‘People Who Are Good with Numbers Need to Develop Emotional Intelligence’
How can financial managers help design products and services? What bearing may a CEO’s death have on investment decisions? Why is our perception of time and place changing? Professor Jean-Malik Dumas from Tilburg University discusses these and other issues in an interview with HSE News Service. He has recently visited HSE Faculty of Economic Sciences under Erasmus Plus programme to teach an elective course in Finance for Master’s students of Strategic Corporate Finance programme.
Teaching Finance at HSE
My profile is between management and finance. Twelve years ago, I was Assistant Professor in management accounting, and what I realized is that many students in finance understand the figures, but sometimes they are a bit lacking knowledge on how you achieve them. If you need to reduce or manage the cost, you need to understand how it happens exactly - not just looking at the paper, but how you make your product actually cost less to produce. I gathered together a number of techniques, some of them are from management accounting, some of them are from operation management, and a bit of it is also strategic management. Altogether, it gives a view on the process that you could use as a consultant to improve performance within an organization.
Thinking about or discussing costs by themselves is meaningless; you always need to look at the same time at value delivered and the cost. Nobody is taking any decisions only based on costs
I would say there’s one core idea in the course – thinking about or discussing costs by themselves is meaningless; you always need to look at the same time at value delivered and the cost. Nobody is taking any decisions only based on costs. It is a very superficial view, and I am trying to bring the students to understand something that you don’t find in many courses – how people perceive value, how you can design value in product and in services. What has been happening already for the past 20 years is that within multinational corporations that have ambitions to grow all over the world, people are forced to work in groups. When we were designing a product several years ago we would only ask engineers to work on it. Now, if we design a product or a service, we’ll have people from accounting on the team, people from finance, production engineers, marketing, and all different kinds of people around the table. So it’s important that within each specialized training there is also a bridge that allows the specialists to communicate with specialists from other fields. This course is trying to achieve this.
For me, there is a lot of learning in this as well. I do see that the students at HSE are very interested and also interesting as they have experience and understanding. But I’ve had to adapt things because I see several things here. First, the method I’m using is more a method you use for MBA, for people with experience. I think the students here are more used to me speaking for two hours, and after that giving an exam on what I just said. I believe this is just fine for bachelor, but not really for the master’s level. For most people, unless they are going to do a PhD, which is rather rare, master’s is the last moment between being at university and working. I think it should also be agreed that people do learning, as a rule, more by themselves. I see that they are not totally used to something like this. They expect more slides and readings, while my work is that I go through a case with them and in the end we learn something together.
Besides, I do see a huge difference in the maturity of the students. Here, the students are very mature, and the atmosphere is very nice, but they are not very used to group work. The capabilities of the students are quite strong. This is a core – why in Russia you look for people who have finished higher education – this is a level of possibility to address any issues, even if they haven’t seen it necessarily in class. I’m quite sure they will do it, but for now, they are a bit far from the practice.
Human Factor in Finance
Each time there was a huge mistake in financial models or a crisis, it always came from very smart people who could develop very smart models. Every failure of a big financial system is in the human side. There was a scandal at Societe Generale in France when one trader made a huge bet and they lost about 5 billion. Each time, at some point, people lose track of the reality. Besides, there is the domino effect when something starts to deteriorate.
I see that each time I discuss crises with people here in Russia, the human factor is not seen as something very important. It’s probably an inheritance from Soviet times (I have many friends around Russia and this is true not only in Russia, but in Russia specifically). I don’t see many companies doing a lot to train their people, to have them grow and become leaders.
Each time there was a huge mistake in financial models or a crisis, it always came from very smart people who could develop very smart models. Every failure of a big financial system is in the human side
John Roberts, an economist, wrote a book about British Petroleum and its revival a few years ago. You realize that, of course, there are some business ideas, and they are successful - you find good clients, a good way to serve them, and so on. But also they were successful because they were able to generate links between the leaders, and create a group in itself. A lot of courses on human resources seem to be a bit naïve, like we are all good, etc. But it’s people who are making decisions, and each time you leave out the human factor, there are consequences in the long term.
Within each financial training, there should be one part about managing and looking at the human factors. It shouldn’t be the main part but people who are good with numbers need to develop emotional intelligence. You can just wait till it happens, or you can create settings in a course, like group work and courses on specific issues, which include financial and human factors, so that people learn about it and develop themselves.
I’m very interested in the unexplained human factor. I wrote my PhD thesis on ‘Behavioral Strategy’. I was trying to understand the underlying elements leading to decisions in firms through the use of sociology and psychology. One of the central line is how the perception of time changes the decisions people are taking. In the central paper of my work, I look at public companies in the U.S. stock market, huge corporations. I looked at when these corporations had somebody dying in the top management. I wrote a theory on the fact that we have all we need for physical survival, like any animal, but there is also a need for symbolic survival that I brought into the context of business. You want legacy, you want to be well-known for something good. This means you want your identity to perpetuate over time. In this paper, I was showing that when a firm has somebody dying in the top management team, there’s an effect that for some time, the rest of the top management, the surviving ones, realize that life is not endless. And in these firms, for a short time after this event, the financial investments are influenced towards more long-term investment. People want to shift and leave a trace within the firm in the long term. For example, the firm suddenly invests more in buildings. When Steve Jobs from Apple knew he was sick, the firm was living in an atmosphere when close people, people who take decisions, knew that something was happening, and there was the real estate investment – they built a huge headquarters, and so on.
When a firm has somebody dying in the top management team, there’s an effect that for some time, the rest of the top management, the surviving ones, realize that life is not endless. And in these firms, for a short time after this event, the financial investments are influenced towards more long-term investment
What is interesting for me, is when the human expresses itself into action within businesses, we may not be totally conscious about it. In the example I gave you, people in the management team are not really conscious that they are influenced towards the long term because of something that happened. But it does happen because they are human.
Impact of Technology
I’m also very interested in the impact that technology has on businesses, but also on the life of people. It has a direct impact because it changes the way people live their life. We use technologies and innovations because we gain something, but quite often we fail to see the whole impact.
In Tilburg we are in the process of developing an education laboratory, where we will make experiments on how to improve certain technologies. Not necessarily only from technology point of view, but also the teaching, perception, transfer of knowledge to the students. I’m developing research protocols around some central questions in teaching. For example, I’m now thinking about developing a protocol on understanding the advantages and disadvantages of being anonymous or identified within a course, and in which situation you need what, and how technology may solve this. If we are in a class, I may or may not see you. If I see you, the guy sitting next to you sees you, which, of course, has some effect. For example, when I’m doing a course that I like and would like to have students participate, quite often students don’t say anything because they fear to be ridiculous in front of others. I’m trying to work on exactly under which circumstances it is useful to be identified or anonymous, and how to use technology in organizing a course at a distance, but with interaction between people, and make the best of this.
Some research in psychology already shows that the fact that people are multi-tasking is a myth. If you think you are doing several things at the same time, you are switching, and each time you switch from one to another, you lose something
Teaching is evolving very much because of technology. Our perception of place is very different now because you can do most activities in many places. That also changes our perception of time. What is happening now with most of our students, when you look at the way they work on a project, they work five minutes in the metro, ten minutes at home, and one hour with colleagues in a room at school. Technology gives us mobility.
However, we need more research to understand whether the outcome is the same. Some research in psychology already shows that the fact that people are multi-tasking is a myth. If you think you are doing several things at the same time, you are switching, and each time you switch from one to another, you lose something. Society, businesses and individuals are more and more feeling this impact. I had a student doing research a few years ago, and he was showing something called ‘social jet lag’. The fact that you work at any moment, because now you have a mobile, you receive an email and so on, may get you further away from your family and friends. ‘Social jet lag’ may have consequences on health. It’s not totally new. In France, there’s a new law, although it will take some time to be in effect, which says that businesses should make sure that you don’t receive emails from your job when you are not working. They would delay the emails on Friday evening, at some point you stop the emails, and receive them all on Monday morning.
Most of our students have grown up with technology. They have had a tablet or other devices from a very young age. We take for granted that all people know how to use the technology. But I’m receiving many emails from students, and I’m thinking that one could write a course on how to write an email. I have about 1,000 students each year, and get countless emails. And they write ‘it’s me’, like I know who they are, and ‘when are you going to change this?’, and I don’t know which course they are speaking about. This means they know how to press on the keyboard, but they don’t understand the tool.
People don’t know how to focus and at some point how to not let the technology disturb their activities. So, on individual level, within institutions and society, there’s a lot to learn on how we can make technology our slave and not being the slave of technology. The point is not to resist against the change, but to make it efficient for everybody. And here it’s critical that all research institutions have leading roles, because we have the means to analyze what is happening in the society, how it changes businesses, and how to make it more efficient. Researchers have a mandate to study the impact of technology at all levels. To be successful, the human factor should be the central guiding principle to adapt our policies and practices. This will make technology sustainable for people, businesses and society.
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