The Rendell Company

The Rendell Company is a firm that has been profitable for 50 years, but has seen its growth rate declining considerably. It is organized in strategic business unit, each unit corresponding to a product line, the marketing and manufacturing operations being therefore the responsibility of each business unit. Every business unit also includes a divisional general manager, and a divisional controller. Budgets and performance reports are the responsibility of the divisional GM, and the divisional controller only helps as an assistant. These points are then discussed with top management after a control of the corporate control.

The issue is that the actual controller of the firm is not satisfied with this organization and thinks that budgets and performance reports are sort of biased by the relationship between the divisional general manager and the divisional controller. Moreover, he is inspired by an organizational structure learned during his visit at the Martex Company, and would want the divisional controller to report directly to him instead of the general managers. His assistant, former divisional controller, does not agree and think that GMs would not trust their controller, considered as spies.

Martex's organization differs from Rendell's in the status of its divisional controller. They do not belong to the division organization properly said, because they are sort of external assigned staff. This is very important to notice that these controllers are located physically in the controller's section of the building instead of being in the divisional manager's office. It clearly means that they belong to the corporate controller unit and work within the division as the eyes of the corporate control. The controller here has more loyalty toward the corporate controller and less toward the division manager.

I do not think that this is a good organization because it is very dangerous for a firm. As explained in the corporate assistant's point of view, the divisional controller could be seen as a "front office spy" working for the back office activities. Trust between controller and manager would disappear and so the manager would avoid to consult or to involve the controllers, which would be a handicap for any decision making. Besides that, the different business units would not fit in the firm strategy if they do not follow standards procedures and goals in terms of performance and budget. The main task of control, ensuring that employees do not perform harmful actions to the organization, would not be carried out anymore. In Martex's case, the organization seems to work out for the only reason that they commonly accepted this system, even before they arrived at their position in the company. In Rendell's company, most managers have been working for more than 10 years with the previous organization. This kind of change in relationship and organization would be obviously refused by these managers, they would then adopt a negative behavior that would only penalize the firm. The divisional controllers should keep reporting to their general managers primarily, in order not to lose trust and make managers block the system.

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