they will be exposed to the secret knowledge held bynfinancial executives, and may perhaps learn how to speakntheir language and move up the corporate ladder. It meansnthat they will know what is meant by jargon with which theynpreviously felt uncomfortable. They may learn to use suchnjargon to ensure that their opinions and proposals arenseriously received. In addition to in-house courses innfinancial management, many adult education programs inncolleges and universities offer such courses, and they areninvariably well attended. Sometimes companies pay theirnemployees’ tuition to encourage attendance. Books on thensubject sell well.nOne of the consequences of bottom line emphasis withinncommercial life is that the influence of business andnfinancial managers within companies has been enhanced atnthe expense of individuals directly responsible for innovationsnin product development and marketing. The numbernof chief executives with financial backgrounds, always a highnpercentage, has increased. Within companies, financialnexecutives have found a much broader range of people whonshare viewpoints. It may not have been their intent, butnthese financial courses have tended to develop new constituenciesnwithin the company, which are more amenable tonfinancial approaches to operational decision-making. Executivesnwho were limited to technical management of companynassets, who were confined to recommending action onnsuch matters as long-term financing, capital budgeting,ndividends, and valuation, and whose authority was confinednto staff and service roles, or to advising the president at best,nhave become increasingly involved in nitty-gritty aspects ofnthe firm. Education works both ways. Management maynhave intended that nonfinancial managers would absorbnfinancial thinking as it relates to their decisions aboutninvestment of capital, but they found that financial managersnalso learned about operational roles, and many felt that theyncould do it better. Because many if not all of the decisionsnmade by operating people (or, in some industries, creativenpeople) have financial consequences, many financial managersnbegan to seek more control over these decisions. Theyngenuinely believed that unnecessary mistakes were beingnmade. But the consequence was that the pressure to justifynoperational and creative decisions in financial terms increased,nand with it the influence of financial executivesnwithin companies.nA generally conservative trend was set in motion. Thensmall scale investment decision had been an area in whichnfinancial people had not really participated. This began tonchange as emphasis on financial management of resourcesnbecame the norm within companies. People began to thinknthrough decisions that would have been made on the basis ofninstinct, “feel,” or knowledge of the market and to anticipatendemands for financial “proof” of the correctness of even thenmost obvious decisions. Analysis began to displace gutnfeeling and unwarranted time and effort began to be spentnon projecting alternative results of even small scale investmentndecisions. Sometimes figuring out how to present an”gut feeling” decision in financial terms became a difficultnundertaking. Decision-making was slowed as entrepreneurialninitiatives dwindled.nThere is an inherent risk in “shoot from the hip”ndecision-making. The risk of excessive control is less self-n28/CHRONICLESnnnevident. The most obvious consequence of an ovedyncontrolled environment is that a large part of the energies ofnthe productive elements in a firm becomes focused onnnonproductive activity, which is what financial justificationnof creative decisions is. Productivity is curtailed. Thenmarginal improvement in decision-making may not warrantnthe effort expended. In the latter part of the 1980’s, thesenconsequences inspired efforts to restore innovation andnproductivity to American business.nSome businesses have conventionally relied on humanninstinct and creativity, supported by after the fact formalnanalysis. Nonessential goods and services, in particular, havenbeen a refuge for such creative types. The fashion industry,nthe cosmetics industry, books, records, and films all come tonmind as examples of such “glamour industries.” At theirnbest, an unfettered creative impulse can be almost miraculouslynat one with the whims of the buying public. It is likelynthat emphasis on the bottom line has little place in industriesnsuch as these. How do you project and quantify humannjudgment in matters of taste? What makes a “hit”? Can thensuccess of a design or a recording group be predicted?nPeople in the mass market paperback business will tell younthat in budgeting, they “assume” that they will have at leastnone winner among the numerous titles they publish.nOtherwise they couldn’t justify their budgets. Should this bencounted on? Is this “bottom line” thinking?nBottom line emphasis breeds caution and homogenizationnin decision-making: safe decisions rather than exciting,ndangerous, but potentially more profitable ones. Emphasizingnthe need to prove out the level of risk, the game isnmechanized. As a result, it is probably true that fewer errorsnare made. It is also probably true that fewer unexpectednsuccesses occur. The key word here is unanticipated, as thencode word of major companies became “no surprises” eithernon the positive or the negative side. With the emphasis onndeveloping the ability to predict and control income growthncame gray and unsurprising results.nWhether or not this trend has been wholly unfortunatenis open to question. But certainly there is misunderstandingnof the operational consequences of the termn”bottom line” — not necessarily a misunderstanding amongntop management, but among line managers who are in thenend responsible for the decisions that ultimately comprisenwhatever is the bottom line. As any good financial analystnwill admit, there are many bottom lines. There are nonuniversally agreed upon notions of success and failure. Innstrict financial terms, management may choose to emphasizenprofit related to sales (which is what most people innbusiness think is meant by the bottom line). But managementnmay decide to emphasize gross profit margin, profitnbefore allocations, or net profit margin as the bottom linenmeasure. Management may also emphasize the relationshipnof profit to investment, focusing on the rate of return onnassets, either pre- or post-taxes. Management may elect tonmeasure the efficiency with which a firm uses its resourcesnby measuring turnover or earning power. There are manynstandard financial ratios by which top management maynelect to measure its financial progress. “The goal remains thensame: maximizing the firm’s assets. That is the real bottomnline. The investment decision is an important component ofn