Rendell Company Case Study

Rendell Company

Management Control System

12th edition

Robert N. Anthony

Executive Summary

This report will give us a clear perspective as to what the optimal organizational structure that suits Rendell Company plus some additional control system in attaining the company's main objectives. We will be also tackling the roles, functions and responsibilities of a controller in an organization. This case takes us into Rendell Company which is currently having problems between the corporate controller and the divisional controller. We assessed the advantages and disadvantages of the organization structure of Martex whether it can be applied and be implemented to Rendell Company in order to resolve the problem. Through the frameworks and issues, we concluded that while current setup would cause some budgetary discrepancies because of the lack of loyalty between the divisional controllers to the corporate controller, changing the organization structure of Martex would cause a disparity between the division manager and the divisional controller thus resulting in an anxiety in their working environment which is too costly as compared to maintaining the current setup.

I. Case Context

Rendell Company is experiencing some difficulties in implementing its modern control techniques due to the irking relationship between the divisional controller and the corporate controller (Mr. Bevins) resulting in an added fat to the organization's budgets. Now, with these problems, Mr. Bevins is interested with the organizational structure of Martex if this will be the solution of the current problem.

II. Problem definition

How Should Rendell resolve the current reporting relationship of the corporate controller and the divisional controllers to achieve goal congruence? Is the controller relationship of Martex better than that of Rendell's current organizational relationships?

III. Framework

The group worked out on these following considerations in resolving the issue:

1. First we identify the company objective which is to achieve profitability and growth.

2. Attaining goal congruence within the organization is

important to support the company's main objective.

3. Analysis of the current organization and reporting

structure by evaluating its strengths and weaknesses.

4. Assessment of the proposed organizational set-up (patterned

from the set-up of Martex) by evaluating whether implementation will fit Rendell's corporate objectives.

5. Identify the roles of the corporate controller and the

divisional controllers.

6. We decide which alternative is more aligned with company

objective and organizational set-up.

7. Recommendations after analyzing these frameworks.

IV. Analysis

Current Setup:

Strengths:

 -Current setup is more efficient

 -This setup would resolve tactical issues much easily because of better relationship 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 more easily.

Weaknesses: wrong

 -Biased information is provided by the division controllers to the corporate controller.

 -Hidden fats in expense budget.

 -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.

 -Corporate controller is more confident in reports given by the division controllers

 -Minimized fats in expense budget

 -Easier to implement new control programs

Weaknesses:

 -Difficult to implement change in organizational structure

 -Change may not be suitable for diversified companies

 -Division managers might isolate division controllers from the management team

 -Organizational change may lead to dysfunction and inefficiencies

 -Change may lead to conflict between