“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.
Several universities even had controller-based executive education programs back then. In fact, Rector taught at one that Vanderbilt University’s Owen School once offered, called “The Changing Role of the Controller.” But that program, along with the University of Pittsburgh’s similarly titled program, haven’t been offered for years.
Both apparently suffered the fate of many live finance courses: They couldn’t draw sufficient attendees to multiday programs.
“Over the past few years, finance executives just haven’t had time to go and do formal, longer programs because of all the work they’ve had to do implementing Sarbanes-Oxley, for example,” says Colleen Cunningham, former CEO of Financial Executives International. “That was clearly a distraction.”
FEI itself had a joint controller-based program with Harvard University. “The last one was in 2003,” she says. “We had to stop doing it — we had only five people sign up for the last one. Controllers just didn’t take the time to come for them.”
A number of organizations, including FEI, the American Institute of Certified Public Accountants, and the Institute of Management Accountants still offer controller and other finance training programs, usually granting CPE credit. But the classes are largely web-based.