Drop and Give Me $20 Million

Those who have been through the Boot Camp for Executives say the results are impressive. StaffNovember 1, 2003

Pushups aren’t required at the Boot Camp for Executives, but the break-’em-down-build-’em-back-up-again mentality of Marine Corps training is the hallmark of the business-reengineering program, run by The Tatham Group.

In the two-day program, facilitators at the Toronto-based consulting firm lead executives from such companies as Bank of America and Johnson & Johnson in business-simulation exercises. Each participant plays a different role—CEO, CFO, line worker, and so on—and then acts out the part he or she has been assigned.

As the simulation progresses, the executives run into snarls while trying to finish simple tasks, like filling a customer’s order. After each attempt, they try to figure out what went wrong. “Their knee-jerk reaction is to zero in [on a problem] and then go fix it,” says CEO Michael Tatham, who has been refining his boot-camp model for 26 years. “But they generally fix only a piece of the company and end up making matters worse.” As they continue working through it, though, the big picture emerges, he says.

Those who have been through the boot camp say the results are impressive. “In two days, the staff came out with a clear understanding of what we’re trying to do,” says James Falle, CFO of Aegon Canada Inc., a $630 million Toronto-based life-insurance company. “In my previous experience, it took a couple of weeks for people to even understand what business-process reengineering was.”

Tatham aims to train boot campers to look at each step of each business process with an eye to eliminating waste. For example, at Aegon, a check-issuing procedure used to take two weeks, but after employees examined the process at boot camp, they started sending checks out in a day. “Once the folks on the line are given the approach and the time to focus on the problems, they have all the answers,” says Falle.

The price of enlightenment isn’t cheap, however: it costs $55,000 for 21 people to attend the program. —Kate O’Sullivan

Franco Modigliani, 1918-2003

Corporate finance lost one of its most revolutionary thinkers on September 25, with the death of Franco Modigliani at the age of 85. The Italian-born economics professor, who had served on the faculty at the Massachusetts Institute of Technology since 1960, helped pioneer much of the current thinking on shareholder value. He was awarded the Nobel Prize in Economics in 1985 for his theories on corporate finance and savings.

In 1958, Modigliani coauthored, along with fellow Nobel laureate Merton Miller, “The Cost of Capital, Corporate Finance, and the Theory of Investment” in The American Economic Review. In it they argued that the value of a company is independent of its capital structure; it is dictated first by the earning power and riskiness of its assets, not by how those assets are financed. It was, and still is, a controversial theory, but there is no doubt that it has changed the way finance executives view value creation and capital markets.

“It’s impossible to overdo the superlatives when it comes to Franco’s intellectual contributions to corporate finance,” says Stewart Myers, professor of finance at MIT’s Sloan School of Management and a colleague of Modigliani’s at MIT. “Most practicing managers are following Modigliani-Miller without even thinking about it. They contributed so many things that we take for granted today.”

Modigliani was also known for the ease with which he conveyed his complex theories. “The view which existed until the time our paper came out was that management was supposed to maximize profits,” he told CFO magazine in 1998. “We replaced that with another one, maximizing the market value of the firm…. You should do things the market likes,” he advised. —Joseph McCafferty

CFOs on the Move

Andrew C. Corbin was named EVP and CFO of WebMD, an Elmwood Park, N.J.-based online health media company. He succeeds interim CFO Kirk Layman, who will continue as EVP of administration…. Patricia McKay was installed as CFO of Corte Madera, Calif.-based home-furnishings retailer Restoration Hardware. She replaces Kevin Shahan, who is now VP of financial planning and analysis…. Professional-staffing firm Kforce Inc. added CFO Derrell Hunter to its own staff. He succeeds Bill Sanders, who will continue as COO…