Capital Teams

This past weekend I had class again. There wasn’t quite as much prep-work for the weekend, but still there was plenty to keep me busy.

As has been the case of late, there was one day of finance (aka Acquiring Capital and Managing Investment Decisions) and one day of another class. This week the “other class” was Effective Team Communication.

So for finance this week we talked about Capital Budgeting and Risk Assessment. As I’m sure I’ve mentioned before, finance is not my strong suit. I generally can understand what I’m learning, and I can certainly handle most of the math, but I don’t love it. It’s necessary. I see the value. I’m not drawn to it. Thankfully I have someone else at the office who handles the hard finance work who’s really good at it and likes it. I still need to have an extensive understanding of it, though, and in particular some of what we learned this weekend: Capital Budgeting.

Capital budgeting process allows you to plan the cash flows related to large purchases. It allows a firm to evaluate whether the purchase is a sound investment based on the revenues it produces, or to compare the relative worth of two or more projects. It was helpful to learn all this especially since Samaritan is growing right now and there will be plenty of opportunity to consider projects in the near future. There are several ways to evaluate the worthiness of project: Net Present Value (NPV), Payback Period (the amount of time for a project to recoup the initial investment), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), Simple Rate of Return (SROR), and Profitability Index (PI). There are varying thoughts about which is best, and most firms use at least two of the methods for evaluation. The most consistent predictor of value added to a firm is NPV, though PI is important for anticipating the effect on financial statements, and the payback period is important for small businesses with potential liquidity issues.

We’ve got a group project due in two weeks where as a team we’ll evaluate a potential investment project for one of my teammate’s companies. It not only will be fun to learn from the project but she will be able to get real life use out of the work we’ll do. If I get permission I may post some information on the project as we work on it. I’m looking forward to gaining knowledge related to a completely different industry.

On Saturday we talked about teamwork and communication, mostly around our EMBA teams, but with a lot of application for our day jobs. The lectures and discussion were based on Patrick Lencioni’s Five Dysfunctions of a Team, a book I’ve read a couple of times over the past several years. It was helpful to go through the book and concepts anyway, and I’m looking forward to some fresh applications in my life and work. My EMBA team is drama-free and we all have a shared commitment to excellence and a sense of responsibility. In addition, the school projects are all clearly designed and have fixed, immovable deadlines and so we’ve had very little difficulty working together. Obviously this is more of a “laboratory” situation, not a real life work team, and so one would expect it to be simpler.

It was a grueling but good weekend at class.  Still enjoying the program and still being stretched.

Oh, and here’s a TED talk we watched that you should watch too, on “being wrong.”

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