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Q.1) In what ways does Mr.Somersby control the operation of the section of his division?

In what

ways does top management control the operation of the law division?
Soln: the task which was performed by the 2 sections was the legal processing of the loans but the operation & control mechanism was different. In case of individual loan section independent companies would batch together a number of loans and sell them to NJIC in a package. After the loan gets approved by the investment division of the company it would forward it to the law division to look after the legal issues. Now to control the operation of this section, the section was divided into 3 groups each headed by the attorney & each responsible for a geographical section of the country i.e. Atlantic west, Midwest, pacific coast. In addition to the 3 attorneys there was 1 who helped out in busy spots & took over a group in case of sickness or vacation & was in the training status. Since the corporate loan, generally used to be of much larger amount than an individual loan & was directly made by NJIC to a borrower, such as industrial or commercial enterprise the operation & control was quite different. The corporate loan section used to work closely with the investment division people because of the size & complexity of the corporate loans. The corporate loan section without exception also retained well known outside counsel. The top management at the NJIC controlled the operation of the law division by asking the head to prepare a budget for the operation of the division during the following year. The top management through this budget checked the total expected cost & revenue to ensure that the overall anticipated profits was satisfactory. When the actual results come the management compares the actual result with the budgeted report & use to find the deviation & the reasons for the deviation.

Q.2) what possibilities for improving control, if any, do you think should be explored? Soln: as control over the entire section seemed to be difficult a more stringent review of the budget would be put in place as the division heads prepare the budget for the following year which is compared when the actual results come. So this can be done on a more regular basis so as to exercise more control so the budget can be reviewed every month & any deviation can be handled more effectively. In the corporate loan section the company attorney relied on the outside counsel to perform the tasks. The company was of the opinion that it would increase the marketability of the investment. The law division can have a better control over these tasks if these tasks are fully executed by the company lawyers & attorneys & it would reduce the cost as well. There can be better control on the work assigned to lawyers

as currently there was no time limit given to them for submission of the report. There should be a standard norm for the same so that a check could be exercised over these lawyers.

Q.3) As Mr. Montgomery, what comments would you make and what questions would you ask

Mr.Somersby about the performance of the 2 sections of the law division for the first 6 months of 1987?

Soln: the comments that could be made by Mr. Montgomery in relation to the individual loan section
& corporate loan section are as follows:   There has been huge deviation in the actual performance from the budgeted reports in both section. Even if all the sections are taken jointly there has been a deviation of $25374 which is over budgeted The questions that can be asked to Mr.Somersby are as follows       Is there any substantial reason for the devition? What measures would you take to minimize the deviation? Why has there been an extra cost incurred as borrowed labour? Why were only 24 full time employees employed when the budgeted was 26? On what basis are the resources allocated? What will be the impact on cost if we employ experts instead of outsourcing the tasks in the corporate loan section?