Rendell Case Essay
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?
From the position descriptions of Martex stated in the case we can conclude that the organizational philosophy of Martex with respect to the controller function, especially in the modern business, has gone through a huge change. For organizational function, it emphasized the importance of directly reporting to the corporate controller in lieu of responsibility to the division manager, and for this position, it largely concerned with administrative function of an important managerial position as it relates to the control of costs and the profitable operation of the business as a whole. The Martex’s controller vertical structure appear to be relatively independent without being intervened by the division manager so that they can greatly contribute to improvements on controlling corporate cost and preparing divisional budget from the company-level management perspective.
In my point of view, it is beneficial to corporate operation as a whole. But these is a point which should not be neglected that is sometimes the interest inconformity between division and corporate. Like what stated in the case, there is always a fat in the division budget, but if execute the Martex’s methods, the direct consequence of “unbiased source of information” will really show up? I doubt it. Given the intervention of the division manager from their own purpose, the accuracy of either data sources or analysis reports could not be guaranteed anymore. So in my position, I would be more in favor of rejecting this organizational philosophy in Rendell Company.
2. To whom should the divisional controllers report in the Rendell Company? Why?
The divisional controller should report to the divisional manager for now. The reason is that the control system structure should take corporate structure into account. If merely imitating the methods of Martex, it may fail. It is not completely suitable for a different corporate structure using the same management control system. The reason of success in the Martex is primarily because the line-staff relationships underlie the implement of assigning general staff to the division instead of the divisional staff. In addition, the division controller’s office is often located with the division colleagues not the division manager, and therefore make the intervention least possible. In contrast to the Martex, Rendell did not meet the same requirement as the Martex had had.
Once took the job, the Rendell division controller was told his function was to help general manager. So every decision and analysis he made would be from divisional interest instead of corporate as a whole. On the other hand, as a member of the divison, if the controllers were treaded as the front spy looking into the division status, they will also be questioned for the reporting and isolated from the rest of the division. No mention the job could be taken over unofficially. The reason of this phenomenon is that the division controllers are not created as an independent position in the Rendell Company, which is, more or less, under the pressure of the division management.
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?
The best relationship between the corporate controller and the divisional controllers is kept direct relationship. From the perspective of operation and development of the corporate, only if the president and corporate controller (as we all know, mostly, the corporate controller would reported directly to the president) gather the accurate information of various divisions, they can make better decisions for future plan. To avoid the unnecessary difficulties for gathering data and reporting to upper management, the vertical organizational structure should be shortened as possible.
There are several indispensible steps to establish this relationship. And all of the purposes are from two principles: first, shorten vertical structure and avoid intervention of affected parties; second, strengthen accounting system control. First of all, it is important to intently cultivate the awareness of managers and controllers as they simultaneously grew up in the division. The company should establish the so positive image of controllers within the entire company that make every staff clear the necessity of the controller organization for the development.
Secondly, take a strong hold with the accounting system, only this is an objective and powerful tool for the entire management even if the management cannot make sure the accuracy of the other information. Additionally, with an uniform accounting system the company would not step into the chaos status. Thirdly, align the divisional and corporate controller in the same direction. Only with the same objective, such as growth in dollar sales, assigned rate of profit etc., they can coordinate and cooperate more efficiently from the same interest. Setting up a proportion of allocating profit between managers and controllers so as to introduce a competitive and cooperative mechanism is not a bad idea.
4. Would you recommend any major changes in the basic responsibilities of either the corporate controller or the divisional controller?
The controllers now take on the responsibility of establishing the standard practice regulations and the coordination of systems. To guarantee the rightness and unbiased standpoint, the corporate controller should supervise the argument process. Because there is no counterpart in the division to offset the potential personal mistake. So for this part, in a certain extent, corporate should suppress the individual impact of controller for the standard establishment. The controller, whatever in corporate level or division level, should have supervision over the cash, cash equivalent and credits. In case of the uncontrollable expense on the divisional budgets.
From such process, on the other hand, it can resolve the partial problem of false financial statements and bloated budgets. The divisional controllers should have the partial authority over the disbursements of any kind of expense, whose signature on checks at the same time should also be authorized and double-checked by corporate controller. Through authority sharing between administrative staff and control organization, it would be more beneficial for the corporate cost control.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 25 October 2016
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