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DOVERCOURT RECREATION CENTRE – HEALING A RIFT Chen Rao wrote this case under the supervision of Professor Mary Weil solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright ©2014, Richard Ivey School of Business Foundation Version: 2014-08-11 “Given this poor year-end performance review, I must be honest, I am contemplating resigning.” John McCarthy, who had just been elected president of the board of directors at the popular Dovercourt Recreation Centre in Ottawa, was shocked to hear those words from John Rapp, the facility’s successful executive director. McCarthy had been recruited to improve board meetings that were unproductive and tedious, but he quickly realized that the ineffective meetings and declining board membership were merely symptoms of escalating tension between the executive director and the board. McCarthy had thus far persuaded Rapp to hang in until he had a chance to pursue some changes, but he knew that in July 2001 time was running out. McCarthy was confident that he could use his consulting background to deliver a solution to the conflict that threatened to undermine Dovercourt’s strong reputation in the community. He needed a plan and needed to act on it decisively in order to keep Rapp until the next board meeting. NON-PROFIT ORGANIZATIONS Non-profit organizations are different from for-profit corporations in a number of areas: ownership, transparency and profits.1 First, unlike for-profit corporations, non-profits have no clear owners or shareholders. Instead, they have special governance bodies to ensure their actions benefit civil society. Second, non-profits are subjected to rigorous accountability regulations and are vulnerable to public trust concerns. Finally, instead of aiming for profit maximization, most non-profits are mandated to break even by fiscal year-end. They often have a social mission, and a small full-time staff often leverages a large volunteer pool. Their funding may include government funding and private donations as well as revenue generated from providing services.
1 Jennifer Amanda Jones, “Social Enterprise: Making the Choice Between For-Profit and Nonprofit,” July 17, 2013, https://nonprofitquarterly.org/policysocial-context/22618-social-enterprise-making-the-choice-between-for-profit-and- nonprofit.html, accessed June 19, 2014.
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The non-profit sector has been steadily growing as a portion of Canada’s gross domestic product (GDP), accounting for $69.4 million dollars in 2001, up from $54.5 million in 1997.2 DOVERCOURT RECREATION CENTRE Located in an upscale neighbourhood in Ottawa with above-average earners, Dovercourt had a citywide reputation for being inclusive and client-oriented. More than 320,170 patrons visited annually, bringing in $1.2 million dollars in revenue. The success of Dovercourt’s many activities, including children’s programs, childcare, swimming, a fitness centre and rehabilitation programs, attracted people from even outer regions of the city (see Exhibit 1). As a registered charity, 20 per cent of Dovercourt’s operating budget was covered by the City of Ottawa. The city had a fee-for-service contract and provided a building for the centre. The remaining 80 per cent of revenue came from Dovercourt’s programs. Compared to many non-profits, Dovercourt was very much self-funded and relied on the popularity of its programs to pay the salaries of its 20 city staff members. For 2000, participants filled 150,708 spots in Dovercourt’s aquatic programs, 77,707 spots in the fitness programs and 53,232 spots for recreation programs. Also, 36,179 people rented equipment, and 2,350 participated in special events. These strong participation rates ensured Dovercourt had enough revenue to cover operational expenses. JOHN MCCARTHY McCarthy was originally recruited to help the board conduct better meetings. McCarthy graduated from Carleton University’s School of Public Administration in 1974. He acquired a broad range of experiences in engineering, operations and marketing as a manager in two of Canada’s largest corporations — Bell Canada and Nortel Networks (Nortel). McCarthy’s career coincided with the restructuring of the Canadian telecom industry and the emergence of the Internet. The required changes in corporate organizational design and development provided opportunities to work with leaders of the largest international consulting companies. McCarthy developed specific expertise in new product development and cultural change leadership. Leveraging the experience of leading a consulting firm inside a strategic business unit at Nortel, McCarthy started a boutique management consultancy, Superna Business Consulting, with two partners in Ottawa. The firm specialized in strategic planning and business case development of disruptive technology solutions for both private and public clients. After gaining a number of subcontractors, the three partners co-managed the practice for six years before selling it. Following his retirement from full-time consulting, McCarthy filled some of his time cycling, skiing and kayaking as well as serving on the boards of non-profit organizations and providing pro-bono career counseling to former employees and colleagues who continued to experience turmoil in their high-tech careers.
2 Statistics Canada Economic activity in the non-profit sector, 1997 to 2007, “Gross Domestic Product: Hospitals, Universities and Colleges and Core Non-profit Sector,” www.statcan.gc.ca/pub/13-015-x/2009000/desc/c4-g4-eng.htm, accessed June 19, 2014.
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EXECUTIVE DIRECTOR JOHN RAPP John Rapp, Dovercourt’s executive director, was a former city recreation employee. Passionate about community outreach to disadvantaged and marginalized populations, he was seen as a self-starter and an inspirational leader. Entrepreneurial, ambitious and idealistic, he pushed Dovercourt to be “all things to all people.” Rapp’s commitment to recreational leadership as a process to create social change made him in high demand for fitness and recreation service forums across the city. Rapp was revered by both his staff and the community. He wanted to build an expansion onto Dovercourt’s existing facility to provide more service offerings. He tried to push the board of directors to dedicate more time for fundraising and was disappointed when his suggestions caused acrimony and a clash with the board instead of spurring action. THE BOARD OF DIRECTORS At Dovercourt, the board of directors was responsible for hiring the executive director who, in turn, was responsible for hiring staff. Rapp had four directors and 11 full-time managers to ensure Dovercourt operations ran smoothly. On the board side, membership was typically about 12 people, and members often served up to six years. When McCarthy first joined the board, it included members from the public service, a high school principal and an accountant, as well as neighbours who wanted a say in the centre’s operation. The co- chairs at the time openly acknowledged their inexperience with rules guiding boards of directors and the roles of board members, yet strong board members were acknowledged as vital to Dovercourt’s viability. The board member who initially recruited McCarthy wanted him to help get the meetings back on track. Meetings dragged on for hours as minutes from previous meetings were sometimes subject to extensive debate. That meant new issues, such as rolling out new programs, weren’t voted on promptly. And the tedious nature of the meetings caused some board members to leave early or simply to check out mentally as they went on and on. CONFLICT ESCALATION The board and Rapp experienced several stressful conflicts in late 2000. A recurring issue was that monthly financial results did not track to the monthly budget forecast that Rapp had developed at the board’s insistence. Rapp felt this focus on meeting monthly targets was misplaced because the recreational business follows seasonal patterns. For example, in January and February, gym enrollment traditionally spikes due to New Year’s resolutions, while programs or camps designed for summer are typically geared toward children during their summer break. Rapp spent a lot of time explaining extraordinary expenditures versus projections in the monthly budget. The co-chairs of the board became increasingly frustrated with Rapp, given the volatile business cycle and their sense of the unpredictability of his actions. Rapp’s less formal management style did not fit well with their need for specific monthly accounting. Other board members who didn’t have a lot of experience sitting on boards also wanted predictability and sided with the co-chairs. The board began to vigorously
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develop policies and procedures to bring a better sense of order to the board meetings, but the enforcement of the new rules was spotty. One conflict that McCarthy worked to address involved board members concerned about locker rooms not being cleaned and a lack of parking spaces. McCarthy found that the building’s existing facilities were facing severe operational constraints mainly because patrons who were not local residents came in to use facilities or to participate in activities. He mediated a settlement in which Rapp agreed not to promote Dovercourt’s programs so widely in exchange for time during the week to pursue his outreach about the importance of recreational programs. McCarthy investigated Dovercourt’s financial performance and found that Rapp had a 10-year history of delivering revenue and profit targets at the end of each fiscal year. DECISION TIME Rapp was disappointed by the board’s constant interference with operational matters, its lack of commitment to fund-raising and its reluctance to take a direct role in championing community events. As a father of a new family, he felt obligated to look around for a higher salary and better benefits in a city job that not only paid more but also had no board criticizing his actions and issuing negative performance reviews. McCarthy had already successfully overhauled the board meeting structure by helping author an agenda with a schedule. He also provided guidance, coaching all board members as well as Rapp to better articulate rationales and decisions. However, he knew he needed to do much more to retain the centre’s key talent. McCarthy knew the existing situation with the unhealthy relationship between the board and Rapp wasn’t tenable, and yet with Rapp’s huge popularity in the community, he was worried about a potential decline in enrollment if Rapp was forced out of Dovercourt. The voices of children playing faded into the background as McCarthy walked home from Dovercourt, wondering if it would be possible to manage to get both sides to reconcile and to realign expectations.
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EXHIBIT 1: PROGRAMS AT DOVERCOURT COMMUNITY CENTRE3 1. Core Programs
• Fitness • Aquatics • Dance • Pottery • Sports
2. Day Camps 3. Childcare
• After School Program • Breakfast Club/Before School Program • PD Day Programs • Kinderkorner • Daytime Preschool Activities • After-Four Program at Turnbull School
4. Party Booking 5. Other Services
• Outdoor Rinks • Wading pool • Rentals • Cooperative playgroup • Financial assistance • Internet cafe
3 Dovercourt Recreation Centre website, www.dovercourt.org/programs-for-all/, accessed July 24, 2014
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