Mortgage Broker Real Estate Investment

Question: Discuss about the Mortgage Broker for Real Estate Investment. Answer: Borrowers Details Andrew Bisset and Jane Bisset Andrew has been in the Real Estate business for more than twenty years. Jointly with his wife Jane, the couple have a family trust The Bisset Family Trust. This family trust owns six shops at 55 Park Road, Belmont, valued at $1,450,000 about two years ago. Currently, these shops are under pledge with ABZ Bank and the trust owes $625,000 to the bank. Five of these shops are rented out and the sixth one is occupied by Andrew from where he conducts his real estate business under the name Bissets Real Estate Pty. Ltd, say Baum Baum, (2015). Andrew draws an annual salary of $78,000 from the company but Jane has stopped active participation in the business from this financial year. In the previous financial year, when Andrew and Hooper were partners, Jane worked as Property Manager drawing an annual salary of $43,000, whereas Andrew got $55,000 as his share from the partnership business, as per Baum Baum, (2015). Background Bissets Real Estate Pty. Ltd. This company was floated by Andrew at the beginning of last financial year. Andrew and Jane are the two directors and this came into being after Andrews former partner Joseph Hooper retired out of the partnership business. Andrew has more than 22 years of experience in the real estate business and during this period he has been dealing in properties in the South East area of Brisbane, assert Erp Akkermans (ed.), (2012). His speciality is in the Commercial and Industrial properties, both for rent as well as sale assistance, though the rent component is more than 75%. The existing six shops which the Bissets now own in the Shopping Centre situated at 55 Park Road, Belmont QLD 4171 have a combined area of 1850 m2 and the area has been zoned as Commercial by the authorities. Presently, these six shops are rented out, the details of the contract, the tenants and their terms are listed below. Although the terms of tenancy are, in all cases, above one year, Andrew has put a clause of revie wing the rents every year in accordance with CPI, as detailed by McFarlane, Hopkins Nield, (2012). Tenant Rent Term Review J R Blend T/A Blend News $22,000 pa net 3 + 3 years Annually by CPI Copelin Accounting Pty Ltd $18,000 pa net 1 + 1 + 1 years Annually by CPI R Spragos T/A Rogers Dell $28,000 pa net 5 + 5 years Annually by CPI Vu Nguyen T/A Care Pharmacy $20,000 pa net 3 + 3 years Annually by CPI M Goodson T/A Good Alterations $8,000 pa net 3 + 3 years Annually by CPI Bissets Real Estate Pty Ltd $42,000 pa net 3 + 3 years Annually by CPI Loan Purpose The main purpose of availing this loan by the Bissets is to develop a shopping centre on a vacant piece of land admeasuring 3000 m2 which is close to the commercial centre where they already own six shops. Although the land is presently marked as Special Purpose Zone, the local council in its new development policy has agreed to mark it as Commercial Purpose Zone but it may take another two years for the policy to be notified. The Bissets have already have a commercial loan from their regular banker, the ABZ Bank but unfortunately ABZ Bank does not finance properties marked under the Special Purpose Zone. Hence, Bissets approached me to make arrangements with a private investor for a loan of $625,000 to purchase this land which they have contracted for $600,000 and whose settlement is due in 60 days. Bissets also require $25,000 to cover the cost of stamp duty and will be buying the land in the name of The Bisset family Trust, as explained by McFarlane, Hopkins Nield, (2012). Facility Details I have outlined below the process for arranging the finance for meeting the requirements of my clients. The timing of the whole process will depend on the flow and availability of information and provided the lender does not find any complexity in the contract documents, the process can be completed in about 7 working days to get approval of unconditional finance. A further time of one week is required for preparing the loan contract and settlement to be ready, asserts Hinkel, (2010). Process Provide the clients with the Proposal Documents, including my recommendations. Complete the application and submit it to the lender. After the Lender has conducted the credit check and assessed the application, it will confirm its approval and accordingly I will inform the client The lender will ask for a valuation report from a valuer and will advise me or you directly, to expect a call from the valuer for verification of contract documents, asserts King, (2015). As soon as the Valuer gives the report and it is found in order by the lender, the lender will advise to prepare documents for the disbursal of the loan amount. Subsequently, I will meet you and we will go through the loan approval documents in order to ensure that there are no errors. We will prepare answers to queries, if any, posed by the lender and then will sign the contract document, with you as the borrowers and I acting as the witness, as per King, (2015). Funds Position Andrew and Jane Bissets Joint Financial Information ASSETS Owned house 12 Currumbin Close, Carindale QLD $560,000 Share Portfolio of Blue Chip Listed Cos. $345,000 Motor Vehicles $60,000 Furniture $85,000 Cash at Bank $45,000 Total Assets $1,095,000 LIABILITIES Home Loan with ABZ Bank $190,000 ABZ Bank Credit Card (with limit of $20,000) $10,000 Total Liabilities $200,000 NET SURPLUS $895,000 Income Statement of Bissets Real Estate (Partnership) Gross Revenue $422,000 Net Profit $84,000 Depreciation $16,000 Directors Super Contribution $11,000 Income Statement of Bissets Real Estate Pty Ltd Gross Revenue $346,000 Net Profit $72,000 Depreciation $14,000 Directors Super Contribution $11,000 Income Statement of Bissets Family Trust Gross Rental Income $138,000 Loan Interest $52,000 Management Fees (paid to Bissets Real Estate Pty Ltd $11,000 Net Profit $50,000 Depreciation $25,000 Financial Position of Bissets Real Estate Pty Ltd ASSETS Business Goodwill $250,000 Plant Equipment $35,000 Debtors $30,000 Total Assets $315,000 LIBILITIES ABZ Bank Overdraft Limit $25,000 (Limit of $40,000 secured by residence) NET SURPLUS $290,000 Servicing Capacity The serviceability calculations have taken into consideration the Debt Servicing Ratio and the Net Cash Position of the companies and finds them strong enough for servicing the fresh loan. The Bissets are taking this loan to expand their property network. The conversion of this land will be possible in about 24 months and the Bissets are prepared to wait. Keeping the lending policies of the lenders in view, the serviceability assessment of Bissets has been done by taking into account the lower income options, as explained by Megarry et al, (2012). Security Bissets are offering their six shops as well as the new project which they will develop on the purchased land as collateral security for the borrowed amount. Calculating on the basis of 10% interest charged by the lender, the outgo of the Bissets will be $60,000 p.a. on the new loan. Taking into account their current rental income and also the proposed income from the new project, serviceability of the loan will not be difficult for the Bissets, as per Sexton Bogusz, (2013). Risk Assessment The Bissets have a long and successful history of managing a property business and have established a solid base of clients who will offer them a steady flow of business, as detailed by Ashworth Perera, (2015). Recommendations This recommendation is based on the Bissets having An impeccable credit history A reliable business practice Retain sufficient cash surplus The potential to increase business income Maintained a stable growth Attachments Documents Attached Serviceability Assessment Copy of Contract Document for the land Evidence of Bissets income Details of Bissets cash and bank Detailed statements of Bissets loan and overdraft from ABZ Bank Mortgage broker Part a: the client MEMO Date: 27/06/2016 From: John Stone, Mortgage Broker To: Ray Henley and Steve Manning, Directors in Henman Holdings Pty. Ltd. Subject: Commercial Equipment Finance: Information and Documents Required Hi Ray Steve, I am pleased to accept my appointment as your agent for arranging finance to purchase commercial equipment for your business expansion. Ive listed below my requirement of supporting documents and information to complete the loan application. Asset Liability Statements of the companies in which you are the directors. Copy of your drivers licence Current residential address and period there Previous residential address(if any) and period there Name of spouses their age and number Number of dependents Details of other personal or investment income Copies of your and the trading entities past two years tax returns ACN ABN details of both companies Copy of Trust Deed and Trust ABN details Accountant name and address Solicitor name address Evidence of cash at bank and fund sources Evidence of Superannuation funds Copies of other existing leases I am including my financing recommendations and the process to be followed for your kind perusal and consideration, as ascertained by King, (2015). Proposal Document Initial Fact Find The applicants are in the transport business for many years, each having served as Financial Controller of transport companies of repute. Ray hold a MBA degree and Steve has a Marketing degree. Ray is married to a school teacher and Steve is single. Both have no dependents. Steve is pursuing a degree in HR, which they think shall be useful in their expanding business, asserts Hinkel, (2010). They wish to purchase new Trucks and Dog Trailers for their planned expansion and have already taken a second depot on a monthly charge of $6,000. The Process I have outlined below the process for arranging the finance for your fresh requirements. The timing of the whole process will depend on the flow and availability of information from your end. Provided the lender does not find any complexity in the contract documents, the process can be completed in about 7 working days for giving approval of the unconditional finance. A further time of one week is required for preparing the loan contract and settlement to be ready, as detailed by McFarlane, Hopkins Nield, (2012). Provide the clients with the Proposal Documents, including my recommendations. Complete the application and submit it to the lender. After the Lender has conducted the credit check, assessed the application, it will confirm its approval and accordingly I or my office will inform you. The lender will ask a valuer for the valuation report and will advise me or you directly, to expect a call from the valuer for verification of documents. As soon as the valuer gives the report and it is found in order by the lender, he will immediately advise me about the unconditional approval of the loan amount and I shall pass this advice immediately to you. Subsequently, I will meet you and we jointly go through the unconditional loan approval contract documents in order to ensure that there are no errors. We will prepare answers to any queries, if posed by the lender and then will sign the contract document, with you as the borrowers and I acting as the witness, as per King, (2015). Part B: The Lender Borrowers Details Ray Henman and Steve Manning are directors of Henman Transport Pty. Ltd., a company engaged in the business of transportation. They have recently floated Henman Holdings Pty. Ltd ATF The Henman Discretionary Trust which will be the holding company of the transport business being run by Henman Transport Pty. Ltd. and will be the borrowing company for the new finance facility being asked for expansion, assert Megarry et al, (2012). Background The company, floated two years ago, with seed capital loan of $500,000 from a private investor, already maintains a depot, employs 5 permanent employees and takes the services of sub-contractors for extra manpower requirements, as per Megarry et al, (2012). Borrowers Financial Information Year 1 Sales $700,000 Net Profit $240,000 Year 2 Sales $812,000 Net Profit $358,000 Current Year (10 month period) Sales $1,125,000 Net Profit $506,000 Operating Costs Annual salary to Ray $100,000 (fully franked) Annual salary to Steve $100,000 (fully franked) Depreciation $86,000 Interest $52,000 Sub-Contractors $71,000 Directors Super Contribution $60,000 Annual Fee to Private Investor $45,000 Existing Equipment Repayments $5,000 (Per Month) Borrowers Finance Requirement $500,000 for buying new Trucks and Dog Trailers. The loan will be repayable in 48 months with full refund of Input GST Credits as additional repayments specified in the contract, assert Sexton Bogusz, (2013). Borrowers Security Borrowers will be offering the new equipment being bought as collateral security for the borrowed amount. In addition, the borrowers are agreeable to enter into a tripartite contract for sharing their receipts with the lender through an Escrow Account, as detailed by Erp Akkermans (ed.), (2012). Borrowers Serviceability The borrowers are expanding their service network so that an impending risk in one market segment does not affect their business potential. The purchase of new equipment will be spread over a period of 12 months and is intended to take place on a need basis or where an existing equipment needs to be replaced. Keeping the lending policies of the lenders in view, the serviceability assessment has been based taking into account the lower income options. The serviceability calculations have taken into consideration the Debt Servicing Ratio and the Net Cash Position of the companies and finds them strong enough for servicing the fresh loan, explain Baum Baum, (2015). Risk Assessment The borrowers have been in the transport for a long period and have established a solid base of clients offering them a steady flow of business. The promoters have also been cautious in averting financial risks by keeping their employee strength to the minimum and taking the services of sub-contractors on a need basis, say Ashworth Perera, (2015). Recommendation This recommendation is based on the borrowers having impeccable credit history good past business experience retain sufficient cash surplus the potential to increase business income maintained a stable growth Documents Attached Serviceability Assessment Copy of Performa Invoices Evidence of the borrowers incomes Details of borrowers cash and bank Details of borrowers recent credit card statement List of References Ashworth, A. and Perera, S. 2015, Cost Studies of Buildings (6th ed.). Routledge, Oxon. Baum, A. and Baum, Prof A. (2015) Real Estate Investment: A Strategic Approach (3rd ed.). Routledge, Oxon. Erp, S. van and Akkermans, B. (ed.). 2012, Cases, Materials and Text on Property Law. Bloomsbury Publishing, London. Hinkel, D. F. 2010, Practical Real Estate Law (6th ed.). Cengage Learning, Boca Raton, FL. King, S. 2015, Beginning Land Law. Routledge, Oxon. McFarlane, B., Hopkins, N. and Nield, S. 2012, Land Law: Text, Cases, and Materials. Oxford University Press, Oxford. Megarry, R., Wade, W., Harpum, C., Bridge, S. and Dixon, M. J. 2012, The Law of Real Property (8th ed). Sweet Maxwell, New York. Sexton, R. and Bogusz, B. 2013, Complete Land Law: Text, Cases, and Materials. Oxford University Press, Oxford.

An Essay For College Application

An Essay For College ApplicationStudents who are seeking admission to a particular college or university need to prepare a sample college application essay. An essay, particularly an essay for admission to college, will help the student to show his or her overall capability and commitment to learning. Students who have to write an essay in college should realize that they need to use academic writing skills as well as their personal qualities. The essay should be written in a tone that is true to the character of the student.Writing an essay can be tough; therefore, it is important that a student selects a topic that is easy to write about and not too ambitious or too technical. Having a clear idea of the type of college application essay is important, since the school or university wants to select the best applicant for the post.A sample college application essay should deal with the necessary topics such as experiences, interests, and other personal information. It should also incl ude points regarding one's qualifications and educational background. Most applicants should have an excellent academic record in high school, college, or university.It is important that students remember that even though they will be asked to write an essay, they do not necessarily have to write something that is very long. They can include several paragraphs instead. But it should be at least five pages long. It is also vital that the essay address the important issues on the admissions list.The student must be aware that the importance of academic composition skills is very important. Students who are academically weak will probably receive lower scores than the students who excel in this area. However, academic writing skills and aptitude will always be an advantage. Therefore, students who have yet to reach their potential should not feel embarrassed if they have some reading difficulties.A sample college application essay, while containing a lot of personal information, should not be too detailed. It should contain the important information that the students need to apply. Therefore, although the student should still try to avoid using heavy academic jargon, he or she should not be overly technical either.The most important point in an essay is that it should be submitted as soon as possible. This is to allow a student to make improvements and to determine whether or not he or she has made progress toward the college admissions. The school or university will only consider the essay if it is received by the deadline, as it may not be accepted if it is left until the last minute.

Legal and Ethical Issues free essay sample

Legal Ethical issues brought upon SNC Lavalin since 2011 / Recommendations (Fabien) Internal issue: In March 2012, SNC-Lavalin released the results of an internal review showing the company cannot properly account for $56 million in payments directed by former executive vice-president Riadh Ben Aissa and signed off on by CEO Pierre Duhaime. The CEOs authorization of these payments did not comply with the agents policy and therefore was in breach of the code (of ethics), the companys internal review found. To this day, these missing funds could not be linked to specific transactions or countries. Libyan issues In July 2011, Consultant Cyndy Vanier is flown by SNC-Lavalin on a fact-finding expedition to Libya during the NATO mission to report on the companys many projects and the conditions for employees. In Nov 2011, Cyndy Vanier and SNC- Lavalin vice-president Stephane Roy will be arrested in Mexico. They were charged with organized crime, falsifying documents, and the intent to smuggle humans. We will write a custom essay sample on Legal and Ethical Issues or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The plan was to smuggle the son of Lybian dictator, Saadi Gadhafi, out of Niger to Mexico with fake documents. As a result of these investigations, SNC-Lavalin dismisses Consultant Cyndy Vanier, Vice-President Stephane Roy, Ben Aissa, executive vice-president Riadh Ben Aissa, CEO Pierre Duhaime for violating the company Code of ethics. May 2012: Swiss prosecutors have arrested Riadh Ben Aissa, a former SNC-Lavalin Group Inc. executive vice-president, for business-related corrupt practices, fraud and money-laundering in North Africa. Tunisian issues May 2012: A Tunisian businessman accused Quebecs SNC-Lavalin of soliciting bribery, claiming he was shut out of the bidding for a contract after refusing to pay off a senior official in the companys North African branch. May 2013: RCMP search warrant document alleges that SNC-Lavalin paid nearly $6- million to the son-in-law of Tunisias president between 2001 and 2010 to win contracts in the North African country. The payments in question were made at a period when a variety of major contracts were awarded to SNC-Lavalin in Tunisia. Swiss authorities uncovered the Tunisian payments as part of an investigation into corruption and money laundering. Mr. Ben Aissa, Executive Vice-President for SNC Lavalin, was detained in Switzerland Bangladesh issues: June 2011: The Dhaka Daily Star reported that SNC-Lavalin offered large bribes to at least six influential Bangladeshi officials, including two former government ministers, to obtain a lucrative bridge contract Oct 2011: The offices of contractor SNC Lavalin were raided by Canadian authorities over allegations of corruption in the bidding process for a IJS$ 2. 9 billion bridge project in Bangladesh. Among the officials allegedly bribed by the Montreal based company was then communications minister Syed Abul Hossain, who now heads the department of Information and Communications Technology. The others are former state minister for foreign affairs Abul Hasan Chowdhury; former secretary of the bridges division of the communications ministry Mosharraf Hossain Bhuiyan; Rafiqul Islam, exdirector of Padma Multipurpose Bridge project, along with three businessmen working on the project. The accusations of bribery prompted the World Bank to suspend a IJS$I . 2 billion loan and temporarily barred the SNC-Lavalin subsidiary from bidding on other contracts in the country. Sept 2013: A former senior SNC-Lavalin Group Inc. xecutive, Kevin Wallace, who versaw the companys bid to supervise the construction of a six-kilometre bridge in Bangladesh a project that is stalled amid allegations of corruption has been charged criminally under Canadas foreign bribery law Montreal Issues: March 2012 SNCs former chief executive, Pierre Duhaime, faced multiple charges in connection with an alleged $22. 5-million bribe that police say was funnelled to hospital administrators to ensure the compa ny won the contract to build the McGill University Health Centre. Nov 2012: The Quebec police charged CEO Pierre Duhaime who resigned in March ith fraud, reportedly in connection with a contract to build and design a new $1. 3- billion super hospital in Montreal Recommendations to fix issues: Recommandations that SNC Lavalin is considering as the results of their own investigations: The appointment of Compliance Officers to the Companys business units and regional hubs around the world. Part of a comprehensive, risk-based compliance organization, the officers will report directly to SNC-Lavalins Chief compliance issues whenever and wherever they may arise across the Company. An Code of Ethics for SNC-Lavalins 34,000 employees around the world. A component of SNC-Lavalins overall compliance policy, the code should provides a concise overview of the Companys approach to addressing and mitigating corruption risk in daily business activities. It outlines acceptable and unacceptable conduct in a user- friendly manner, while reaffirming the importance of compliance with applicable laws and SNC-Lavalins recently enhanced Code of Ethics and Business Conduct. A new policy governing engagements with business partners: The policy must set out rinciples and due diligence procedures to be observed before entering into an agreement with any and all parties who will act on behalf of SNC-Lavalin. The Policy will help ensure the Company deals solely with people or entities of integrity and in good standing with the business community, and which possess the necessary background, reputation and qualifications for the service(s) provided. Personal Compliance Training for all employees, with a special focus on those working in functions known to expose employees to a higher level of corruption risk. Provided in person by compliance experts, the training for high-risk functions will ensure SNC-Lavalin employees have the requisite tools to do business according to the utmost ethical standards, no matter what regulatory circumstances they find themselves in, or external parties they are in contact with. An Amnesty Program launched between June 3 and August 31 of this year. The Program provided employees with an opportunity to come forward regarding ethical violations so that any remaining issues could be dealt with and rapidly resolved. A otal of 32 employees made amnesty requests. While no new information of a material nature was revealed, the information the Company received did confirm its previous assessment of corruption risks. Other recommendations that SNC Lavalin might want to consider: Obligations to report on all meetings with any official of a government, and ask to produce a detailed sum up of the discussions Strengthening and improving internal controls and processes: make sure all financials transactions are properly recorded and approved by the CEO and Compliant Officer.

Bartleby essays

Bartleby essays Since he will not quit me, I must quit him. Ah Bartleby, Ah Humanity. (Page 140, Herman Melville) This is the key to Bartleby, written by Herman Melville, for it indicates that Bartleby stands as a symbol for humanity. This in turn functions as a commentary on society and the working world, for Bartleby is a seemingly homeless, mentally disturbed scrivener who gives up on the prospect of living life. However, by doing so Bartleby is attempting to exercise his freewill, for he would prefer not to work. His relationship to the narrator is thus significant, for as he attempts to exercise his freewill he is breaking from the will of the narrator and the normal progression of life. However, this attempt to exercise his freewill and break loose from the confines of typical societal functions, isolates Bartleby from society, which in turn places him in a state of depression and soon there after, death. Ultimately, by having Bartleby prefer not to, Melville is commenting on the role of human ity in the work force. If man attempts to break free of his role and exercise his own freewill then he is severing himself from humanity which in turn will lead to depression and perhaps death, for he will have nothing but a wall always obstructing him. From the beginning Bartleby is isolated within the confines of his work place. I procured a high green folding screen, which might entirely isolate Bartleby from my sight, though not remove him from my voice.( pg 111) In this quotation the narrator put Arnold, Page 2 up a screen to separate his office from Bartlebys, which isolates him from the other members of the staff which thus isolates him from humanity. However, this is not the end of the isolation for he is not only detached from those around him, but society as well. I placed his desk close up to a small side window, a window that had originally afforded a view of certain grimy backyards, bu...

CRJ 422 Week 1 discussions 1 and 2 Essay Example | Topics and Well Written Essays - 250 words

CRJ 422 Week 1 discussions 1 and 2 - Essay Example Analysis of the traditional cultural versus the interpersonal interest conflict from the angle of social justice, it is important to understand the implication of same-sex marriage to the society that is opposed to the arrangement. Equally, it would be significant to understand the implication of prohibiting same-sex marriage as it will lead to infringing the rights of the minority in the society. In the approach of social justice, Therefore, the main question in the application of the law is whether it is just to protect the minority in the community or to safeguard the rights of the majority in the community. The constitution of the United States through the chapter on the bill of rights stipulates the rights freedoms and privileges that are enjoyed by the American citizens. Nevertheless, in as much as the citizens have their rights stipulated in the Constitution, which is the principle law of the country, the rights at some point, could be seen to interfere with the free operations of the criminal justice system. The fourth, fifth, sixth and eighth amendments of the constitutions are particularly of concern to the criminal justice. Individuals are protected from unreasonable search and seizure of property unless with warrant for a probable cause according to the fourth amendment. This amendment may hinder the operation of criminal justice. An example when the police suspect that evidence of robbery are hidden in a particular location and could be relocated any time, it would take the police time to process the warrant which might be ready after the relocation. In the Fifth Amendment, individuals are protected from self-incriminating and double jeopardy. This amendment prevents the criminal justice from benefiting from the evidence that a criminal may be willing to present (Deborah, 2013). The sixth amendment requires individual proceeds in a court to

American Legal Regimes and Wealth Creation Term Paper - 1

American Legal Regimes and Wealth Creation - Term Paper Example Most historians described this as the conflict between labor and capital. The conflict that was filled with a lot of damage of properties escalated well into the 20th century and ended when the war started. By early 1900, the country was already filled up (Cohen 234). Major cities all over the state were packed with hundreds of thousands of poor American laborers who worked in deplorable conditions. Corruption during this period is considered the most escalating issues that brought all the problems that the country was facing. The progressive movement is considered to have been the solution to the problem that seemed to be driving the country way ward. It is hard to say that the movement fixed everything, however, remarkably little passed unchecked. The movement grew outside the government since none of the politicians was willing to support the economic and social change that the progressive movement brought. However, after pressure was applied b\y the movement the government finally decided to stand alongside the movement as it fought corruption out of the system. Most historians accredit the year 1896 as the period during which the progressive era began (Hayek 12). It is also viewed that most reforms that the movement had advocated for begun just before the country join t the war in 1917. However, even with is mind it is considered that most of the reforms begun way back during the colonial period although none of them had picked up until the modern era this being the 1900s. One cannot claim that all citizens and domestic workers have a fair playing field even now. It is also had to claim that the countries politics are free from corruption. Thus, it is considered that the movement that begun back in the late eighties lives on pushing for reforms and a corruption free political system (Cohen 234. During this era, which is most commonly

Strategic Management And Leadership Semco Case Study Business Essay

Strategic Management And Leadership Semco Case Study Business Essay Executive Summary: The purpose of this report is to identify the leadership and management styles adopted by Ricardo Semler and their impact on the strategic choices of Semco. This report will also explore various management and leadership theories and the resultant effect on organisational and leadership strategy. Introduction: The report intends to take a holistic view of the management and leadership styles and theories and their impacts on organizational leadership and strategy in the backdrop of Semco. Continuing further, the report will assess and evaluate the leadership requirements of Semco and formulate a suitable leadership development plan. A brief look into the evolution of Ricardo Semlers Semco is necessary to understand the organization. Semco, despite challenging the traditional style of corporate management, has continued to grow by leaps and bounds ever since the legendary Ricardo Semler took charge. The organization that was thought to have adopted a management style often termed as a recipe for disaster has been a champion of change with profits growing consistently. Semco had a manifold increase in profitability, growth and productivity, which is remarkable considering the many years of economic melt-down and the volatile political scenario it was operating in. Such an accomplishment requires full faith in employees and a commitment from the top management, but it was not always so. This progress was gradual and methodical as will be demonstrated in the following sections. 1: Leadership styles adopted by Mr. Semler and impact on strategy Ricardo Semmler The authoritarian: When Ricardo Semmler joined his fathers company in 1979, the company was involved in manufacturing equipment for the shipping industry. The revenues were shrinking and despite Semmlers insistence to diversify into other businesses, the management stuck to the same industry. When Mr. Semmler was made in charge in 1980, his first action was to fire 60% of the top management which opposed his radical ideas. An autocratic style of leadership, as theorized by Kurt Lewin, is evident from many actions taken by Semmler. This was combined with a traditional management style which involved following a strict policies and procedures framework for almost every task. Reports and manuals were a norm. The focus was on productivity and achievement of goals. The management performed the traditional roles, as described by Henry Fayol in his theory of 5 functions of management, namely; planning, organizing, commanding, coordinating and controlling the organization. This management style suited well to the fairly authoritarian style of leadership of Ricardo Semmler who held the power to decide for the organisation. Impact on strategy He changed the strategy of the organization, shifting the focus from shipping industry only to diversification into various industries. His vision was to reduce reliance on one industry only and expand into different businesses. This meant that the achievement of tasks were the focal point of the strategy while the employees felt stressed and de-motivated. Innovation seemed non-existent and steadily the staff turnover began to rise. Stress took its toll on Ricardo Semmler himself and his health condition became worse. This was the time for a change. The Change: Source: http://www.shkaminski.com/Classes/images/Managerial%20Grid.gif The management grid by Blake and Mouton perfectly describes the styles of management adopted by Semco. Initially, Semco was located in the bottom right section aiming for high production with low concern for people but gradually the shift towards Team management whereby the organization is divided into small teams operating fairly independently of others but in a coordinated way with high productivity while keeping employees motivated and satisfied. Ricardo Semmler The Democrat: This was when he turned the tables around, making the change by involving the employees in almost every decision made in the company. The change was not a drastic one, it was gradual yet steady. Ricardo Semmler had realized that employees involvement in the decisions related to the organization was essential. They must be well aware of what the organization wants to achieve. Employees should give in their 100% regardless of the skills set they possess. For these reasons, Semmler transformed himself and adopted a leadership style that was identical to Kurt Lewins participative style of leadership. Reforms such as removing the formal line of authority, discarding the organization chart, letting employees set their salaries, select work hours that suit them and even choose their managers and spiraling the organisition into one where there are no cabins and where employees are involved in all major decisions made by the organization are all evidences of the change in management style by Ricardo Semmler. Impact on strategy These actions have brought about a change in the overall strategy of the organization. The employees are aligned with the strategic objectives of the organization. The organization now operates with a strategy that promotes culture of overall openness sharing ideas and providing feedback. The strategy of Semco is now to involve employees in the organizations benefits through its unique profit-sharing scheme, motivating them to work for the growth of the company they can call their own. The organizations structure has been re-defined, moving from hierarchical to business unit approach with teams at the core. Teams mutually decide upon what needs to be done and who will be responsible for what tasks. For this to be achieved multi-tasking is pivotal and most employees are adept at majority of the tasks performed within the unit. This promotes ideas of self-governance and self-management and incorporates responsibility among employees into the overall strategy of the organization. The f ocus has shifted from being task oriented to more people oriented with high importance given to productivity. 2: Link between management and leadership theories 2.1 Leadership and Strategic Management: Leadership and management are two distinct systems that must co-exist in any organization. Managers tend to have a short-term orientation and usually solve problems as they appear. Leaders on the other hand are more forward looking and make decisions that suit the long term interests of the organization. Leadership and management both shape up the organization. While leaders decide on the direction of the organization, provide the resources and set the frame, managers ensure that the objectives are achieved within the allocated resources. Theoretically, managers and leaders are considered to be separate. However, managers will not be working alone and will be managing a team of individuals for achieving the targets set for them. This will require a degree of leadership skills too as this would call for influencing the actions and thoughts of other people. Henry Fayols 5 Functions of Management (1916) http://www.oppapers.com/essays/Leadership-Management/48673 Henry Fayol devised a theory which suggested that management is essentially a combination of stepped activities, namely; Planning: Plans are made, budgets are decided, limitations are taken into account and parameters of operations are established. This role is commonly shared by both the leader and the manager. A leader would usually be planning for the longer-term while the managers viewpoint is fairly shorter and focuses on immediate targets. Organizing: The second phase invariably includes the allocation of resources that would be consumed for achievement of objectives. Decisions about financial capital, human capital and the structure to be followed for attaining success are taken. Commanding: This ensues deriving the optimum out of the resources. Managers communicate clearly what is expected from the employees and lead by example. Coordinating: Teams will be striving for their individual targets and a balance needs to be maintained among all activities. Harmonization of activities is vital and so is management of conflicting interests. Leaders would take the driving seat. Controlling: Sizing up the benefits of activities is important. Controlling is measuring performance to be able to plan for the future. Leaders would again be looking at the long-term implications of the actions performed and decide on the future strategy. Managers on the other hand will be more concerned with what needs to be repeated and what is to be avoided. To sum it up, Henry Fayol proposed a management theory which describes the functions of management but in effect, it also categorizes the traditional role performed by the leaders as well. Peter Druckers 5 Management Processes (1954) http://www.oppapers.com/essays/Leadership-Management/48673 Peter Drucker, a renowned management theorist had a similar viewpoint of the process of management. According to him, management plays a predefined role in any context. These are: Objective Setting: Leaders provide the vision of the organization as a whole and managers, for their part, set the direction of their individual units. Motivation: Employees need to be motivated if managers want to extract their full potential. Leaders and managers have a variety of motivational tactics to use. Some could be financial incentives, while others are more humanistic in nature. Task Organisation: A manager needs to organize the task and organize the activities for the smooth operations leading to realization of objectives. Measurement: Performance needs to be measured in order to identify any divergences from the required performance and to find ways to fill any gaps in the desired and actual performance. Training and Coaching: Managers and leaders must develop their sub-ordinates. Managers and leaders have to train and coach their sub-ordinates in order for them to perform to the required level. Transactional Management and Transformational Leadership The transactional and transformational theories are another way of describing the inter-relationship and distinction between managers and leaders. According to this theory, managers are more involved with day to day activities of the organization while leaders are concerned with the strategic vision. Managers follow the set principles while leaders challenge the status quo. Leaders are more concerned with bringing about the change in the culture while managers implant that change in the organization. The primary role of a leader is to set the direction while managers ensure the organization is kept on track. Mckinseys 7S Framework http://www.mindtools.com/pages/article/newSTR_91.htm Source: http://www.mindtools.com/pages/article/newSTR_91.htm The model suggests that any organization has 7 building blocks. The blocks are categorized as: Soft Elements: Shared Values, Skills, Style Staff Hard Elements: Structure, Systems and Strategy The model places highest importance to the shared values placed in the middle. It re-iterates the fact that all other elements are derived from the vision for what the organization wants to achieve. The Hard elements are determined by the leadership style chosen while the soft elements are drawn from management. Leaders would; evaluate what set of skills are possessed by the employees and what should to be developed select the staff taking into consideration their abilities and the needs of the organization; and Decide upon The style in which the organization is taken forward. The style of leadership would depend on circumstances Managers on the other hand; Shape the structure of the organization using tools such as reporting lines, organization charts etc Develop a plan, allocate resources and decide the course of action. In short, devise a strategy Craft the policies and procedures and standards on how tasks are performed. Leadership style may have profound impact on the strategy of an organization. A transformational style of leadership may stir up the enterprise, motivate and spur action. Such a leader provides an insight into the future, takes the initiative, inspires followers, involves stakeholders, improvises, thoughtful about individuals and implements successfully. This form of leadership would lead to an overhaul of the way the organization operates. A transactional leader on the other hand would have a strategy of maintaining the status quo and keep the current operations. Add Emotional Intelligence 3: Utilize appropriate techniques to review Semco leadership requirements 3.1: Use appropriate methods to review current leadership requirements In order to completely understand the requirements of leadership, it is necessary to understand the environment Semco is operates in, the phase the Semco itself is going through, what pressures are exerted from an industry sector, what its structure is and what the strategic direction it has assumed by the corporate parent. Semco strives to develop a competitive advantage. This is achived by looking at four factors according to Porters Diamond. These are: Firm strategy, structure and rivalry: strategy is what the organization wants to achieve. Structure of the enterprise should be developed to support the strategy and rivalry serves as motivation. Demand Conditions: portrays the demand of products and services. Factor conditions would be developed according to these demand conditions Related and supporting industries: an industry cannot survive without its associated industries. Semmler saw this when the shipping industry was shaking and Semco was badly hit. Factor conditions: The resources of the nation are the factor conditions. Education, mineral resources, capital goods all account for here. What we already possess and what needs to be developed. STEEPLE: Semco is primarily involved in production of heavy industrial equipment and development of intelligent systems however, it also holds stakes in an investment company and energy sector.A STEEPLE analysis is used to understand the environment that Semco operates in. https://www.cia.gov/library/publications/the-world-factbook/geos/br.html Social factors: Semco has shown high concern for social factors. It pays its staff good salaries and keeps them motivated. Semcos policy is to maintain a work/life balance evidenced by initiatives such as Retire a little bit allowing employees to do what they want. Technlogical factors: Technoloical advancement is the need of time and organizations need to identify and discover new technologies to improve efficiency and effectiveness. Economic: Semco operates in the fastest growing South American economy. It is among the emerging economies that have shown revival signs. Growth is expected to be 5% in 2010 as per the Central Bank. GDP composition by sector is: Agriculture:Â  6.1% Industry:Â  25.4% Services:Â  68.5% (2009 est.) Environmental: Brazil is the 7th largest oil consumer in the world and 10th largest when it comes to electricity. This is largely because major part of economy is related to industry. This poses a threat to environment. http://www.semco.com.br/en/content.asp?content=2contentID=548 Political: Semco operates in a political environment where, in the past, the government has often changed monetary, fiscal, taxation and other policies to influence the course of Brazils economy. Such actions are beyond control and Semco cannot predict what measures or policies the Brazilian government may take to influence the economy. Legal: The legal structure in Brazil is one that welcomes foreign investment. There are no requirements for government approvals or minimum investments. http://www.lexmundi.com/images/lexmundi/PDF/guide_brazil.pdf Ethical: Ethics is a major issue of concern in Brazil. It ranked among the 15 most corrupt countries in the world. There have been cases of corruption in the public sector. http://www.brazzil.com/cvrmar97.htm STEEPLE provides an insight into the macro environment Semco operates in. It is also important to understand the phase that Semco is going through as an individual organization. The organization has taken a strategy of diversification by entering new markets and developing new products. This has been done by revolutionizing the current practices, regular reinvention and constant renewal. Semco operates in a complex environment although the environment provides plenty of opportunities that might match its strengths. Semco needs to adopt a strategy of global companionship and to partner with international, well-reputed organizations to achieve economies, compete effectively and lead the market. It has to build strong bonding between the sister concerns and develop strong networks within the group and with parties external to the group. It needs a leadership that promotes mergers, acquisitions and alliances in order to continue its long run of success. 3.2: Plan development of leadership according to future needs: Semco needs to develop leadership that has the ability to foresee the future requirements and have a strong sense of responsibility. Semco needs to make use of the corporate parent theory to productively apply the concept of diversification through mergers and acquisitions. Strong communication skills are an essential attribute that must be developed to avoid ambiguities. The leader must be able to network well with inter-related parties and command respect so that others may give to heed his ideas. The leader should have the strength to accept his mistakes and the humility to give credit where it is due. Semcos culture is the core competency that it has developed over the years. Its competitors have been unsuccessful at adopting the culture, either because of lack of resources or lack of conviction. 4: Produce a future leadership plan for Semco