George Lancia Case

George Lancia Case #1

Cam Mathews

• June 1993 when Cam Mathews was hired to be a consultant for George Lancia’s organzations controls.
• George is concerned about the success of his businesses.
• Cam is 24 years old, business graduate
• The statements for G. Lancia did not look good.
• Cam is expecting major changes for his business

George Lancia

• 45-years old and the owner of the organization.
• Worked under himself throughout high school then after graduation is when he worked as a surveyor’s assistant for two years which he sold securities for five years.
• Throughout the year he owned a movie theatre, drive-in theatre and a restaurant. He also began to buy and sell real estate which includes rental properties which gave him a good amount of wealth.
• In 1985 is when George and Kevin Gibson agreed in the idea of investing in several fast food restaurants in Eastern Ontario. But in 1988 is when they realized that the restaurants were not improving and George was forced to buy out the other investors
• Later George was offered another investment opportunity which was a nursing home and retirement lodge in a small town called Sterling, Ontario. George accepted the offer in principle but the agreement is still being completed by lawyers
• In 1991 George decided to build a new house which means that his money is tied between six restaurants, the retirement lodge, rental properties and the new house.

Management Structure

• George’s investments are set up as individual numbered corporations so he could be protected from personal liability and to save the structure from problems as one unit.
• There are two sources of exposure:

1. George’s reputation
2. The borrowing ability within the small town would be affected if any individual corporations went bankrupt

• Banks and creditors recently began to ask for personal guarantees on and new debt requested by George
• George is in charge of all the decisions and approves the spending. The primary source of control is from monthly financial statements, which George often views several months late and does not trust the accuracy of the statement.
• He seldom has direct contact with the front line employees who are:

1. Secretary: Sharon 23 years old. She has a college diploma in bookkeeping. She is the controller of the company. She prepares financial statements, manages payroll, and handles supplier relationship.
2. Assistant: Caroline 24 years old. She has a commerce degree from Brock University and helps Sharon prepare financial statements.

• The problem is the statements were occasionally late or inaccurate. Which George was aware about this situation but he knew that the office wouldn’t run the same without the woman. Since George avoids conflict Sharon has an effective veto on the decisions in her area.

Restaurants

• Kevin Gibson is the GM of the restaurant operations. He is 22 years old when he started working for George. He has no prior formal management education but he has managed fast-food restaurants since he was 18 years old.
• At first George gave Kevin full control of decisions but Kevin was unable to provide results over time and was revoked of making decisions.
• George would host “grilling sessions” where he would ask Kevin for explanations of any apparent poor results and to project next month’s results.
• George would receive other information about the restaurant informal phone calls from banks, suppliers, employees, or the franchiser whenever problems arise.
• Restaurant employees and suppliers always thought Kevinw as the owner because he still makes decisions behind George’s back.
• George hopes Kevin would repay the loan to finance Kevin’s house.
• Jeff Craney, 35-years old with no management education or former management experience, manages the restaurant in Coburg. He invested a substantial amount of cash to build the store in 1991 and holds 49 percent of the shares. But the restaurant is not managed effectively and has operating problems. George is worried that he might have to force a buy out on Jeff is the problems are not solved
• John and Lucy Wilson asked George to sell them the Peterborough restaurant in 1992. The couple used two houses as the down payment and were going to pay the rest over time. George is still responsible for the asset from the perspective of the bank, employees, and the landlord. They have no management education or supervisory experience. John worked as a linesman for a power company and Lucy was a health care aid.

The Sterling Manor

• Is the retirement lodge and nursing home that holds up to 62 residents and 50 employees.
• The negotiations between George and the initial owners the Vaughans were intense because the owners, the Ministry of Health, and the bank doubted George’s ability to run the home successfully.
• At the same time there were major changes in the industry that were pending. The government developed stricter regulations to increase the quality level and service in the industry. The regulations stipulated how the funding should be allocated between nursing, food services, and housekeeping. The changes will change the net profit considerably and management would face a greater challenge then before when there were less regulations for financing.
• Linda Baxter is the administrator the Sterling Manor. She was a nursing assistant for 25 years and had a diploma for long-term care management. She cares for her job and is very personable but lacks technical skills, time management, and supervising. Linda was employed by the Vaughans and reports for them on a regular basis. When her and George dispute, Linda will disagree and ask the Vaughans for their answers. The administration was very disorganized and phones, paperwork, and mail went unanswered. Linda couldn’t focus because she felt like she wasn’t accomplishing anything but with the regulations pending Linda is worried that everyone else would think she is incompetent and reacted when other would try to help her.
• Heather Irvin, the director of nursing at the manor. She was a registered nurse with 30 years of experience. She found it difficult to organize and run the staff while dealing with the conflict and confusion surrounding the ownership. She realizes the importance of management because lives are at stake. She believes that Linda does not know how to operate a health business therefore when Heather will not listen to Linda. So she will always complain about George to Linda because George has minimal knowledge about nursing and cannot see how Heather’s work is.