Dewan Inc. has several divisions, each with a manager responsible for the operations of the division. Each division of Dewan controls product design, sales, pricing, operating costs, and profits. However, Dewan’s corporate management maintains control over the financial operations of the divisions by approving all capital expenditures above a small amount and by keeping tight reins on the financial reporting from the division to corporate headquarters. Each division has a corporate controller who manages the division’s accounting system and provides analysis of financial information for the division management. The division controllers report to their division manager and to the corporate controller of Dewan Inc. The division manager evaluates the performance of the division controller and recommends salary increases and promotions to the corporate controller, who makes the final decision. The division manager and the division controller write separate and independent reports to Dewan’s corporate headquarters discussing the financial results of the division. Dewan’s corporate management insists that the division controller provides an independent view of the division’s operations. Dewan’s dual reports by the division manager and division controller create interesting conflicts of interests.
a. Identify and discuss the factors that make the division controller’s role difficult in this type of situation.
b. Discuss the effect of the dual reporting relationship on the motivation of the division controller.
