Management Fundamentals 5th Edition by Robert Lussier

Exercise 1

Objective
To improve your skill at developing a control system for an organization/department.
Skills
The primary skills developed through this exercise are:
1. Management skill - decision making
2. AACSB competency - analytic
3. Management function - controlling
Situation
Marie Bolton owns and operates the Bolton Clerical Employment Agency. As the name indicates, her agency focuses on providing clerical employees to its business clients. It has a file of clerical employees looking for jobs or better jobs. When employers place job orders with the agency, the agency recruiter tries to find a person who fits the job specifications. The agency sends possible candidates to the employer. The employment agency charges the employer a fee only when one of its referred candidates is hired by the company. The fee is based on the employee's first-year salary. The average fee paid by employers is $1,000.
Each agency recruiter gets 35 percent of the fee charged as a salary. Pay is 100 percent commission. Refunds are made if the person placed does not stay on the job for three months.
Marie has two employees called recruiters. With only two employees, Marie is also a full-time recruiter. She does the management functions in addition to recruiting. Marie has no formal control methods because her two recruiters are very competent professionals who are paid only by commission; she places minimal restrictions on them. Marie is somewhat satisfied with the way her business is operating. However, through a professional association she found out that her business is not doing as well as the average employment agency. Being competitive by nature, Marie does not want to be below average.
Marie has asked you to set up a control system to help her improve her agency's performance. She has provided you with the following performance report, comparing her agency figures to those of the average agency. The professional association forecasts that revenues for next year will not increase for the industry.

Procedure
Identify the systems process for Bolton by identifying its primary inputs, transformation process, outputs, and customers/stakeholders:

Identify major types of control for each stage of the systems process.

To set up a control system for Bolton, follow the steps in the control systems process.
Step 1. Setting Objectives and Standards
Marie's objective is to earn $250,000 in revenue for the next year, which is the industry average. Establish standards for the year that will enable Marie to reach her objective.
Quantity. Quantity of interviews per recruiter: ___________
Quantity of placements per recruiter: ___________
Calculate the number of additional interviews needed to meet the standard per recruiter: ___________
Calculate the percent increase: % ___________
Quality. State the dollar value of acceptable refunds per recruiter: $ ___________
State the corresponding number of refunds: ___________
Time. State the time period in which the quantity and quality standards should be met: ___________
Cost. State the cost based on commissions per recruiter:
$ ___________
Behavior. Identify any behaviors employees should change to help them meet the standards.
Step 2. Measuring Performance
What are the critical success factors for employment agencies? Have you identified the critical success factors within your standards? If not, rework them. How often should Marie measure performance and what methods of control should she use?
Time frequency for measuring performance: ____________
Quantity of interviews per recruiter for time period: ____________
Quantity of placements per recruiter for time period: ____________
Specific control methods to use:
_________________________________________________________
_________________________________________________________
Step 3. Comparing Performance to Standards
How should Marie compare her agency's performance to her new standards?
Step 4. Correcting or Reinforcing
What type of corrective action should Marie take if standards are not being met or what type of reinforcement if they are?
_________________________________________________________
_________________________________________________________
Assume that Bolton does exactly meet the standard.
Calculate the rate of productivity for Bolton's past performance
(average agency): ___________________________
Calculate the rate of productivity for the new performance standard: ___________________________
Is there a change in productivity? ______________ yes ___________ no
If yes, by what percent did it increase or decrease? ___________________________
Base the inputs on recruiter commissions only.
Calculate the past commission per employee (average agency): _____________________
Calculate the new commission per employee: _____________________
What percent pay increase do recruiters get? _____________________
Do profits increase when the new standards are met? _____________________
How do you think the employees will react to your proposed control system? Do you think they will resist the control? Why or why not?
_________________________________________________________
_________________________________________________________
Apply It
What did I learn from this exercise? How will I use this knowledge in the future?
_________________________________________________________
_________________________________________________________
Your instructor may ask you to do this Skill Builder in class in a group. If so, the instructor will provide you with any necessary information or additional instructions.