“I’m outraged,” said Jan Sweeney, director of the Urban Life Program of White Hills Children’s Museum. “A few weeks ago, I asked the Design and Engineering (D&E) Department of the Museum for a bid to build the Central Artery Exhibit of my Cities and Streets Project. The D&E bid was $7,000 more than a bid she had received from a local construction firm, yet it seemed that the Museum’s director was encouraging me to use the D&E Department anyway.”
BACKGROUND
White Hills Children’s Museum was a medium-sized nonprofit museum located in northern California, just outside San Francisco. Its charter stipulated that is was to orient its activities and exhibits toward the environment, and it had been enormously successful in attracting a wide following of regular visitors. The museum also enjoyed a national reputation, and attracted a sizable number of visitors who were vacationing in northern California.
Recently, under the leadership of a new director, the museum had been organized into profit centers, and Ms. Sweeney’s program had been designated as one of the programmatic profit centers. As such, she was encouraged, but not required, to “purchase” all design and construction services for her program from the museum’s Design and Engineering Department, a service profit center. Both managers -- as well as all other profit center managers -- had the possibility of earning annual bonuses based upon the profits of their profit centers.
The services of the D&E Department ranged from the construction of relatively simple display cases to the design and manufacture of rather complex exhibits. Some of the recent exhibits the D&E Department had developed included a miniature waterfall and an artificial windstorm. Because of the complexity of the demands made upon it, and the resulting need for a wide variety of technical skills, the D&E Department needed a rather large staff. Since the museum was too small to fully utilize its staff, however, the Department also sold its services to other organizations, including several smaller museums located within a radius of about a hundred miles from While Hills. At the moment, because it was a slow period for most museums, the Department’s staff was not fully utilized. This was not an unusual situation.
The Central Artery Exhibit
In planning her Cities and Streets project, Ms. Sweeney knew that she would need to have several exhibits designed and built to rather exacting specifications. One of these was the Central Artery exhibit, a large scale illustration of the environmental impact of placing an . . . .
Assignment
- What is the impact on the Museum’s surplus of each of the options?
- Should Mr. Sampson intervene in this decision? Why or Why not?
- If Mr. Sampson intervenes, what should he do? Please be specific: For example, should he tell Ms. Sweeney to purchase the work for the exhibit from Mr. Harp? If so, at what price?
- If Mr. Sampson does not intervene, what do you think will happen? Is this good or bad for the museum in the short term? In the long term?
- What other advice would you give Mr. Sampson? Ms. Sweeney? Mr. Harp?