Non-profit Organization Failure Case Study

Resource: Magnolia Therapeutic Solutions Case
o How did your decision compare to the board's decision? Why did you make the decision you did? What effect did organizational infrastructure and culture have on your decision?

o What do you think were the main causes behind the problems that Magnolia ultimately suffered? What would you have done differently to avoid those problems?

o What differences in acquiring revenue, accruing expenses, and training key personnel are there between a nonprofit organization's inability to thrive and a for-profit organization's inability to thrive? Cite at least three differences.

o What is Magnolia's deficit in terms of risk management

case study is below:

Magnolia Therapeutic Solutions Case Study
Magnolia Therapeutic Solutions is a nonprofit organization in New York City that specializes in psychotherapy for individuals diagnosed with Post Traumatic Syndrome Disorder (PTSD). The organization was created in 1998 by Mary Stewart. Mary recognized a significant demand for therapeutic services in NYC for individuals suffering from PTSD. Despite a large body of research showing the positive effects of psychotherapy on PTSD symptoms, at the time, there were very few organizations in NYC that specialized in the use of professional psychotherapeutic services to work with PTSD individuals.

Seizing the opportunity to provide a much needed service, Mary established Magnolia Therapeutic Solutions (henceforth referred to as Magnolia) and ran the organization as the Executive Director. Due to the unique position of the organization and a number of funding sources willing to provide start-up grants to Magnolia, the organization grew quite quickly. In 1998, the organization began with six employees, and each employee wore many different hats to ensure the sustainability and growth of the organization. However, by 2000, the organization's staff size had grown to 34. Thanks to the continued growth of demand for services and the tangential supply of grant money, the organization was performing quite well. Staff members were now no longer required to perform more than their main task, the annual budget was now over $1.3 million, and the organization had already received many prestigious awards and accolades for the services that they have performed for NYC.

On September 11, 2001, NYC suffered one of the most devastating acts of terror ever inflicted on the United States. The NYC local government was quick to act and immediately called in a variety of services to provide assistance in the overall relief effort. Magnolia, having been noted for its specialty in PTSD services, was asked to attend to the needs of the upsurge of individuals suffering from PTSD because of the terrorist attack. NYC provided a sizable, 1-year grant to the organization to help it meet capacity issues that resulted from increased demand for services. Subsequently, Magnolia hired more counselors and used the remaining grant money to increase other administrative services within the organization.

The assistance Magnolia was able to provide to the PTSD victims of the terrorist attack was substantial. Considering the great success that the organization enjoyed, when constructing the 2002 budget, Mary insisted that Magnolia included the 1-year grant that it received for 2001 because she believed that the grant would be renewed for 2002. Additionally, despite the ailing economy, Mary placed steeper demands on the development department to raise even more money than 2001 by budgeting anticipated grant revenue higher for 2002. The total budget was $2 million dollars and was approved by the organization's board of directors. If you were on the board faced with the decision to approve or reject this budget, what would you do?"

Ultimately, the organization suffered a $500,000 shortfall in the 2002 budget when the large city grant was not renewed and revenue fell short of predictions. Subsequently, Mary was forced to layoff one third of the staff. This had a very large and negative affect on the remaining staff and caused the organization to stagnate over the next few years.