Rendell Case

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Chapter

3

Behauior in Organizations

111

Cmn 3-1
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Fred Bevins, controller of the Rendeli Company, was concerned about the organizational status of his divisional controllers. In 1985 and for many years previously, the divisional controllers reported to the general managers of their divisions. Although Mr. Bevins knew this to be the general practice in many other divisionally organized companies, he was not entirely satisfied with it. His interest in making a change was stimulated by a description of organizational responsibilities given him by the controller of the Martex Corporation. The Rendell Company had seven operating divisions: the smallest had $50 million in annual sales and the largest over $500 million. Each division was responsible for both the manufacturing and the marketing of a distinct product line. Some parts and components were transferred between divisions, but the volume of such interdivisional business was not large. The company had been in business and profitable for over 50 years. In the late 1970s, although it continued to make profits, its rate of growth slowed considerably. James Hodgkin, later the president, was hired in 1980 by the directors because of their concern about this situation. His first position was controller. He became executive vice president in 1983 and president in 1984. Mr. Bevins joined the company as assistant controller in 1981, when he was 33 years old. He became controller in 1983. In 1980, the corporate control organization was primarily responsible for (1) financial accounting, (2) internal auditing, and (3) analysis of capital budgeting requests. A budgetary control system was in existence, but the reports prepared under this system were submitted to the top manageThis case was prepared by Robert N. Anthony, Harvard Business School. Copyright Haroard Busiress School case 109-033 by the President ald Fellows ofHarvard College.

ment group directly by the operating divisions, with little analysis by the corporate control organization. Mr. Hodgkin, as controller, thought it essential that the corporate control organization play a more active role in the process ofestablishing budgets and analyzing performance. He personally took an active role in reviewing budgets and studying divisional performance reports and hired several young analysts to assist him. Mr. Bevins continued to move in the same direction after his promotion to controller. By 1985 the corporate organization was beginning to be well enough staffed so that it could, and did, give careful attention to the information submitted by the divisions. Divisional controllers reported directly to the divisional general managers, but the corporate controller always was consulted prior to the appointment of a new division controller, and he also was consulted in connection with salary increases for divisional controllers. The corporate controller specified the accounting system to which the divisions were expected to conform and the general procedures they were to follow in connection with budgeting and reporting performance. It was clearly understood, however, that budgets and performance reports coming from a division were the responsibility of that division's general manager, with the divisional controller acting as his staffassistant in the preparation of these documents. For example, the divisional general manager personally discussed his budget with top management prior to its approval, and although the divisional controller usually was present at these meetings to give information on technical points, his role was strictly that of a staff man. Most of the divisional controllers had worked for Rendell for 10 years or more. Usually they worked up through various positions in the controller organization, either at headquarters, in

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Part

I

The Managernent Control Enuironment

their division, or both. Two of the divisional controllers were in their early 30s, however,...
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