Atlanta Home Loan

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ALH’s problems started with the failure of implementing strategy formulation. Al should have started by developing strategic objectives, and strategies. Then, he should have defined how the organization’s resources were going to be used to meet these objectives. In addition to this, it would had been convenient to reward his employees when exceeding their expected performance. This would have strengthened the employees’ loyalty, and encourage them to achieve the company’s goals and objectives. Implementing an ethical culture enhances the employees’ performance, and helps to reduce the risk of unethical behavior.

Assignation of authority was not properly allocated among the partners and employees. It is clear that most of the decisions were implemented verbally either in person or by phone. Moreover, he did not allow his employees and partners to accomplish several managerial responsibilities. Al should have stated on the partnership agreement the authority assigned to each partner. By doing this, he could prevent that anyone besides him has the authority to sign checks.

Another problem the company faced was the performance of improper hiring practices. Al did not practice background checks, nor asked for reliable references. In addition to his mistake of leaving in charge people that he hardly knew, no separation of duties was assigned. As it is mentioned in our book, activities should be separated so that one person alone does not have all the authority.

Lastly, Al Fiorini wrongfully implemented personal and cultural controls. He left his company unprepared for his departure. Due to the lack of time and organization, he did not perform the best hiring procedures.

3. Were Wilbur and Leticia crooks, or were they basically good people who were tempted to go bad by a weak control system?

Wilbur and Leticia probably did not join the company with the intent of stealing or to do any sins. However, they are human, and as any other human, they have weaknesses and can commit mistakes. It is possible that they were at one point honest employees who, for given reasons, fell into bad behaviors. The main reasons for them to fall into bad behaviors is weakness and lack of supervisory control. On their case, they were exposed to temptation with no controls to stop them. They were not inherently corrupt people, but were exposed to far too much temptation and with nothing to stop them, eventually moved into major fraud. AHL tempted Wilbur and Leticia, and combined with Al’s lack of supervisory control, it became too easy for them to ultimately become problem employees. They may have given the motivation, but Al’s absence gave them the opportunity.

4. What should Al do now?

Albert Fiorini should go back to Atlanta, and continue running his company. He should work with what is left of his company which is $25,000 worth of equipment. It might seem difficult for him, but he needs to regain control of AHL. For him to obtain his business back, he should employ components of result controls, action controls, personal and cultural controls.

Fist, Al should define AHL dimensions as customer satisfaction, and profitability. This will benefit the company by accomplishing its target. Second, Al must measure the company’s performance. He should apply financial or non financial methods. For example, net income or customer satisfaction. Third, it is important that he sets performance targets for his employees to achieve. Lastly, rewards should be provided to encourage the behaviors that will provide the desired results.

Besides from the previously mentioned results controls, Al should implement a most direct form of management as action control. This will ensure that his employees’ actions are in benefit of the company. The four basic forms of action controls are: Behavioral constraints, pre-action reviews, action accountability, and redundancy.

The first action control will be creating behavioral constraints. On his case, Al can apply physical or administrative constraints. Some examples could be limiting their access to sensitive information, or using computer passwords. By implementing this restrictions, he will assure that the right amount of authority and information is provided to his employees. Pre-action reviews is the second action control form. This means that Al can approve or disapprove the proposed plan. Also, another form of action control to be applied is action accountability. This involves holding employees accountable for their actions. He should communicate to his employees either administrative or socially the desired actions of the company. For example, creating work rules, or a code of conduct. The final form of action control is redundancy. This action control form involves assigning more employees to a task. By doing this, he will make sure that all work is satisfactorily accomplished.

References

Merchant, K. A, & Van Der Stede, W. A. (2007). Management control systems: performance measurement, evaluation, and incentives (2a ed.). New York: Prentice Hall.