Rendell CompanyBy: Abeer • Edgar • Luminita

Presentation & Overview of the Case - Edgar

Organizational Structure - Edgar

Described Issues- Edgar

Proposed Solution - Luminita

SWOT Analysis – Current State - Luminita

SWOT Analysis – Martex System – Luminita

Case Questions & Conclusion – Abeer

Rendell Company

President

James Hodgkin

Controller

Fred Bevins

Divisional General

Manager

Divisional Controller

50 years in business

Corporate Office:

• Financial Accounting• Internal Auditing• Budget Analysis

Seven Divisions:

• Responsible for Manufacturing and Marketing of specific product line

• Preparation of budgets and performance reports

The Divisional GM and his Controller were responsible for the preparation of budgets and performance reports.

The Corporate Controller thought that he was not getting frank and unbiased reports from the Divisions due to the organizational structure of the company.

The Corporate Controller believed that Divisions were not reporting accurate information to Corporate. He thought that if Divisional Controllers reported directly to him, he would be better informed.

Problem: Some difficulties in implementing its modern techniques

Problem: Added fat to the organization budgets

Solution: Change to Martex organizational structure

Strengths:- Current setup is more efficient;

- Better relationship between division managers and divisional

controllers.

-The current set-up allows tactical issues to be resolved more easily.

Weaknesses:

- Biased information is provided by the division controllers to the

corporate controller.

- Hidden fats in expense budget.

- Difficulties to implement new control techniques.

Opportunities:

Martex System

Threats:

- Ability of Divisional GM to conceal financial flaws

- Lack of empowerment to Divisional controllers

Rendell Company

Current State

Strengths:-Unbiased and objective reports on division

budgets and performance from division controllers to the corporate controller.

-Corporate controller is more confident in reports given by the division controllers

-Minimized fats in expense budget-Easier to implement new control programs

Weaknesses:

-Difficult to implement change in organizational structure

-Change may not be suitable for diversified companies

-Division managers might isolate division controllers from the management team

-Organizational change may lead to dysfunction and inefficiencies

-Change may lead to conflict between division mangers and division controllers

Opportunities:

Current System

Threats:

Outside Competition

Rendell Company

Martex System

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?

• Transparency of information on budget issues.

• Advantages and Disadvantages

• Rendell Company should retain its current organizational structure with additional control systems to address budget issues

2. To whom should the divisional controllers report in the Rendell Company? Why?

•To the divisional general managers of Rendell Company.

•The current setup is more efficient

•New programs are difficult to implement and there are hidden fats in the expense budget.

3. What should be the relationship between the corporate controller and the divisional controllers? What steps would you take to establish this relationship on a sound footing?

• Unbiased information is provided by the division controllers to the corporate controller and to easily implement new programs.

• Corporate controller is to be more confident in reports given by the divisional controller.

4. Would you recommend any major changes in the basic responsibilities of either the corporate controller or the divisional controller?Basic responsibility of the corporate controller:

- Establish the management control system, strategic plans and budgets,

- Preparing financial statements and financial reports- Evaluate the performance per division- Developing personnel in the controller organization

Basic responsibility of the divisional controller:

- Implement the strategy setup by the corporate controller

- Evaluate the performance of the department within the division

THANK YOU