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Case Summary
In April 2002, Albert (Al) Fiorini founded Atlanta Home Loan (AHL), a mortgage lending and financing company by investing $40,000. He had impressive experience in mortgage banking, so the new company grew well. AHL had telecommuting marketers, eight loan offices, and all worked remotely as it was a convenient solution for the employees. Al decided to continue their education, which required him to move to Los Angeles for joining an MBA school, and he needed to leave someone in charge of the AHL.
Als choice was Joe Anastasia, with two decades of working experience in the mortgage business and impressive performance. The men got a verbal partnership agreement to have equal shares for AHLs profits, and Joe invested $8,400 in the company. Soon after, Al changed his opinion about Joe as the latter had stopped showing up and was unavailable when needed. By September, Al completely lost trust in Joe and turned his choice to Wilbur Washington, with whom he made a written agreement and licensing. Wilbur required full authority for signing checks, and Al rejected it yet left blank checks with his signature to the office manager.
Joe Anastasia asked for the reimbursement of his $8,400 investment, but Al did not proceed until Joe returned every loan file he took home. Wilbur hired new employees making the processor to loan officer ratio irrational, and Als concerns about it did not convince him to stop. By October, Wilbur ruled all of the AHLs operations, yet Al decided that this man is not trustworthy. Al asked a friend to introduce them as his agent and fire all of the employees, but they refused to leave even with the police in the office. Wilbur reached to Citizens Bank & Trust (CBT) to wire the new funds held by AHLs corporate accounts. When Al found out about this new bank account, he tried to report to CBT about the fraud, yet the bank rejected his concern because they knew Wilbur personally. The police and FBI were not willing to initiate the investigation. Al lost more than $15,000 in licensing fees and was forced to sell his home while Wilbur lobbied employees to give Al up and started to own AHL fully.
Identify the Devices (Controls) that Al Fiorini Used to Control His Business Both Before and After He Went Back to School. Classify Each Control as a Results, Action, or Personnel/Cultural Type of Control
Before going to school, Al had multiple devices to control his business. He directly monitored each loan applicants credit documents and inquiries, tracked managers performance regarding communication with leads, and personally worked on any complicated loan case. Al also received money from proceeds, collected checks, and manually wired the amounts to the general AHLs banking account. The devices listed above belong to the action type of control as they required Al to be directly involved in the operations. The result type of control used by Al before leaving for the school was the companys compensations to the loan officers that were calculated according to the outcome of their performance. After leaving Atlanta, Al had to apply more control devices to help him remotely track the companys performance. He established action controls, such as forwarding all mail to his new address and everyday phone conversations with employees. Al paid commissions based on the companys operations effectiveness to Wilbur, and it was the result type of control.
Personnel and cultural control types raise employees self-motivation and increase their willingness to work better (Donnelly et al., 2018). These devices include corporate culture codes, clearly formulated values, and awards for excellence at the workplace. Al paid a $10 bonus to managers for successful operations with leads, and it was the personnel control strategy. The AHL case shows that Al had not fully applied such control devices, which led his business to severe consequences.
What went wrong? Did Al use the wrong types of controls? Did he use the right types of control but fail to design or implement them properly? Or was he just unlucky?
The choice of people to leave in charge of AHL was the step that revealed deeper problems inside of the company. It turned out that the control methods Al utilized were mostly based on the companys performance, outcomes, and interactions with customers. The action and result control devices were suitable to increase AHLs revenue and to forecast its growth. The lack of culture and personal controlled Joe to skip work, and Leticia to sell her loyalty to get profits from helping Wilbur. However, the fact that all employees worked remotely has to be considered as it complicates the process of building culture and setting values in the company. Al certainly was not unlucky, as the network of wrong decisions and people with bad intentions caused the loss of his AHL authority.
Were Wilbur and Leticia crooks, or were they good people who were tempted to go bad by a weak control system?
Wilbur and Leticia were crooked: if they were good people, they would have had enough strength to get over the temptations of a weak control system. There are many different ways of establishing a company, and owning it by taking away the business of someone who trusted them enough to run it is an inappropriate act. Moreover, banking operations made by Wilbur gave Al enough evidence to report fraud, which is illegal.
What should Al do now?
Wilburs side banking operations, the requirement for authority for signing checks, and inappropriate actions give Al enough basis to sue him. Al should try to open the legal process against Wilbur. His willingness to fight for the business he founded might show the employees how he valued their labor, become the basis for the companys philosophy to establish, and make the workers rethink their decisions. If Al wins his business back, he will need to create a corporate culture and set strict workplace discipline combined with an awarding system for employees.
Reference
Donnelly, A., Kennedy, F. A., & Widener, S. K. (2018). Insights into the relationships between personnel control, action control, and intrinsic motivation. SSRN: Action Control, and Intrinsic Motivation. Web.
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