Very few business programs teach you how to start and grow a business. The curriculum (which hasn’t changed much in 100 years) is designed to train mid-level managers to run existing businesses.
So what’s the point of taking business classes if you don’t want to be a manager or entrepreneur?
Because you will work in a business, and not knowing how a business functions can leave you at disadvantage to your managers.
Some useful things you’ll learn in business school:
- HR and business law – Many people are woefully ignorant of labor laws, and often don’t know their rights, or worse believe workplace tales of legal issues. Assumptions of what the boundaries of a non-compete agreement are, what “other duties as assigned” can mean, what “right to work” really means, what managers can/cannot do, and what qualifies you to be exempt from overtime, leaves employees ripe for abuse and exploitation. As much as employees fear being fired, it’s much easier for an employee to get a manager fired, or for a managers actions to lead to a costly lawsuit.
- How decisions are made – Most employees have no idea what criteria drives business decisions. Helpful accounting and finance principals like “return on invested capital”, hurdle rate, EBITDA, cost of capital, fixed vs variable costs, CAPEX vs OPEX, direct vs indirect costs, etc., will help you understand the “why”, and in many cases predict what management will do next (like closing a plant, or laying off workers).
- How to read an annual report – Few employees of public companies have ever read an annual report, and are blissfully unaware of what the senior management strategy is. They also can’t make sense of the financial reports. This leaves them at a huge disadvantage, and prone to disinformation from management. As a consultant, I was once invited to an employee all hands where management painted a very rosy picture of the company’s current market position and how they had no debt and $ 20 million in the bank. As I sat in the auditorium, I pulled up the firms latest quarterly filing and saw the real story: They lost their five largest customers in the last year, and the banks cut their line of credit forcing them to pay off their debt and seek additional outside investment. They were also facing “revenue shrinkage” which meant they could no longer charge the fees they were used to, and revenue would decline, which would lead to cuts and layoffs. But here was an auditorium of several hundred people clapping and cheering their senior leadership and buying the BS wholesale. They were all shocked and surprised a few months later when the cuts came “out of nowhere”.
- Investing and general financial literacy – To most people, the stock market is a mysterious, complex, impossible to understand place, and the finance industry likes to keep it that way so you pay them fees to manage your money. Many people have no idea where their 401k is invested or how to make an investment decision based on economic criteria. Do you really know what a Lipper average is, or how to read a prospectus? How about when to invest in stocks vs bonds? Is your company over valued, or ripe for a takeover? Should you sell your company stock or hold it? The flip side of this is understanding interest rates, what influences them, and the difference compounding makes. I’ve seen so many people think they are getting a great deal on a major purchase, but can’t do the math on the financing terms. (Like when a car dealer offers you $ 500 cash back to go with a loan that has a higher interest rate.)
- Economics – Most people have no clue about economics other than parroting some generalization about supply and demand. In reality, economics is the financial weather report. It will literally tell you which way the winds are blowing and whether your company is likely to add or cut positions, increase/decrease investments, expand/contract, etc. Do you know the difference between a recession and depression? What are the effects to the business if interest rates go up? What is a trade deficit and the impact of a trade war? Do you know what the main economic drivers of your industry are? If the price of copper or gold rises/falls, do you know what that means? Do you know the difference between monetary and fiscal policy? Most people don’t, and that has major consequences.
- Trendspotting – In addition to economics, being able to understand the industry you work in and expected future trends has huge implications. Most industry journals are only read by managers, even though they can be accessed by anyone. What is the industry forecast? What are the new trends? How is technology expected to change it? Will you be replaced by AI or robotics? What are the new jobs/careers that will be in demand in your industry, and what job training should you seek now to get ahead of it? Mainstream media won’t give you the insights you need to make career choices. Read what the senior decision makers in your company are reading.
I could go on, but I think you get the picture. Regardless of your chosen degree or profession, having a minor in Business, or at least some level of business training will more than pay for itself in your lifetime. The more you know, the better decisions you can make for your career and your family.
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Published on: Jan 11, 2019
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