University of Petra

Management Control Systems

Case Study: Atlanta Home Loan

Submitted to: Prof. Nidal Al-Salehi

Prepared by: Hanan Abaza

Student ID#:201610460

April 2017/2018
Summary:

Atlanta Home Loan (AHL), is a mortgage lending/financing company. Investment

capital of $40,000. Located in Atlanta, Georgia, and founded by the industry
expert Albert (Al) Fiorini.

As perceived form the case, Al has arrived to a point where he must rely on
individuals, in order to keep his business running. he trusted individuals blindly.
We can notice that AL used some good tools of Result control, and a portion of
Action control, but no people control at all.

Result control:

- Telemarketers: hourly wages with ($10) performance bonus based on

leads produced.
- Loan officers: AHL encouraged them by paying 40% on AHL originated
loans, and 60% on officers originated loans.
- While he was away, Al monitored his business by tracking the numbers of
leads produced, loan applications funded, as well as all the corporate
emails forwarded to him.

Action Control:

- AL did not use physical or administrative control. For example he trusted

Lelitia the office manager, with four signed checks. At the same time,
Wilbur was asking for authority to sign checks.
- Poor communication with employees. Al need to communicate with his
employees either administratively or socially. For example he should
create work rules, policies and procedures, contract provisions and
company codes of conduct. And then create a rewards/ punishments
based on their performance, in order to make the employees feel
responsible for their actions. (No action accountability)

People Control:

- Joe, Wilbur and Lelitia deceived AL ,and let him down. while he was away
doing his MBA, Joe showed irresponsible behaviors after the agreement
 with Al, Lelitia failed to secure the four resigned checks, and Wilbur
collected the four checks and wrote checks for hem and Lelitia for entire
amount of $11,700. (no self-monitoring)
- Al did not look for the right people to hire, he had know him for only two
months. Al made a deal with Joe based on his potential experience and
performance, but without reference checks. (selection and placement)

Main problem:

“AHL Lack a clear direction and poor communication with employees”

Sub-problems:

- There is no clear vision, mission and objectives for the company. AL (lack
of direction)
- AHLs Employees are self-interested, they are not well motivated.
Employess like Joe and Welbur with good experience in the industry, they
understand what AHL needed to grow. Instead, they acted for their own
interest instead. (lack of Motivational problems)
- Employees’ performance measurement is uncompleted. Al granted
compensation bonus for telemarketers and proportional revenues for loan
officers, but has ignored the non-financial incentives. Like (employee of
the month.. etc.)

Developing alternatives solutions:

1. Pay more attention to the supervision on the top management level, and
motivate them. By increasing the control on making decision authority, add
administrative constraints. Provide stock-based compensations. example:
AL could allow Wilbur to sign checks for the amount of 1000 or less only.
2. AI should develop people control and form a positive cultural in company.
A positive, loyal, honest and hard-working environment.
Evaluating Alternative solutions:

1. Pay more attention to the supervision on the top management level and
motivate them by providing Provide stock-based compensations.
PROS CONS
Gives managers the incentive to act Long term commitments with partners
like owners
Control the top management Risky in terms of sharing profits with
behaviors. partners
Make managers more responsible. costly

Divide making decision authority

2. Develop people control and form a positive cultural in company.

PROS CONS
Increase Self-monitoring and mutual- Time consuming.
monitoring for employees.
Increase loyalty and trust
Shared values between employees and
the company.

The best alternative solution:

The second solution, beside result control tools AI used, he should enhance
action control. As well as developing people control and form a positive
environment in the company. A positive, loyal, honest and hard-working culture.

Implementation:

- Define the main vision ,mission and goal. ALshould make his employees
goals consistent with the business main goals.
- Developing a code of conduct, moral values , rewards for the desired
behaviors, and punishment for the non desired behaviors.
- Concentrate on the hiring and replacement process, make a reference
checks before signing agreements with partners.
- Develop appraisal system based on the performance and assign rewards
for the desired behaviors, as well as punishments for the undesired
behaviors. Add non-financial incentives, to reinforce employees to do the
right thing.