Atlanta home Case.
Overview of AHL.
AHL was a mortgage lending and financing company which was established by Alber Fiorini with only his initial investment of $40,000. AHL grew rapidly under Al’s supervision with employees consisting of four telemarketer and eight loan officers communicating via telecommunication to avoid traffic. These telemarketer’s on average should generate one lead per hour and additional leads were rewarded with performance bonus of $10 for each lead produced along with the hourly wage. AHL didn’t track the actual electronic link to processor’s file before submission instead Al monitored loan officers’ application through the credit inquiries requested for each application. At closing the deal brokers’ check would be mailed to AHL’s office or money would be directly wired to the AHL’s general account. He trusted some employees to run his business when he returned to school to earn his MBA. He had time constraint to find a reliable and trustworthy employee to run the business before he was headed to California.
Problems and Controls
Joe Anastasia was former loan officer in AHL for 2 months before he was made a partner with a verbal agreement to share equal profit and given Joe investments $8400 in AHL. As noted in the case that Al had short period of time to find someone professional to run the business so when Joe’s resume stated his personality as “dependable and honest” and he had work experience is mortgage lending firm and he was doing a better job in AHL then, it was enough for Al to make him a partner. He didn’t consider the fact that resume is usually biased and good performance in AHL for just 2 months doesn’t indicate reliability, it could be the case of excitement in the new job that might fade away in the following month. Moreover, Joe’s started slacking in his work by not attending important meetings (meeting landlords) and attending just half a week at work instead of 5 business days. This attitude had led to Joe being fired but Al’s failure to find anyone after Joe had brought him back to reinstate the partnership agreement with Joe despite his unprofessional attitude and suspicious act of taking large batch of loan files and not returning for 3 days and not closing any loan since august.
After terminating partnership agreement with Joe because he couldn’t be trust, Al went to Wilbur Washington with the partnership proposition. Wilbur was introduced to Al by Joe, which could say that Joe and Wilbur were working together for long time to take AHL from Al. Again, Al judged too soon to announce Wilbur as a partner solely because he had experience. In fact, he gave all autonomy to manage entire staff and payroll to him.
Al left four signed blank check with Letitia and merely instructed her to not to be used without his permission. He trusted Letitia on the fact that she was still working at AHL despite her salary being deferred for just a month. This doesn’t necessarily implies loyalty, maybe she didn’t want to leave because she just join AHL on May. Moreover, Al went back to school on June so her loyalty cannot be very strong towards him in just a month.
Under Wilbur’s supervision there was $11700 revenue wasn’t wired to AHL account like it usually is. Instead Wilbur personally collected the cheques from the client’s attorney and deposited in AHL’s account. Later Wilbur split this amount between Letitia and himself with the blank check signed by Al that was left under Letitia’s protection, without Al’s knowledge. To address this issue Al warned Wilbur and Letitia against such behavior via fax. In addition, he contacted the bank to cancel money transfer and hired 3rd party agent to handle AHL’s staff. However, all his attempt failed because Wilbur was the signing authority now and transferred all the money to CBT account with his connection with the CBT’s manager.
AHL used combination of result and personnel control. This can be noted because there is pay for performance system this can be noted when Wilbur would get paid 100 percent on loans closed less monthly licensing fees or 10 percent of all revenue. Also, the former partner Joe was also paid 50 percent of AHL’s profit. The loan officers got 40% of total loan revenue on AHL generated loans and 60% on self-originated loans for clients. While pay for performance system is one of the widely used controls, in this case it was not executed well as there was no clear definition of the performance dimensions. The employee’s goal according to the reward would be to generate more loans than to close more loans. And revenue is only generated once the loans are closed. So proper alignment of the measures and dimension would have given employees better understanding of their goals. In addition, there was no specific performance target that would motivate each employee to work harder. Furthermore, Al’s attitude when he hires employee is to look for qualities like experiences, honest, loyal and self-motivating. This indicate personnel controls where employees are driven to perform better based on self-actualization. He should have weighed less on this control given there was lack of time to choose a right person to run his business. If there was enough time he could have selected and trained the partner better. In terms of culture control it had been missing from the time Al was under control which can be noted when the employees operated daily using telecommunication, hence not a closed knit organization to influence each other’s behavior.
Al should have adopted strict action control for the time he was away instead of combination of weakly implemented controls. Action control would have put behavioral constraints on Joe, Wilbur and Letitia by making it difficult to commit fraud and alleviating inappropriate professional attitude. Existence of preaction reviews would have kept Al up to date with all the actions taken by his fellow partners and employee (Letitia). Just the fact that everyone is accountable for their action would have preventative results as they will be held accountable if anything went wrong. Lastly, redundant procedure would have created extra safety net in case the employee surpass behavioral constraints and preaction review.