CASE STUDY IV-1 The Clarion School for Boys, Inc.— Milwaukee Division: Making Information Systems

CASE STUDY IV-1 The Clarion School for Boys, Inc.—
Milwaukee Division: Making Information Systems
Investments
John Young, Controller of the Clarion School for Boys, Inc.—Milwaukee Division, hung up the
telephone as the school bell signaled the end of another day’s classes. Young’s conversation with
Sean McHardy, the Superintendent and Chief Operating Officer of Clarion—Milwaukee
Division, was short and to the point. McHardy had called to confirm that Young would be
prepared to present his assessment of the current information systems (IS) at Clarion and propose
a direction for information systems at the organization for the next fiscal year at the quarterly
Board of Directors meeting scheduled for next week (June 13, 2006) in Chicago.
As an MBA student, Young had learned about the importance of an overall information systems
strategy. McHardy’s request, however, required Young to formalize a full plan, complete with an
assessment of the current situation as well as future projects and budgets. As Controller, Young
knew that the members of the Board of Directors were anxious to hear how Clarion—
Milwaukee’s current investment in information technology was paying off. Since 1998, when the
Board had approved a sizable investment in hardware and software, there had been little formal
monitoring of the system’s benefit.
Young had joined the Milwaukee Division of Clarion in November 2005. His previous job had
been as assistant controller in one of the divisions of American Chemical Company (ACC) in
Chicago; he
Copyright © 2010 by Stephen R. Nelson and Daniel W. DeHayes. This case was developed to support classroom
discussion rather than to illustrate either effective or ineffective management practices.

After 10 years, Young had tired of big companies and narrow jobs and decided to move into a
position with broader responsibility. However, most of his days at Clarion—Milwaukee had been
spent “fighting fires” rather than planning business strategy. Although his position was quite
different than he had expected, he felt the intangible rewards clearly surpassed those at American
Chemical. Young had developed several good friends at Clarion—Milwaukee and enjoyed his
daily routine.

The Clarion School for Boys, Inc.
The Clarion School for Boys, Inc., was founded in 1989 as “a refuge for wayward boys” by a
group of investors from Chicago, all of whom had grown up in foster homes but accumulated
considerable wealth during their lives. Their vision was to create an environment for boys who
had got into trouble that would provide them with a diagnosis and treatment plan as well as the
discipline and support needed to become productive members of society. They felt that they
could operate these schools efficiently and make a small profit in the process. During the next 10
years, Clarion established a diverse program of care that relied on the dedication and devotion of
this group of investors. The first school was opened near Chicago, Illinois, in 1991. Later,
Clarion opened additional schools near Detroit, Michigan (1995); Indianapolis, Indiana (1998);
and St. Louis, Missouri (2000).
The Milwaukee division was the second oldest school in the Clarion system, opened in 1993. It
was housed on the grounds of a former monastery and contained several buildings and 80 acres
of land on the edge of the city. As in other states, Clarion—Milwaukee Division depended
somewhat on the parents for financial tuition. However, over 80 percent of the revenue came

from per diem charges paid by government agencies for the housing and treatment of problem
boys.
The Clarion School for Boys—Milwaukee Division was classified as a private, for-profit
residential treatment facility for delinquent boys between the ages of 10 and 18. In 2006, there
were 128 full-and part-time employees who provided care and treatment to 120 students. Of the
9 residential child-care facilities operating in Wisconsin, Clarion—Milwaukee was the second
largest in terms of enrollment and the third most expensive in per diem charges. Unlike Clarion
—Milwaukee, most other child-care facilities were not designed to help children who were
exhibiting severe behavioral problems. As a result, Clarion—Milwaukee often functioned as a
“last resort” before a child was placed in a mental hospital or state correctional institution.
Clarion—Milwaukee’s ability to manage difficult cases was largely the result of its
comprehensive treatment program. The treatment effort was supported by a faculty-managed
school program along with modern crisis-management facilities and tracking devices. Since
1999, Clarion—Milwaukee’s strategy to differentiate itself from its competitors emphasized the
importance of using modern information technology in combination with a caring staff attitude.
Because the school typically dealt with potentially dangerous students, the ability to contact
support staff and access student records quickly was considered essential to effective
performance.
As operational expenses and capital requirements continued to rise, the Milwaukee school
became more dependent on increased per diem charges and higher enrollments to balance the
budget. During the 2005–2006 fiscal year (ending June 30, 2006), Clarion charged placement
agencies or families $150.50 per day for each student enrolled in the regular treatment program.
For students enrolled in the ISIS program, a premium care/rehabilitation facility opened in 2001
for students whose next option was a juvenile delinquency institution, the charge was $197.00
per day. Total per diem revenue for the 2005–2006 fiscal year was budgeted at $4,891,000, but
enrollment had been running well ahead of projections. As a result, there was considerable
interest in expanding the school’s capacity in fiscal 2006–2007.
All capital expenditures were allocated from the Capital Assets Fund of Clarion, Inc. Each
division competed with the other operations for access to this fund. Clarion—Milwaukee was
proposing three major projects for fiscal year 2006–2007:
• 1. a major upgrade to the IBM AS/400 computing system and associated software,
personal computers, and network,
• 2. the remodeling of a living unit to expand the ISIS program, and
• 3. the construction of a cottage that would accommodate 10 additional students for the
regular program.
Young would have responsibility for managing each of these major capital projects. All capital
projects exceeding $25,000 had to be approved by the Board of Directors of Clarion, Inc. The
Board was known for reviewing each capital request carefully.