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Hjiiiiiinuiijii aging materials, have pruned operations for similar reasons. Controllers, often with the help of enlarged crews of internal auditors, have also been turning their attention to reducing inventories and receivables. Abbott Laboratories, for example, was able to hold its inventory growth down to 3.8% last year, while sales grew 15%. One successful tactic was to tie a bonus system for managers to inventory targets. Phillips & Jacobs Inc., the graphics division of Tasty Baking Co., sliced a full 30% off its inventory over the past three years by identifying slow-moving film products and setting up a system that helps the company shift them among branches more efficiently. Cutting the fat out of receivables has become common at many companies. Corporations are also improving their management of cash and foreign currency with increasing help from the controller. The controller is even getting involved with acquisitions these days. When Fisher Scientific Co. bought the Lederle Laboratories Div. of American Cyanamid Co. this June, it depended largely on background work supplied by its controller, Michael J. Foglia. "From A controller expands his territory Even now, few corporate controllers have been given as free a hand to organize and expand their departments as has Lionel N. Sterling, the 40-year-old senior vice-president and controller of American Can Co. And Sterling has made the most of it. Formerly in the control department of International Telephone & Telegraph Corp., he has succeeded in building one of the most far-flung controller departments to be found at any major company. In 1973 American Can had just completed an overhaul that reorganized the company into 17 separate business divisions. The company, which had $3.1 billion in sales last year, was formerly managed along traditional functional lines. "We had to reorganize the entire control method as well," says Vice- Chairman Harry S. Howard Jr. Sterling was hired in early 1974 as a vice- president for operations control. Howard explains, "I was looking for a man who understood two things: the management of assets and the control process." And Sterling, who had left itt in 1971 to join a venture capital team at Donaldson, Lufkin & Jenrette Inc., a New York brokerage firm, struck Howard as just the right person. "I came here with nothing but a promise," Sterling says. "They told me I'd get what I need." In full control. By 1977, when Sterling was named senior vice-president and controller, it had become clear that he had gotten quite a bit. For one thing, the controllers in each of American Can's 17 divisions now report directly to him and only on a "dotted line" basis to their own division managers. "What this allows us to do," says Sterling, "is to put more responsibility into the business because we always have at least two independent judgments on any decision emanating from any one of the businesses." Sterling reports directly to American Can's executive office on most matters rather than to the chief financial officer, as is the practice in most companies. More unusual, Sterling has garnered-a number of corporate functions under his wing that even today are seldom found in the the controller's office. He is in charge of not only the budget and accounting but also corporate planning and mergers and acquisitions. While controllers in many corporations are getting more involved with these functions, few are directly responsible for them. Authority limits. Despite Sterling's expansion well beyond the traditional territory of the controller, he and Vice- Chairman Howard agreed that Sterling would exercise no direct decision-making authority. "Many controllers," says Howard, "want to tell the business heads how to run their business. That I could not afford to have." Howard admits that having the division controllers report directly to Sterling did ruffle feathers. "At first, the business ' heads were very apprehensive," he says. "But now they are getting more comfortable and realize that these cross-checks are damned good tools." The center of Sterling's new control system is a monthly meeting that he and American Can's President William S. Woodside hold with each division head and division controller. "Our orientation and our reports are red-flag in nature," he says. Each divisional manager updates the annual forecast of earnings and cash flow, comparing them both with the annual budget and a five- year plan, which itself is updated every year. Any deviations from the budget are then discussed at length. More important, says Sterling, the division managers are asked to identify factors that might alter the forecast down the road. The managers assess how much these factors could affect profits and determine just how likely it is that each of these factors will occur. This provides a probable range of error for each forecast. For example, the manager might think his division is close to a major cost-reducing breakthrough that could add $100,000 to a division's forecast of $1 i*?╜.^*r*iMm ^.Vn^s Sterling: Breaking new ground at American Can Co. million in earnings for the year. But if the manager believes there is a 75% chance that the breakthrough will occur, he would add $75,000 to his profit range. Sterling also introduced an elaborate information-gathering system shortly after he arrived at American Can. Formerly, some of the operating areas of the company had their internal accounting records hooked up to a computer, but others did not. Sterling computerized all the divisions and set up a centralized system so that accounting information is transmitted as quickly to him as it is to the head of the division. Role in acquisitions. Perhaps the best indication of Sterling's expanded role was the part he played in the company's $100 million acquisition this spring of Pickwick International Inc., the $265 million record distribution company. "The Pickwick acquisition definitely would not have been done in the past," says Sterling. "People would have looked at the record business and said, 'We are a can company. That's no fit at all.' " But Sterling and his staff were determined to broaden the company's outlook. They believed that among American Can's biggest strengths were packaging and consumer distribution. More than $1 billion of the company's 1976 sales came from such items as Dixie paper products, tissue paper, dress patterns, and similar consumer products. "We wanted to integrate through to the retail level with a product that was identifiable to the consumer," says Sterling. Starting in the spring of 1976, Sterling's staff did several industry studies, and the record business popped up as a natural to make use of American Can's well-established consumer distribution system. Sterling put his acquisition people on the project to screen individual companies. He brought his recommendation to the executive office in January. That same month, American Can started negotiating the deal with Pickwic\. 10 SPECTRUM 77