Case 3-3

Rendell Company
Fred Nevins, controller of the HeadeII Company, was concerned about the organizational status of his divisional controller& In 1985 and for many years previously, the divisional controllers reported to the general managers of their divisions. Although Mr. Bevias knew this to
be the general practice in many other divisionally organized companies, he WI:la 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 Rendel] 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 manufac+
twin 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. Bevinsjoined the company as arssistant 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 management 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 of establishing budgets and analyzing performance, He personally took an active role in reviewing budgets and studying divisional performance reports
and hired several you analysts to assist him. Mr. Bevins continued to move in the same di rection 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 perfor
mance. it was clearly understood, however, that budgets and performance reports coming from
a division were the responsibility or that division's. general manager s with the divisional controller acting as his stair assistant in the preparation of these documents. For example, the di-