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Out of the office and onto the line.

No more plain-vanilla cash management and financing operations. Today's corporate treasurers must move fast, and they're getting deeply involved in their companies' operations.

At Financial Executives Institute's recent Treasurers' Conference, eight corporate treasurers gathered to discuss for Financial Executive the remarkable changes that have taken place in their responsibilities in the last 10 years, the changes they anticipate will take place in the next 10 years and the major challenges they face. Their discussion was moderated by Bryan R. Roub, senior vice president-finance of Harris Corporation.

BRYAN R. ROUB: What skills are most valuable to the treasurer today?

BUEL T. ADAMS: The two most important skills a treasurer needs to have are, first, analytic ability and, second -- something that every manager needs -- the ability to communicate both verbally and in writing. These are more important, in my opinion, than technical skills. Technical tools are important, but they aren't the core of the business.

JAMES M. GROBERG: I agree that one of the most important things for the treasurer is a keen analytic sense. I would add creativity, which was not as important in the past as it is now. With all of the financial instruments that are available to us and the new ones that are coming along all the time, the treasurer has to understand what new products are useful in his or her area. This, in my mind, takes creative thinking.

Creativity becomes even more important as businesses expand globally. You have to understand how your business will be affected if, for example, Argentina suddenly puts a new tariff in place. This is something new, at least for me. We didn't have these demands in the past.

MARY LOU AMBROSE: I'd add another that I think is essential, and that is the ability to integrate information. We have to be able to take data from so many different sources and pull it all together before we can understand what impact it will have on our business.

ROBERT P. WATSON: That's key. When I first started working, we spent most of our time adding up numbers and calculating present values and the like. We didn't need to ask ourselves what these numbers really mean and how they flow in relation to each other. Today the things we used to spend time on are being done by computers, so we have time to conceptualize the problems we're trying to solve and to understand how they interrelate with all other factors.

ROBERT H. HERTZ: I would add negotiation skills. Increasingly, we have to find financing for customers, and negotiations are part of the process. This is especially true internationally.

ROBERT S. PARK: I think the need for technical skills is expanding. With the flattening of the corporation that's going on today, we have to understand what the next layer is talking about. That next layer may be an employee or it may be an outside source. The treasurer needs to understand what's going on throughout the company and to communicate with so many more different departments than we used to. This is in addition, of course, to the need to stay on top of the many financial instruments that are available, as you've already said.

KENNETH C. BUDDE: My company is relatively small in comparison with most of the companies represented in this discussion. The principal treasury function we have is cash and banking management. But even in these areas there are many more products this year than there were just a year ago. The marriage of market-place information and knowledge with our needs is a real challenge for us.

GROBERG: I think the bottom line of what we are responsible for is risk management. Things that were relatively unimportant to the bottom line 10 years ago, or even five years ago, become so much more significant now. My company, for example, is very heavy in the human resources business. We used to give very little thought to unemployment insurance or workers' compensation for our temporary employment operations. In that industry, 5 percent or 6 percent on sales is good performance. Consider what would happen if our workers' compensation rate or unemployment insurance rates suddenly double. Those areas weren't particularly important to us even as recently as two years ago.

ROUB: In the past, the risk manager was the individual who dealt with the insurance brokers. But all of that began to change, I would say, about seven or eight years ago when risk management concepts began to be applied to other areas.

M. JEANNINE STRANDJORD: At Sprint our risk management and insurance department assumed responsibility for developing loss prevention policy three years ago, and now serves as a central resource for field operations. We added environmental compliance activities last year.

The treasurer's job has grown so much in the last 10 years. We've moved from funding for the corporation and cash management to assuming functions that are more operational: risk management, loss prevention, benefits administration, all of which are very important to the corporation. And now we're talking about adding real estate and facilities to treasury.

ROUB: Do you think this is a general trend?

STRANDJORD: Yes, it's very normal these days. More and more you'll see these things coming to the treasurer out of human resources or operations because of the huge financial impact they have.

GROBERG: The flip side is that I find these operational aspects very difficult to control. The loss control practices for workers' comp, for example, are in the operating division, not in the treasurer's office. So when the treasurer's office started getting involved, the operations people tended to back away and say, "Okay, you've got it. If it goes up, it's your fault." If it doesn't work out, it's your fault." We've got to be extraordinarily careful that the operating divisions understand that we don't invent the claims experience. Or the accruals. Clearly we need to stay close to operations and make certain they don't abdicate their responsibility just because the treasurer's area has picked up those responsibilities.

BUDDE: And the treasurer needs to be able to negotiate these fine lines with operations people and deal with them effectively.

STRANDJORD: Another area that has changed treasury, especially in international, is that the financing becomes a part of winning the business. Maybe even finding the business in some countries. So we've become a part of a marketing team. In fact, the president of our international operations said at first that the international treasury function should be incorporated in his marketing group, but we were able to convince him that it belonged in treasury.

HERTZ: What about litigation response? Everybody is seeing a tremendous increase in litigation, and there's confusion about what's covered by insurance, with insurance companies backing away from specialized risks. As time goes on, we're going to see that function, unfortunately, play a larger role in companies than before, and the treasury department will be actively trying to find protection and suitable controls.

WATSON: A lot of risk management is prevention. Many of these risks have taken on more operational characteristics, because we can no longer solve the problems by transferring them to an insurance company.

GROBERG: How many of you had to become computer literate, or have you relied on your people to do it? I have found the computer extremely helpful, particularly when I'm traveling. I no longer have to send back to New York to get an analysis done or a worksheet prepared, and I find it easier to make notes at night using the notebook computer. The computer really has had a material effect on my productivity and in my understanding of what's happening to the information.

WATSON: There are several layers of computer literacy. Many of us were using the computer when we were analysts with some of the basic spreadsheet programs. But with the newer programs and the depth of the functionality that's in some of these machines, unless you have considerable time to devote to it, it's difficult to develop a deep level of skill.

AMBROSE: Being able to network information is very important. When a question comes up, you have to have the information when you need it. There's no room for time delays for phone calls or memos. I think a network is extremely important in moving forward.

ROUB: What will treasurers of the year 2000 look like? What kind of skill set will they have to have?

ADAMS: Probably nothing that we don't have already today, just more emphasis. A knowledge of computers will be essential. And so will a knowledge of the international market, international economics, for those who are not already international. There will be significant interface with markets outside the United States.

STRANDJORD: I think the global impact will be very important. The treasurer will have to have international expertise, and not only strong technical skills but very good organizational and people skills. They also must truly understand the business. And creativity will be important because, as you've already said, they need to evaluate and use the many new products that are constantly coming to the market, especially in derivatives.

GROBERG: In a sense it was easier for us because we started when things were simpler and we learned as things evolved. The new candidates for the treasurer's office are going to have to have the ability to accumulate much broader knowledge in a very short time. Look at the areas that have become so important in the last few years. Derivatives, of course. And credit. We never had to worry before about the ability of banks we do business with to survive. And with this comes the need to extend internal controls. We had a situation the other day where we were overcharged some $27,000 a month for four months on bank fees. Then there's risk management and loss control. The ability to absorb a great amount of information in a number of different technical areas is going to be one of the prerequisites, rather than the narrow technical skills of the traditional treasurer's office.

AMBROSE: I also think the treasurer has to have a very significant orientation for change. What we've all been talking about is change -- very, very rapid change -- and the ability to respond to it. The treasurer has to like change and be comfortable with it because our job really is to look at opportunities even in areas for which we're not directly responsible. The minute you stop looking for change, you start to fall behind your competition. That competition may be the banks with which you do business, your customers, or, of course, competitors in your own line of business.

WATSON: One of the ways to keep abreast is better use of outside resources. The typical treasurer probably will be dealing more with people who have in-depth knowledge but who aren't on staff. In the past, we had higher latitude because of the lack of precision and slower analysis of what the other sides were doing. But today everybody's got it down to the sixteenth, and the analysis is key. So your ability is not so much knowing what the right numbers are, although that's important, but in dealing with people who have the best ability to do what you need to get done -- and knowing that they may not be on your staff.

AMBROSE: We need the best people we possibly can in the treasurers departments. In the past there were more people in the function, and there was a margin for error. But there is no margin for error any more.

ROUB: But the taste for change is true for just about any function in business I can think of.

WATSON: It has to be in the corporate culture. It's difficult to tell someone to stop doing something and start doing something else when they're worried about job security.

ROUB: The change attitude is really the core of total quality management. Do you have a quality management program underway in your departments?

STRANDJORD: Yes. But even before we put in the program we went through a period of dramatic change. We now have two-thirds of the people we had a few years ago even though we're performing more functions, and we're more flexible and sophisticated -- more open to trying new things.

WATSON: We've found that to stress the tools that TQM offers, rather than stressing the word "quality," makes the process of implementation smoother. Stressing "quality" separates it from doing business.

AMBROSE: We've integrated quality to such a degree that we don't separate it out as being quality. That's just the way we do business now. Everyone "owns" those concepts.

ROUB: We in effect did TQM before we knew that's what we were doing. Is your treasurer's organization ahead of other corporate areas?

AMBROSE: I think it's easier to measure in the financial function. It's harder to measure when you apply it to suppliers, to customers, and so on. When we contract services with suppliers, we establish performance requirements so we can measure the quality of the service and how well the supplier provides it. The requirements are based on critical items we need to provide service to our customers, who can be internal or external. The quality of the service is affected, therefore, by our suppliers. Measurement of this quality can be an issue if either the supplier or customer is unfamiliar with TQM concepts or measurements or if measurement is difficult to quantify.

I want to stress that we have a service that is really valuable to operating units. Whether that service is insurance or commodity hedging, we're an integral part of that team. But people aren't going to come knocking at our door, and it's incumbent on us to market those services.

ROUB: In a large company like ours, there are pockets of ignorance. We have people out there doing deals that don't know that they need help.

STRANDJORD: Several years ago people in our finance function were narrowly focused in the technical areas and were not really in the mainstream of the business. But finance has changed dramatically, and we are now on a number of operating teams.

GROBERG: The line between the financial function and the operating function is becoming thinner and thinner, and, if you're doing your job, you almost have to force yourself over that line, force yourself on the operating people, in order to provide them with the kind of backup they need. At first they bring you a fait accompli and say, "Oh, I didn't know I had that problem. Do something about it." In our company, operating divisions are very entrepreneurial and fairly unsophisticated in the areas where we have some expertise, so we have to go out and grab it. As a result, I'm now getting much more involved in operational situations, getting involved in the negotiation of big projects at a very early stage.

HERTZ: Every company is looking at using all the resources within the organization to develop teams to react more quickly to customer needs. Certainly the treasury function needs to play its part.

STRANDJORD: But until the operating units see that you can bring some value, they're not going to be that interested.

BUDDE: We've been in situations where things go haywire and someone realizes that it has a financial impact and they want some "accountants" to look at it. This gives us the opportunity to get involved informally and to create a relationship that demonstrates we can be part of the team. It's my experience that most operations people think of financial people as internal auditors. We need to break down that barrier. It's beginning to happen, but it's a long-term, painstaking process. It won't happen overnight.

HERTZ: Our top management enforces our involvement in operations. We have an oversight committee that mixes the operations and financial people at the local level to get products into the field on time and at reasonable terms. The committee learned, for example, that financial people were not involved in the R&D processes, and so we're now including finance as part of that team. It's up to the treasury people to add something to the pot -- financing vehicles, currency hedges or risk management, for example -- and gain the respect of the other players. It's still an experiment in our company, and we'll see how it goes.

WATSON: When the American companies were doing well, there wasn't as great a need for teamwork. Now with margins under much more pressure, management has to recognize that time is a valuable resource. The need for teamwork just to sustain profitability is much greater now than it was five or 10 years ago.

BUDDE: Communications is key. The ability to interact with other people successfully is so important, especially for those of us who have been stereotyped. We've got to rid ourselves of the stop-light image and create a green-light image. Let everyone know we are interested in participating in the process and want to see it move forward. It's up to us to sell ourselves.

AMBROSE: It's so important for us to get over the idea of being a stop light. I try to tell the people with whom I work that there are no boundaries. So we may get a hundred harebrained ideas, but one or two really good ones result. I find it's easier to pull back than it is to start with boundaries that you have to get around. Approaching projects this way helps us get rid of the perception that we're the stop light, we're the deal breakers. We become part of the team. But I agree, it's a long process.

PARK: We're basically a domestic company, and the treasurer's department doesn't get involved in the operational issues. The controller is much more involved with the operations people doing cost studies and talking about margins and so on. But we have been getting more involved with the marketing departments. The credit group is getting much closer to the marketing and sales organizations, discussing why they can't take additional orders from certain customers or that they have to spread out shipments to control exposure. Our salespeople know who to call in the credit department if they suspect a problem. Very often that can prove to be very important information.

And as we attempt to compete in foreign countries we -- and most steel companies, in fact -- are going to have to be more willing to sell in local currencies than we used to. This is another area where our treasury department gets involved in the marketing function.

AMBROSE: That's true for us too. We've been working with a number of operating groups and have done a lot of their exchange management for them. We start with the basics to show them that foreign currency doesn't have to be mysterious. For the operating units that have been selling overseas for a long time, there's not even a question that their salespeople immediately ask us in. And it isn't just a matter of how the financing is done and whether it's a lesser or more developed country. We work with them on foreign exchange ramifications, collection ramifications, and so on.

PARK: In the past you knew that your sales to a certain country were going to be about $5 million, and that was your foreign exchange exposure. Today you know much more precisely what is happening, and you know every second what the rates are, so everything is much more finely tuned. Although your decision-making process is fundamentally the same, you have a greater variety of tools available to hedge any exposure.

ROUB: What about the next three or four years? What problems do you have now that are going to get worse? Which ones are going to go away?

GROBERG: I certainly pray this won't happen in the United States, but in Brazil, supermarkets, for example, sell their merchandise for less than cost. Why? Because they make their money, not on the products they sell, but on the financing of those products. This is happening in other countries as well.

I'm not trying to illustrate the problems of international business but rather to illustrate the importance of the financial area in driving the bottom line compared with how it drove the bottom line 10 or five years ago. And you can think of 15 different areas where the significance of financial transactions or risk management transactions can have a much greater effect on the bottom line than they ever could before.

ROUB: What's right at the pit of your stomach that you worry about?

GROBERG: As I've said, for us, human resources -- health care, workers' compensation, unemployment insurance -- is a big one. It will put companies out of business. No question about it. You've got to be creative and attack it head on.

ADAMS: I'd say the potential for returning inflation and high interest rates. Everyone is saying that inflation is under control, and it is, but a few wrong steps by the new administration could turn that around very quickly. The markets are very skittish, and with all the information moving around as quickly as it does, the consequences could be very serious.

HERTZ: One of my biggest concerns is the increased possibility of missing significant risk in deals. With financing instruments being increasingly complex and a need to close deals quickly, it is becoming more difficult to wrap one's arms around all the risks that are in the transaction. I agree that we're going to have to work with outside expertise -- banks and other sources -- to understand some of the transactions.

AMBROSE: It's incumbent on us to have the right people in the right job and to manage information. With information that's very quick and very accessible, it's essential to be able to discriminate between what's important and what you can leave to the side. If you don't have a system in place to help you do this, you can be overwhelmed to the point of not being able to make a decision.

ROUB: What about the environment, particularly with companies becoming global?

AMBROSE: I think it's going to be like health care. There's a huge liability out there. Everyone's going to look to corporations with deep pockets to clean up the environment, and that's going to be a problem.

WATSON: If yours is an acquiring kind of a company, you may discover after you've completed an acquisition you've got a problem. That's a nightmare waiting to happen. It's easier to live with things you've had for a long time than it is to take a chance on something new. I know there are companies that have been well into the acquisition process and have stopped when they realized the extent of the liability to which they could be exposed.

ADAMS: I think we're entering into a period of rationalization of the environmental question. Up to this point, the impetus has been to spend whatever is necessary to get things cleaned up. But I think people are coming to grips now with the fact that there is a cost, and that we have to do some more cost/benefits analysis.

GROBERG: And yet in recent months there have been decisions where settlements of environmental matters have been overturned, and the companies involved are right back in it again and spending 50 times their liability to defend themselves.

HERTZ: I agree that the environmental issue will play a lesser role. But I hope that something can be done about the size of the damage awards. The government has to step up and take a pro-active role in setting some kind of limits.

STRANDJORD: More foreign countries are adapting the same kind of strict laws we have in the United States. There are potentially tremendous liabilities in international operations.

ROUB: What about shareholder activism?

HERTZ: We're going through a cycle. We're seeing some very active groups today that are reminding management of their responsibilities. I don't think, in the long run, it will continue. What bothers me is the short-term/long-term trade-offs. We've lost our sense of where the balance ought to be in the process.

ADAMS: I think that with the new administration -- and even with Congress, which is more of a miracle -- there is finally an understanding of the pressures that business is operating under.

And shareholder activism has changed. The activists we see today are actually beneficial. They support TQM and good management. Well-managed companies won't have to worry.

ROUB: How about downsizing? How have your roles changed? Have you lost good people?

STRANDJORD: Downsizing is the future. That means finding the right people for the right jobs. We need people who are creative and proactive. Many of the people we lost were simply doing their jobs as they'd always done them.

BUDDE: We don't have a large staff to begin with, so downsizing isn't an issue for us. But to build the right team we've worked on hiring the right people and developing the right attitudes. Turnover has taken care of those who weren't performing. You've got to have the right people in the right spot if you're going to survive in this marketplace.

WATSON: I think that the reaction to downsizing is something that we should be concerned about and, while we've got to get our staffs down, we have to be sensitive to the fact that employees used to feel a lot of loyalty toward their employers and co-workers. I don't know that we understand all the implications of that yet.

ADAMS: Do any of us see a responsibility in the area of public education? I think the American corporation is going to have to play a much more proactive role in education.

PARK: And we have to approach the education of people whether or not they go to college. The people that are going to work in the plants and factories are not pushing wheel barrows and swinging sledge hammers. They're typing data into the computer and reading data that's coming back out and making decisions based on the output.

AMBROSE: One of the things that I see with some of the kids coming out of college and graduate school is that they can't write. They are taught to think but not to write. And these are smart people.

ROUB: One of the things we've learned as we've gone through our TQM process is that it isn't necessarily the people who have been there a long time who don't perform well. In fact, probably one of the greatest pleasures we have had in this process has been watching long-time employees blossom because suddenly someone's saying, "What do you think?" No one has ever asked these people before what they think. It's really terrific.



Vice President and Treasurer

CBI Industries, Inc.

Annual sales: $1.7 billion

Industry: Contracting services and industrial gas products

Size of staff: 16

Reports to: Chief Financial Officer


Vice President and Treasurer

Aluminum Company of America

Annual sales: $9.5 billion

Industry: Aluminum production

Size of staff: 46

Reports to: Chief Financial Officer


Senior Vice President-Corporate Division, Secretary and Treasurer

Stewart Enterprises, Inc.

Annual sales: $140 million

Industry: Cemeteries and funeral homes

Size of staff: 26

Reports to: President, Corporate Division


Senior Vice President and Treasurer, Chief Financial Officer

Volt Information Sciences, Inc.

Annual sales: $550 million

Industry: Data bases/directories, electronic publishing, computer systems, temporary personnel

Size of staff: 300

Reports to: Chief Executive Officer


Chief Financial Officer and Treasurer

Dynatech Corporation

Annual sales: $500 million

Industry: Information technology

Size of staff: 14 direct reports

Reports to: Chief Executive Officer



Allegheny Ludlum Corporation

Annual sales: $1 billion

Industry: Specialty materials

Size of staff: 12

Reports to: Senior Vice President/Chief Financial Officer


Senior Vice President and Treasurer

Sprint Corporation

Annual sales: $10.4 billion

Industry: Communications

Size of staff: 320

Reports to: Chief Financial Officer


Vice President and Treasurer

Encore Computer Corporation

Annual sales: $150 million

Industry: Real-time and mainframe replacement computers

Size of staff: 3

Reports to: Chief Financial Officer



Senior Vice President-Finance

Harris Corporation

Annual sales: $3 billion

Industry: Electronic systems, semiconductors, communications, Lanier office systems

Reports to: Chief Executive Officer
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Title Annotation:State-of-the-Art Treasury Management; role of corporate treasurers
Publication:Financial Executive
Article Type:Panel Discussion
Date:May 1, 1993
Previous Article:Equity REITs: proceed with caution ... but proceed!
Next Article:Gearing up for EDI.

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