The Crimson Press Curriculum Center

First Page and the Assignment Questions:

“I don't know how much money I might have lost because of Kate. She is a longtime friend whom I thought I could trust, but I guess that trust was misplaced. Now I've got to decide whether or not to fire her. And then I've got to figure out a way to make my business work effectively without my having to step in and do everything myself”

Rosemary Worth was talking about the consequences of a theft that had recently occurred at the business she owned, Private Fitness, LLC. Private Fitness was a small health club located in Rancho Palos Verdes, California, an upscale community located in the Los Angeles area. The club offered personal fitness training and fitness classes of various types, including aerobics, spinning, body sculpting, air boxing, kickboxing, hip hop, step & pump, dynamic stretch, Pilates, and yoga. Personal training clients paid $50 per hour for their instructor and use of the club during prime time. During slower times (between 9:00 a.m. and 4:00 p.m.) the price was $35 per hour. The price per student for each hour-long fitness class was $12. Some quantity discounts were offered to clients who prepaid. Unlike the large health clubs, Private Fitness did not offer memberships for open access to fitness equipment and classes.

Prior to starting Private Fitness, Rosemary had been working as an aerobics instructor and fitness model. She had won many local fitness competitions and was a former finalist in the Ms. Fitness USA competition. She wanted to go into business for herself to increase her standard of living by capitalizing on her reputation and knowledge in the growing fitness field and to have more time to spend with her two young children. Private Fitness had been operating for six months.

To open the club, Rosemary had to use almost all of her personal savings, plus she had to take out a bank loan. The building Rosemary rented, located in a convenient strip mall with ample parking, had formerly been operated as a fresh food market. Rosemary spent about $150,000 to renovate the facility and to buy the necessary fitness equipment. The club was comprised of five areas: an exercise room, a room containing aerobic equipment (e.g., treadmills, stair climbers, stationary bicycles, cross country ski machines), a room containing weight machines and free weights, men's and ladies' locker rooms, and an office.

Rosemary contracted with five instructors whom she knew to run the classes and training sessions. The instructors were all capable of running personal training sessions, but they each tended to specialize in teaching one or two types of fitness classes. Rosemary herself ran most of the spinning classes and some of the aerobics classes. The instructors were paid on commission. The commission, which ranged between 20% and 50% of revenue, varied depending on the instructor's experience and on whether the instructor brought the particular client to Private Fitness.

Assignment

1. Describe a solution to Rosemary Worth's control problem that emphasizes results controls, action controls, and personnel/cultural controls.

2. What should Rosemary do?