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Academics, Alexandria, Student Life

Goodbye for now to the 40 acres

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dancing houseSitting down to write a “goodbye” blog  is actually a really difficult task to do. The most obvious reason is that  this post is to celebrate a degree in accounting, which limits how entertaining it can be.  But more importantly, it is incredibly difficult to say goodbye to this experience in my life. I have never been so challenged personally, professionally, and academically, and there have definitely been a lot of moments I questioned if all of this was even worth it. I have faced decisions that would shape the person and professional I want to become on an almost daily basis. I failed a number of times, but in the end I am emerging with a graduate degree in hand and a dream in mind.

As everyone starts changing their focus from school to graduation and celebrating the moment, its important to take a step back and take note of what we all are celebrating.

We are not celebrating a degree in accounting. We are here to celebrate our success over an obstacle we have collectively, and triumphantly, overcome. An obstacle we initially undertook in order to better our present and future selves and to become closer to the people we want to become, to become our true selves.

There’s a reason that when you stand on the main mall of this campus, and look at the tower, you see the words “Ye shall know the truth, and the truth shall set you free”. This is one successful step in the journey to become our true selves that unites all of us MPA graduates.

A lot of people may be sniggering at the connection of an accounting degree and “truth”. One of my MBA professors always introduced me as part of the professional field that is smart enough to make 2+2=5.

Like any great journey, there are going to be obstacles along the way. Sometimes we fail to find the truth. Sometimes it find us, and it’s too much for us to face. Sometimes we fail to tell the truth. But, in the end, we win by learning from our failures continuing on our journey to become our future ideal selves.

Looking to the world of classic literature, all of the great stories about quests have only a page dedicated to the outcome of the journey. The beauty of the story is the process, the struggle, the challenge, the small triumphs and defeats we face on the way. And, whether we have recognized it or not, we are extremely lucky as Texas MPAs in that the skills we have learned and the experiences we have obtained in this program will help us on our respective journeys. I want to clarify that these lessons don’t exclusively apply the quest for truth in accounting, but the quest for truth in all aspects of our lives. There’s a lot about us that does not revolve around practicing accounting, but the skills we learn as accountants can definitely help us in other areas of our life.

Lesson number 1: Work Hard.
MPAs are a very intriguing breed, because when we talk to each other, we continually talk about how little we care about grades or how little studying we put into a test. However, as I’m sure faculty and parents can attest to, we are probably some the most achievement-oriented, high-strung, hard-working students on this campus.

We have worked hard because our professors have expected the best from us. We have spent hours of preparation for each of our classes in order to not sound like an idiot when we are inevitably cold-called. We practically live in McCombs when it’s midterm or final season. Yet, despite all that work, the average raw score is frequently a barely passing grade. Having to work so hard to simply pass a test is hard on one’s self confidence, but it also teaches us a very valuable lesson: you can always learn more. We have to keep working in order to become experts in accounting, and one class in no way makes us an expert in the material. Just a lot more knowledgeable that everyone else who hasn’t taken the class.

To sum up lesson number one, to quote Vince Lombardi, “The only place success comes before work is in the dictionary.” We have worked hard to be here and have overcome a lot of really dry accounting-based readings and received many less than perfect grades to be sitting here today.

Lesson Number 2: Play hard.
Well, I think this was more of an outside of the classroom kind of lesson. (even though some of did party hard in Professor Atiase’s cost accounting class) As accountants, we are all about balance. Our debits always equal our credits. We love our balance sheets. We work hard, so we play hard. It’s really not our fault for a number of reasons. Life is not all about accounting, and it’s important to make the time for the things we love to do and people we enjoy spending time with. No one looks back at this time in their life and wishes they spent more time in Reliant.

Lesson Number 3: The devil’s in the details.
How many times have we heard this throughout our accounting classes? I’m pretty sure Deitrick didn’t last a lecture without saying it at least once. I’ve lost countless points on tests and assignments due to overlooking details, thinking it was so silly they didn’t just give me credit since I understood the concept. However, I can concede, very begrudgingly, that they were right and I was wrong. I think the most important thing I have learned is the importance of accounting for details in this life. The value and meaning of our lives is in the details, in the moments. The moments where we failed. The moments where we succeeded. The moments in which we were sure. The moments in which we doubted. The moments we were outside of our comfort zone. The moment we were wrong. The moments we were right. We moments we wish we could have spent with people before it was too late. The moments we wish we could take back. The moments we wish we could live in forever. These are the details that make up our stories.

The word “account” means to recount a tale or story. We are trained to focus on these details and document them to tell the story of what’s happened within the past year. This is our job, our profession, but we often fail at documenting the moments and stories that make up our story and our experiences. The thing about details is that they are easy to forget, and without documenting them we lose part of ourselves and we fail to learn what we did right and wrong

This right now is one of those moments. The moment we want to rush through so we can get out of here, but the moment we have rushed towards for so long and desired so badly. This is the moment we pulled all-nighters for. The moment we dreamed of when we kept getting tests and memos back after they had been torn to shreds. This is the moment where we celebrate all the struggle we have shared. The moment you repeatedly thought would never arrive.

This is also the moment where we say goodbye for now. We say goodbye to the 40 acres. We say goodbye to our professors. We say goodbye to each other. This is the last moment we all have together, living in the same city, working toward the same goal, sharing our stories together. This is the moment we are all Texas Exes.

But let me be clear. This maybe goodbye for now, but this is not the ending of the story. This is the moment where we begin.

Academics, Alexandria

Dollars and Sense

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Dollars and SenseThis semester, I have been taking an MBA elective with Professor Reuben McDaniel called Information and Knowledge Management. The final requirement of the class was to write a research paper addressing the topic “How do you get people to do what they already know to do?” My research paper involves accounting, so I thought it would be appropriate to discuss on this blog. Also, it introduces the kind of thinking you can be exposed to in some of the graduate business electives you can take.

So… about my research paper. The knowing-doing gap I was particularly interested in was why managers continue to make short-term, profit-maximizing, decisions when they know they should be making decisions that will benefit the long term strategic direction of the organization. I especially wanted to see if financial accounting standards and accounting information systems played a role in contributing to this short term decision making. My (albeit amateur) research proved to yield some very interesting results.

What I found out:

What I have always thought about financial accounting was that it was to track financial performance of a company in a given period.

What I’ve learned from my research is that accounting is actually a method to measure the quality of management’s decisions in contributing to the long-term organizational survival of the firm… at least it can be.

What this means for all of you as future managers is that by implementing certain accounting standards and methods into the accounting information system of a company, you will be able to establish an information network for yourself that can not only integrate your organization’s long term organizational goals into your daily operations, but provide potentially daily feedback on how your decisions are contributing to sustainability objectives, natural resource management, the value your employees are bringing to the organization, how effective your recruiting and firing processes are, etc.

Ultimately, accounting can provide the framework and information managers need to enable them to make the decisions they already know they need to make for the long term benefit of the organization, and ease short term pressure from shareholders.

How I arrived to this:

Financial accounting as we know it has been limited to tracking current financial value and performance of firms because the ingrained idea in most of classic economics and traditional business theory is that a corporation’s sole purpose is to maximize short term profits. This flawed image of the role of a company is deeply embedded in the American capitalist system, even if evidence doesn’t support it. This image of a company as merely a vessel to maximize profits molds the actions of most corporations, constraining them to focus on maximizing short-term profits and delivering returns to shareholders. Their decisions are expressed by accountants in financial terms, because that is what measures the value they bring to shareholders.

According to Rosabeth Kanter in her Harvard Business Review article “How Great Companies Think Differently”, companies command enormous resources that influence the world for better or worse and their strategies shape the lives of the employees, partners, and consumers on whom they depend. Above all, the traditional view of business and accounting methods of today doesn’t capture the way great companies think their way to success.

Business is an intrinsic part of society, much like family, government, and religion, and has been one of society’s pillars since the dawn of the industrial era. Great companies should work to make money, obviously, but in their decisions on how to generate profits, they think about building institutions that can survive. Companies that want to achieve organizational survival in a complex world are aware of the need to build people and society.

The social logic that some of the best performing and most enduring companies follow demands that companies be more than instruments for generating money. This logic also provides a framework for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them. According to institutional logic, the value a company creates shouldn’t simply be measured in terms of short-term profits or paychecks, but also in terms of how it sustains the conditions that allow it to flourish over time.

Rather than viewing organizational processes as ways of extracting more economic value, great companies create frameworks that use societal vale and human values as decision making criteria. Managers of great companies hold the perspective that their organization has a purpose and that they can meet stakeholders’ needs in many ways: by producing goods and services that improve the lives of users; by providing jobs and enhancing workers’ quality of life; by developing a strong network of suppliers and business partners; and by ensuring financial viability, which provides resources for improvements, innovations, and returns to investors.

New accounting methods, such as sustainability and HR accounting, can potentially measure companies’ abilities to operate in a sustainable environment and measure the value of the jobs and qualities of life they provide for employees.

What was surprising to me:

I have always been very proud to be in the number one accounting program in the country. I believe accountants play a very important role in business in that we are responsible for measuring and reporting how successful a company has been operating in a year, and the information we provide helps managers, creditors, and investors alike in making important decisions. But what I have learned in the process of this paper is that I have fallen into this knowing-doing gap myself and find myself unconsciously thinking that a company’s success can only be measured by its finances, even though I know this isn’t true from the management and strategy classes I have taken.

A lot of people think of entrepreneurs as the people that can use business to make a difference in the world, and I have always assumed that accountants can’t have a piece of this pie. However, with ideas like sustainability and HR accounting, it turns out we can in the future. We can help demand and develop accounting standards that measure all of the aspects that make a firm successful and report on how well businesses are doing on multiple fronts that to enable corporate managers to make long-term oriented decisions that can both grow their corporation and benefit society and the world we are living in.

Academics, Brooks, Events, Feature, Student Life

Competing With Engineers for a Sustainable World

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A couple of months ago, we all received an invitation to compete in BASF’s Team Chemistry challenge. A fellow MPA student decided to formTexas-mascot a group, and so I joined. It seemed like a fun project – come up with ideas to lessen the environmental impact of football gameday. I love football gameday and I have an interest in environmental sustainability, so it was like a match made in heaven. Of course, the incentive of winning a bunch of money didn’t hurt.

So, we set to work coming up with ideas on how to approach the problem.  We easily came up with a host of small solutions that would have some impact, but quickly got bogged down in the details. After spending some more time pondering our work, we decided to focus on a group  of related solutions and hone in on them.  As Joel said in his most recent article about accountants being risk-averse, we learned from our initial mistakes, found the proper balance, and ended up with some pretty cool ideas.

We were invited to a couple of events by BASF and the Athletic Department to learn more about the initiative and the goals of the competition. One event was a sustainability panel sponsored by UT Engineers for a Sustainable World. The panel was entirely made up of engineers and the audience was entirely engineers … except two of us MPA students. It was very intimidating hearing about them discussing various polymers of which we had no clue of their existence much less their properties. Apparently these students have a big advantage over us with their knowledge of chemicals, considering BASF is essentially a chemical company. The next event was a stadium tour, during which our guides told us about their issues with waste management. Their focus seemed to be only on waste management problems, while our solutions did little to address that.

ConcoursePoster_#2_Sec120But, we pressed on, confident in the power of our ideas despite not having the technical knowledge that is certainly common among our competition. What we do have is a business ingenuity that enabled us to come up with feasible solutions that are easily implemented and have a measurable impact. We used the skills we have learned in economics, finance, and accounting to estimate the results of our proposals. We also used our branding and presentation skills to develop a persuasive format through which to deliver our proposal.

We find out Friday if we are invited to the finalist round, where we will present and defend our ideas in a “shark tank” environment. We’ve had fun putting it all together, and we’re proud of our accomplishments, but it would be great to get to write a “Part II” to this article about our preparation for the finalist round!

 

Academics, Alexandria, MPA Council, MPAC, Student Life

MPA Council and the ICAEW: The future of global auditing

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icaewIn late February, Program Director Jim Franklin and Department Chair Lillian Mills were able to have some members of the Institute of Chartered Accountants of England and Whales (ICAEW), one of the leading institutions publishing articles about the profession internationally, to come and speak about the future of global auditing with members of MPA Council.

We were asked the question “What challenges do you think the auditing profession currently faces?” and “If you lived on a small island where all the companies did not have to have their financial statements audited because everyone trusted each other. If you wanted to open the island to foreign-based companies, what protections would you put in place?”

The resulting discussion I felt was fascinating, as it combined the knowledge I’ve developed in both my auditing and complexity theory categories. I feel these two questions are extremely related, and here’s why:

Let’s say we are on the small island described above. There is no need for audited financial statements because there is trust between the companies and shareholders. We face the decision of requiring audited financial statements in the face of foreign companies wanting to sell shares on our island because we do not have the same trust in these companies. Auditors would become in demand because of a lack of trust between company management and investors.

If shareholders feel they have been presented fraudulent financial statements, they will blame the auditors for not catching it. Even though it was the company that committed the fraud, the highly-trained auditors did everything they were supposed to do, a disproportional amount of blame falls upon the auditors.

This blame falls on the auditors because most people don’t fully understand the role of the auditors and the work they do. They just expect them to catch all and any fraud. This is what we discuss in auditing class as the expectations gap. Because people don’t understand the training and qualifications we have, and the limited nature of our job, we can only do so much to prevent fraud. Companies preparing the financial statements are the ones ultimately responsible.

Also, auditors are held accountable for the effectiveness of accounting standards. The problem with this is that the world is coming more and more complex, and companies are quickly adapting their operations in order to survive in the complex world. Frequently, we can’t keep up in developing accounting standards to reflect these new and innovative ways of doing business. Technically, a company’s financial statements could be following GAAP, but the core economics of the transactions are misrepresented.

Because of this expectation gap and lack of trust that is continually strengthened by corporate fraud, a a decent amount of people are mistrusting auditors for “not doing our job.”

The answer seems to be to close the expectations gap and to increase people’s trust in our services. The million dollar question, though, is how in the world can we do that?

Academics, Brooks, Career

Does Accounting Add Value?

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accountant2

For many businesses-owners, accounting is perceived as a necessary evil. It is a cost that you have to bear but does not create value the way that other departments do, such as marketing, engineering, or finance. Some may argue about whether the accounting department of a firm is “productive” in the classical sense, but their support role is essential for any successful business. Accountants are derided for not providing as much value (especially by the finance and economics types, even though they are not productive in the classical sense, either) but without the accountants, large businesses could not operate.

Even for a small business, accounting is crucial. When your profit margin is in the thousands, you need to make sure and collect all receipts as soon as possible. Maintaining current books is crucial for this task. It becomes both more difficult and more important to discharge accounting duties as sales climb along with your need for new capital. As you move up the ranks and become a  larger company with many employees, accounting techniques, practices, and procedures enable managers to maintain control over cash flows and company resources. Anyone who has overseen cashiers knows the importance of keeping up with revenues.

Accounting information can also be used to make cost-benefit decisions, like the cost-benefit decision of how much accounting detail should be pursued. To make the cost-benefit decision, you have to use the tools of finance as well, and this is where the artificial distinction between finance and accounting dissipates. Without the building blocks of accounting, finance would have to start from scratch and end up with less reliable results. This is not because finance is not capable, but because there is value in comparative advantage. Financiers can focus their efforts on long-term capital budgeting, marketers can drum up sales, engineers can design, and accountants can precisely tally it all up.

Many companies also need accountants to report financial results to stakeholders, including stockholders, the Board of Directors, the government, and lenders. Although much of reporting for big business is typically seen as a legal requirement, the value of such standard reporting is still great and can be found in the cost of capital. Without assurance that a company’s financial reports are accurate, cost of capital would be higher to accommodate the additional risk. This concept applies to both small businesses that want to grow as well as large public corporations.

Further, our tax system in the US is quite complicated, and many companies do not have enough scale to warrant having in-house tax staff to navigate every complexity. In this way, tax accountants can help companies minimize tax expenses and associated risks. With their specialization and familiarity with tax law, tax accountants can consult with timthumbmanagement about strategies that can help them reduce their tax burden.

CFOs around the world agree that accountants add value not only to their company but to the public in general. We do this by performing critical functions that enable other business departments to do their work more efficiently. Next time you hear accountants being diminished as less important in some way, you can remind them of all these ways that accountants add value.