For the past several years, a large U.S. based hotel/restaurant operator has been pursuing a strategy of disposing of its U.S. company-owned properties. Four years ago, the company owned and operated 106 properties. Today, that number is 40. The number of retained properties is expected to stabilize between 1 5 and 20 properties.

During this same period, there was a shift in control of property operations. Previously, headquarters operating personnel held control. Now, hotel operations is basically a decentralized organization, with primary responsibility for operating results resting with three regional vice presidents and each hotel's general manager. The three regional vice presidents report directly to the Executive Vice President of U.S. Hotel Operations, and each are responsible for between 10 and 15 properties. Each property's general manager Is directly responsible to the regional vice president. Corporate headquarters provides staff support in operations policies, food and beverage, engineering and maintenance, and accounting.

Accounting support has stayed in a relatively unchanged centralized configuration.

The staff of the U.S. hotel controller currently numbers approximately sixty-four. However, the ratio of accounting personnel to properties owned has increased. Previously, the ratio was approximately one headcount per property. Today, it is 1 .6 headcount per property. T-A describes the department's major functions.

CENTRAL HOTEL ACCOUNTING In his visits to the properties, the controller would often solicit comments conceming the accounting support being rendered by the headquarters' staff. An all-too-frequent response was that the properties would be better off without such support. The field operators felt that the accounting staff had no idea of the problems the properties had to deal with and demanded information and data without any consideration or knowledge of the situation at the property level.

The controller must now decide how to reduce his staff in order to get the headcount in line with property dispositions. In doing this he has several objectives:

1 To control and, where possible, immediately reduce costs related to accounting functions.

2. To make accounting functions more responsive to the needs of operators.

3. To foster greater familiarity and closer affiliation between accounting staff and field operators.

4. To improve productivity and increase morale among the accounting staff.

REQUIRED:

1 What organizational alternatives are available to the controller?

2. How can the accounting staff be reduced and still be responsive to the needs of operations?

3. Using this case as an example, comment on the effects of strategic initiatives on the proper scope and functioning of a firm's accounting department.