Rendell Company Case

Debora AryaniCorina IlmaniarHendra Panca

Jumran

Overview

• Rendell Company had seven operating divisions• Each division is responsible for both the

manufacturing and the marketing• Profitable for over 50 years, although still

making profits but the growth slowed down considerably

• Divisional controllers reported directly to the divisional general managers

Overview

• Mr. Bevins ,as the corporate controller, got biased reports because the divisional controller’s primary loyalty was to his division manager.

• Mr. Bevins was quite sure that some “fat” was hidden in the divisional expense budgets. He was interested in the controller organization structure at the Martex Company

Our group decided to focus this case study into answering the three questions below:

What should be done to achieve the goal congruence between the division manager and the corporate?

What are the consequences applying the system answering the question above?

What actions should be taken to solve the problem arise from the implementation?

Problem Identification

State Your Opinion

Which function should be applied for the divisional controller of a company?

Administrative VS Strategic

State Your Opinion

Rendell should apply Martex’s organizational structure to solve its problem.

Analysis

Rendell Company Martex Company

AnalysisRendell Dotted Line Controller Relationship

Strengths WeaknessesDivisional controllers are treated as a team (trusted assistant) inside a division rather than a spy

Controller only acts as an administrator in terms of budgeting and accounting detail

Making decisions are quicker on this organization structure

Promoting conflict of interest between divisional controller and corporate, due to asymmetric informationReducing the objectivity of the report because the controller is highly influenced by the division’s manager which ends up with reporting “fat” budget reports

AnalysisMartex Solid Line Controller Relationship

Strengths WeaknessesDivisional controller can act more independently and have higher levels of integrity

Reducing the teamwork and cooperativeness between the division management and the controller

The “fat” manipulation is reduced in budget reporting

Divisional manager is also possible to assign other people inside their division to replace controller’s roles as a trustful assistant

The decrease of asymmetric information between corporate controller and divisional controllerPromoting goals congruence since it reduces conflict of interest level between division and its headquarter

Conclusion and Recommendation

• ConclusionRendell should apply Martex’s controller system to achieve goal congruence between the corporate and divisions.

Adopting a single and integrated financial accounting system across all divisions.

Authorizing division controllers to pursue the role of internal auditor of the division.

Empowering the division controllers to provide recommendations based on its analysis of capital budgeting requests.

Applying bonuses based on the value of the company instead of the related division.

Further actions

Recommendation

Enhance the relationship between the divisional controller and its division by providing team-based activities such as out bounds periodically.

If possible, the divisional controller should consist of people who have a previous relationship and experience dealing with the divisional manager to ensure that they are more welcomed at the site.

Communicate the new structure through a formal document, company’s website or posters hang on each division.

Initiate a common Code of Conduct Manual for all employees that emphasizes that divisional goals are only supports for the over-all corporate goal, and that corporate goals will come first over divisional goals.