Rendell Company Analysis and Recommendations

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Table of Contents

Abstract
Introduction
Organization structure of Martex
Recommended structure for Rendell
Corporate controller/division controller relationship
Recommendations
Conclusion
Works Cited

Abstract

Under Martexs organization structure, the division controllers report directly to the corporate controller, and this ensures higher integrity and more efficiency. At Rendell, the division controllers report to their division general managers, and this caused a lot of frustration for the corporate controller who, not only got false reports on financial activities in the divisions but could not get any clear clarifications from the division managers whenever he sought it.

This prompted the corporate controller to consider adopting the structure of Martex, which could have been ideal for Rendell. The new organizational structure would help streamline financial operations at the company and bring better results.

Introduction

The corporate controller at Rendell Company, Fred Bevin, was having problems working with the division controllers of the company. This is because the division controllers worked under, and reported to their division general managers rather than him at headquarters. Under this setup, Bevin felt that he was not getting accurate reports about the financial activities at the divisions. Of particular concern were the inflated budgets that the division general managers were presenting to top management, yet the division controllers were not reporting any improprieties. He admired the organization structure at Martex, where the division controllers reported directly to the corporate controller and considered having it implemented at Rendell.

Organization structure of Martex

Under the organizational set up of Martex, the Corporate Controller, the Divisional General Managers, and the Divisional Controllers all have a solid line relationship. The company is divided into several divisions, each headed by a divisional general manager. The corporate control organization is stationed at headquarters and is headed by the corporate controller. The functions of the corporate control organization include handling the company’s accounts, performing internal audits, and analyzing budget requests from the various divisions.

The corporate control organization provides the guidelines for budget control, and these are implemented by the divisional controllers in their divisions. The corporate controller actively influences the appointments of divisional controllers. The divisional controller works under the divisional manager in the division. Part of the divisional controller’s job description is to help the divisional general manager perform various duties in the division. The divisional controllers are empowered to perform their assigned functions more independently.

They help in the preparation of the divisions’ budgets in collaboration with the division general manager. The divisional controllers have a solid line relationship with the corporate controller, and they report directly to him. This enables better financial management and scrutiny of the divisions’ budgets by the corporate control organization at headquarters. This also ensures that the budgets presented by the divisional general managers to the top management for approval have been ratified by the corporate controller and corporate control organization at headquarters since they are in charge of the company’s finances.

This arrangement allows for goal congruence between the corporate controller and divisional controllers and reduces the chances of asymmetrical information being passed between the two. The divisional controllers can act more independently and keep higher levels of integrity under this arrangement. The chances of divisional general managers adding any “fat” to their budgets will be reduced since the divisional controller is supposed to report all financial information from the division to the corporate controller at headquarters. Any discrepancies will be noticed and the higher management will be notified.

The division controllers provide unbiased information to the corporate controller, and the corporate controller has more confidence in these reports. The corporate controller will also find it easier to implement new control programs through the division controllers. This organizational structure also reduces conflict of interest between the division and its headquarters. There is fear that under this arrangement, the divisional general manager may not consider the divisional controller as part of their team at the division, but rather as a front office spy working for headquarters. This may cause the divisional general manager to sideline the divisional controller at the divisional level (Antony & Govindarajan 121).

This should not be the case since the goals of the company are the same as the goals of the divisions and headquarters put together. Each division is expected to concentrate on achieving its goals to help the company achieve its goals. It is the division controller and his team that provides the necessary information for budget preparation at the divisional level so the division general manager is obligated to work with the division controller.

Since the division controller will report all financial activity at the division level to the corporate controller at headquarters, the budget that the division general manager will present to the top management for approval must be in agreement with the division controller’s report, since the corporate controller and his team at headquarters will be scrutinizing those budgets. If the organization is to achieve its overall goals, the divisional must achieve its set goals first. This means that there must be congruence between the division general manager and the division controller. The decisions made by the division general manager should be in the best interests of the company and not his interest.

This is a highly efficient organizational structure that can work for Rendell Company. If Rendell adopted this organizational structure, it would bring more efficiency to its operations. The corporate controller, Mr. Bevin, has been having several difficulties in executing his duties. For example, he felt he was unable to implement the development and use of new technologies as fast as he wanted since he did not have a close relationship with the division controllers.

He felt that he was not getting adequate information on what was going on in the divisions. This was because the division controllers were reporting to the division general managers and therefore felt loyal to them. Not only was the corporate controller getting biased reports from the division controllers, but he was also finding it difficult to get any helpful information from them whenever he made specific inquiries regarding the financial activities of the divisions. With such a structure, the division general managers were able to add some “fat” to their expenses budgets and the division controllers would not report such matters to the corporate controller.

This would not be the case if the division controllers reported to the corporate controller directly instead of their division general managers (Antony & Govindarajan 120). By reporting directly to the corporate controller, the division controllers would provide more accurate information and answer specific queries regarding the financial activities of the divisions. The corporate controller and his team at headquarters would thus be able to effectively monitor the financial activities going on at the divisions and implement newer techniques in regards to financial management at the company.

Recommended structure for Rendell

The division controllers at Rendell Company ought to report to the corporate controller at headquarters. First, the corporate control organization provides the guidelines for budget control, and these are implemented by the divisional controllers in their divisions. For this to happen effectively, the division controllers must be answerable to the corporate controller directly. This will ensure that they take instructions directly from the corporate controller and implement them as set out in the guidelines provided by headquarters. Since the division controllers actively participate in the budget-making at the division level, they are supposed to implement the budget guidelines set out by headquarters.

This will only be possible if they report directly to the corporate controller, as they will be able to receive direct instructions and seek clarifications in case of anything. If the corporate controller needs any clarifications regarding the financial activities of a particular division, they will be able to get it from the division controller. Since the corporate controller already has a big say as to who is appointed division controller, he will be able to pick people who he feels he can work with effectively if these people were to report directly to him.

The financial performance of the company depends on the financial performance of the divisions. The division controllers are in charge of the finances at the division level while the corporate controller handles the overall company’s finances. For there to be seamless execution of these duties from the divisional level up to the main company headquarters, the division controllers ought to report to the corporate controller for easier coordination.

The current arrangement at Rendell where the division controllers report to the division general managers and only have a dotted line relationship with the corporate controller is not effective enough. This is because the corporate controller cannot get the cooperation he needs from the division controllers who owe their loyalties to their division general managers (Anthony & Govindarajan 121). Since part of the corporate controller’s duties is to analyze the budgets presented by the divisional general managers to the top management, he needs the put of the division controllers to give him an accurate picture of what is going on in the divisions.

This can only happen if the division controllers are reporting directly to him rather than the division general managers. The division controllers will also be more independent in executing their functions well at the division level without fear of the division general manager (Mullins 67). If the division controllers are reporting to the division general managers, they may not point out any financial improprieties by their divisional general managers.

Corporate controller/division controller relationship

At Rendell Company, the corporate controller designs and ensures the proper implementation of the management control system. He is also in charge of devising strategic plans and budgets for the company. Other duties of the office of the corporate controller include the preparation of financial statements and reports for shareholders, organizing and supervising internal audits at the company, and preparing and analyzing performance reports of the various company divisions. All these require the input and cooperation of the division controllers if the reports are to be accurate and give a fair reflection of what is happening at the division level (Stacy 37).

For this to happen, the division controllers should have a solid line relationship with the corporate controller in which they report directly to the corporate controller. In other words, the corporate controller should be the direct boss of the division controllers. This will make it easier for them to coordinate and cooperate in the execution of their duties (Cunneen 189). For an ideal set up, the corporate controller should have the powers to appoint and remove the division controllers.

This will give him a chance to assemble a team with which he can work efficiently to deliver on the company’s goals. The personnel to be appointed as division managers will be drawn from the divisions or headquarters and should have gathered the necessary experience required to be effective division controllers. Since the corporate controller provides the budget guidelines for the whole company from headquarters, he will need to have division controllers who will be able to implement these guidelines as required.

He also needs to identify people with integrity to help him monitor the company finances at the division level effectively. With the division controllers reporting directly to the corporate controller, they will be able to work independently without fearing the division general managers. In case the division general manager is involved in some financial improprieties, the division controller will report this to the corporate controller who will take appropriate action.

This will help the company streamline its budget and eliminate the “fat” that Mr. Bevin, the corporate controller suspected was being added by the division general managers with the help of the division controllers (Antony & Govindarajan 120). Under the current set up at Rendell, the divisional controller works under the divisional general manager, and this allows any financial flaws at the division to be hidden.

The corporate controller at headquarters does not get any reports of financial misappropriation because his representative at the division does not report to him directly. If the division controller is the direct representative of the corporate controller at the division level, he ought to report directly to the corporate controller for them to coordinate their duties well. Such an arrangement also allows room for the division controllers to come up with suggestions and new ideas on how they can perform their functions more effectively and help the company achieve its goals. They can report their ideas directly to the corporate controller who will give them due consideration and see how they can be implemented throughout all the divisions of the company.

The whole budget-making process and preparation of financial and performance reports will be well coordinated. It will start at the divisional level then everything will be integrated at headquarters. The division controllers will give assessments that are more accurate in their reports that will go directly to the corporate controller. They will not feel the need to protect any division general manager since technically; they do not work under them. This relationship between the corporate controller and the division controllers will help them achieve goal congruence since they will be working as a team with common goals under the same guidelines.

Recommendations

If Rendell is to adopt the Martex organizational model, there have to be some major changes, especially in regards to the duties and responsibilities of the corporate controller and the division controllers. To begin with, the new organizational structure should be communicated to the whole company through formal documents and posted on the company website. The communication should reach every member at every level of the company’s organizational structure (Seleshi 56).

A manual outlining the company’s official code of conduct should also be issued to every employee. The code of conduct manual should emphasize the fact that the goals of the divisions are there to support and contribute to the overall corporate goals of the company. The company goals should always take precedent over the division goals.

The financial systems for all divisions should be integrated under one overall system. This will help streamline operations and bring in efficiency (Mullins 123). The division controllers should take on the responsibility of being internal auditors of the divisions in which they are stationed.

Their expert analysis and recommendations on the company’s budget are very crucial and should be taken seriously (Stacy 207). This is because they are best positioned to know the financial situation in the division. All the divisions should be treated the same regardless of their size or value when it comes to giving the division controllers promotions, bonuses, and other incentives. This will motivate even the division controllers in the small divisions to work hard since they will all see each other as equals.

Something also needs to be done about the potential friction between the division controllers and their division general managers or the whole division. This can be in the form of team-based activities that are aimed at enhancing the relationship between these two parties (Cunneen 43). One way of trying to create some harmony is to appoint division controllers to work with division general managers that they have had good working relationships before in the company in various capacities.

This will ensure that they are more welcome and are more familiar with the operations at that particular division. The division general managers should not be entirely be sidelined in this new relationship between the corporate controller and the division controller. The division general manager should be forwarded copies of the reports that the division controller sends to the corporate controller. This will give him a chance to confirm that the reports are accurate, and if there are, any issues he does not agree with he will be able to raise them.

Conclusion

The organizational structure at Martex requires the divisional controllers to report directly to the corporate controller at headquarters rather than their division general manager. This gives the division controllers more autonomy to execute their functions properly. At Rendell, they report to the division general manager, and as such, they owe their loyalty to them. This makes it hard for the corporate controller to properly carry out his functions since he does not get accurate reports from the division controllers.

For more efficiency, Rendell should adopt the organizational structure at Martex. This will give the division controllers more independence and they can report accurately about the financial situation in their divisions to the corporate controller. The corporate controller will also find it easier to implement budget control policies and other financial management ideas that are aimed at improving the financial outlook of the company.

This will also make the division controllers be the internal auditors of their divisions, and it will reduce the chances of division general managers adding any “fat” to their division budgets. Implementing such major organizational changes is not easy, and the news will have to be communicated officially to all members of the company (Seleshi 78). If properly implemented, the Martex organizational structure will help Rendell to streamline its financial operations so that the company can perform better.

Works Cited

Antony, Robert N., and Vijay Govindarajan. Management Control Systems, 12^th Ed. New York: McGraw-Hill, 1998. Print.

Cunneen, Patrick. Organisational Structure: An Essential Lever in Managing Change. Dublin: Blackhall, 2008. Print.

Mullins, Laurie J. Management and Organisational Behaviour. Harlow: Prentice Hall/Financial Times, 2005. Print.

Seleshi, Sisaye. Organization Change and Development in Management Control Systems: Process Innovation for Internal Auditing and Management Accounting. Greenwich, Conn: JAI, 2000. Print.

Stacey, Ralph D. Strategic Management and Organisational Dynamics: The Challenge of Complexity to Ways of Thinking about Organisations. Harlow [u.a.: Financial Times/Prentice Hall, 2007. Print.

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