Magnolia Case Study
Amber Meenach
BSHS/373
Scott Kersh

Magnolia Therapeutic Solutions is a non-profit organization based in New York City that helps provide psychotherapy for those suffering from PTSD (Post Traumatic Stress Disorder). After the traumatic events of 9/11/01 when terrorists attacked out Twin Towers, Magnolia was granted extra funds from the state of New York to help treat victims who were suffering due to the attack. Due to the upsurge of clients Magnolia now was having to service, they increased staff and administrative services. Mary Stewart, the founder and executive director of Magnolia, counted on the grant from the state to be renewed for the following year, an when it was not granted Magnolia found themselves $500,000 short of their expected budget and ultimately caused the organizations downfall. In this paper I will be discussing how I would have decided things differently in the case of Magnolia Therapeutic Solutions.
Board Decision
The first mistake that I feel was made was that the board allowed Mary Stewart to count the state grant for another year, without any indication that it would be offered for a second year. Money that is not guaranteed should never be worked into the budget. This is why there was such a significant short fall in the outcome versus what was expected. As a board member, I would have proposed that we remove the grant from the budget, and only included the funds that are already in place for each fiscal year. If the grant from the state were to be offered after the budget was proposed it could have easily been added. Counting funds that are not guaranteed to be given to the organization was why so many employees had to be laid off, and eventually led to the demise of the organization as a whole.
The second mistake that I feel was made was hiring so many new employees due to the rush of new clientele. Taking on so many new clients does require more employees, but they should have been hired on a temporary basis. So that they were hired knowing that the job would not be a permanent one, thus eliminating layoffs, and eliminating the negativity that was felt by the remaining employees. The grant money from the state was only agreed upon for one year, and if extra help was needed, it should have been only for that one year, until the grant was offered the following year. According to the case study, Magnolia’s employees had always done several jobs within the organization, thus saving time finding employees, and money since they were only paying the same employees that had already been in place. This is a great plan for any non-profit organization, and Magnolia was no exception. Even if this was not possible at that time, due to the dramatic increase in clients, fewer employees should have been hired to do several jobs within the organization. This also would have prevented the layoffs from happening, or at least lessened the number of employees that were laid off.
The third mistake I felt Mary and the board made was allowing Mary to increase the amount that was expected from fundraising. Fundraising funds can fluctuate from year to year, and to expect the development department to raise more money, especially with the economy, seems unrealistic. The board should have never allowed for any more fundraising funds than was usually allowed on the budget, and any increase in what money was received from fundraising could have been recorded in the book keeping at a later date.

Organizational Infrastructure and Culture
The organizational infrastructure did have a lot to do with my decisions. I felt that before the 9/11 terrorist attack Magnolia seemed to be thriving, and doing very well in keeping their doors open to help people. Someone within the infrastructure should have seen the downhill effect that some of these decisions would have ultimately caused, however, everyone agreed to the prospective budget for 2002. Culture had no effect on the decisions that I made for Magnolia.
Non-profit Vs. For-profit
There are several differences between a non-profit, and a for-profit organization and how they acquire revenue, accrue expenses, and train personnel. The first and most obvious is the fact that while a for-profit organization gains revenue through offering a product or service for a fee; non-profit organizations gain most of their revenue through fundraising, donations, and grants from outside sources. Accruing expenses is also different in that a for-profit organization’s goal at the end of a fiscal year is to come out with a higher number in revenue then they do in expense. The main goal in a non-profit organization is achieving balance between revenue and expense. As far as training personnel a non-profit organization typically relies heavily on volunteers to help them reach their goals, while still keeping overhead down and this is not typical at all for a for-profit organization. A for-profit organization typically does not have volunteers, only employees.
In closing I believe that had Mary and the board of directors thought through their decision to approve the budget for 2002, and not have taken such a dramatic risk by assuming funds that were not promised, Magnolia would still be a flourishing non-profit organization. Taking unnecessary risks can be detrimental to any organization, but especially in the case of a non-profit organization that depends on a specified amount in order to keep the doors open. Magnolia Therapeutic Solutions eventually failed simply because they made plans based on uncertain terms.