I don't think there is any hard and fast solution to when it is best to close a chapter. Having been involved on the collegiate and alumnae local and international levels, each and every situation is so unique. We lend the chapters resources, ensure regular touches and trainings and do as much as we can to ensure their long-term success. I think if there are a string of circumstances, that might impact a chapter closure. However, it also depends on the available resources to rehabilitate that chapter, as well.
The DePauw issue was not handled well, but I like to think this is atypical of the sorority in question, and of all sororities.
I do think if you're going to close a chapter, immediately reopening it is not a good solution. Like it or not, the chapter's reputation as an unsuccessful chapter is going to carry on campus and it needs time to go away from the campus consciousness.
There's nothing overtly wrong with cancelling a group of members who are not maintaining sorority standards, but it is foolish to think that these actions won't have repercussions or lead to multiple voluntary cancellations amongst other members. Even when only one or two people are laid off from a job, there are long-term and deep rifts within the company and the company's confidence is shaken-- the same is true within a student organization like a sorority. People are scared, start leaving, rumors begin swirling-- it's rarely a winning situation.
Like it or not, sororities are very much a business-- a non profit, but a business. I think we do the best we can, but mistakes happen and human nature happens.
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