Coffee on the Third Floor: Mark Maffett on Hidden Ubiquity of Accounting

Araba Nti, '17

Araba Nti, '17

Why did the accountant stare at his glass of orange juice for three hours? After spending a good 45 minutes talking to Mark Maffett about accounting, his work, and settling in Hyde Park after migrating from the South, it was clear that accountant jokes need not apply. Joining Booth faculty in 2012, Mark Maffett is an Assistant Professor of Accounting and Centel Foundation/Robert P. Reuss Faculty Scholar at Booth. Maffett may be best known among Booth students for his financial accounting intro course. But for those who are interested in pursuing a career in consulting, there may be an opportunity to have a little more Maffett in your life as he prepares to teach a new course with a heavy emphasis on financial accounting applied in a consulting setting (read on to find out more).

For those who shudder at the thought of devoting a lifetime to thinking about debits and credits, Maffett makes it clear that the interesting and more powerful part of accounting lies elsewhere: “The overlap between what we teach and what we research is not as direct as some of the other disciplines. A lot of what we research is on more of a big picture level than the nuances—like accounting rules—that we teach in classes. More generally, our focus is on how the quality of a firm’s disclosure environment affects various capital market outcomes.”

Mark Maffett, Assistant Professor of Accounting and Centel Foundation/Robert P. Reuss Faculty Scholar at Booth

Mark Maffett, Assistant Professor of Accounting and Centel Foundation/Robert P. Reuss Faculty Scholar at Booth

“A paper that has had a lot of influence on the way that we do things and the questions that we ask is one by two economists, [Ginger Zhe] Jin and [Phillip] Leslie, that look at the effect of the disclosure of hygiene scorecards in restaurants. They were able to get ER admissions information from where they did the study so that they could look at the incidence of foodborne illness and other sickness, then tie it back to these disclosures of the scorecards and how that changed what restaurants people decide to go to. This paper seems as far removed from accounting as you can get, but the conceptual mechanisms that underlie the effects of going from having to go to the courthouse to flip through the files for hygiene scores to explicitly posting the score where everyone can see it when they walk through the door is very related to the type of questions we think about.”

Applying this to his own work: “I’m looking at whether the provision in the Dodd Frank bill requiring firms to disclose mine safety information in the financial statement had any real effects. Did it decrease mining related accidents and injuries? If you increase safety it’s going to be costly from the mine’s perspective, so did it lower productivity? I also find that there are very real effects on demand for these companies. For example, if you’re a mutual fund and don’t want to be exposed to the possibility that a company in your portfolio could have a catastrophic mining accident.”

As consumers of financial reporting, Maffett’s message for Booth students “be aware of the context in which you are receiving a piece of financial information and how that is shaped by the interests of the parties that are disclosing that piece of information—the levers they have to turn. Financial information is shaped by a particular party’s incentives in terms of what they disclose to you.”

Maffett recognizes a need for an advanced accounting course that is more reflective of the changing career aspirations of Booth students entering functions that require a solid grasp of accounting: “a lot of the jobs that students are taking are changing. The higher proportion in consulting, lends itself to a little more of a broad of a focus.” Aware that students who have interviewed for consulting have found that interviewers expect more accounting knowledge that what is taught in the financial accounting intro course, Maffett envisions his course to be more advanced than the intro course but more transaction focused than FSA.

Aspiring consultants, help Prof. Mark Maffett help you be more prepared for your internship and full time job. Email him at (Mark.Maffett@chicagobooth.edu) or stop by his office (Room 437) to chat.

Araba is a first year at Booth who recently discovered that there’s life above the 2nd floor of Harper Center.

Coffee on the Third Floor - Steve Morrissette

One of the most striking things you may notice about Steve Morrissette is his modesty. While insisting that there are many other terrific courses students should take at Booth, Morrissette brings his vast industry experience and meticulous preparation each year to deliver his Mergers and Acquisitions strategy class to Booth.

Araba Nti, '17

Araba Nti, '17

After receiving his MBA from Booth in 1990, Morrissette has held numerous CFO and CEO roles, primarily in commercial banking. From this, he has developed a toolkit that runs the gamut from mergers and acquisition strategy, corporate development, post-merger integration, and entrepreneurship—skills he continues to use in the “real world” through his consulting company and his work with start-ups and search funds. Morrissette’s decision six years ago to add teaching to his busy schedule was highly influenced by his experience at Booth: “I was tremendously appreciative of the education I have got at Booth. I learned a lot from my professors here, it built upon my strengths, and it stretched and grew me significantly.”

Steve Morrissette in the Alps

Steve Morrissette in the Alps

Reflecting on how Booth has changed, Morrissette recalls what it was like teaching at Booth for the first time: “When I got my course evaluation forms back, students were saying that they spent 4 ½ or 5 hours a week on my course. I went to my mentor and I said ‘I’m embarrassed that students are only spending 4 ½ or 5 hours on my class.’ Because when I went to school, the more time consuming classes were more like 10 to 12 hours a week. And my mentor said ‘One of the things that has changed is that now there are so many other activities that we want students to participate in such that 5 hours now is a very appropriate level of coursework.’”

Why should all Booth students care about mergers and acquisitions? “Thinking about acquisitions forces a clarity of understanding of a firm’s core strategy. To use an analogy, you get the x-rays and bloodwork, and you’re tying together a series of diagnostics that allow you to look at a strategy or an acquisition from multiple dimensions, understand it, then come to a critical thought on whether or not a strategy or an acquisition is going to be effective.” To go beyond a class of “practitioner war stories”, Morrissette spent approximately 250 hours conducting research for his course. To keep his subject matter up to date, he invests time each year interviewing industry practitioners and hours each work reading industry-related material.

How does he have time for all of this? Using an investing analogy, he describes his time management strategy as one of keeping a balanced portfolio—making sure his time is being spent in a way that gives him the greatest return (both non-financial and financial): “I spend about a third of my time teaching, a third consulting, and a third doing board and investing work. I track all of my hours. Because I came from a billable consulting world, I literally track them in a software package so that I know where my time is going…I don’t track personal time—I’m not that extreme.” Still not clear on how Morrissette has time for all that he does? Well, he admits that he doesn’t get enough sleep.

Banking vs. consulting? Morrissette chooses none of the above for fresh MBA graduates: “I am of the side that line experience, ‘real jobs’—running something in an operating business as opposed to providing services to an operating business—are extremely valuable. I believe that there is no substitute for real line experience.” Although Morrissette acknowledges the value that professional services can provide to those who are new to business, Morrissette has other ideas for fresh MBA graduates: “There are thousands of companies in the U.S. that need new ownership. There are thousands of new ideas to come up with, but sometimes finding that great new idea is more difficult and much higher risk than buying one of those thousands of companies out there.” A search fund provides a vehicle for MBA graduates (the “searchers” in search fund speak) by committing a $10 to $15 million investments in a company like what Morrissette describes, while providing the MBA graduate with two years of post-MBA salary ($300 - $400k) plus a 20% stake in the company. Morrissette speaks of a Booth graduate and guest speaker in his class who headed a six employee company through a search fund, growing the company to 600-800 employees through a series of eight acquisitions over eight years. For searchers who are not able to achieve this type of success, Morrissette still views the experience as a win: “Even if the company fails, in three or four years, you can say that you had 15 wealthy investors willing to back you, it didn’t work out, but it was a great experience searching for an acquisition where you looked at hundreds of companies, streamed them down, did due diligence, and ran one.’ That’s a hell of a lesson. That is not a failure on the resume. For the searcher, instead of being an MD at Goldman or a manager at McKinsey, they would have to start over after five years. But the skill set they build is tremendous.”

One last piece of career advice Morrissette has for Booth students is to not overlook the skillset one develops from middle-market companies, going so far as to argue that admitting more students from middle market companies and family businesses will positively impact the learning experience for all at Booth.

Araba is a first year at Booth who recently discovered that there’s life above the 2nd floor of Harper Center.