Q 1) In what ways does Mr Somersby control the operation of the sections of

his division? In what ways does top management control the operation of the
Law division?

Ans I ) The task which was performed by the two sections was the legal processing of the
loans but the operation and control mechanism was different.

In case of Individual loan section ind ependent companies would batch together a number of
loans and sell them t o NJlC in a package. After the loan gets approved by the
Investment division of the compan y it would forward it co the Law division to look after
the legal issues. Now co control the operation of this section the section was divided into
three groups, each headed by the attorney and each responsible for a geographical section of
the country.A) Atlantic Coast B) Midwest C) Pacific Coast.

In addition to the three attorneys, there was one who helped out in busy spots and took
over a group in case of sick ness or vacation and was in the training status. Apart from
five attorneys and a secretarial staff, the section also comprised of 26 so called mortgage
examiners. All these attorneys and mortgage examiners were under the Supervisor or the
Head of the Individual loan section, John Wallace. He controlled the operation in the
Individual Loan Section and reported to the Vice President of the Law Division, Mr.
William Somersby.

Since the Corporate loan, generally used to be of a much larger amount than an individual
loan and was directly mad e by NJJC to a borrower, such as Industrial or commercial
enterprise the operation and control was quite different. The corporate loan section used to
work closely with the investment division people because of the size and complexity of the
corporate loans. 111e corporate loan section witl1out exception also retained well known
outside counsel. The extent to which the compan y attorneys relied on outside counsel to
perform parts of this work depended on the complexity of the transaction and how busy
company attorneys were. Even though the borrower paid the fee for the outside counsel, the
head of the corporate loan section, Mr. Carlisle, checked closely in the fees charged by the
outside counsel. A great degree of control was also exercised through weekly staff
conferences with Mr.Carlisle.He also tried to eq ualize the work load of the various
attorneys and also held discussions on current negotiations which made it clear that in
case of illness another lawyer would be prepared to take over the work. Mr. Carlisle u
se to report to Mr Somersby Oil the operation of the Corporate Loan Section. The Top
Management at the NJJC 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
Mana gement through this budget checked the total ex pected cost and 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 and use to find the
deviation and the reasons for that deviation.
Question 2: W hat possibilities for improving control, if any, do you think
should be explored?

Ans 2) 1)As control over the entire section was seemed to be difficult a more stringent
review of the budget could be put in place. As the division heads prepare the budget for
the following year which is compared w hen the actual resu lts come. So this can be don
e on a more regular basis so as to exercise more control. So the budget can be reviewed
every month and any deviation can be handled more effectively.

2)In the corporate loan section the compan y 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 company lawyers and attorneys and it would reduce the cost as
well, as was the case of Individual Loan Section.The company can employ some of the
experts in this section so that the q uality of the work is not compromised.

3)There can be a better control over the current work which is been assigned to the
lawyers, as there was no time limit for them to complete the work. The lawyers were
req u ired to submit the report at any time as per their convenience.So there should be a
standard n om1 as to when this report has to be submitted so that a check could be
exercised over these lawyers.

Que 3) As Mr. Montgomery, what comments would you make and what
questions would you a k Mr. Somersby about the performance of the two sections
of the law division for the first six months of 1987?

Ans 3) TI1e comments that could be made by Mr. Montgomery in relation to the
Individual loan section and Corporate Loan Section are as follows. There has been huge
deviation in the actual performance from the budgeted reports in both the sections. Even if
all the sections are taken jointly there has been a deviation of $25,374, which is over
budgeted. The questions that can be asked to Mr Somersby are:

-Is there any substantial reason for the deviation?

-What measures would you take to minimize the deviation?

-Why has there been an extra cost incurred as borrowed labor?

-Why were onl y 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 em ploy experts instead of outsourcing the tasks in
the corporate loan section'?