In September, Larry Gammon, President of the Easter Seal Society of New Hampshire, Inc., was reflecting on some of the changes that had been made to the organization. Eighteen months ago, when he took over as President of the Easter Seal Foundation of New Hampshire and Vermont, Inc., the organization had an operating budget of $8.5 million, and was headed toward its fourth consecutive operating deficit: $650,000. The organization’s line of credit was at $950,000 and the bank had indicated that it would not increase it any further. In short, there were no reserves, no borrowing power, and a frustrated board and staff. (See Easter Seal Foundation of New Hampshire and Vermont, Inc. (A) for background details).

Mr. Gammon commented on the changes he had made:

We had a proud tradition, a strong service base, and influential and committed volunteers. Our task was to capitalize on our strengths and eliminate and/or improve our weaknesses.

We began with a commitment to live within our means. Our strategies for doing so were designed to reduce fixed costs and improve revenues. Some major activities that were put into place to meet the above objectives were:

1. Restructure. We eliminated the Foundation, and merged it into the Society, keeping the Boards intact as one board. We eliminated Vermont as a corporation, and laid off the Chief Executive Officer. The Easter Seal Management Corporation was dissolved, and the only surviving subsidiaries are Special Transit Service, Inc. [STS] and Agency Realty, Inc. [ARI]. There is only one CEO. This has saved over $200,000 in duplicate accounting, management and support costs.
2. Sell the Elderly Housing Program. We realized early that we were over our heads in this project, and sold all rights to the feasibility studies and planning to a hospital in town, recouping most of our direct costs and securing a long term service contract to the project.
3. Sell property that was underutilized. We sold a major property that was only one-third occupied, with a lease back arrangement that is cost effective to us. This permitted us to reduce the credit line by $350,000. We vacated a facility in Plymouth, combined the service with our Laconia operation, and placed the building on the market. We developed a cooperative arrangement for our Camp with the Boy Scouts, running the program in their facility in a mainstream model. This saved us over $100,000, while providing a better service. Our Camp site is now for sale.
4. We reduced our Business Office costs by over $150,000, Clerical by $50,000 and Occupancy by $100,000. All in all, our indirect rate has gone from 19.9% in May last year to 14.8% in September this year. At the same time, our operating budget has increased by $1,000,000, reflecting an increased emphasis on service delivery.
5. We increased our marketing/sales program by establishing a full time department for the same, and concentrated on (and succeeded in) getting new grants and fees from the State of New Hampshire.

Our activities above are a reflection of a changing environment and not an indictment of the previous administration. In fact, it is likely that much of what we did would have been accomplished by my predecessor, if faced with the same issues. . . .

Assignment

1. What is your assessment of the changes that Mr. Gammon has made? What else might have been done?
2. With the benefit of 20/20 hindsight, what would you say were the mistakes, if any, that were made by Mr. Gammon’s predecessors? What, if anything, would you have done differently?