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How—and When—to Add Heads to Treasury Head Counts

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September 09, 2019

Benchmarks and other approaches to guide treasury teams that may need more bodies.

“We’re a hardworking team,” one treasurer at the Life Sciences Treasurers’ Peer Group’s spring meeting joked after telling the group that he alone is the team—he has no help. Despite the laughs he got, adding head count is a serious issue for many treasurers who are being tasked to do more work with the same, if not fewer, resources.

How about a benchmark? The treasurer’s company will top $2 billion in revenue this year and one benchmarking idea put forth is that a small, growing company should have at least one person for every $1 billion in sales. To have the infrastructure in place to support future growth, consider changing the ratio to one FTE for every $500 million in sales.

The benefit of being big. NeuGroup Peer Research validates the point that the bigger the company, the bigger the treasury team. The average number of treasury staff at companies with revenue above $100 billion (85) is more than six times the number at companies with revenue between $1 billion and $10 billion.

The difference is one reason treasury teams at small growth companies need to embrace technology and automation solutions that boost efficiency, improve the analysis of data and raise treasury’s strategic value.

Beyond revenue: EVA. Of course, size (revenues or market capitalization) is just one tool to determine the right time to push for additional head count. Cost and resource justification prompted a dialogue about metrics used at member companies. While ROIC is predominant, one member spoke of his CFO’s preference for economic value-added or EVA, a metric popularized by Stern Stewart, a management consultancy. EVA, which is the return on capital (or net operating profit) less the capital invested multiplied by the cost of capital for a given project, is used for everything at this company, including justifying new treasury hires.

Or look at risk. For another perspective, Amanda Breslin, head of Chatham Financial’s global risk management advisory business, said, “The most pertinent factors driving team size are typically the magnitude of risk relative to key metrics (such as percentage of EBITDA at risk), the complexity of hedging programs being managed, the range of activities on the treasury team plate, and the degree of automation being used.” She said one approach she has observed with some consistency is using the cost of an additional FTE (or technology tool or outsourced support) weighed against the benefits of greater risk reduction or risk monitoring.

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