Martex Corporation

1. What is the organizational philosophy of Martex with respect to the controller function? What do you think of it? Should Rendell adopt this philosophy?

Martex Corporation adapted a solid line relationship between the division controllers and the corporate controllers. Each business unit manager does not have a staff of his own. Divisional controllers reported directly to the corporate controller. Martex senior management wants to have transparency and unbiased access to information, whether operational or financial, at each business unit so that:

a) Each business unit's goal will be more congruent with the company's goal

b) Top management will be able to make more sound decisions if corporate staff will have access to unbiased information

c) Corporate will have better control of the information reported to top management in order to avoid sugar coating of the financial information and operating statistics.

d) Corporate will have better and quicker response on red flag information on each business unit. Example: one business unit overspent on marketing expenses versus budget.

Our group believes that the organizational philosophy used by Martex is effective for the company as it is able to produce fair and objective reports on division budgets, financial statements and operating statistics. However, we believe that it would be difficult and costly for Rendell to adopt this philosophy considering the people in the company have been accustomed to the dotted line relationship between divisional controllers and corporate controller for decades and changing it may just lead to dysfunctions and conflict.

2. 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?

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