The first day starts with a warning.
“Welcome to FORAD,” Thunderbird Professor Michael Moffett, Ph.D., tells his students. “I want you to know that you don’t have to be here. If you can’t put the time into this course, or if you are unsure in any way whether you want to be here, I want you to drop today. Your team cannot afford to have you quit on them.”
This is Multinational Corporate Finance, a capstone practicum that has tormented Thunderbird students for nearly three decades. “It’s a three-credit course that feels more like six credits of work,” says Moffett, who has been leading the program for more than 15 years. “FORAD is a job.”
At the heart of the curriculum is the FORAD simulation, a game that puts teams of students in charge of their own multinational companies. Over the course of a trimester, each team must make decisions on how to run its hypothetical company.
Players must decide on operations: Production quantity, pricing and the interplay between U.S. headquarters and subsidiaries in Germany and Japan. Then players must determine how to finance their operations. Among key decisions: Whether or not to raise or lower debt, raise or sell equity, transfer funds from the subsidiaries to the holding company and in what currency, and whether or not to hedge.
Teams must submit weekly decisions that represent a 90-day period, one fiscal quarter, in the life of their companies. Moffett then runs the simulation and posts results on the board at the Pub. The company with the highest stock price wins.
But it’s still not over. Teams then must complete detailed annual reports and then defend their actions before a panel of alumni and finance faculty. These are the feared Defenses. Overall, the exercise represents about one-third of the FORAD experience.
Different professors — including Brian Heathcotte, Ph.D., James Mills, Ph.D., and Dale Vor der Landwehr, Ph.D. — have made their mark on the program over the years. New textbooks and other components also have been added, but one thing has remained the same: The FORAD simulation.
Through fall 2011, the basic software remained unchanged from when Thunderbird first licensed it from Professor Lee Remmers of INSEAD in 1982. It ran on MS-DOS with bright Arial fonts on a colored screen with little mouse functionality and no windows.
“It was old when we first used it in ’95,” said FORAD survivor Bruce Edlund ’96, who now works in corporate treasury for Wal-Mart in Bentonville, Arkansas, and returns to Thunderbird twice a year to judge defenses. “When the professor first shows you the model in class and gives you the workbook explaining how to use this program, you can barely believe it.”
In an age when students can trade stocks and manage their bank accounts from their phones, the software might have appeared primitive at best, but it worked … most of the time.
“When you introduce a simulation like this, you give up the ability to really control what happens in your class,” Moffett says. “What happens if it crashes? I’ve been on the phone to Paris at 3 a.m., trying to troubleshoot with (the creator of the simulation) what is going on with the model. I have been really close to just about giving up.”
Updated operating software — specifically Windows Vista and Windows 7 — have made running the simulation even more difficult. But finding an alternative was not an option.
Other financial simulations on the market do not come close to testing the complexities of managing different currencies and financing an international enterprise with as much detail. And no one, including the INSEAD professor who developed the software, was ready to put in the work to upgrade the simulation.
Moffett knew the time had come for someone else to take over the program. Five years ago, after judging another round of defenses, he pulled Edlund aside. “I don’t know what we’re going to do about this model,” he said. “It’s not very reliable. I don’t know how long it’s going to work.”
When Edlund got on the plane to return to home, he started programming. “I guess it’s just in my blood,” he says.
For the next five years in his free time, and for no compensation, Edlund has been building the next generation of the FORAD simulation. From nearly the beginning, he has relied on the experience of alumna Veselina Dinova ’05 to help test and troubleshoot different iterations of the model.
Dinova, a native of Bulgaria who now works in corporate treasury for Yahoo! in Sunnyvale, California, is an equally supportive FORAD advocate. In addition to helping Edlund create the new model, both return to campus twice a year, every year, to help judge defenses. She takes vacation days, travels with her calculator and goes through huge stacks of biennial reports in an effort to give back to the class and the school that changed her life.
“I really appreciated all of the things I learned in FORAD, and as an alumna I want to be able to give back,” Dinova says. “I absolutely love the class, and think it is unique at Thunderbird. Even though I come back here as an expert to judge these defenses, I feel like I continue learning.”
A Thunderbird curriculum without the FORAD simulation is unthinkable to Edlund and Dinova, who both were part of winning FORAD teams in their respective trimesters. Edlund was a member of the Frog Soup team that eked out a legendarily narrow victory over their French rivals, Frog Legs, and Dinova was part of Fifteen Minutes of Fame.
It is this spirit of competition that FORAD survivors cherish when they recall their experiences.
“The value of the course comes from the intensity and the competitiveness,” Moffett says. “I could stand up there and teach for 10 hours straight, but it wouldn’t come close to the knowledge these students gain from working within their teams, arguing over decisions and coming to their own conclusions together. The model is there to stimulate discovery. As a professor, that’s a dream. It’s what you’re looking for.”
According to Edlund and other graduates, the course itself is a kind of finance status symbol. “Whenever you meet another T-bird alumnus who is in finance, the first question is, ‘Did you take FORAD?’” he says. “And you either did or you aren’t really a finance person. And then the next question always is, ‘How’d you do?’ People go to great lengths to try to win, so that’s a big deal.”
The sheer amount of out-of-class hours required to prepare for complex weekly decisions has the effect of bonding teammates together. “Team dynamics are really important,” Dinova says. “You hope people are going to be reliable and deliver what they promise, and team leaders need to create an environment where everyone is going to contribute.”
The diverse teams also force players to test their cross-cultural skills. “Our team was comprised of five members from five different countries, four different native languages and three continents,” Alberto Cruz ’94 says.
Dominique Quere ’93 still keeps in touch with three of his FORAD teammates. “The key to our success was climbing a nearby mountain,” he says. “Then on the way back, cooking some frozen chicken on a camp fire, trying to eat it while deciding on our strategy for the week to come.”
Moffett also recalls horror stories of teams that couldn’t hold together. “One time I was called by campus security on the weekend because a FORAD team was screaming at each other over a decision in one of the Snell classrooms,” he says.
Other teams have been derailed at the last minute. Rrahul Dalmia ’10 was part of the Cheetahs, which held steady in first place until a disastrous decision in the last period sent them from first to seventh place. “Fatal,” he recalls.
Philip Duncan ’84 remembers a more cutthroat experience. “We had a great run and took the weekly prize for 10 weeks,” he says. “Then we were bumped into second place in the final week after a rival group enlisted a previous FORAD classmate.”
Win or lose, nearly all participants describe the course as a life-changing experience. Robert Birch ’86 says FORAD humbled him and caused him to rethink his career.
“It is the most conceptually difficult class I have ever taken, including law school,” he says. “FORAD is serious business. The acronym strikes fear in the heart, but I would like to take it again.”
Sometimes it is speculation that thrusts a team into first or rips it apart. Moffett warns teams before the game begins that if they speculate wildly — or if they can’t defend their decisions at the end — they will lose points. One team in 1995 even made it a running joke, naming their company SpecaSanon, short for Speculators Anonymous.
For teams accused of too much speculation, the final defense can turn brutal. “The lights in the auditorium felt like the African sun that night,” Jonathan Pearson ’00 says. “There must have been 300 people watching me sweat.”
The experience was just as traumatic for Julio Benitez ’89, who took the course with Professor Mills. “We had heard that every semester one team during the defense would just get pounded,” he says. “Well, that semester, it was us. After sitting there for what felt like a lifetime, the panel let us go. All the other teams came up to us to thank us for being the sacrificial lamb for the semester.”
Some teams have taken drastic measures to impress the judges. Karen Keese ’86 and her team rented tuxedos for their winning defense. David Adam ’01 and his winning team enlisted a classmate dressed as a chicken to try and divert the judges’ attention away from an uncovered currency hedge that had gone in their favor.
“It didn’t work,” he says. “I learned an important lesson from that presentation and Moffett’s searing glares: Always admit your mistakes and be grateful that sometimes you get lucky. Then, move on!”
One group even tracked down Moffett’s wife, ringing the doorbell to get an interview for a video segment that opened their defense. In the video, an interviewer quizzed her on how much her husband loved the group’s product, “Arrogance” cologne.
For some teams, Moffett says, the experience is never over. “I have had teams, years later, call me at home on a Saturday morning from another continent after a reunion to say they want to compete one more time — and win this time,” Moffett says. “I just tell them to let it go.”
“Completing FORAD is almost like a badge of honor,” Dinova says. “From my colleagues in treasury, I haven’t heard about a course at another school that is remotely similar to this one. The learning experience from a student’s perspective is incomparable to any other class because it so closely reflects the real world.”
After five years of programming, testing and building, Moffett launched a beta test of the updated FORAD software for the first time in spring 2012. The new interface is clean, sharp and much easier to use. Different windows can be opened for various projections, and teams can see their history of decisions all on the same screen — something impossible with the old model.
The FORAD name and rights also have been taken over by Edlund and Moffett in a partnership with a goal to eventually license the simulation to other schools around the world.
“Vesi and I had such a great experience here at Thunderbird,” Edlund says. “And seeing how dedicated Professor Moffett is to the course, how could we not do this?”
Samantha Novick is public relations and new media specialist at Thunderbird School of Global Management. She has a journalism degree from Arizona State University and has lived and worked in Ireland, Jordan and Thailand. In addition to her native English, she speaks German.
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