Controllership Assay

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Case 3-3 Rendell Company
Q.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? Martex Corporation has adopted a close relationship between the corporate controllers and the division controllers. Each business unit manager does not have his own staff. Divisional controllers informed directly to the corporate controller. Martex management looks for transparency and impartial access to information, whether operational or financial, at each business unit so that: a) Each business unit's goal will be more congruent with the company's goal b) Top management will be able to make more sound decisions if corporate staff will have access to unbiased information c) Corporate will have better control of the information reported to top management in order to avoid sugar coating of the financial information and operating statistics d) Corporate will have better and quicker response on red flag information on each business unit (for example, a business unit that overspent on marketing expenses instead of previsional budget) We believe that this philosophy can be a real strong asset for the company because it enables producing reliable reports for each division and data statistical budget. We believe that the organizational philosophy used by Martex is a key effective factor for the company as it enables to produce fair and objective reports on division budgets, financial statements and operating statistics. We think that it would be difficult and costly for Rendell to implement this philosophy because workers are accustomed to work another way. They might feel over watched and decrease the level of trust even within a team. It could lead to a bad working atmosphere and problems creation. Another case study for case 3-3

Rendell Co. Case Analysis
Case 3-3: Rendell Company
Key Issue: The need for a change in the controller relationship. From a “Dotted Line” approach to a “Solid Line” approach Dotted Line: divisional controller reports to the divisional general manager. Some decisions (hiring, compensation) are to be be discussed with the corporate controller Solid Line: divisional controller reports directly to the corporate controller. • Manufacturing company: 7 operating divisions, all responsible for the manufacturing and marketing of a distinct product line. (Smallest: $50M Biggest $500M) • James Hodgkin: President Fred Bevins: Corporate Controller Old controller organization

• Corporate Control Organization is responsible for: a) financial accounting b) internal audit c) analysis of capital budget • Budget Control System were prepared by each division and submitted to top-management (little analysis) Present controller organization

• Hodgkin (controller at this time), thought it was essential that corporate control organization played a more active role in establishing budgets and analysing performance o Bevins worked the same way once he was named controller

• Divisional Controllers reported to Divisional general managers o Corporate controller were consulted when hiring new divisional controllers or increasing divisional controllers salary • Budget and performance reports from each division is the responsibility of that division’s general manager (with the assistance of divisional controller) • Division general manager reports directly to the corporate controller • Bevins believed that’s his relationship with divisional controllers was not close enough that he could urge the development and use of new techniques as quickly as he wished. • He also believed that he wasn’t getting adequate information on what is really happening in each division and that divisional managers might have a better idea, rather than the general managers. • Bevins was interested in the controller organization of Martex Strengths

• Provides a training ground in general management
o General managers act as CEO of their own division
Allows GM...
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