A. Control and Effects
Controls implemented by AI before he went back to school
* Telemarketers – their salaries consist of hourly wage and performance bonus based on leads produced. The performance salary has a motivational effect on amount of leads.
* Loan officer – Company paid the loan officers 40% of total loan revenue on they originated and 60% on loans Loan officer originated. The explicit allocation encourages loan officer to increase their revenue.
* Processors – AI have not electronic links to monitor the process of applications, but only track the number of credit inquires. The control may be ineffective because the number of credit inquires is not a good indicator of processors’ work.
* AI granted Wilbur to manage company according to the licensing agreement and enabled Wilbur fail to sign check against company main bank account without permission of AI. The control is right, but fail to implement properly. Since AI left the blanket checks to an office manager and just required verbally the manager not to use checks without AI’s agreement, which fail to restrict the administrative authority of Wilbur. On the other hands, the restriction doesn’t give Wilbur enough autonomy as a partner to manage company.
* Telemarketer developed leads and gave the list of leads’ name to AI, AI distribute to names to loan officers.
People controls: AI selected Joe and Wilbur as new partner to operate company successively.
Controls implemented by AI after he went back to school
* Track employee head count, the numbers of leads produced, loan applications funded, office expenses and band activity. By the means, AI monitors whether the employee act in a desirable way.
* AI had all of corporate mail forward to him.
* Talk with employees by phone 3-4 hours per day.
* Ask a friend and police to fire all corporate employees. The control was invalid since Wilbur was on the spot and argued with police.
* Monitor bank account activity and called bank to stop payment on the checks
B. Issues and Recommendations