Rendell Company Case Background The Rendell Company was established in 1968 for the purpose of providing high

quality representation to the electronic market in Illinois and Wisconsin. The Rendell Company had seven operating divisions: which is the smallest had $50 million annual sales and the largest over $500 million. Fred Bevins was the controller of the Rendell Company, was concerned about the organizational status of divisional controllers. The current conditions on Fred Bevins was the divisional controller reported directly to the divisional general managers, but the corporate controller always was consulted prior to the appointment of new division controller, and he also was consulted in the connection with salary increases for divisional controllers. The corporate controllers specified the accounting systems to which the divisions were expected to conform and the general procedures they were to follow in connection with budgeting and reporting performance. Most of the divisional controllers had worked for Rendell for 10 years or more. By those condition, Mr Bevins foresaw increasing difficulties with this relationship as the corporation introduced more modern control techniques. He though that existing relationship between the corporate controller and the divisional controllers was not so close. More important, he thought that he was not getting adequate information about what was actually happening in the divisions. The divisional controllers primary loyalty was to his division manager, and it was unreasonable to expect that he would give Mr. Bevins frank, unbiased reports. Mr. Bevins was quite sure that some fat was hidden in divisional expense budgets and that the divisional controllers had good idea where it was. In other words, he thought that it would be better if the divisional controllers directly reported the divisional activities to the corporate controller, rather than for the divisional manager. The idea of the new system was he got from Martex Company controller organization. The condition of the Martex Company was the corporate controller, report direcly to the president and has reporting to him all division controllers and other accounting, data processing, and analysis groups. The controllers organization is charged with the responsibility of establishing cost and profit standards in the corporation and of taking appropriate action to see that these standards are attained. It reviews all research activities in the various divisions and their central research. The organization also handles all matters involving cost and profit eatimates. The present size of divisional controllers staffs ranges

from 3 to 22. Division controllers are not involves in preparing division profit and loss statements; these are prepared by separate group for all divisions and the corporation. The success of the Martex controller organization and its relations withe divisional managers to be largery the result of managers and controllers having grown up with the arrangement and accepting it long before they arrived at their managerial positions. It was also, a uniform and centralized accounting system; predetermined financial objectives for each division, such as the growth in dollar sales and a specified rate of profit as a percent of sales; profit sharing by managers and controllers.
Corporat e Controlle r Corporat e Controlle r

Division Manager

Division Manager

Division Controlle r

Division Controlle r

Rendells controller relationship The difference controllers roles in two company: Rendell Corporate Controllers : - reviewing budgets - analysing performance - make specified accounting system - general procedures in budgeting and reporting performance Divisions Controllers: - assist division manager in preparing budget and performance report

Martex Controler Relationship Martex - establish budgeting standard - establish objective percent of profit on sales, target for each dividion - has the right to delegated authority to question the failure - supervision of all accounting record.

Problem Identification From the given situation of the Rendell Company, we can summarized the problem:

How should Rendell resolve the current reporting relationship of the corporate controller and the divisionals controllers to achieve goal congruence? Is the controller relationship of Martex better than that of Rendells current organizational relationships? Strengths The current setup allows more efficient information flows and provides division general managers directly with customized information and recommendation. This setup would resolve tactical and operative issues easier because of a closer working relationship based on trust between division managers and divisional controllers. With the division controllers reporting directly to division managers, the current set-up allows tactical issues to be resolved faster and based on latest information.

Weaknesses The division controllers provide wrong, biased information to the corporate controller because division controller is staff of the division general manager and acts loyal towards him. That leads to hidden fats in expense budget that reduce the profitability of the divisions. Division controllers may lack of objectiveness in assessing divisions activities and try to defend division general managers decisions. According to what was mentioned before, it would cause difficulties to implement new control techniques. Proposed Setup: Strengths Unbiased and objective reports on division budgets and performance from division controllers to the corporate controller provide more detailed information about the divisions. Corporate controller and division controller speak the same language so that adjustments in operations can be done faster and more effective. More critical assessment of the operations helps to reduce fats in expense budget and make it easier to implement new control programs

Weaknesses

It is difficult to implement change in organizational structure in short time. Relations between members of the organization have been established in a long term and hind fast changes in organization procedures. Direct reporting of the divisions controller to the corporate controller reduces the trust between division controller and division general manager and may result in excluding the divisions controller from the management team. Organizational changes always go in with a loss in efficiency in the short term. The pressure on divisions controller increases because both the divisions general manager and the corporate controller will see the divisions controller as his staff. Defining and realizing a new management control system is a long-term decision that should be introduced to the staff to get commitment for it, if not, it may reduce the motivation of the employees. Implementation without well developed planning in advance may result in role confusion and conflicts. The proposed setup is difficult to implement because personal relations inside the organization have not been taken into account while defining the management control system. Decision and Recomendation From the case background and analysis we found that one of the success factor in Martex controller relationship is in its uniform and centralized accounting system where is the controllers division has developed accounting system that is the same for all divisions, If Rendell want to adapt this kind of system it will be not easy for every division to change their accounting system, because it will spent much time, spent much work and there is no guareantee that it will be match with their needs and there is posibility to raise the conflict. The other issue that might be come is about the loyalty between division controller and division manager. If the division controller work for corporate controller, the division manager might feel spied on and this will create miss trust in management team. This kind of situation has long run effect in work team effectiveness, teamwork cooperation and cohesiveness. If it happen, company can not achieve goal congruence and later can influence company objective to get profit and growth. Instead of change the controller relationship, we recommend Rendell to concern more in minimize the fats in the budgets. This problem actually occur because the division controller did not give a right information to the corporate controller so we have to concern more to make a better relationship between the division controller and corporate controller

The company has to so, Rendell can retain its current stucture. We found that the budgets fats is occur because to solve the budget issue Rendell implement additional control systems, so Rendell can develop a corporate accounting system and get the divisions to submit their feeds. Additional Controllers System
1. Establish incentive system like order to achieve better control of the system. We can

adopt the martex accounting system with profit sharing between divisional manager and controller, this will motivate both division controller and division manager to achieve the companys goal.
2. One of the factors that causes the fats is the low level of the goal congruence because

the division manager is take more attention to the self interest not for the best interest for the company. So, we think the company has to reduce the self interest thorugh do division controller rotation in every division so they will not have a personal relationship with the division manager.