What's Missing in Controller Education?

The subject was Bear Stearns. The audience was controllers and aspiring controllers.

Out by Chicago's O'Hare Airport at the American Management Association Center, a dozen of them — from lines of business including healthcare, retailing, banking, and the garment industry — were engaged with veteran instructor Robert Rector in a discussion about the investment banking firm's problems, and what controllers could learn from them.

Over five modules in the three-day training, the class delved into how to apply information in a range of areas, from reporting to IT to time management to leadership. On numerous occasions, Bear Stearns came up. And class questions, along with Rector's answers, helped explain how the firm got in so much trouble: "They went into a particular product line, and it became too big a part of their portfolio," says the teacher. "The market looked good at the time, but it didn't have sustainability."

The course, called "The Controller's Job in Today's Environment," costs $1,895 for members of the American Management Association, which teaches it more than a half-dozen times a year as part of its busy instruction schedule. Overall, AMA offers more than 170 open-enrollment seminars in 20 subject areas, with finance and accounting representing a major slice. Last year, the AMA registered more than 43,000 participants in 3,000 separate sessions, according to John Canniffe, portfolio manager for AMA's finance and accounting seminars.

Inflection and Nuance
Rector is one of about eight instructors teaching this course, along with "Advanced Strategies for Controllers" and other finance-oriented seminars. He has strong views about finance training, and one is that real, live classroom participation is too often giving way to online learning.

Rector laments that online finance training often is geared to providing the minimum information necessary to give a controller — or other finance executive — the basic Continuing Professional Education (CPE) credits or Continuing Education Units (CEUs) needed to remain compliant under corporate standards.

Online education certainly has a role in transferring basic information — especially in an environment when taking three days off to travel to a seminar seems luxurious, compared to sitting at one's office computer and getting the "same" information.

But many companies don't consider what qualities can be lost when a course is delivered online, says Rector. "When you're in an interactive class with a human being as your instructor, you get the inflection; you can understand the nuance," he says. "And the focus in the subject matter can be directed to the group."

The Eggs in Bear's Basket
That's what Rector was doing in his recent Chicago "Today's Environment" session, with a rapt audience of finance executives focused on dialogues that seemed ripped from the headlines.

In leading classes, he tries to localize the discussion to the group in attendance, as well as to tie the instruction to what's going on in the news. When he's in Seattle, with so much interest in aerospace, for instance, he often cites aviation issues. One such topic often is how manufacturers and airline customers — and their controllers — need to consider seating capacity, the mix of business travelers and tourists, and amenities on board.

"If you look in any academic book on controllership, at some point you're going to talk about product lifecycle," he notes. And lifecycle decisions enter into all the smaller choices that are made about the design of planes, and the plane that customers need. One big question an airline-industry controller can help with: "How much should we spend on existing aircraft, realizing that we have to retrofit it again for the next cycle?"

In the Chicago case, the timeliness of Bear Stearns's problems presented itself as an example. Its concentration on the subprime market, he says, exposed the bank far beyond what most competitors faced. Plus, the bankers "got far too exuberant, and failed to respond to their clients." It is "a perfect example of putting too many eggs in one basket," he adds.

The point has relevance far beyond banking in the hands of an instructor with his 35 years of management, consulting, and finance teaching experience. With a number of health-care employees in this class, hospital analogies came easily, as those institutions, too, can expose themselves to risk by being too narrowly based.

In addition to operating income, "hospitals also need endowments, and money for research and grants," he says. "The question, no matter the industry, is where do you get your funding?" But, like bankers forced to sell inflated products to support a too-narrow product line, hospital owners shouldn’t "want the whole place to be obstetrics, or nuclear medicine," according to Rector. "If something happens in the market, you need to make sure you can sustain the cash flows and your power to borrow."

Who Has Time?
Likewise, any educational program that consisted purely of teaching finance in a classroom started heading for trouble a few years ago, with the rise of web-based teaching tools.

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