Double Blind

Note (added September 10, 2010): I will be closing comments on this thread at the end of September. I no longer wish to spend time pruning comments. Thank you.

You may be interested in the prior posts on CMA Entrance Exam observations, and CMA Case Examination.

These comments apply to the 2008-2009 incarnation of the SLP program and the program may change in future years. This post generally applies to the February to June 2009 period.

The CMA Board Report:

Around February we received a notice that the board report backgrounder was available. The goal is to write a report (limited to 10,000 words plus appendicies, which was reasonable) that addresses the requirements of a fictional business. The report is to be handed in hard-copy (professionally bound) and digitally (presumably to run through a plagiarism detector) by late May. The written report consists of 60% of the grade. Two weeks later, there is a presentation component, consisting of a 30 minute presentation and 20 minutes for Q&A. This is 36% of your grade. The other 4% of your grade is a “peer evaluation” where your other group members can evaluate you (apparently this is a BC-only implementation). The written report is nationally graded, while the presentation is graded by the provincial agency. A joint grade of 60% or higher is needed to pass. The report and presentation is to be completed by the members of your group, which usually consisted of four, but sometimes five people. Our group was four people.

The 2009 Board Report case dealt with a greenhouse company located in the Niagara Peninsula area of Ontario. It was a small family-owned business that was mildly profitable and not too leveraged on the balance sheet. The goal was to propose a plan that enabled the business owners to transition their business to their children. Implicit in this was recommending an alternative product strategy that would produce more cash simply because the existing business (roses) was losing profitability quite rapidly due to external competition. The case itself was quite well written and the alternatives the report asked you to analyze were fairly balanced in that they were all relatively financially unattractive options without tweaking. The “tweaking” is where your research and non-linear thinking would presumably come to the rescue by recommending a more attractive variant of the three alternatives proposed in the case.

The only problem with the case was that the alternatives give you assumptions of growth and sales that lead to clearly unrealistic scenarios (e.g. revenues doubling or tripling over the span of a couple years), but the instructions say that you should be treating these figures as gospel.

Components of the report and the general format of how the report is to be written was made fairly clear by the previous SLP classes, which walks you through the preparation of another company (a senior’s care facility) in three components. There is also a healthy sample of the two previous board report cases and a sample report for each that was a “good report”. With this and the previous tools that were employed in previous SLP assignments, one can get an impression of what the markers are expecting. In fact, without any knowledge of the SLP, one could probably write up a passable report if they were equipped with some business writing skills.

If I was a consultant that was contracted to write such a business analysis report for a real-life company, I would never approach things in the way we were asked to in class. I’d be too embarrassed to say it was my own work.

Since the immediate objective is to pass with the highest grade (opposed to writing a good report), it was much easier to ask what the markers were expecting to read, opposed to going through the approach that would seem instinctively correct (i.e. research, formulate thoughts, analyze, and then make a recommendation). Instead, there is a much more unwieldy and serial approach that the SLP program makes absolutely clear you must employ before going forward. In particular, what is very annoying is that the one-tool-fits-all approach to business analysis that is encouraged in the program is the SWOT (Strengths, Opportunities, Weaknesses, Threats) and PESTE (Political, Economic, Social, Technological, Environmental factors), listing things in painful detail. This is like using a bazooka to kill mosquitoes – instead, what is important is isolating specific variables that are of relevance and explaining how they interact with each other and the financial statements. The standard analysis approach that is used does not do this at all.

The markers are looking for material demonstrating you can “link” factoids together (e.g. X does Y, which mitigates the Z weakness), so if you can write a case report showing that you can consider two independent pieces of data on two separate laundry lists in the report, you will receive good credit for it. This means there has to be a minimum of analysis in the report so just listing out facts will not be a passing paper.

There is a political aspect to the report – because there were three other people in my group, this was not the time to do anything creative, and keep things as conservative and as cookie-cutter as possible. This strategy did work.

It is important to do your spreadsheet work early and keep in mind the variables that need changing in a spreadsheet in order to be able to produce financial statements with a mouse click. Once you have the spreadsheet with variables constructed, it is a simple matter of feeding in variables and cases (e.g. “proposition X means a 10% increase in revenues, and a 2% drop in gross margin, what happens?”) to get the desired cash flow necessary. Once this is done then you can substantiate your research and results in quantitative form in the report.

We did a lot of prep work in advance of the deadline, and my group was good at assembling their pieces together (some required a lot more revision of writing than others), but on the day before the hand-in date we had a good afternoon and night-time session to do final revisions, read over our work comprehensively, and produce a relatively safe and adequate report. Our written report grade was well above the 60% threshold required to pass.

My whole issue with this entire process is that such reports will not work in real life situations, they cannot be “tested” and they are rarely written by four people in a group in the manner that the SLP program demands. I would recommend for future groups to come to a conclusion on what they want their recommendation to be, parcel out three pieces of work that are as independent as possible to each other and have one person assemble them and put in the appropriate verbiage showing “linkage”. This is pretty much the opposite of the scientific method, which is to form a hypothesis, create an experiment to test your hypothesis, do it, and then report on whether your hypothesis works or not. The whole idea of doing research is to not have a conclusion before you start writing the report, but unfortunately, the board report structure requires a recommendation/conclusion before you can really start producing evidence to substantiate your claim. It is very similar to how most junk science research is done.

The Board Report Presentation:

The information that we had received during the SLP program from our moderators was contrary to what was required during the Board Report presentation. During the SLP interactive sessions, the moderators required your group to go through a bunch of corporate background information and chew up half your time before proceeding with the recommendations. If you didn’t do so, you were panned for not providing industry/company information. The actual instructions for the board report presentation clearly states it is different than summarizing your written report and is a “sell” job of your recommendations.

With this ambiguity, the approach we took was stating our recommendation, briefly discussing what the problem was, briefly what the company’s position was, alternatives we looked at, why they didn’t work, and then get on with our recommended option, discuss how it can be implemented and why it would be so wonderful. We spent slightly too much time talking about alternatives we rejected, but the presentation clearly gave our thought approach and the logic of our approach was very sound, given the ambiguity.

The presentation is delivered with PowerPoint slides, and each group member gets seven or so minutes to say their thing before passing onto the next person. Our group practiced this in advance on two separate days and were quite well rehearsed when the time came. I also prepared questions (both softball and hostile) and made sure they got the “talking points” correct, something that I’ve learned well in my political experience (it is better to say nothing than to say something contradictory to what was stated previously, even if that previous statement was flat-out incorrect!).

I really dislike how PowerPoint is used with oral presentations. Most of the times I have seen PowerPoint used, it does not add value. It can even subtract value from the presentation simply because the recipients of the presentation are fixated on slides, opposed to the oral delivery. At many times during the SLP, people just read the slides, which completely defeats the purpose of having them. You might as well hand out a printed version of the slides and not say a thing, and save the time entirely for Q&A. That said, it was not the time to go PowerPoint-less since we could have given a business version of the Gettysburg Address and it would be lost on the markers as they scratched their heads and wondered , “Where are the slides??”.

A major complaint I had was the temperature of the venue, which was held at the UBC Robson Square board room. Apparently nobody thought to turn on the air conditioner since the thermostat was set to 24 degrees Celsius and it was one of those thermostat boxes that were locked so you couldn’t adjust it. It also felt warmer than 24 degrees, with no air circulation in the room. Wrapped up in a suit jacket and tie, I really started to sweat during the presentation, not out of nervousness, but out of simply feeling like I was enclosed in an oven. This is another reason why I rarely wear suits unless if I absolutely have to. While normally this would not be a problem as there are methods to cooling down (i.e. take off the jacket, roll up your arm sleeves), this would be highly inappropriate in an academic environment. Instead got a cloth napkin and wiped my forehead every five minutes because it was just so ridiculously hot in the room. This did not distract from my presentation or performance, but I know such physiological issues would influence markers’ decisions as they might think I am nervous. Unfortunately, I sweat fairly easily compared to other people.

Having done some talking in public now and then, I never get nervous in front of crowds or when doing presentations, even when faced with hostile crowds. It is second nature to me. But I have never done them in a room that was so warm!

The Q&A proceeded as we had planned for; they challenged us on some of the variables that we used and the nature of our proposal. The questions were generally uninspiring and didn’t really probe too deeply, which made me suspect that the three person panel was running out of steam at the end of a long day. We did a good job answering them.

After the Q&A was finished, they gave their remarks and thought our presentation was “obviously well researched” and that we had spent too much time talking about items that we did not recommend. They also thought our introduction was effective. They seemed fairly upbeat and we left the room thinking that we had passed.

While I thought we gave a competent presentation, apparently the 3 person board panel did not like our presentation at all and gave us a grade that was significantly below 60 percent. On the marking sheet, received three weeks later, they indicated that the “slides were not valuable and did not add information to presentation”, “flow of presentation was disjointed”, “missing reasonable assumptions”, and “contradicted each other during Q&A”. This was a rather large shock to us considering the 2-to-1 positive feedback they gave to us in person – more or less the three person marking panel performed a lie of omission to our faces and I do not have respect for that behaviour. It was not the time to sugar-coat evaluations. Despite this and our grade, our group still received our designations.

Feedback should be candid and it should not be balanced. If you are about to deliver a group a failing grade, you tell them in person, instead of positive fluff-words. This seemed to be pervasive throughout the interactive sessions in the SLP program. Professionals should be able to give and take criticism and not act as if they have been personally insulted or have their feelings hurt.

Peer Assessment:

This is a simple game theory test, a minor variant of the Prisoner’s Dilemma. The way this grade was structured by CMABC was silly – you are to evaluate the leadership, attitude and effort of the other members of your group from 0 to 4. The marks are averaged and that will be what you receive as your peer assessment grade. Since it costs nothing to give other group members higher grades, the only reason to not give other members of your group full marks is if there was dysfunction in the group. Thus, the only value that this process has is if the peer assessment grade was not high then it would signal to CMABC that some group members did not like each other, but did not decide it was enough to have them kicked out of the group.

At the very beginning, your group has to form a ‘contract’, where the terms and obligations of the group members are listed and agreed to by everybody. In the event that one member of your group is completely dysfunctional, there is a “dissolution” process that is very burdensome for everybody else involved. First, all other members of the group has to inform the offending group member, and have a meeting and “a plan of improvement”. Then if the situation is not resolved then there is a mediation process which takes place with the oversight of CMA. Finally the member can be removed if the following takes place: “The Group must also provide documentation to support the case against the Member. This should include the dates and times of missed meetings, situations when the Member was unprepared, missed deadlines, unprofessional behaviour and/or ignored emails and telephone calls.” Suffice to say, it takes a bit of determination to go through with this process.

Even worse, as a “reward” for the group’s effort to get another member kicked out for non-compliance, they will be docked up to 5% on their written report grade. In other words, there is no way that anybody in their right minds would go through this process unless if the offending member is a complete psychopath.

Some closing thoughts:

One of my biggest issues with the entire CMA SLP program deals with the handling of groups. The biggest determinant to your success in the program is not the work you do, but the three or four people you are saddled with – if you have two bad lemons, you’ve got a choice whether to just do everything yourself (which is not out of the question), or to go down with the sinking ship. Also, if your group has one bad lemon, by virtue of the costly dissolution process, that person is most likely to get a free ride throughout the board report process. Fortunately, the three other people I was assigned to I got along with very well. I have heard horror stories about other groups, however, especially groups with “my way or the highway” types.

The Board Report does not adequately tests individual’s capabilities and competencies, since stronger members of the group easily overshadow those that are weaker.

In a future post, I will be writing later about my thoughts and impressions about the CMA SLP program and the accreditation process. I will link it here when I have written it.

Tags: CMA, CMA Board Report

This entry was posted on Sunday, January 10th, 2010 and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.