I estimate that there will be 30 participants in the seminar. The seminar will be held at a local hotel. and the hotel will charge $200 for the rental of the room and $20 per person for meals and refreshments. Audio- visual equipment will be rented at a cost of $100. There will be two instructors. and each will he paid a fee of $500. Printing and mailing of promotional material will cost $900. Each participant will be given a notebook containing relevant material. Each notebook will cost $l0 to prepareand 60 copies of the notebook will be printed. I will preside. and one Harlan staff member will be present at the seminar. The hotel will charge for our meals and for the meals of the two instructors. Other incidental out-ofpocket expenses are estimated to be $200. Fees charged for one-day seminars in the area ranged from $50 to $495. The $50 fee excluded meals and was charged by a brokerage firm that probably viewed the seminar as generating cus- tomer goodwill. The $495 fee was charged by several national organizations that ran hundreds of seminars annually throughout the United States. A number of one-day seminars were offered in the Minneapolis area at a fee in the range of $150 to $250. including a meal