Case analysis:-
Skim the case:-read it twice
What is required of me and what is my role? Consultant of AL
What is the main issue and why is it important to the organization? Fraud and mismanagement
Why has the issue arisen, and why now?because al left the co. in middle to complete his studies
When does the issue need to be decided?
How should I allocate my time on this case?
2. Read the case closely.
How do the exhibits fit the case? Which ones are relevant, and which ones are not?
What industry does the organization operate in? mortgage business
What is the state of the economy?Economy is doing well.
What information do I have on competitive factors that are important to my analysis?
What are the key organizational factors? (What is the reporting structure, and what are the organization’s goals and objectives? What principles, rules, or values, if any, are at issue? What are the organization’s planning and control systems? Are there any incentive systems that might affec behaviour? Which business functions are critical to success or failure?)
Who are the affected stakeholders (investors, employees, managers, customers, suppliers, and members of the public or community)? What are their interests and what motivates them?
Who are the readers of any reports that I might prepare? What decisions will be made based on my report?
Notes in the case:-
Trusted employees to run the business.
AL started the co. in 2002 with $40,000. Initially co. was doing well with 4 telemarketers and 8 loan officers. bcoz of good banking relation s rcvd loans at wholesale rates. the avg revenue per loan was $3200.00. their business based on referrals and commission basis. Al also make an estimate for his income from no. of applications filed. Because he knew that the failure ratio in his business is less than 30%. He pays 40% of his loan revenue to loan officers and the remaining 60% wired directly to AHL general account.
Before going for further studies he has an option to sell the business, shut it down or hire someone to run it.because of a profitable business he did not want to shut it down also doubted to sell it so fast so he decided to hire someone.
Problem:- as joe was fairly a new employee and AL does not knew much about his background and nature without doing the proper investigation but impressed by his words and decided to make him his partner.he only knew JOE just from last 2 moths which is not enough. you cannot rely on someone just by the words stated on resume . even though he was a good salesman and performer . also even if he decided to make a partner should have done the proper legal paperwork before creating the partnership.. Also Joe only invested $8400.00 into the co. and become 50% partner in the co. which is not fair with AL who invested all his money , experience and knowledge in the co.
After joining the partnership when Joe did not show up for meeting with landlord and also missed the office for few days was a warning sign for Al before leaving for his studies he should have guessed it or took a proper action to fix the situation . even though he tried to hire someone else and but he quitted within 3 days and al did not really had an option except to accept the joe’s apology and continue with the partnership.at the time Al left there was a potential revenue of $300,000.00 in the co. as joe was not coming to the office regularly and also took some confidential files at home and did not return to office for 3 days.
New partner:- after making the decision to get a new partner but he picked up the wrong person bcoz new partner Wilbur was also a friend of joe the old partner obviously both has a good relation.
It was a better idea to leave the signed chqs with the assistant manager rather that with new partner also does the diversification of duties. Obviously when joe came to know about the new partnership did not really like the idea . and asked for his money on the refusal he filed a lawsuit against Al.
Monitoring from California:- even thigh sitting in California Al tried to keep in touch with all the employees and the keep an eye on the co. activities on daily basis. When the new partner hired too many loan processors and Al warned him to control the overhead expense but he did not like the idea told Al not to interfere in this way of doing business.
Subsequent event:- Al was not loyal at all he tried to steal money from bank and tried to cash the chqs sitting with the assistant. Even though Al tried and put hold on the account but wilbor released the hold and withdraw the funds from the account. After watching the fraudulent activities send his friend to fire the whole staff and hire new employees but it did not work .being a fraudulent he opened up a new account and tfred all the money to his personal account where he had the signing authority.
When AL get the knowledge about new account he tried to stop the fraud but did not really worked out. Also Wilbur filed a case against al. and it cost him over $7500.00 to deal with the lawsuit. Wilbor also renewed the leased under his personal name and tfred everything under his name. bcoz of the situation Al could not pay his bills on time and had to file the bankruptcy. In 2003 al was left with nothing but a thought that where did he went wrong and what could have been done to stop all this. There was not much with co. so he was undecided whether to fight for it or no.