Achiyat Ulumuddin Chasan

1464002
Management Control System

Rendell Company
Problem
Mr. Bevins as controller of the Rendell Company predicts a problem with the
relationship between corporate controller and divisional controllers. As corporate controller,
Mr. Bevins see ineffectiveness with the organizational status of divisional controller. All this
time, divisional controller was under order of divisional general managers. Divisional
controller directly reported to the divisional managers. With this role, Mr. Bevins realizes that
divisional controller goal to establish budgets and analyze performance will be very difficult
to pursue. Because with loyalty of divisional controller to the divisional managers rather than
to corporate controller, he thought that adequate information of the divisional performance
will not be given. Mr Bevin wants to change this organizational status adopt Martex
organizational philosophy, which is divisional controller works under control of corporate
controller.

Corporate

Divisional Manager

Divisional Controller
Picture 1 Rendells Controller Organizational Status

Corporate

Divisional Manager

Divisional Controller
Picture 2 Matrexs Controller Organizational Status

Analysis
Controller is a person who responsible for designing and operating management
control system. The controllers usually perform the following functions:
1. Designing and operating information and control system
2. Preparing financial statements and financial reports to shareholders and other external
parties
3. Preparing and analyzing performance reports, interpreting these reports to the
managers, and analyzing program and budget proposals of the various segments of the
enterprise and consolidating them into the annual budget.
4. Conducting internal audit supervision and record control procedures to ensure the
validity of the information
With those kind of roles, to perform as controllers efficiently and unbiased, the
controllers should work in the organization as an independent unit. In this case, there will be
a conflict of interest between corporate controller and divisional controller according to the
divisional controller is working under divisional manager. One of the goals of controller is
how to minimize the budget allocation, while the divisional manager is how to run divisional
unit business functionally so divisional manager tend to use the budget as much as the
allocation. So, there is no goal congruence between corporate controller and divisional
controller because divisional controller is loyal to divisional manager. It will make divisional
controller prefer to defend their divisional manager decision because both of them are
working as a team.
Besides the goal congruence problem, in order to decide which organizational status
should be implemented in Rendell, we should analyze advantages and disadvantages of each
system.

Rendel
l

Advantages
Division Controller is trusted by Division

Disadvantages
Goal incongruence between Corporate

Manager, so DC can get real internal

Controller and Division Controller make

information
Goal congruence between Divisional

unbiased information
Divisional Controller regarded as a spy

Matrex Controller and Corporate Controller make the

want to get division unit information

goals of controller can be achieved effectively rather than as a team.

Case Evidence
The lack of goal congruence between corporate controller and divisional controller
can be proved from the statement of Mr. William Harrigan. Mr. William Harrigan is Mr.
Bevin Assistant Controller. He has worked in Rendell Companies for 25 years and had been a
divisional controller before going to headquarter.
When corporate controller ask to divisional controller about cutting a budget in their
division, although the divisional controller know the actual condition the budget can be cut,
divisional controller will not agree with the corporate controller. Rather than cutting the
budget, divisional controller prefer to defend divisional unit budget.
Mr. Harrigan also stated that with the usage of Matrex organizational status will make
the divisional controller no longer be a member of management team in divisional unit. So
the general manager will not trust them anymore and they will isolate them and the control
function in the division will suffer.
Conclusion and Recommendation
In the recent Rendells organizational status, there is no goal congruence between
corporate controller and divisional controller. This will disrupt the company to achieve the
goals. To prevent this problem, I recommend to,
1. Adopt Matrex organizational status, which is divisional controller should be took
under jurisdiction of corporate controller.
2. Give divisional controller full authority to perform control management in divisional
unit and take information from them. This is to prevent division unit isolate them and
wont give them real condition information because divisional control is not their
team anymore.
3. Communicate the new organizational structure to all department to prevent instability
in the authority of divisional organizational structure.