Fundamentals of accounting

I have been working on the fundamentals of accounting for my first MBA exam today. Like most employees or a large organisation, I have not had to deal with balance sheets in my work before, so the practice application of double-entry bookkeeping is new to me.

You may be aware that businesses, companies, and organisations (entities in accounting speak) must follow a set of financial reporting standards called the International Financial Reporting Standards (IFRS) or the Generally Accepted Accounting Principles (GAAP) in the US. An entities finances are kept separate from its owner’s finances (Entity concept) even when the entity is a proprietorship, where the entity has a sole owner/investor.

The reporting centres around the balance sheet that displays the health and composition of an organisation. The balance sheet has three main elements, assets, liabilities, and equity, all recorded in monetary amounts in a single currency.

Balance Sheet equation: assets = liabilities + equity

Assets are items owned and controlled by the company and acquired at a measurable financial cost and are split into current assets and noncurrent assets. Current assets are short term items that are likely to be used or converted to cash within the financial year; these include cash, accounts receivable (money owed for goods/services), inventory, and prepaid expenses like insurance. Noncurrent assets are long term items that are unlikely to be used or converted to cash within the financial year; these include property, plant and equipment such as factories, equipment and land.

Liabilities are debts owed to creditors in return for goods and services and are similarly slit into current and long-term categories based on the current financial year. Current liabilities include bank loans, accounts payable (money owed for goods and services) and estimated tax liabilities (estimate before filing reports at the end of the year). Equity is the capital supplied by investors (Paid-In Capital) and profits from the business that are then reinvested into the company (Retained Earnings).

The balance sheet displays all assets, liabilities, and equity of a company, with assets on the left and liabilities and equity on the right. The Double-entry bookkeeping principle requires that any transaction, such as a purchase of inventory or equipment, results in two entries, an increase in PP&E or inventory, could mean a reduction in cash or increase in accounts payable if they are purchased on credit, for example.

I hope you enjoyed a brief introduction to accounting and the balance sheet.

What is an MBA

In the early days of Google, the company got rid of all their managers. They assumed that as they hired the brightest and most driven engineers, they did not need layers of bureaucracy stopping people from doing their job. The Google founders believed if you get intelligent people, you could give them pretty much any problem to solve, and they would work out how to do it. Within a short period, Google brought management roles back and started the ‘re:Work‘ programme to find the best scientific management methods.

Fredrick Taylor introduced scientific management in the 1880s, and the theory’s ideas of economic efficiency and labour productivity formed the basis of the first Master’s of Business Administration at Harvard in 1908. Taylorism was one of the first attempts to apply scientific ideas like analysis, empiricism, and standardisation of best practices to process management and the move from craft, to production, to mass production made famous by Ford and the Model T.

Thankfully, management science quickly evolved to include social ideas like behavioural science and care for employees as people. Still, the basic idea of applying the scientific method to increase productivity forms the basis of management in most fields. The MBA is where people go to learn this science.

It is possible to learn everything you find on an MBA curriculum in books and on the job, particularly if you join a graduate scheme and the places you work have strong internal development programmes. Most companies do not provide a rounded leadership and management training and support offer, so bright-minded individuals either end up not meeting their potential or seeking degree courses.

Peter principle…people in a hierarchy tend to rise to their “level of incompetence”: employees are promoted based on their success in previous jobs until they reach a level at which they are no longer competent, as skills in one job do not necessarily translate to another.
Wikipidia

There are two strong reasons to do an MBA; the first is that if you want to progress to senior positions with a major corporation, it is a requirement, the second is that you want to learn a scientific approach to managing effectively.

An MBA curriculum should teach the fundamentals of management. It will cover the core functional areas, including accounting and finance, human resources, marketing, operations. A good programme will also cover leadership ideas such as strategy, law, and ethics. Most MBA courses will provide optional modules that cover entrepreneurship, digital transformation and global trade.

Many tech entrepreneurs, such as Elon Musk, have talked down the need for an MBA favouring people gaining technical skills. But good managers are essential, and the skill set is different from just being good at the technical parts of a job. The best MBA courses are highly selective and expect people to have gained technical proficiency in their specialist area and have ample experience in their field before joining.

First, get good at the technical parts of your field, and then, if you choose to move up in an organisation and manage people, get an MBA.

Learning as a habit

I have signed up for an MBA. After a three year break, I am ready to get back to formal study. An executive MBA seemed to be the logical option at 37 and for the current stage in my career. Since graduating, I have enjoyed unstructured learning, reading around my interests and focusing my intellectual energy on work. I have made significant progress on my journey to expertise, and I am building something at work to create disruptive change. To take my output to the next level, I need to learn more.

A part-time Masters degree is a big commitment, and making the most of the opportunity can take up to fifteen hours per week. Formal courses are designing to help students find this time with the accountability of regular deadlines, the curated path through content, and a community of peers for support. However, Fifteen hours is a significant addition on top of working forty to fifty-hour per week, training for at least 10, and spending an hour publishing 500 words per day. Finding those fifteen hours is going to require a conscious effort to make learning a daily habit.

I read an article today from John Coleman on the Harvard Business Review website that suggested five ways in which you can cultivate a learning habit:

Have a clear outcome
Set goals to achieve your outcome
Build a community around your learning
Develop your ability to focus
Use technology to support your learning

I have a clear outcome of improving my performance at work by completing an MBA and applying what I learn to my career. I have a realistic goal of committing fifteen hours per week or around two hours per day to study, writing, and apply what I learn to work. The time commitment is made more accessible while I am not commuting to and from work, and I have built up a habit of writing each day.

The MBA as a format is unique because it is built around community learning, making my role contributing to the pre-made community rather than having to create my own. The skill to focus for two hours per day over eighteen months will be the biggest challenge, but it is something that I have been working on for a while with daily blogging and in elements of my work. Finally, working in EdTech, the use of technology to support my learning should be easy.

I will dedicate a future post to each of these habits but is a formal course something you are interested in doing? Are you able to cultivate your learning habit using Coleman’s five suggestions?

Contact me on Twitter if you want to discuss building a learning habit or starting a new course of formal study.

The MBA where your teacher is a machine

Quantic.edu, formally Smart.ly, is an online MBA programme built by a former CEO of the Rosetta Stone language learning company. It is based on self-paced learning driven by questioning and then supported by live sessions for traditional discussion of case studies and group work. The aim is to make high-quality education cheaper, quicker, cheaper, and better at delivering outcomes. They have taken the learning by testing idea that has made Rosetta Stone so successful and repurposed it to help people learn business skills.

To make education cheaper, the programmes primary instructor is software, which is then supported by live classes with humans. Around 80% of the cost of a degree in America is staff costs, so replacing the lecture with self-paced learning allows Quantic to offer their Executive MBA for just $9,600, significantly cheaper than other similar programmes. The programme is also quicker, taking 11 months to complete compared to the 18-24 months of a regular executive MBA.

The company offers its regular MBA for free to the student. It acts as a recruiter, placing its graduates in jobs with tech firms like Apple, Google, Amazon, and Facebook, looking for a talented individual, and then charges the company a recruitment fee. They have been innovative with their admissions process too. Once a prospective student applies, they have to go through the self-paced business Foundations’ courses in the period before their submission is accepted, with the engagement in these courses being a part of the acceptance criteria.

The real innovation is in their active learning teaching method. The website states that there is individualised feedback every eight seconds. The free course I took averaged around fifty words to a page and taught through questioning the questions’ difficulty gradually increasing as your confidence builds. These tests are presumably ‘low stakes’, meaning your answers are not recorded, but rather it’s part of the teaching method to give regular feedback and allow you to get it wrong and provide the solution to correct you.

Research – just as good as a traditional MBA

A July 2016 study by Stanford University academics compared learning from Quantics’s online model to on-campus MBAs for finance and accounting modules. Quantic participants took a pre-test, completed a self-paced course, and then took a post-test. On-campus MBA students took only the post-test. The study concludes that ‘Preliminary analyses show learners in the Quantic groups performed as well as or better than MBA participants at post-test.’

The Quantic students improve an average of 29 percentage points in accounting and 33 percentage points in Finance from pre-test to post-test. The average post-test score was 86% (accounting) and 82% (Finance), which was 11% higher for accounting and 1% higher for Finance than the on-campus MBA students’ scores in the same test. Students also like it; Quantic received similar net promoter scores to Harvard and Wharton MBA programmes in the study but has since improved on this by introducing their blended model that supports machine-driven learning with live classes.

“This study supports the assertion that some of the foundational accounting and financial concepts taught in traditional brick-and-mortar MBA program can be learned independently, online through Pedago’s targeted Quantic active-learning courses. Significant improvement in students’ knowledge can be gained in as little as two hours of engagement with these courses.” Quantic efficacy study

The self-paced courses are not enough on their own. The study suggests that the materials be used as part of an MBA programme that includes cohort-based elements alongside. The two suggestions were for the machine taught content to acts as introductory materials before the MBA starts or as prerequisites to live sessions in a flipped learning approach.

If acting as introductory materials at the start of the course, they can enhance students understanding of fundamental ideas in hard to learn areas or bring students up to a similar starting level—the Prerequisite work for blended-learning classes. If used as prerequisite learning between live sessions, it can leave instructors more classroom time to explore case studies and interact with peers in group work.

Podego – The tesla of education – cheaper and quicker to learn

Quantic is run by Pedago, a private company that aims to ‘build an end-to-end talent engine.’ They state that the fourth industrial revolution is leading to disruption of the labour market, removing or changing the jobs people do, and that technology can help people become smarter and re-skill in the new job market.

Education + career matching = Talent engine
Podego

They want to be the ‘Tesla of education’, using technology to making it cheaper and quicker to learn new skills, using technology and new approaches. One such method is eliminating the lecture and replacing it with discovery-based learning, replacing the lecturer with a computer, and focusing on interactivity and personalised feedback and progression, supported by live online classes with humans.

They state that Quantic is the worlds first accredited, machine taught degree and that it is specifically designed for access on mobile as that is where modern students want to learn. Their MBA is their first course and acts as a proof of concept and aim to move into teaching programming, blockchain, robotics, and other subjects that represent a skills gap in the economy.

The Education company of the future

MAKE IT ACCESSIBLE: We’re mobile-first, platform-agnostic, self-paced, and easily-translatable into every major language.
MAKE IT AFFORDABLE: We remove the cost barrier and the heavy student debt burden, ensuring access regardless of socioeconomic status.
MAKE CREDENTIALS VALUABLE: We admit students for degrees and certificates based on prerequisites and prospects for employment.
TIE IT TO CAREER: We link education directly to its ultimate benefit, motivating financial gain, career advancement and personal fulfilment.
MONETISE ON THE EMPLOYER: We help companies match with the ideal job-seeking student, with the desired skills, education, and culture fit, paying upon a successful hire in our career network.
Podego

I highly recommend you sign up for their free courses and experiment with the Quantic learning method. If I took anything from exploring a couple of their introductory courses, it was the idea of tracking the number of interactions a student gets in their on-demand content. Self-paced learning in courses is essential to make the class time more valuable but can often rely too heavily on content and not enough testing. Moving to a metric of ‘seconds per interactions’ might be too much of a jump for current HE lecturers, but ‘minutes per interaction’ might improve the student experience significantly.