r

12O
Part

One

The Management Control Enuironment

the preparation of these documents. For example, the divisional general manager personally discussed his budget with top management prior to its
approval, and although the divisional controller usually was pre'sent at these meetings to give information on technical points, his role was strictly that of a staff man. Most of the divisional controllers had worked for Rendell for 10 years or more. IJsually they worked up through various positions in the controller organization, either at headquarters, in their division, or both. TWo of the divisional controllers were in their early 30s, however, and had only a few years' experience in the headquarters controller organization before being made, first, divisional assistant controller and then divisional controller. Mr. Bevins foresaw increasing difficulties with this relationship as the corporation introduced more modern control techniques. For one thing, he thought the existing relationship between himself and the divisional controllers was not so close that he could urge the development and use of new techniques as rapidly as he wished. More important, he thought that he was not getting adequate information about what was actually happening in the divisions. The divisional controller's primary loyalty was to his division manager, and it was unreasonable to expect that he would give Mr. Bevins frank, unbiased reports. For example, Mr. Bevins was quite sure that some fat was hidden in the diviwas going on in the divisions if reports on divisional activities came directly from controllers working for him, rather than for the divisional manager. Mr. Bevins, was, therefore, especially interested in the controller organization at the Martex Company as he learned about it from E. F. Ingraham, the Martex controller, when he visited that company. until his visit to Martex, Mr. Bevins had not discussed the organization problem with anyone. Shortly thereafter, he gave william Harrigan, his assistant controller, a memorandum describing his visit (see the appendix to this case) and asked for Mr. Harrigan's reaction. Mr. Harrigan had been with Rendell for 25 years and had been a divisional controller before going to headquarters in 1982. Mr. Bevins respected his knowledge of the company and his opinion on organizational matters. Mr. Harrigan was accustomed to speaking frankly with Mr. Bevins. The gist of his comments follows: I don't think the Martex plan would work with us; in fact, I am not even sure it works at Martex in the way suggested by the job descriptions and organization
charts. Before coming to headquarters, I had flve years'experience as a divisional controller. when I took the job, I was told by the corporate controller and by my general manager that my function was to help the general manager every way I could. This is the way I operated. My people got together a lot of the information that was helpful in preparing the divisional budget, but the final product represented the thinking and decisions of my general manager, and he was the person who sold it to top management. I always went with him to the budget meetings, and he often asked me to explain some of the figures. when the monthly reports were prepared, I usually went over them, looking for danger signals, and then took them in to the general manager. He might agree with me, or he might spot other things that needed looking into. In either case, he usually was the one to put the heat on the operating organization, not me.

sional expense budgets and that the divisional controllers had a pretty good idea where it was. In short, he thought he would get a much better idea of what

Chapter

Behauior in

Organizations 121

We did have some problems. The worst, and this happened several times a year, was when someone from the corporate controller's office would telephone and ask questions such as, "Do you think your division could get along all right if we cut $X out of the advertising budget?" Or, "Do you really believe that the cost savings estimate on this equipment is realistic?" Usually, I was in complete agreement with the data in question and defended them as best I could. once in a while, however, I might privately disagree with the "official" flgures, but I tried not to say so. Questions ofthis sort really should be asked ofthe general manager, not of me. I realize that the head office people probably didn't think the question was important enough to warrant bothering the general manager, and in many cases, they were right. The line is a fine one. The business of the division controller's being an "unbiased source of information" sounds fine when you',vord it that way, but another way to say it is that he is a front office spy, and that doesn't sound so good. It would indeed make our life easier if we could count on the divisional controllers to give us the real lowdown on what is going on. But if this is to be their position, then we can't expect that the general manager will continue to treat his controller as a trusted assistant. Either the general manager will find somebody else to take over this work unofficially, or it rn,on't get done. I think we are better off the way we are. Sure, the budgets will have some fat in them, and not all the bad situations will be highlighted in the operating reports, and this makes our job more difficult. But I'd rather have this than the alternative. If we used the Martex method (or, rather, what they claim is their method), we can be sure that the divisional controller will no longer be a member of the management team. They'll isolate him as much as they can, and the control function in the division will suffer.

Questions
1. What is the organizational philosophy of Martex with respect to the controller function? What do you think of it? Should RendeII adopt this philosophy? 2. To whom should the divisional controllers report in the Rendell Company?

whv? 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? 4. Would you recommend any major changes in the basic responsibilities of either the corporate controller or the divisional controller?