Tuesday, September 1, 2015


As I have mentioned, I was involved with two panel discussions recently at the annual meeting of the American Accounting Association.   At one point, I was asked about the best teaching advice that I ever received.  

Over a 44 year period, everyone hears a lot of good teaching advice (and some bad advice also).   Deciding which advice is best can be a challenge.  

But, my mind always goes back to something my boss told me during the first year I was teaching.   The advice came at a time when I was struggling to figure out who I wanted to be as a teacher.   Those first few years are so important because they form the structure on which a teacher builds an entire career.

One day the head of the business program was talking with me about teaching.   He looked at me and said “If you truly care about these students, you will push them as hard as you can to be great.”   There was a lot that I liked about that sentence in 1972.   There is a lot that I like about it today.   I think it has probably influenced me more than any other advice I’ve heard or read.  One thing that I liked best was that he spoke the words as the absolute truth and not just as some clever fortune cookie type mantra.   He believed 100 percent in the importance of what he was saying

--Everything starts with the need for me as the teacher to care about my students as people.   It is easy to think about students as a group (my 9:00 class or my 10:30 class) rather than as individuals.   Too often, we describe such groups in negative ways.   They are annoying.   They are lazy.   They are frustrating.  They fail to think.   They fail to prepare.   But students are unique individuals with their own hopes, dreams, weaknesses, and aspirations.   It is not important for me to like my students but it is important for me to care about them.   Walk into your next class and look at your students as distinct human beings.   They are not part of the furniture.   They are people.   Don’t waste so much time judging them.   Simply realize that they are human and, whether they know it or not, they need your help as their teacher.   As Mother Teresa said, “if you judge people, you have no time to love them.”  

--I need to push my students as hard as I can.   I know it is redundant to say but students are human beings.   They often lack motivation.   They procrastinate.   Their ambitions have not been well nurtured.   They have not been well trained as students.   Many of them have no idea how to succeed.   Many will underachieve in school and then become convinced that mediocre is the best they can be.   The teacher needs to open their eyes to what great things they are capable of achieving and then be willing to push them to hit those goals.   In most cases, success only comes from hard (but also efficient) work.   I would love to boast that all my students are self-disciplined and self-motivated.   But that is not the way of the world.   Most people need help.   They need to be pushed.   They need to be challenged.   Grade inflation has come about because teachers do not want to bother pushing students to do outstanding work.   Our world is struggling at the moment because too many people leave college believing that “good enough is good enough.”   Push your C students to make a B.   Push your B students to make an A.   Push your A students to make an A+.   Each step is a triumph that you and the student can share.  

--Don’t be satisfied if your students get good grades.   Education is more than grades.   Push them to be great.   Our world, as I have said, has numerous problems.   We need many more graduates leaving college with great educations, great ideas, great innovations, great ambitions.   Don’t look at your students and see them as they are.   Look at them as they might be able to become if you push them hard enough.   See the potential within them and then do your best to help them reach it.

Three thoughts that make a world of difference
--Care for your students as people.
--Push each one as hard as you can.
--Help them find greatness, a greatness that can make our world better. 

Teachers really do have the potential to save the world.

Thursday, August 20, 2015


As most people know, I am a full-time faculty member here at the University of Richmond.   Over the summer, Dr. Ronald Crutcher was named the 10th president of our University.   I was at one of the opening ceremonies for the fall semester this morning.   President Crutcher spoke and was kind enough to mention this teaching blog.  He said that he had been reading it since he was appointed to the position of president.   So, I want to wish President Crutcher a true welcome to the University of Richmond.   No matter how good you think we are, your job is to make us better.   Make it happen.

I was at a conference in Chicago last week and was part of two panel presentations on teaching.   In such wide ranging discussions, I inevitably talk about quite a number of ways to become a better teacher over the course of the next academic year.   Not surprisingly, I tend to give a variety of answers to questions depending on the direction of the conversation.  

But one of those questions has been on my mind since last week.   One person asked:   What is the most important piece of advice you can give to a college professor who wants to become a better teacher?  

That is a serious and very interesting question.   What is my most important piece of advice?  I feel like I should take a survey and analyze the answers that I receive.   In truth, I am not sure what answer I gave in Chicago.   On a panel, you tend to throw out answers without adequate thought.   Here’s the answer I would give now, after some consideration.

A person once emailed me “Great teaching does not come from years of doing it.   Great teaching comes from thinking about it.”   For example:   If you were the coach of a great college football team and had a chance to win a national championship, you would probably think about nothing else between July and January.   You would be obsessive.   You would eat, drink, and sleep football.   In your mind, you would break the team apart and consider each component and how to get improvement.   And, heck, the coach is just getting the team ready for a game.   Although football receives tons of attention, it really is just a game.  Unless you are related to a player or have a bet on the game, it really has no impact on anyone.   But the coach would think about little else for all those months.   Victory would be so important that the thinking would be natural.

In comparison, how much time have you spent thinking about your teaching over the summer?  How much have you talked with other teachers over these weeks and months?   How much will you think about your teaching over the coming weeks?   If the answer to these questions is “very little,” then you are probably aligned with a majority of teachers.   But that is never going to get you to greatness.   It is hard to improve without sacrificing time for a lot of thinking.   If you want to get better at anything, you need to invest a serious level of thought.

Thus, here is my answer.   My “most important piece of advice for great teaching” would be the following.   Very much like a championship football coach analyzing the team, break apart your teaching process into its smallest component parts.   You can probably come up with 10-20 “parts” if you try:   testing philosophy, homework assignments, structure of class, how much you will lecture, office hours, methods of communications, writing assignments, grading policies, attendance, getting students to be engaged in the class, and the like.   There are a lot of bits and pieces that make up “teaching.”  

Then, pick 2-3 of these pieces that you want to focus on during the upcoming semester and think about those 2-3 in every possible way that you can.   Don't spend minutes; spend hours.   How could you do each of them differently and how could that make your teaching more effective and efficient?   There are always alternatives.   What are they?

I believe it is difficult to improve “teaching.”   The topic is simply too broad.   On the other hand, I think everyone can select a couple of components of teaching and come up with serious improvements.   But only if you are willing to do some serious thinking about those parts.  You cannot fix the car.   You can only fix pieces of the car.   For the next semester, pick the pieces of teaching that you want to think about (possibly obsessively but not necessarily) and see what improvements you can uncover.   Then, the next semester, pick a couple of different components to think about and do it again.   I believe you will be amazed by how quickly your teaching begins to improve.

Once you pick what you what to think about find some colleagues who enjoy teaching and sit around and talk about these things.   We are all in this together.   We should be helping each other.   It is shocking how little some of us talk to each other about teaching.

So, what have I been thinking about this summer?

My students often do not seem to have a real understanding of what it means to be great students.  They tend to have their own way of approaching a class and, whether they seem to be getting an A or an F, they faithfully stick with that approach. 

This summer I have been thinking about the question:   How do I get my students to become better students?   If I can get improvement, they will be better for me but also better for all of their other teachers.

I want them to walk into my first class (next Monday) having spent time considering what it means to be a great student.   They are all smart enough to do well in my class if they will just make the smart decisions that seem to come so naturally to great students.   Over the summer, I have sent them several emails on this topic (I will talk more about this experiment at a later date).  Here, I want to talk about one particular experiment.

One of my beliefs is that poorer students tend to procrastinate and then have to rush around at the last minute to complete assignments and often have poor results.  Without sufficient time, nothing ever goes well.   I believe great students tend to procrastinate less so that they have adequate time for excellent work.   Think think think – how can I reduce procrastination.

I wanted to influence my students so I sent them the following email about two week ago.

Notice here that I am trying to make several points that will encourage immediate action and less procrastination:
--This material is important because it is relevant to the world around us and to what we are going to cover in class.
--Knowledge is not just something school students accumulate for a test.   It is a big help to successful business people who can make immediate use of it.
--There is a big difference between wanting to make an A and wanting to be successful in the business world.  I don’t think enough students ever make this distinction.   It is an important because this distinction impacts how a student approaches the learning process.
--Students often don’t realize what they really want.   I am trying to help them see through all their talk to determine their true goals.   “If you put the work off until the test gets close, you don’t want knowledge.   You want a grade.”   I think self-awareness is helpful.   After you have self-awareness, then you are in a better position to make improvements. 
Here’s the email I sent:

“It is amazing to me how often I will read something in the newspaper about a topic that we will be covering in Intermediate Accounting II (Accounting 302).   I am always reminded that if you are going to be successful in the world of business you have to know what is going on.

“Attached is an article from the Wall Street Journal a few days back about sales leaseback arrangements.   You will see this article again in class because we are going to be talking about these arrangements (probably around October 15).  

“If your response is:  ‘I want to make an A.  I'll read this article when it gets close to when I must know it for class’ then you are probably going to be a very good college student.   If your response is:   ‘I want to be a successful business person so I am dying to read it right now’ then you are probably going to be a successful business person.   Success is more than simply working for a grade.

”From my experience, it is important to know which one of those goals is YOU.   My experience is that half of the students in 302 want to be great students and half want to be successful business people.   Don't fool yourself.   You are adults now.   It is important, I think, for you to know what your real goals are.”

Will this help my students become more aware of how a great student approaches material in order to become a successful business person?   I think it can help some.   And, if I make similar points during the semester, by the end of the course, I am hoping that I have helped all of them not just to learn accounting but also to learn what it means to be a great student, one who will graduate and go out into the real world and achieve true success.  If I can help them get rid of procrastination, a big step has been taken toward making them great students.

Well, that is what I have been thinking about over the summer.   What have your thought about?   What epiphanies have you come up with about your teaching?

Tuesday, August 4, 2015

Here Is Your Assignment AND Words from a Legendary Teacher

My next set of classes starts on Monday, August 24.   However, I emailed my students their first assignment back on April 28.   I did not want them to waste their summer.   More importantly, I wanted to start having a positive influence on them as soon as possible.   The assignment had several parts culminating in their writing a short essay on the characteristics of a great student.   I just wanted them to think about what that meant.   I’ll write more about the results of that assignment during the fall when I see whether it had any impact on the students.

Today, though, I want to give you an assignment to complete before your fall semester begins.   When I put on teaching presentations, I often begin by instructing my audience to do the following exercise.  Standing in front of all those teachers, I ask every person to close their eyes.   (I always warn them that they cannot fall asleep.)  

“I want you to think through your years in school—start with kindergarten and go all the way through high school and college.   Think about all those dozens of teachers and pick the one teacher who had the most positive influence on your life.   It could be a fifth grade reading teacher or a high school biology teacher.   It could be a college math teacher or your kindergarten teacher.   Think about all those teachers and pick the one who stands out to you as having the most positive influence.   I find most people can settle on one great teacher fairly quickly.

“Now, I want you to identify the three characteristics that stand out in your mind about this person.   If you had to describe this teacher by his or her characteristics, what would you say?   Was the person kind, gentle, mean, depressed, etc.?   This teacher certainly stood out in your life—what enabled them to be such a force in your life?  What made this teacher great?

“Teachers often tell me they are not sure what characteristics lead to great teaching.  That is absolute baloney.   You have just identified the three characteristics that, for you, are basic to great teaching.   And you probably did it without too much problem.   This is a simple exercise to help you identify the characteristics you believe lead to great teaching.

“Our goal here today is to help you move closer to becoming a great teacher.   So, take the three characteristics that you just identified.  Think about your own teaching.   For each of these three, award yourself a grade:  A, B, C, D, F.   How well are you doing?   For example, if you felt that the great teacher in your life became great by being sweet, then how would you grade your own teaching when it comes to being sweet?

“To become great, you have to work on getting better.   That is just common sense.   Take the three grades you just gave yourself.   Unless you awarded yourself three A’s (which probably means you are an incredibly easy grader), what can you do over the next 12 months to move those grades higher?  That is the key.  How can you improve over the next 12 months.   For me, that is the secret to improving as a teacher.   Find the standard you want, measure yourself honestly, consider how to make improvements.    And, then, go do it.”

Next, in these teaching presentations, I have the members of the group open their eyes and we discuss their great teachers and the characteristics that made them great.   Listening to everyone talk about these teachers is a wonderful experience.   Try it in your next faculty meeting.   I am a big believer that the mere act of talking about great teachers will help you become a better teacher.

Therefore, I want to finish up this blog posting today by talking about a great teacher.   Interestingly enough, this is a teacher that I never had and probably never spoke with in my life.   But I am convinced that she was great.

I grew up in the 1950s in a small blue-collar furniture town of about 1,000 in the hills of North Carolina.   My high school graduating class was roughly 100 and, as I remember it, 25 percent of the graduates were married and about 10 percent already had children.   It was a fabulous place to grow up with wonderful people but it was not the most cosmopolitan place on the planet.  

However, our high school band was fabulous.   The band seemed to have a consistent excellence that really went beyond the place and size of the school.   I have no musically ability at all so I had no idea how that consistency was maintained.   The band director was Kathryn Siphers.   I did not know her at all but she seemed to be a quiet and serious person—one who appeared able to coax the best out of those high school musicians year after year.     In hindsight, I wish I could have set in the room and watched her lead and guide those young people to get such great results.   It must have been a fabulous example of great teaching.   I think I would have learned a lot.

She died at the age of 62 in 1986.   That is a long time ago.   My little home town now has a Facebook page and it is amazing to me, how many times former students bring her name up and talk about her in glowing terms.   Just today, one person wrote about her:   “I think I cried harder at her funeral than any other one I have ever been to” and another person responded “Her influence was unlimited.”   After nearly three decades, people talk about her as a very real presence in their lives.   Ms. Siphers truly meets my definition as a great teacher.   Even after 44 years in this job, that is still a goal I am working towards.  

When she died, a colleague wrote about her in the local newspaper.   I think this will tell you more about what it means to be a great teacher than anything I can think of to say.

“Ms. Siphers was more than a band director.   She was a teacher’s teacher.   In her philosophy on teaching, she wrote, ‘Teaching is my life.  I have been given one talent to use.  This talent has made it possible for me to teach many children music.  I believe in music as an exalter of the human spirit, as a life-giving force in education.   My challenge is to lead students into genuine and permanent love and understanding of beautiful music.   I believe if a teacher is to be successful, one must grow as one works.  One must be enthusiastic and untiring in efforts to get the work done.   Constant planning, working, evaluating, examining of materials and teaching procedures must be made.  For me, teaching is exciting.   It is an obsession, but a magnificent obsession.’”

There is nothing I could possibly add to those sentiments.

Monday, July 27, 2015

Start Now to Build Interest

Final Invitation:   If you are attending the annual meeting of the American Accounting Association this summer in Chicago, I will be participating in two different panel presentations on teaching on Monday, August 10.  One is at 2 p.m. and the other is at 4 p.m.   I would love to have everyone there as several of us chat about the challenges of becoming a better classroom teacher.  I think both presentations will be great fun.   I will be around for the entire conference so don’t hesitate to grab me if you have a question or a suggestion.

Please send an email to Jhoyle@richmond.edu if you would like for me to alert you whenever I post a new essay on this blog.

If you have read my blog over the years, you already know that I believe communication between teacher and student is one of the most important aspects of good teaching.   You can increase both student enthusiasm and comprehension by careful communication.   You can avoid unnecessary battles and you can get your students ready for the coming semester before they even see your face.

I want my students to be convinced before they walk in on the first day that my class is a serious one but one that has great rewards.   If students are not convinced of the rewards, it is hard for them to put in the work that is necessary for success.

Here is the bigger part of an email that I just sent to my 46 students who are signed up for my Introduction to Financial Accounting course in the fall.   (I left out here some mundane class information about textbooks and the like.)   Read what I wrote to my students (almost all of whom are sophomores along with a few freshmen).   What am I trying to accomplish?   Figure it out and then do something similar yourself.

July 27, 2015

To:   Accounting 201 Students (for Fall Semester)

From:   JH

Back on April 23, I emailed you (and, for those of you who added the class after that date, I have already forwarded you a copy of that initial email).   In that email, I indicated that I would start sending you information about the class around August 1.    Since our first class is just four weeks from today (and since I just arrived home from Alaska), this is probably a good time to get started.   I will email you a few more emails over the next couple of days to help get us all ready for 8/24.

My goal in these emails is simple.   I want you to walk into class on the first day with some interest and enthusiasm.   I ask relatively little from you:   3-5 hours of work each week outside of class, some interest, and some enthusiasm.   That’s it.  You do that and I’ll make sure you have an absolutely great semester.   On the last day of class (December 4), I want you to walk out of the classroom and say “I never knew I could think so deeply.   I never knew I could learn so much.   I never knew I could work so hard.   And, it really was fun.”   Nothing would please me more than for you to say that this is the best college class you’ve ever taken.   If we work together, that’s a goal we can achieve.

For me, that’s what every college class should feel like.   In even simpler terms, I want to help you grow significantly over our next few months together.   And, surely, that is a goal that you would love to achieve.  This is your education.   The only person who is going to benefit from this work is YOU.   In most cases, college is your last formal education and will have to do you for the rest of your life.   Try to make every class a great experience.   Don’t be laid back.   Get excited about all that knowledge you can cram into your head.   You never know what might become very useful later on in life.   I like students who are excited about their own learning.   I am always put off by students who claim with some pride “I already know everything I am ever going to need to know for the rest of my life.   No thanks.   I really don’t need any more knowledge at all for the next 80 years.   It is just not worth my effort.”  Well, la de da.  

Okay, here is the real reason for this email.   I want to introduce you to Financial Accounting.   You’ll do better in four weeks if this introduction bounces around in your head a little in the meantime.

Let’s assume that a rich aunt leaves you $25,000 in her will with the stipulation that you must invest the money in the ownership shares of one business.   With that purchase, you will become one of the owners of the business you choose.   After three years, you can sell these shares of stock and you then get to keep all the money.   So, you are really in favor of making a good decision that will grow in value. 

You consume a lot of soft drinks so you decide to study two well-known companies:   The Coca-Cola Company and Pepsico.   You could buy ownership shares on the New York Stock Exchange of one or of the other and, hopefully, in three years they will have gone up in value so that they will be worth a lot more than $25,000.   We will discuss all of this stuff a lot more in detail over the first couple of weeks of class.   At present, I just want to give you a feel for Financial Accounting.  Information without a test.

You could make the decision about which company to invest in based on taste (“I like Coke better than Pepsi so I’ll buy shares of Coke”) or based on the color of the can (“Love those Pepsi cans so I’ll buy shares of Pepsi.”) or based on their television ads (“I laugh at those Coke polar bears so I should buy shares of Coca-Cola.”).   Probably not surprisingly, few very successful investors (the Warren Buffetts of the world) pay much attention to taste or the color of a can when investing big chunks of their own money.   So, what do they look at to help them make those decisions?

As my Financial Accounting textbook will tell you, this course is all about conveying understandable financial information so that decision-makers can make good decisions about an organization (most likely a business organization, in our Accounting 201 course).    Conveying understandable information.   Yes, it does sound very much like a language.

For example, if I tell you that your cousin just won $1 million in the lottery, then you can probably anticipate that your cousin is going to be much more prosperous in the future.   Why?   Easy – you know what the words “your” “cousin” “just” “won” “$1 million” “in the lottery” mean.  The information has been conveyed successfully from my head into your head through those words.  I said these words to you and you understood them and could then use that knowledge to make good decisions.  Success!!

Notice that this information is called “financial” information because it is stated in terms of money (“$1 million”).

But, here, you don’t care about your cousin.   You are trying to decide what to do with the $25,000 your aunt left you.   Should you invest in Coca-Cola or in PepsiCo?   We could look at this in a couple of ways.

a.   You could ask questions about each of the two companies and then compare the results:   “which company has the most debt?” or “each company is holding a lot of bottles of soft drink, waiting for them to be sold.   How much has the company spent on those soft drinks being held?”  or “how much cash does the company have and where did the company get all of that cash?”   If you are the curious type (my favorite type of student), there are probably an infinite number of questions like these that you could ask with the answers helping you gain the knowledge needed for a wise decision—which company is the best one for you invest your money in.

The purpose of this course is to make sure you know what information is available and what that information means.

b.  You could also examine the information that is made available by the company and decide which company looks better and has the brighter future.   For example, I just looked up The Coca-Cola Company through Google and found out that, on December 31, 2014, the company had accounts receivable with a net realizable value of $4.466 billion.   What in the world does that mean?

Well, as we will find out in a few weeks, that is actually a very easy question to answer once you know the rules that underlie financial accounting.   Knowing the rules helps you understand the information.

Is that important?   Is that interesting?   Is that helpful?   I certainly think so.  It is the type of information that everyone in the business world already knows.   You cannot compete with them without a basic level of knowledge to help you make wise decisions.   Unless you are going to live on a desert island for the rest of your life, then, yes, this is very helpful, important, and (I think) interesting information.  

In many ways, this course is teaching you a new language.   It is like learning Spanish except here no one worries about how you pronounce the words.  

I tell people that I speak three languages:   English, Southern, and Accounting.   I can convey information and understand information in all three.   I think that is a great skill to have and that is what you and I together are going to explore starting in just four weeks.

Okay, let all of that float around in your mind for a couple of days.   I am trying to plant the seeds that we will raise up during the first couple of our class meetings starting on 8/24.

Monday, July 6, 2015


Repeat of My Earlier Invitation:   If you are attending the annual meeting of the American Accounting Association this summer in Chicago, I will be participating in two different panel presentations on teaching on Monday, August 10.  One is at 2 p.m. and the other is at 4 p.m.   I would love to have you there as several of us chat about the challenges of becoming a better classroom teacher.  If you are interested, grab me after the panel presentations and we can continue the discussion.  


I have written several times over the years about my basic distrust of student evaluations.   Based on the ones that I have seen, here are some of my issues:

(1) – Students are not encouraged to spend enough serious time considering the questions and their responses.   Some students clearly give an appropriate amount of thought and make helpful observations.   Many students appear to dash off their opinions as if they were late for dinner.   “Good guy” doesn’t really provide much helpful feedback.
(2) – It is easy for too much of the evaluation process to be based on mathematical numbers that are hard to interpret.   If I go from 4.28 on a specific question in the fall to a 4.21 in the spring, does that mean I am getting worse or maybe just more demanding?
(3) – A teacher’s popularity has some impact on evaluations.  I am not interested in popularity.   I am interested in how well the person motivates and guides students to learn.  
(4) – Most of the evaluations that I have seen have so many questions that I think the individual questions quickly lose their impact.   I do not think a lot of students have the inclination (and possibly the ability) to draw fine distinctions between various aspects of teaching over a long range of questions.  It always interests me as to how many students give the same numerical grade to a teacher on virtually every question.
(5) – The evaluations that catch people’s attention are the outliers, the ones where the students either love you or hate you.   Those people have strong opinions that can receive too much weight when judging the quality of the education.   It is easy to ignore the feelings of the great mass of students in the middle whose opinions—although just as valid—are often more muted.
(6) – Evaluations really have two purposes and I think that duality causes a problem.   Student evaluations are supposed to help provide feedback to the teacher so that he or she can improve in the future.   That seems reasonable.   In those cases, the teacher should want to hear the bitter truth so that changes and improvements can be made.   However, evaluations are also used by administrators who must make salary, tenure, and promotion decisions.   Then, the professor wants every response to be as positive as possible.  

Okay, it is easy to be critical but how would I do student evaluations differently if I were suddenly made king?   Here are some of my thoughts on the topic.   I believe this is a conversation that we should be having.   My ideas clearly have some practical flaws but, at least, they are a start toward doing something more creative.

I would view student feedback for a teacher as a separate goal distinct from student evaluations used by administrators.   I think you always create a problem when you try to kill those two birds with that one stone.

As I have written in the past (see, for example, my blog posting titled “Congratulations!!” on May 2, 2012), at the end of every semester, I email each student who makes the grade of an A in any of my courses to let them know of their success.   That is a true pleasure.   I pass along appropriate congratulations.   For me, that pat on the back is important—those students did the work and made the grade.   The final grade should not be an anonymous reward.   They deserve a word of praise.   Then, I ask those same students to write a paragraph on how they went about making that grade of A.   I eventually accumulate all those responses and pass them along to the next class to serve as guidance.   I want each new group to understand, right from the beginning, how to succeed in my class.  

Beyond that, those essays provide me with a peek inside the workings of my class.   What do students of mine have to do to earn an A?   How much time must they spend?   Where do they need to invest their energy?   What types of activities and learning strategies proved to be beneficial?   You cannot ask a C student what it takes to make an A because they obviously don’t know (or don’t choose to pursue that goal) but you can ask an A student what it takes to make an A.   I read each of those essays very carefully—often many times.   I try to figure out what I like about the answers and what I don’t like.  

If one of my main teaching goals is for every student to earn an A then I want to know what it takes to reach that achievement.   If one of those students talks about working just 30 minutes per week and still gets an A, I need to consider making the course more demanding.   If a student talks about making an A without ever reading the textbook, I should think about whether that is consistent with my educational goals.  

I want every student to make an A.  I am interested in what it takes to achieve that mark.   That is feedback that I have found very helpful over the years in assisting me in the evolution of my teaching.  Each semester, I read numerous essays that basically say “here is what it takes to be a successful student in Professor Hoyle’s class.”   Am I happy with what I hear or do changes need to be made? 

However, that does not provide adequate information for administrative decisions that must be made.   So, if I were king, I would also have a formal student evaluation process.   I would give every student in every class one assignment at the end of each semester.   I would ask them to turn in those responses directly to the school’s administration.  

The one assignment for the student evaluation would simply be:   “Please discuss this course and this teacher as to how much they have helped to improve your critical thinking skills during this past semester.   Please give as many specific examples as possible.”   Okay, there might be a few exceptions such as a studio arts class or a basic language class but I believe the underlying goal of a vast majority of college courses should be the development of critical thinking skills.   The student evaluation would start with a formal definition of what the school means by critical thinking skills and then make the assignment.   This approach addresses the central issue in the educational process in college. 

If a teacher can help a student develop his or her critical thinking skills, then I believe most everything else will take care of itself.   That is certainly my number one goal in both my financial accounting and intermediate accounting classes.  

Administrators get the information they need for salary decisions and the like by studying these responses.   Read 75 student essays on whether a teacher helps develop critical thinking skills and you (or anyone else) will have a good understanding of the teacher’s success.   It is not about popularity.   It is not about entertainment.   It is not about numbers that have a questionable meaning.   The student is the one who benefits from the class.   When it comes to critical thinking skills, what development did that student experience?   And, of course, they need to give as many specific examples as possible.

Okay, one immediate question is going to be:   How will the administrators be able to use this information?   Here is what I would suggest.    First, I think that at most schools about 20 percent of the teachers are excellent, about 60 percent of the teachers are average, and about 20 percent of the teachers are poor.  That is just my perception based on what I’ve seen over the past 44 years.   You can easily change those percentages if you wish (possibly 25:50:25 or 30:40:30) but, unless you teach in Lake Wobegon, please don’t tell me that all of your teachers are above average.   That is nonsense.   A few teachers are excellent, a few teachers are poor, the vast majority of teachers are average.

The administrator reads all of these essays and judges the faculty member to be Excellent (let’s say 20 percent), Average (60 percent), or Poor (the final 20 percent).  We could argue about this but I imagine 80-90 percent of the faculty will fall into one of those three groups fairly easily. 

After making this judgment, the administrator writes up an evaluation for each faculty member.

For the teachers in the Excellent group, the administrator congratulates the faculty member and describes why this person qualified for the top group.  The administrator also points out any possible improvements that were noted.   “Excellent” is different than “Perfect.”   Improvements are always possible.

For the teachers in the Average group, the administrator describes why that decision was made, pointing up both the good and bad areas that seemed to be mentioned most often by students.   Then, the administrator makes as many suggestions as possible on future efforts that might move the teacher from the Average group to the Excellent group.   That is the one fundamental goal.   That should always be discussed:   How can the teacher move up into the next highest level?

For the teachers in the Poor group, the process is much the same.   First, why was the evaluation made in this way?   Second, what needs to be done to move into the Average group?   The process should always be based on describing (1) what the evaluations indicated and (2) how the teacher can get better.

Two evaluations:
Student feedback to teacher:   How did you make that A?
Student feedback for teacher evaluations:   Please discuss this course and this teacher as to how much they have helped to improve your critical thinking skills this semester.

Would that really work better than the system we have?   I honestly do not know but I do think it is time to have that conversation and start experimenting to see if better evaluations are even possible.   I just think, for the systems I have seen, improvement is needed.

Wednesday, June 10, 2015

Teaching Critical Thinking by Studying Research and Development Costs

Invitation:   If you are attending the annual meeting of the American Accounting Association this summer in Chicago, I am participating in two separate panel presentations on teaching on Monday, August 10.  I would love to have you there as several of us chat about the challenges of becoming a better classroom teacher.  To me, that seems like a topic that could produce hours of fascinating conversation.   Grab me after the panel presentations conclude and we can continue the discussion.  
In almost every entry written over the years for this blog, I have addressed topics that I felt were of interest to all college teachers.   Struggles with student preparation, testing, class participation, and the like probably apply to everyone who enters a classroom each day to encourage and enlighten college students.   History teachers, English teachers, science teachers, accounting teachers and all the rest face similar issues as they attempt to broaden the perspective and deepen the knowledge of their students.

However, today’s essay is almost exclusively intended for people who teach accounting.   It is the topic I know the best.   One of the traditional goals of a college education is the development of each student’s critical thinking skills.   Unfortunately, too much of current education focuses on memorization.   In the age of Google, the importance of memorization has faded dramatically.   In colleges, we face the ongoing challenge of moving students away from memorization and toward the development of critical thinking. 

In this blog entry, I want to explain a short exercise that I use each semester to help students make this transition.  

The reporting of research and development costs provides an excellent topic for the discussion of the theoretical structure that underlies official accounting rules because the handling mandated by US GAAP is unambiguous.   As most accounting students learn rather quickly, US GAAP requires virtually all research and development costs to be recorded as expenses when incurred.   Memorization of these few words requires only a few seconds.  Students are likely to feel a sense of euphoria because they have managed to “understand” an important accounting rule.   However, memorization and critical thinking are two different skills.  

The purpose of this class assignment is to encourage students to go beyond the simple memorization of a basic rule.   I want to guide them through the analysis necessary to understand the logic that led to the rule’s designation as “generally accepted” along with the implications of that decision.   By developing a deeper level of understanding, students will be better able to evaluate how other similar types of costs might be handled.    

Here is the assignment that I distribute to the students 48 hours prior to our class discussion which usually takes place near the midpoint of the semester. 

“A pharmaceutical company develops, manufactures, and sells drugs created to cure a wide variety of human health problems.   Company officials are constantly searching for new medicines that can be produced and sold to the public.   Such additions to the approved product line are essential to the ongoing prosperity of all companies in this industry.   Historically, an average of $10 million in revenue is generated from each new medicine that is brought to the market successfully.   Products that fail to reach the market earn no revenue.   Over the previous 8-10 years, the company has been successful in bringing one product to the market for every three projects undertaken.  This average is consistent with the industry as a whole.

“At the start of the current year, the company began working on three potential new products.   Each is being put through the normal testing process which takes 1 to 4 years to complete.   By the end of the year, the company has incurred $1 million in research and development costs in connection with each of these three projects.   Financial statements are to be produced.   Company officials evaluate the likelihood of eventual success for each.   They believe that Project A has a 90 percent chance of being brought to the market, Project B has a 60 percent chance, and Project C has a 30 percent chance.   Officials know that a total of $3 million in research and development costs have been incurred to date.   They expect at least one of these projects to attain success, an event that should bring in future revenue of $10 million.   They are now seeking guidance on the reporting of the $3 million in research and development costs.

“I am not interested at this time in what US GAAP requires for this cost.   Instead, assume you are named ‘Leader of US GAAP,’ a title that makes you the one person in the world responsible for deciding how to account for this $3 million.   First, come up with as many alternative reporting possibilities as you can imagine.   Second, evaluate each of these options and select the one that makes the most sense to you.  Explain why you believe this particular choice should be the required reporting within US GAAP.

“As just a hint, start this exercise by defining the word ‘asset.’”  

In class, I begin our discussion by asking the students whether the problem seems realistic.  I want them to feel that this is a typical situation for company officials to face in the world of business and not an issue contrived for a college class.  Analysis and learning go best when students believe they are dealing with a problem they could encounter after graduation.  If any part of the assignment is thought to be artificial or unreasonable, its inclusion should be discussed and understood before we grapple with the overall accounting issues.  Here, I do not expect students to object to any of the factors that were included.   The situation was created to be realistic.

Students often want to identify the appropriate treatment required by US GAAP.   Hands fly up to provide that answer.   It is the one possible handling of the $3 million cost that they know for certain.   It is spelled out in the textbook.   I refer to this response as a “no-risk answer” because it cannot be incorrect.   However, simply parroting what FASB has mandated does not help develop a student’s critical thinking skills.  For that reason, I forbid them from listing “expense all $3 million” until after every viable alternative has been identified.   In learning accounting beyond memorization, students need to consider all possibilities and not be distracted by current US GAAP.

I continue the class conversation by asking a student to provide the definition of “asset.”  By this point in the semester, they should all have a working knowledge of the definition:  A probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events.

I next ask why any company chooses to spend $3 million on research and development costs.   Whether Google, Apple, or a pharmaceutical company, this is not a random action.  The obvious answer is that officials expect to create one or more new products that can be brought to market successfully to generate additional revenue of sufficiently more than $3 million in order to compensate for the risk.  

Then, I ask if the probable economic benefit to be derived from the $3 million expenditure is in the past or in the future:   Based on industry averages and the company’s own historical evidence (and the individual evaluations of the three projects in-process), all benefit are expected in the future when one or more of the projects is added to the market.   At this point, none of the three projects has yet generated any revenue.

That leads the students to the essential class question:  How could a company report this $3 million in research and development costs if not restricted by the rules of US GAAP?   Students usually list a number of possibilities without much prompting.

•           The $3 million is reported as an asset because the entire amount is spent with reasonable hopes of generating expected future revenue of at least $10 million.  It is a normal and necessary cost that is expected to lead to a probable future economic benefit.   Available information shows a high likelihood that sufficient revenue will be earned to more than cover the costs incurred to date.  All revenue from these projects will be earned in the future.  Therefore, expense recognition should be deferred until that same future time period.
•           Of the total cost, $2 million is reported as an asset because two projects have greater than a 50 percent likelihood of success whereas the other $1 million is an expense because the final project is thought to have less than a 50 percent chance of success.  Reporting here is based on what is most likely to happen.   Financial statements are created to reflect reality and this is reality.  
•           Of the total cost, $1 million is capitalized as an asset because the company traditionally has been successful on one out of every three projects.   The remaining $2 million is an expense.   This reporting is based on historical evidence which is a common approach in many areas of financial reporting such as the recognition of bad debt expense, sales returns, and depreciation.
•           Of the total cost, $1.8 million is reported as an asset based on a weighted-average determination of the likelihood of success:  90 percent, 60 percent, and 30 percent.  The individual chances of success are included for every project.  The other $1.2 million cost is an expense.
•           And, finally, the entire $3 million is reported as an expense because of the inherent uncertainty of anticipating eventual success in research and development projects.

At this point, critical thinking starts to play a role in the conversation.   Students are asked to select and justify the alternative that makes the most sense to them and, therefore, should be required by US GAAP.  Based on their understanding of the financial reporting process, which alternative is the fairest reflection of the operations and financial condition of the pharmaceutical company?

Student responses vary from class to class but common arguments usually include the following.
                     A popular choice is to capitalize the $3 million as an asset.  Students reason that the entire expenditure is a normal and necessary cost of creating new products to generate revenue.  For a pharmaceutical company, research for and development of new medicines is a required step in maintaining the company’s future.  If officials did not anticipate earning revenue of more than $3 million, they would never have spent this money.   No evidence appears to indicate that the company will fail to recoup its investment.  Therefore, the entire amount is a required sacrifice necessary to develop new products for the market.  
                     Another likely choice is reporting an asset of $2 million with the remaining $1 million shown as an expense.   In judging whether a probable future economic benefit exists, a likelihood of success in excess of 50 percent is compelling.   The first two projects are more likely than not to produce revenue in excess of the cost that has been incurred.   They meet the criterion for asset recognition whereas the third project does not.
                     Some students argue (often vehemently) that capitalizing $1 million is the best reflection of probable future economic benefit with the remaining $2 million recorded as an expense.   The $1 million cost should be recognized as an asset because verifiable historical evidence indicates that, on the average, one in three projects proves successful.  Students like having evidence as proof to under-gird the financial reporting.
                     Other students support a weighted-average approach that leads to a capitalized cost of $1.8 million and an expense of $1.2 million.  They believe that all potential products should be included in the computation of the probable future economic benefit.   A 90 percent chance of success simply means that more cost is capitalized than if the chance of success is only 30 percent.
                     A few students advocate for what I refer to as the “super conservative” approach and expense the entire $3.0 million immediately.   When in doubt, accountants take the approach that makes the company look poorest as a way to shelter outside decision-makers from being overly optimistic.

At the end of the debate, we always take a class vote so we can make a selection.   Recording all costs as an expense as incurred—the approach mandated by US GAAP for more than 40 years—usually receives the least amount of support.   Once alternatives have been considered, automatically expensing costs that are freely spent to arrive at new products likely to generate significant amounts of revenue seems questionable.   Students can memorize the approved method of reporting but that does not mean they understand or agree with it.

After considering the problems with immediately recording research and development costs as expenses, the class is asked two questions to stimulate further discussion:   Did FASB make a theoretical mistake when it passed this authoritative standard?   Were the members of the board just not as smart as a bunch of college freshmen?

Students realize that a logical reason must exist for this handling of research and development costs.  Although a different approach might seem better, FASB will not require a rule that does not exhibit sufficient theoretical merit.   Students are then challenged (often working in teams of two or three) to come up with possible justifications for the Board’s decision.  Here again, their critical thinking skills are called on but, this time, to unravel the logic of the authoritative approach.   With a bit of thought, students usually propose several reasons why recording virtually all research and development costs as an expense is most appropriate.   Their primary suggestions usually include the following.

•           As mentioned, recording all costs as an expense is a conservative approach.   Students have often heard that financial accounting is conservative in nature.  The official reporting of research and development costs fits with that stereotype.   However, this rationale usually does not gain overwhelming support from students because, in studying other topics such as contingencies and bad debts, they have come to realize that financial accounting is not obsessively conservative.    For example, contingent losses are not recognized at all until they become both probable and subject to reasonable estimation.   Potential losses are disclosed (or omitted) rather than recognized if they fail to meet these criteria.   That is different from reporting virtually all research and development costs as expenses (rather than assets) when incurred.    Conservatism might influence this handling but it does not seem to be a sufficient justification.
•           Uncertainty is an inherent problem in all research and development activities.  Students often ask how reliable any estimate of future success can be in such cases as these.  To say that the success of a specific research and development project is 90 percent likely or 30 percent likely might not be considered a reasonable estimate.   Are such figures legitimate judgments or merely wild guesses?   Even if 1/3 of all projects in the past have proven successful, does that necessarily indicate the likely outcome of the current work?   Does a valid connection exist between success on past projects and success in the future for such projects?
•           Manipulation of the reported figures is possible.   Even first-year students quickly realize that assessments of the possible success of a research and development project can be raised or lowered arbitrarily to improve a company’s reported figures.  To illustrate, I typically describe the following hypothetical situation:   “Assume that a company is allowed to capitalize all research and development costs for projects that are more than 50 percent likely to be successful.   The company spends $1 million on a project where future success is judged to be 49 percent likely.   Shortly before financial statements are to be prepared, company officials raise this estimate to 51 percent.   How large is the actual change being made and how large is the reported change in net income?”   A seemingly insignificant 2 percent increase in the possibility of success creates an immediate $1 million jump in reported net income.   Students realize that the possibility of such manipulations must be avoided if decision-makers are to have confidence in reported figures.

Through these discussions, students start to gain an appreciation for the rule-setting process and how specific standards impact a reporting entity’s financial appearance.   While considering the mandated rule, a basic question can be considered:   What do decision-makers really want to know about a company’s research and development activities?   As a basis for this discussion, students are asked to search the Internet for the research and development balances most recently reported by both Apple and Google.  

Within a matter of minutes, students have discovered that Apple’s statement of operations for the year ending September 27, 2014, reports research and development as an expense of $6.041 billion.  They also learn that Google’s statement of income for the year ending December 31, 2014, reports research and development as an expense of $9.832 billion.   Apple’s research and development is approximately 3.3 percent of the company’s net sales number whereas Google’s research and development is 14.9 percent of its reported revenue number.  

Students are asked several key questions.
•           Is this information hard to locate?
•           How understandable is the research and development figures reported by these two companies?   Is a decision-maker forced to consult the notes to the financial statements to gain a clearer explanation?
•           What do decision-makers now know about these two companies?

Students have little trouble answering these questions.   Information for each company is evident on the face of the income statement.  Because virtually all research and development costs are put to expense as incurred, decision-makers should not be confused by the available figures.   With an adequate knowledge of US GAAP, they will understand the meaning of each reported number.  They know the amount that these two companies spent on research and development activities during the reporting period.   No estimations of success were involved.   No uncertainty exists.  No manipulation is likely.  

That is likely why this rule has remained a part of US GAAP for over four decades:  It meets the needs of financial statement users.  Many decision makers are wary of guesses made about success.   Instead, they are interested in knowing the portion of a company’s financial resources that company officials chose to invest in research and development activities.   Because of the requirement of US GAAP, this amount is easy to ascertain and also to compare between companies.

My students often decide that the best justification for recording virtually all research and development costs as expenses is that this approach provides users of financial statements with the information they desire.  Judging a company’s research and development activities based on each new product’s chance for success is too uncertain and open to manipulation.   Reporting the amount of financial resources allocated to this essential activity is less problematic and allows for immediate and valid comparisons to be drawn between companies such as Apple and Google.  

As class conversation comes to a close, students can be warned that most accounting rules come with their own inherent limitations.  That is another important part of the learning process.   Transactions and other financial events are often complicated.   Accounting standards rarely provide perfect answers.  For example, any company that spends significant amounts of money on research and development is likely to report a balance sheet that undervalues its total assets by a considerable amount when US GAAP is applied.  Pharmaceutical companies, technology companies and the like control scores of valuable patents that represent significant probable future economic benefits.   However, virtually all of the research and development costs spent by the company to create these products are omitted from related asset balances.   Those costs were expensed as incurred and never capitalized.   Consequently, reported asset figures found on the balance sheet are likely to be out of line with any reasonable approximation of actual value. 

I usually end this discussion of the balance sheet by reminding students that the auditor’s report does not state that financial statements are presented fairly.  No one ever makes that claim.  Instead, if unmodified, the report specifies that the statements are presented fairly in conformity with US generally accepted accounting principles.   For research and development activities, US GAAP requires that virtually all such costs are expensed when incurred so that the capitalized cost reported for valuable patents and other legal rights will frequently be less than fair value.   However, the financial information is still being presented fairly in conformity with US GAAP.   And, hopefully, that provides decision makers with information they actually want.

For more advanced classes, this entire discussion can be extended into a deeper analysis in a couple of ways.  
•           Students can be asked to compare IFRS reporting of research and development costs with that of US GAAP.  This discussion requires an additional explanation of research costs as separate from development costs but that distinction is not especially complicated.   As one possible approach, students can be divided into two teams to argue in favor of the US GAAP handling or in favor of the IFRS handling of these costs.   Such evaluations are also essential steps in the development of critical thinking skills.  
•           Students can be asked to consider the proper reporting process when one company buys another that currently has research and development activities in process.   That is a common occurrence.   A portion of the cost of the acquisition is allocated to the research and development activity.   The acquiring company is paying for the results of the work done to date.   Is this amount of the acquisition price appropriately reported as a capitalized asset or as a research and development expense?

The discussion of accounting for research and development can be used at the introductory level or expanded for use in upper-level courses.   In either case, students are asked to do more than simply memorize a mandated accounting rule.   They come up with alternatives and discuss the reasons why a particular method might be the best possible presentation.  They finish up by looking at related problems that arise from the approach required by US GAAP.