Wharton@Work

December 2014 | Finance

Get Up to Speed on Finance and Accounting — Fast

Every company wants to create value, but the ways they attempt to do it aren’t always successful. Wharton accounting and finance professor Robert Holthausen says that many companies are more interested in managing earnings per share, and that bias, coupled with a decision process that isn’t thorough enough, can lead them to select investments that don’t really deliver. “Using simple heuristics to make investment decisions often fails to create value,” he says. “You need a specific analysis to determine where to allocate funds. It’s complex, but once you learn it you can apply it to most investment decisions.”

Holthausen teaches executives with a wide range of backgrounds and from a variety of industries how to do that analysis in Wharton’s Finance and Accounting for the Non-Financial Manager. “Many of them started in marketing, sales, or engineering. They don’t have formal training in finance and accounting. All of a sudden they are promoted into a new role, and they need additional knowledge.”

Mike Dottaviano, an executive in the defense industry, knows that need well. “When I decided to attend the program, I was at a transition point in my career. I had just led my first project, and it looked like I would become site leader at my location. I knew that having a stronger understanding of finance was necessary for where I was heading. Finance and Accounting is the perfect program to get you up to speed quickly on current financial and accounting practices.”

He says a strength of the program is its pace and applicability for a range of participants. “I appreciated how the material was presented. You didn’t get left behind, whether you had some knowledge of finance and accounting or not. I was relatively new to it, but there were others there who had a stronger background in finance. Because of the breadth and depth of the content, they still left with new ways to think about and approach things.”

Holthausen, co-author of the new Corporate Valuation: Theory, Evidence, and Practice (CBP, 2014), notes that the program helps executives understand their business at a different level, and it allows them to interpret financial information for themselves instead of relying on others. Armed with the knowledge of how to make investment decisions, read and analyze financial statements, and measure performance, participants can ask the right questions and help make more profitable decisions. What Holthausen and his fellow faculty members teach is “immediately applicable,” he says. “For people with little or no financial background, it’s important both to understand the context of discussions they will be involved in and to be able to participate in those discussions.”

But for Dottaviano, participation was just the beginning. He says once he got back to work, he realized he could affect the bottom line in ways he hadn’t considered before. “It wasn’t just how I ran a program and controlled its costs. There are many other financial pieces, and I started seeing the little things that could be done to reduce costs from an overall rate perspective. I was able to start trimming costs, which in turn made the site’s rate more competitive.”

“The real benefit of the program,” says Dottaviano, “was that it allowed me to see the whole picture and how I can affect it. I learned how to ask more relevant questions, and I can participate in financial decisions more fully. That week accelerated my learning process.”