Review the case study below and respond appropriately. This case study is more comprehensive and requires a more in-depth response. In the paper, you should include the following: Why might a structured organizational assessment framework be a useful too

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Whispering Pines: Pining for Answers

Fredricka F. Joyner, David Frantz, Roger Crane

Indiana University East

This case and teaching note was prepared by Fredrick F. Joyner, David Frantz, and Roger

Crane and is intended to be used as a basis for class discussion. The views represented here are

those of the case authors based on their professional judgment and do not necessarily reflect the

views of the Society for Case Research. Copyright © 2012 by the Society for Case Research and

the authors. No part of this work may be reproduced or used in any form or by any means

without the written permission of the Society for Case Research.

Introduction

Lee McBride, an organizational consultant, was preparing for his noon meeting with Tim

Hayden of Hayden Architects. When he got to the meeting Hayden wasted no time, “Lee, I need

some outside help. I recently accepted a position on the board of directors of Whispering Pines, a

retirement home here in town, and I have quickly realized that I am in over my head.” Hayden

went on to explain that when he was recruited he was told that the position was “mainly

honorary,” and that there was not much to do as a director. Hayden confided in McBride that he

accepted the position out of a feeling of obligation. The by-laws of Whispering Pines require all

of the board of directors to be members of the Society of Friends, commonly referred to as

Quakers. Whispering Pines had a history of having trouble recruiting board members because of

this and, after doing some soul searching, Hayden determined that he felt a sense of duty to “step

up to the plate and accept the position.” “In retrospect,” he told McBride, “that may have been a

mistake. I don’t have a background in business, but even I can see that the place appears to be a

total mess. I can’t seem to get a clear answer or reliable financial information from the board

treasurer, Marge Upman, and I’m afraid that Whispering Pines may be in serious trouble. It

appears that we are losing money with our business model and surviving on donations, but I

can’t be sure. I don’t have the time or the expertise to dig into the operations and see what’s

wrong. I’ve heard good things about you and want you to take a look at the situation and give the

board some recommendations. Will you do it?” McBride responded that before he could commit,

he needed to know a little more about Whispering Pines.

Hayden went on to share the following details: Whispering Pines was founded in 1927 as a

retirement home for members of the Society of Friends. Over the years, this affiliation

requirement had relaxed and now anyone could be admitted. While called a “retirement home,”

Whispering Pines was technically just a boarding house that provided rooms and meals for

seniors. It was not a licensed nursing home, but the staff dispensed medicine that family

members provided (without taking formal responsibility for doing so). Hayden stated that, as far

as he could tell, this informal practice was based on the assumption that as long as Whispering

Pines had less than nine residents the state would not consider a nursing home designation,

although, Hayden stressed, “no one can really tell me where that number comes from.”

Whispering Pines was run by a manager who reported to the board treasurer. Hayden was not

quite sure what the manager’s duties and responsibilities were, but he did know that she collected

the rent, planned the meals, and purchased the groceries. “Exactly how she does those things and

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what type of controls the board has in place is unclear,” sighed Hayden. Very little financial

information was available and the board made decisions based largely on opinions and

perceptions. “I have a suspicion that we are losing money each month and that we’ve reached the

point where we don’t have any reserves left to cover the monthly losses. It doesn’t look like

we’re breaking even but there are no financials available to confirm or disprove this. We have

the capacity for nine residents but currently we only have seven, and, as far as I can tell, there is

no active recruitment or marketing plan. That is an overview but you need to know I don’t feel

confident about the validity of any of this information.”

It was with a slight feeling of being overwhelmed that McBride decided to take on the

engagement. After agreeing upon his fees for the project (which Hayden agreed to personally

cover), McBride said, “Okay, get me a copy of the by-laws, all the financial information you do

have, and anything else you feel may be valuable to me. Then, have Marge Upman tell the

manager that I will be stopping by for a tour of the facility and to interview her about the

operation. Please make sure that the manager knows she can be open and forthcoming with me.

I’ll also want to talk to the other board members. May I come to the next board meeting and meet

everyone?”

Information Gathering

McBride decided to devote the next day to research. First, he went on the Internet and did a

search using “Whispering Pines.” It turned out the facility did have a website, although there was

not much on it aside from some pictures of the facility and a history of the building. He next

researched the state requirements for a boarding house versus a nursing home and found that a

boarding house claims no responsibility to care for its residents, whereas a nursing home does.

He made a note to discuss this with the manager, particularly in light of the fact that Whispering

Pines employees were dispensing medicine to residents. In order to get to the bottom of the issue

of the number of residents influencing the type of business (nursing home or boarding house), he

called the State Fire Marshal since boarding houses fell under his jurisdiction. The Fire Marshal

told him that there was no arbitrary limit on the number of residents of a boarding house and that

the determination of maximum occupancy would be done during an inspection of the property.

In no case would a boarding house become a nursing home just because of the number of

residents. The Fire Marshal further stated that the maximum occupancy had probably been

determined in the past during a fire inspection and that perhaps had been misinterpreted by the

board over time to mean the distinction between a boarding house and a nursing home. Based on

what he had learned about the board’s operations and history, the Fire Marshal’s response made

sense to McBride.

Next, McBride decided to go and do a “walk-about” to get a first impression of the facility. He

had seen pictures of the home when it had once been the residence of prominent citizens. As he

drove up he noticed that the tall, stately, perfectly formed pine trees that used to line the

driveway were broken and spindly with some missing altogether. The once beautiful flower

gardens had turned to patches of weeds, and the lawn was in desperate need of mowing. The

driveway terminated at the back of the house next to some trash containers. There was no

identification sign at the entrance to the driveway off the side street, although there was a sign at

the front of the property facing the main street. All in all, the facility didn’t look appealing.

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Two days later, McBride stopped by to see the manager Gail Goodbroom. He was pleasantly

surprised to find that, unlike the exterior, the interior of the building was in great shape. Things

were neat and orderly with fresh flowers and a collection of well-tended antiques. Most of the

common rooms had dark oak paneling and many of the bedrooms had colorful, floral wallpaper.

During his conversation with Gail, McBride learned that she was responsible for all facets of

running Whispering Pines. She collected the rent from the boarders and made the bank deposits.

She planned all of the meals and purchased the groceries. Gail hired the part-time help and set

the schedule. As someone must be on-duty at all times, the total number of part-time staff varied

between four and six (although only one was usually present at any given time). Gail usually

worked from 7:00 a.m. to 3:00 p.m. Monday through Friday and prepared breakfast and lunch.

The part-timers filled in the rest of the time. Gail managed the payroll and paid all the other bills

as they came due. She made sure the residents’ rooms were cleaned every other week and

coordinated any necessary repairs to the building.

McBride also discovered that Gail completed these tasks with very few checks and balances in

place. She did not prepare a detailed list each month showing the date and amounts of rent

payments from each resident. In fact, in general she provided only the account totals to Marge,

the board treasurer. She purchased all the groceries at a local market with a debit card so the

funds were automatically deducted from the Whispering Pines account. Gail reconciled the

checkbook on her own at the end of each month. If she had any specific questions or problems

she called Marge, but since Marge spent the winters in a warmer climate, Gail was left to decide

things for herself much of the time.

During the tour of the building McBride made note of several potentially serious facility issues

that would need to be addressed with the board. He also noticed pillboxes on the dining room

table and asked Gail to explain the medication policy. Gail responded somewhat defensively:

“Marge tells me not to get involved in handling the medications, but that’s just not possible. The

families of the residents are supposed to put the pills that the resident takes each day in a

container and then we hand them out. However, most of the time the family either gives me the

whole bottle of pills or the pills are delivered here directly from the pharmacy. I put the pills in

the individual containers and we keep them, passing them out at each meal as appropriate. Marge

just doesn’t seem to understand that if I follow her suggestion and not get involved in the

residents’ medications, they just wouldn’t get them.”

The next day McBride received the packet from Hayden containing a copy of the by-laws, some

financial information from the past few years, and the application that each resident is required to

fill out. McBride noted with dismay that the financial information was limited to a simple

operating statement with virtually no supporting data. There were no balance sheets or cash flow

statements and it was clear that even the most basic accounting concepts, such as depreciation,

were foreign to the Whispering Pines board. McBride reviewed all of the documents provided by

Hayden and, together with the information that he had collected, prepared his thoughts for the

board meeting.

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The Board Meeting

The day of the board meeting came and McBride was at Whispering Pines by 9:45 a.m. for the

scheduled 10:00 a.m. meeting. Hayden arrived right before 10:00, but none of the other board

members showed up until around 10:30. The meeting finally got started at 10:45. After being

introduced to everyone McBride was asked to speak. He began, “I am a little confused. The by-

laws call for a 12-member board. There are only four here, which isn’t even a quorum. Where

are the other board members?”

“That’s been an ongoing problem,” responded Marge. “Based on our original mission of

“Quakers helping Quakers,” the by-laws call for all board members to be members of the Society

of Friends. That limits our pool of potential board members and we have a hard time getting

anyone to serve. At the present time we only have four board members. We do have an unofficial

policy that you cannot leave the board until you find a replacement for yourself but that doesn’t

work very well.” There were nods of agreement from the other board members. “Interesting,”

McBride said, “your board members must be Friends, but your residents don’t have to be. Is that

correct? “Yes, that’s right,” Marge responded. “And, why must the board members be Friends?”

“Board members must be Friends because that’s what the by-laws state,” she replied with a look

that conveyed that she thought McBride was a little slow on the uptake.

With that, McBride began to share his findings. He began by noting that Whispering Pines was

incorporated as a non-profit religious group, yet the only discernible connection to religion was

the requirement that board members must belong to the Society of Friends. “With the tax

authorities clamping down on non-profits who claim to be religious groups but do not

demonstrate that fact through their operations, this issue should be of great concern to the board.

You may lose your preferred tax status because your operations do not follow your Articles of

Incorporation, which state that you are a religious group providing a retirement home to your

members.”

McBride shared that during his tour of the facility he noticed several potentially serious health

and safety issues. He had found residents’ medication on the counter in the kitchen, available to

anyone at any time. Furthermore, there did not seem to be a clear indication of which

medication was for which patient. The fire extinguishers had not been serviced for three years

although the State Fire Code requires annual servicing. “You have a chairlift on the back

stairway to transport residents up and down. This chairlift requires an Elevator Operating Permit.

You must know this since the operating permit is posted at the bottom of the stairs next to the

chairlift. However, the permit expired two years ago and has not been renewed.” McBride

pointed out.

McBride then highlighted the almost total lack of financial systems. “My discussion with Gail

identified that there are no checks and balances with the finances. Gail collects the rents, makes

the deposits, uses the debit card, pays the bills and does the payroll all on her own. She even

reconciles the bank statement. Marge, your financial reports are based solely on what Gail tells

you with no possible way to verify the information, since Gail doesn’t even have receipts for the

expenditures. Finally, there don’t seem to be any formal minutes of board meetings or any

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formal financial reports. For example, the financial report included in today’s materials is not

dated and contains no backup detail justifying the expenditures.”

To conclude, McBride expressed concern regarding the fundamental viability of the business

model. He noted that the facility did not seem to be breaking even. Whispering Pines was

currently operating with 2 vacancies and did not have a recruitment or marketing plan in place.

From the financial information that did exist he could see that, for at least the previous two years,

the gap between income and expenses had been filled by donations solicited on an ad hoc basis

by board members. These donations accounted for a significant percentage of the income, yet,

there was apparently no discussion of or plan for either marketing or fundraising.

McBride’s report was met with stunned silence followed by a confused and unfocused

discussion. When it became clear that the board was paralyzed by the current situation, Hayden

stepped in. “Mr. McBride, it looks like we may need your help with some further analysis. What

would you suggest at this point?”

Next Steps

McBride had anticipated this question and had given significant thought to possible next steps.

“One thing that makes this seem overwhelming is that there are a variety of issues at play. I

would like to begin by using an organizational assessment framework to organize the issues so

that the board can begin to get a clearer picture of the lay of the land. I have used something

called McKinsey’s 7S framework in the past and clients have found it to be a useful tool. I think

I would recommend beginning there. I would also like to prepare a break-even analysis so that

the board can get a more accurate handle on the financial gaps that exist. Once we understand the

gaps, it will be important to focus on long-term financial viability and develop a plan to

successfully recruit and retain residents – and board members as well. Finally, I think we will

need to do some prioritization, and there are some great analytical tools to help with that

process.”

“Well,” said Hayden with a nervous laugh, “that should be enough to get us started.”

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Appendix A

Summary Financial Information

`

Other Financial Information: Room Rent: $750 per month ($9000 per year)

Entrance Fee: $300

Garage (storage) Rent: $225/month

* Garage rent is independent of number of residents

2010 2009

Revenue:

New Resident Fee 600 600

Room Rent 58,760 51,950

Resident Laundry Fee 617 519

Garage Rent* 1,610 2,025

Donations 12,798 14,792

74,385 69,886

Expenses:

Salaries 43,523 46,140

Food 6,038 5,269

Insurance 4,035 4,062

Utilities 9,626 10,062

Supplies 3,664 640

Repairs and Maintenance 4,637 3,958

Miscellaneous 269 461

71,792 70,592

Net Income 2,593 (706)

Years Ending December 31, 2009 and 2010

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Appendix B

Break-Even Analysis

No Resident Turnover

6 7 8 9

Income:

New Resident Fee 300 600

Room Rent 54,000 63,000 72,000 81,000

Resident Laundry Fee 570 665 760 855

Garage Rent 2,700 2,700 2,700 2,700

Donations 13,795 13,795 13,795 13,795

71,065 80,160 89,555 98,950

Expenses:

Salaries 44,832 44,832 44,832 44,832

Food 5,574 6,503 7,432 8,361

Insurance 4,049 4,049 4,049 4,049

Utilities 9,844 9,844 9,844 9,844

Supplies 2,152 2,152 2,152 2,152

Repairs and Maintenance 4,298 4,298 4,298 4,298

Miscellaneous 365 365 365 365

71,114 72,043 72,972 73,901

Net Income (49) 8,117 16,583 25,049

$6,038 / 6.5 = $929 Food Cost per Resident

$1,610 / $225 = 7 months of Garage Rent

No increase in rent. Room Rent: $750/month x 12 months = $9,000/yr

All expenses except Food averaged (2009 + 2010) / 2

Garage rented for 12 months @ $225/month

$51,950 / $9,000 = 5.8 Residents

$519 / 5.75 = $90 Laundry Fee per Resident

$5,269 / 5.75 = $ 916 Food Cost per Resident

$2025 / $225 = 9 months of Garage Rent

$58,760 / $9,000 = 6.5 Residents

$617 / 6.5 = $95 Laundry Fee per Resident

Break-Even Assumptions:

Number of Residents

2009 Information:

2010 Information:

Food Cost per Resident same as 2010

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Appendix C

Case Analysis Resources

Resources Related to the McKinsey 7S Framework

The McKinsey 7S framework has been widely-used for organizational analysis since the early

1980s (Fleisher & Bensoussan, 2007) and is included in many text books. In addition, there are

many excellent resources readily available on the Internet that can be used to support application

of this Framework.

Fleisher, C.S., & Bensoussan, B.E. (2007). Business and competitive analysis: Effective

application of new and classic methods. Upper Saddle River, NJ: Pearson Education Inc.

The McKinsey 7S Framework. (nd) Retrieved April 3, 2011, from

http://www.mindtools.com/pages/article/newSTR_91.htm

Resources Related to Issue Prioritization

The Interrelationship Digraph (ID) is one of the seven management and planning tools (Brassard,

1996). It provides a structured approach to issue prioritization that leads to identification and

analysis of cause and effect relationships among a set of +/- 6 – 20 critical issues. GOAL/QPC

(www.goalqpc.com) is the best source of support resources for this tool. Note: The ID has been

in use for decades, but in recent years has been incorporated into Six Sigma analysis, providing

an opportunity to extend the activity by exposing students to an important current management

trend.

Brassard, M. (1996). The memory jogger plus+. Salem, NH: GOAL/QPC