Situational Analysis:

The nature of business of Atlanta Home Loan was a mortgage lending and pay familiarity based
in Atlanta, Georgia. Al Forin is the founder. His company grew rapidly. In 2002, Al Forin had
taken a leave of absence to return to school for his MBA. He was left with the decision to either
sell the AHL, shut it down or hire someone to manage it as it was a profitable trading with broad
growth potential. So he decided to find someone to run his Lending Company (AHL). After
considering his options he finally settled with Joe, he was one of AHL’s officers, he had 20
years’ experience in the mortgage lending business, impressed with his background, credentials
and performance, Al decided to make Joe a deal to be his partner. In July 2002, Al and Joe had
a verbal partnership agreement. Al stared with a $40,000 to start Atlanta Home Loan, while Joe
would invest $8, 400, which was used to rent an office and purchase some office equipment’s,
and Joe and Al would share AHL’s profits equally. After ten working days after becoming Al
partner, Joe only showed up in the office only three times. Because of Joe’s bad performance,
Al did not feel comfortable letting Joe continue to run the company. Al made Joe a deal. In
exchange for terminating their agreement, Al agreed to pay Joe 100% of the fees earned on
loans that Joe closed. Al then find a new manager to run his business while he was at school,
but this manager lasted only for three days. Al was so desperate to find someone to run the
company, Al picked his first option which was Joe. Joe apologized. So Al and Joe reinstated
their previous agreement. Al started monitoring AHL from afar, in the following weeks, Joe went
to the office only four times. One day he took a large batch of loan files home and didn’t return
to the office for 3 days. Al turned to Wilbur. AHL would make commission payments to Wilbur at
100% on all loans closed less a monthly licensing fee of $5,000 or 10% of all revenue. Wilbur
would also be responsible in managing the entire staff. Joe thought tha Al owed him money, he
wanted his $8,400 investment bac, but Al refused, none of Joe’s loans had closed since August,
Al got suspicious, in response Joe filed a civil lawsuit demanding payment. Wilbur basically took
over AHL, stole from the company and incurred charges that Al never knew. Al lost his
business, sensing defeat, Al finally asked the Georgia Department of Banking and Finance to
withdraw AHL’s mortgage banking license. Not only had he lost his business and his income, he
had also lost his credit rating since he had incurred bills that he was unable to pay. And in
February of 2003, Al was forced to sell his home.
Problem Statement:
Analysis:
Alternative Courses of Actions

Elements of Results Controls

Albert (Al) Fiorini should continue running his business of Atlanta Home Loan (AHL) which is
mortgage lending and financing company. He needs to fight to regain control over AHL perhaps
only about $25,000 worth of equipment left. In order to get back his business Al can apply
elements of results controls which require four steps.

First, Al must define the dimensions. He must defining the right performance dimensions
although is critical because the goals that are set and the measurements that are made shape
employees views of what is important. In this case Al must define AHL dimensions on which
results are desired such as for profitability, customer satisfaction or product defects. This
dimension will help company to achieve the target.

Second elements of results control is measuring performance on these dimensions. In this

elements measurements, which involves the assignment of numbers to objects, is a critical
element of a results control system. Al will measure his company performance after defined it in
the first elements. It might many different results measures can be linked to rewards. Al can
measures of financial such as net income, earnings per share and return on assets or in
nonfinancial measures such as market share, growth, customer satisfaction and the timely
accomplishment of certain tasks.

Third elements are setting performance targets for employees to strive for. Performance targets
or standards are another important results control system element. In a results control system,
target should be specified for every performance dimension that is measured. In this case Al
can choose two basic ways to affect behavior. First, stimulate action by providing conscious
goals for his employees to strive for but most people prefer to be given a specific target
to shoot for. Or second Al can allow his employees to interpret their own performance. So Alcan
run his business by setting the performance targets for employees to achieve it.

The last elements in results control are providing rewards to encourage the behaviors that will
lead to the desired results. Rewards included in incentives contracts can be in the form of
anything employees value, such as salary increases, bonuses, promotions, job security, job
assignments, training opportunities, freedom, recognition and power. Al can rewards his
employees by anything employees values as to appreciate them with the effort that they give to
the company.
Recommendation:

Beside from results control, Al must take an action control as the most direct form of
management control because they involve taking steps to ensures that employees act in the
organization’s best interest by their actions themselves the focus of control. Action controls take
any of our four basic forms.

First basic are behavioral constraints. It is negative form of action control. They make it
impossible or at least more difficult for employees to do things that should not be done. In the
case of AHL, constraints can be applied physically or administratively. For example, Al uses
multiple forms of physical constraints, including locks on desks, computer passwords and limits
on access to areas where valuable inventories and sensitive information are kept. So, not
everyone can access to areas where valuable without permission or knowledgeable from Al. For
administrative constraints can also be used to place limits on an employee’s abilities to perform
all or a portion of specific acts. By using this constraints, Al can restrictions of decision making
authority to his employees so they cannot take any action for their own benefits.

Next the pre action reviews involving the scrutiny of the action plans of the employees being
controlled. Reviewers can approve or disapprove the proposed actions, ask for modifications or
ask for more carefully considered plan before granting final approval. In AHL, Al can form of pre
action review during planning and budgeting processes characterized by multiple levels of
reviews of planned actions and budgets at consecutively higher organizational levels.

Then, the basic form in action control is action accountability. It involves holding employees
accountable for the actions they take. The implementations of action accountability controls
requires defining what actions are acceptable or unacceptable, communicating those definitions
to employees, observing or otherwise tracking what happens and rewarding good actions or
punishing actions that deviate from acceptable. Al can take action control to the employees by
looks for the four implementations. Al might need to communicate to his employees either
administratively or socially. Administrative modes of communication include the use of work
rules, policies and procedures, contract provisions and company codes of conduct. The desired
actions do not have to be communicated in written form but Alcan be communicated face to
face in meetings or in private to his employees. Employee’s action can be observed directly and
nearly continuously as is done by direct supervisors on production lines. Besides that, Al also
can track by examining evidence of actions taken such as activity reports or expenses
documentation. Action accountability is usually implemented with negative reinforcements. That
is, Al might be defined more often linked with punishments than with rewards to his employees.

The last one is redundancy which involves assigning more employees or machine to a task than
is strictly necessary at least having back up employees or machine available also can be
considered an action control because it increases the probability that a task will be satisfactorily
accomplished. In AHL Al can assign more back up computer since his business running by
using telemarketers because his worked from their home using telecommuting systems.