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 ...view middle of the document...
• Bevins was interested in the controller organization of Martex
• Provides a training ground in general management
o General managers act as CEO of their own division
Allows GM to make better production and marketing decisions than headquarter might
• General managers may not meet goal congruence
o Would rather make decisions to make their own division look better instead of the better good of the company
o Ie. GM could choose to cut back on training to show better performance or to meet the given budget. However, this could affect the company long term if workers get injured because they were not properly trained. The company will end up paying more than the original training cost.
• General manager will not provide completely objective report
Martex controller organization
• The corporate controller reports directly to the president and has every divisional controller reporting to him and other accounting, data processing, and analysis group
• His responsibilities are to establish cost and profit estimates and standards and to ensure these standards are attained