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tiimmitimiiTi to reduce a company's business to common denominators that everyone in the corporation can understand." For Hoffman, those measures include return on equity, working capital, and a fairly complicated series of measures of the risk and volatility of various ventures. Hoffman has developed a set of parameters to describe all the various businesses his company is in, which range from chemicals to construction equipment and food-processing machinery. He ranks the divisions according to whether they are cash-heavy, in need of new investment, holding their own, or ripe for divestment. "As business grows," he says, "the corporate management becomes more and more remote and needs these common denominators even more." More detailed budgets As the controller's function gets increasingly complex, the budget still remains undoubtedly his chief concern. But whereas budgets once included only sales and expense figures, controllers now demand not only details of expenses but also sales prices, volume projections by product, working capital, and even an analysis of risk factors. Such an analysis often involves a subjective analysis of how likely it is that a sales goal will be met. Budgets are also getting more frequent attention. At J. C. Penney, there are now monthly updates of its regular annual and quarterly budgets. "If you're going to succeed, you can't wait for quarters to pass by," says Controller North- am. Gould Inc. demands a weekly budget, due every Friday night, from each of its division managers. The budget contains 12 pieces of information, including daily sales, order backlog, and working capital. Controller Gerald E. Schultz explains: "We feel that by being on top and planning, we can go out and make things happen rather than wait for them to happen." While the budgets are becoming more complex, management is also tightening up on monitoring and enforcing them. At FMC, division managers must submit a report in the middle of each month on whether they can meet a number of different goals, including inventory and working capital levels, set out in the yearly budget. And the managers must follow that report up with another at the end of the month reporting on the actual results. "When the corporation is off 10<fc a share," says Hoffman, "we can pinpoint exactly where it has come from. We try to use anticipatory control- lership." International Telephone & Telegraph Corp., probably the pioneer in modern financial controls, has raised so-called anticipatory controllership to a very sophisticated level. Not only does the multinational giant ($15 billion in sales worldwide in 1976) calculate all the costs of the labor and materials that go into each of its products. It has also devised an index that is designed to signal a warning as soon as costs start to rise. ITT management then consults the index monthly for help in setting prices. Return on investment Hand in hand with controlling expenses, corporations are also watching their return on investment more closely these days. Many have markedly raised their ROI targets for new investments. Penney, for example, settled for a 10% return on investment 10 years ago but now demands 20% because of inflation and the higher cost of capital. Moreover, corporations are quicker these days to find out what is wrong when returns fall below expectations. fmc's Hoffman has taken harsh action when divisions or product lines fell , .... J v ?? yyy Penney's Northam: "We have to get more out of. . . people, bricks, and mortar." .""*-. f^y^ih^m^-i -m^^i^i^M Stanford's Homgren: The controller is more or less "the seeing-eye dog." below their return-on-investment criteria. In five years, fmg has pruned some 20 divisions or major product lines. Hanes Corp., which had never adopted firm ROI targets before, two years ago set a 12% target for return on assets for each of its three divisions. That led to the shutdown of two plants whose rates of return did not measure up. Hanes, an apparel manufacturer with $372 million in sales last year, believes it will achieve its 12% in each of the divisions next year. "The discipline of looking at the return on assets makes you face up to problems," admits John B. McKinnon, the company's financial vice-president. Today's corporate controller uses his increasingly sophisticated tools to seek out problems that need correcting. One of the most common uses is in culling products that have low profit margins. For example, Mark Controls Corp., a valve manufacturer in Evanston, 111., installed a cost-accounting system that enabled it to cost out each of its 15,000 products. The result of this approach was that Mark dropped about 15% of its product line. Companies as diverse as Stude- baker-Worthington, a conglomerate; Gable Industries, a building supplies company; and apl Corp., a maker of pack- SEPTEMBER 77