CASE STUDY IV-1 The Clarion School for Boys, Inc.—Milwaukee Division: Making Information SystemsInvestmentsJohn Young, Controller of the Clarion School for Boys, Inc.—Milwaukee Division, hung up thetelephone as the school bell signaled the end of another day’s classes. Young’s conversation withSean McHardy, the Superintendent and Chief Operating Officer of Clarion—MilwaukeeDivision, was short and to the point. McHardy had called to confirm that Young would beprepared to present his assessment of the current information systems (IS) at Clarion and proposea direction for information systems at the organization for the next fiscal year at the quarterlyBoard 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 systemsstrategy. McHardy’s request, however, required Young to formalize a full plan, complete with anassessment of the current situation as well as future projects and budgets. As Controller, Youngknew 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 theBoard had approved a sizable investment in hardware and software, there had been little formalmonitoring of the system’s benefit.Young had joined the Milwaukee Division of Clarion in November 2005. His previous job hadbeen as assistant controller in one of the divisions of American Chemical Company (ACC) inChicago; heCopyright © 2010 by Stephen R. Nelson and Daniel W. DeHayes. This case was developed to support classroomdiscussion 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 aposition with broader responsibility. However, most of his days at Clarion—Milwaukee had beenspent “fighting fires” rather than planning business strategy. Although his position was quitedifferent than he had expected, he felt the intangible rewards clearly surpassed those at AmericanChemical. Young had developed several good friends at Clarion—Milwaukee and enjoyed hisdaily routine.The Clarion School for Boys, Inc.The Clarion School for Boys, Inc., was founded in 1989 as “a refuge for wayward boys” by agroup of investors from Chicago, all of whom had grown up in foster homes but accumulatedconsiderable wealth during their lives. Their vision was to create an environment for boys whohad got into trouble that would provide them with a diagnosis and treatment plan as well as thediscipline and support needed to become productive members of society. They felt that theycould operate these schools efficiently and make a small profit in the process. During the next 10years, Clarion established a diverse program of care that relied on the dedication and devotion ofthis 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. Itwas housed on the grounds of a former monastery and contained several buildings and 80 acresof land on the edge of the city. As in other states, Clarion—Milwaukee Division dependedsomewhat on the parents for financial tuition. However, over 80 percent of the revenue camefrom per diem charges paid by government agencies for the housing and treatment of problemboys.The Clarion School for Boys—Milwaukee Division was classified as a private, for-profitresidential treatment facility for delinquent boys between the ages of 10 and 18. In 2006, therewere 128 full-and part-time employees who provided care and treatment to 120 students. Of the9 residential child-care facilities operating in Wisconsin, Clarion—Milwaukee was the secondlargest 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 wereexhibiting 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 itscomprehensive treatment program. The treatment effort was supported by a faculty-managedschool program along with modern crisis-management facilities and tracking devices. Since1999, Clarion—Milwaukee’s strategy to differentiate itself from its competitors emphasized theimportance of using modern information technology in combination with a caring staff attitude.Because the school typically dealt with potentially dangerous students, the ability to contactsupport staff and access student records quickly was considered essential to effectiveperformance.As operational expenses and capital requirements continued to rise, the Milwaukee schoolbecame more dependent on increased per diem charges and higher enrollments to balance thebudget. During the 2005–2006 fiscal year (ending June 30, 2006), Clarion charged placementagencies 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 2001for students whose next option was a juvenile delinquency institution, the charge was $197.00per day. Total per diem revenue for the 2005–2006 fiscal year was budgeted at $4,891,000, butenrollment had been running well ahead of projections. As a result, there was considerableinterest in expanding the school’s capacity in fiscal 2006–2007.All capital expenditures were allocated from the Capital Assets Fund of Clarion, Inc. Eachdivision competed with the other operations for access to this fund. Clarion—Milwaukee wasproposing 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 theregular program.Young would have responsibility for managing each of these major capital projects. All capitalprojects exceeding $25,000 had to be approved by the Board of Directors of Clarion, Inc. TheBoard was known for reviewing each capital request carefully.
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