Control Systems – Rendell Company Report

T6Rendell Company * Divisional controllers report to general managers from 1985 onwards * 7 Distinct business units with their own profits, sales * 1980 corporate controllers responsible for 1) financial accounting 2) internal auditing 3) analysis of capital budget * Reports went directly to top management from divisions * Mr.

Hodgkin wanted to play a more active role in establishing budgets and analyasing performance (would personally review budgets and study divisional performance and hired analysts to help) * Divisional managers discussed their budget with top management with divisional controller present * Divisional controllers primary responsibility was to divisional managers as opposed to corporate controllers so Bevins thought he wasn’t getting enough clear info on performance of units * Harrigan: Divisional controllers shouldn’t be “front office spies” if they want to have good working relationships with managers and help them with the control functions * Corporate controllers shouldn’t put divisional controllers in awkward positions regarding more data/opinions on financials. Questions: 1. What is the organizational philosophy of Martex with respect to the controller function? What do you think of it? Should Rendell adopt this philosophy? * Divisional controllers report to corporate controllers Responsible for establishing cost and profit standards and ensure follow through * Not intended to take initiative away from DMs * More formal line relationships as controllers work physically separate from division managers * Set of formal policies, goals, practices that employees (managers) are aware of before beginning in the orgnization * Accounting system controlled by controller division so systems are not tailored to each BU * Divisional managers at Martex like this system because it gives them an unbiased partner with relevant information, controller can do better analysis and there is little argument about cost reports I think this model works for Martex because of the existing culture that has been developed around this model.

People in the organization are comfortable with this type of hierarchy. At Rendell the firm culture gives more power to divisional managers and gives them dedicated staff working under them. The feelings towards corporate are more adversarial so any change in the controller function will feel like a corporate spy as opposed to better communication. This philosophy will not work with Rendell’s culture. It will lead to more reliance on informal organization and poorer communication with corporate. 2. Who should the divisional controllers report to in the Rendell Company? Divisional controllers should report to both management and corporate controllers while ensuring DM are aware of this responsibility. 3.

What should the relationship be between the corporate controller and the divisional controllers. DC should report to CC to the extent that it ensures corporate directives are implemented properly without harming DCs and DMs. DCs should communicate that corporate initiatives are being followed/met within their divisions. 4. Would you recommend major changes in the basic responsibilities of either the corporate controller or the divisional controller? Divisional controllers need to play a stronger role as opposed to being a staff like assistant to DMs. However, having them as a direct report to CCs would conflict with the existing culture between DMs and DCs.