New Jersey Insurance Company

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1. In what ways does Mr. Somersby control the operation of the sections of his division? In what ways does top management control the operations of the law division? Mr. Somersby controls the operation of the division by requiring reports from each section of his division. Which such reports he was able to monitor the performance as well as the expenditures of each section. The law division has about five sections to which two of them seem more crucial than the others.

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This is because such section handle accounts that can either make or break the financial status not only of their division but of the company as well. Because of the importance of such sections, Mr. Somersby conducts conferences with the sections in order to determine if there are any problems during their operation and to prepare for future developments. The top management controls the law division by monitoring the financial standing of the division through the required reports that they acquire.

They screen discrepancies and questionable differences in cost through comparison with the division’s previous financial report. They are able to do because of the established standard they have set from their years of experience [most of the employees have been retained due to their costly training. Thus, hiring of new employees are avoided unless needed] and frequent transactions in their “routinary” operation. They require the division to set budgets, and monitor their projected costs from their incurred cost. The same goes to Mr. Somersby. When large deficits are detected they questions such occurrence in order to justify the incurred cost or to make certain actions for the situation to desist.

2. What possibilities for improving control, if any, do you think should be explored? Since budget plans seems to be crucial in their company, they should try to establish more definite parameters for their reports especially for the corporate loan division. They should incorporate the factor of TIME with their reports. For doing almost “routinary” transactions and for handling such situations for a longer period of time, the examiners should have a clearer gauge as to how long their transactions would be. By sending reports on a timelier manner they would be able to have more reliable figures for their budget estimates. As for larger accounts [like those of the corporate loans], they should also try to consider not only outsourcing on the legal matter but for investment matters as well. They could consider hiring consultants that have a larger network in these matter in order to have a broader reference in the evaluation process.

These financial experts might be able to help them more in accessing mortgages, company and individual net worth and the market standing of any investment. With this, just like on legal matters, these too can be a form of marketing, because they can claim to have a more reliable service because of the presence of financial experts that are not tied with their company. [Thus unbiased reports and projections]. They should also coordinate with the government in some cases so that they could keep track and prepare for any policy changes in their area that might affect the prices of their resources but that of their needed inputs as well.

3. As Mr. Montgomery, what comments would you make and what questions would you ask Mr. Somersby about the performance of the two sections of the law division for the first 6 months of 1987? As Mr. Montgomery, my comments for Mr. Somersby would be as follows: There have been huge deviations on the projected budget and the actual budget of the law division. More particularly, the individual loan section has incurred most of those deviations. From the figures, it seems that the corporate loan section had lesser number of transactions compared to their previous year. It seems that the individual loan section has employed an outsider which is different because their division has carefully trained and well experienced examiners, and has not required to have one from the previous years. The questions would be as follows:

What are the reasons of the over budget? What are your plans in order to prevent your division from incurring these deviations? Why was an additional labor for the individual loan sections made? How come the budgeted number of employees was 26 and the actual number of employees was 24? Since, employing additional labor for the individual loan section happened, is there a need to employ a new permanent worker? Were some of the people from the corporate loan section laid off? Are there any management problems in the corporate loan section? Have you considered employing financial experts instead of outsourcing them? What would become of the division then?