The forecast looks bright for a new center at CLU
By Tim Gallagher
Q. You are CFO of a growing company that must
forecast accurate sales numbers for the coming
year. What should you do?
- Consult a psychic
- Throw darts at a board
- Add 2 percent to last year's number
- Hire a graduate of CLU's new master's program in economics to consider all the financial system's moving parts and make a precise prediction
A. For 99 companies out of 100, the correct answer will soon be "d."
This spring, newly inaugurated President Chris Kimball and Chuck Maxey, Dean of the School of Business, hired a team of eminent economists to establish the CLU Center for Economic Research and Forecasting (CERF) and to launch what will be one of very few master's degree programs west of the Rockies devoted to economic forecasting. The three economists will split their time between teaching and research.
For several years, Bill Watkins, Dan Hamilton and Kirk Lesh have provided information on economic, demographic and regional business trends in Santa Barbara, San Luis Obispo, Ventura and Los Angeles counties through the University of California, Santa Barbara Economic Forecast Project. The new center at CLU is designed to provide forecasts on a local, state and national level that the leaders of government agencies, businesses and nonprofits can use to make decisions.
"We are delighted to welcome such a respected team of economists on board," said Kimball. "The center brings a new dimension to our School of Business, expands our impact and contribution to the business community, and provides our students with greater opportunities for research."
Joining CLU allows the new CERF team, which has worked throughout the Central Coast of California, to take the gloves off and open up new markets. The demand for solid, professional forecasting is high, and already the economists have lined up clients in Oregon and Arizona. They will continue to work in Ventura County and throughout California as well.
According to Maxey, it was important to CLU from the beginning to have the whole team. "These are people who work very well together, and it is that synergy and blending of talents that produces high quality forecasts and will also produce a cutting edge master's program," he said.
The goal of the master's in economics is to produce trained students who know how to help the companies that hire them become more profitable.
"We expect this to be a very practical degree, a very practical investment from Day One," added Watkins, 59, Executive Director of CERF and director of the new master's program.
Maxey explained the philosophy behind the new economics program: "Our goal at the CLU School of Business is always to add value to the business community by helping them to develop the human capital that is so critical to organizational success. We are interested in useful knowledge rigorously developed and with clear practical application."
Forecasting and Strategy
A company with an economic forecaster on staff can make accurate predictions for sales, expenses and market trends.
"Companies today have to navigate in perilous economic waters," pointed out Maxey. "It has never been more important to have someone capable inside a company who can predict economic developments and help the firm craft a strategy to deal with them. Sometimes, having an understanding of what is likely to happen in the economy is too important to outsource or to delegate. Our program will help companies build that strategically essential capacity."
Watkins, who had been Executive Director of the UCSB Economic Forecast Project since 2000 and previously served as an economist with the Board of Governors of the Federal Reserve System in Washington, D.C., offered examples of how an economic forecaster could work in various industries. A bank could use a forecaster to predict loan demand and delinquency. A company starting up in new markets could use a forecaster to determine how big the demand is going to be. "This is really nothing more than applied statistics," said Watkins, who has a doctorate in economics. "Econometrics is basically what you use to ask, 'What is going to be the effect on my company if we do this?'"
Starting a new program in a down economy might be considered a risky strategy, but Kimball doesn't see it that way.
"I would like CLU to be known as a place that is nimble and flexible. Especially in this climate, we want to be able to respond quickly to opportunities that come along. Rather than get caught in a cycle of 'eliminate, cut or postpone,' we are in a mode of 'Let's act,'" the president stated. "It's like Bill said at one of his forecasts, 'In this climate, grab market share.' To me that's what we're trying to do."
Maxey and Watkins plan to start small — about six students this fall — and eventually expand to 15 to 25 students. Those studying for the degree will be able to complete the program in a year.
Still, it is an ambitious endeavor while simultaneously starting CERF.
"I'm not worried," said Watkins. "I've got Dan and Kirk."
Hamilton, who also has a doctorate in economics and had served as the Director of Economics for the UCSB project since 2000, is the number cruncher, the man who is so good at predictions he makes you want to take him to the racetrack.
Lesh, who is currently working on his doctorate in economics, had been with the UCSB project since 2007 and also taught part time in the CLU School of Business. He is a senior economist and a widely sought speaker. With a background in private industry, he seamlessly blends the academic study with business realities.
Forecasting work can make you unpopular, and Watkins has a list of cities that don't like hearing from him because of his honesty and his accuracy.
"To do forecasting work well and with integrity, you can't be afraid of the data," noted Maxey. "The key to institutional success is to get the most accurate reading you can, face the reality, and make a plan to deal with it. Those are the clients we are looking for."
One of those who didn't like the message but appreciated the messenger is California Gov. Arnold Schwarzenegger. He met Watkins this spring on the eve of the crushing defeat of the propositions he helped engineer. On the basis of an hour's conversation, Watkins credits the governor for having the courage to face the reality when so many around him seem to be in denial.
According to Watkins, California does not have the future it had 30 years ago. He believes the state's approach to the economic climate is completely wrong. "In a recession you do not add regulations and increase taxes. But that's what Sacramento tried to do."
Blunt talk. Yes, that's Watkins' style. And his words are prolific. He regularly writes op-eds for many newspapers and for www.newgeography.com. He blogs and even tweets on Twitter.com: "The economy is important. We need to keep this conversation going."
Maxey thinks Watkins, Hamilton and Lesh are the perfect team to initiate the center and the degree program.
"As the leader, Watkins is smart, honest and personable. He tells the truth. He has the enviable ability to provide the simple-to-grasp explanations that are based on rigorous analysis of complex things. Sometimes it seems that we within the academy forget that our job is to make things easier to understand, not more difficult," Maxey noted.
Watkins held a high-paying job in banking when he decided to go back to school for his graduate degree. Six years later, he got his degree and a job that paid less. But it was that combination of private enterprise, banking and academia that helped make him so successful.
He and his team tripled their business during his nine-year tenure at UCSB and already they have benefited from the smaller environment at CLU. The director's goals are simple:
- To make CLU's CERF a nationally recognized forecasting center
- To build a top-ranked master's program
- To help educate his successor
Punctuating CLU's progressive moves, Kimball remarked, "The addition of CERF illustrates our commitment to serve the business community and the wider area. The University is called to service. This is a great way to provide that service."
Tim Gallagher, former publisher of the Ventura County Star, now owns Gallagher 20/20 Consulting, a Westlake Village firm specializing in public relations and Web 2.0 strategies. Staff writers contributed to this article.