Staffing the treasury group has always been a challenge: The financial acumen and skill-set of the best treasury practitioners can often yield higher compensation at banks or buy-side firms. Over time, this challenge has only grown:
1) As treasury’s role expanded from the transactional to the strategic, the quest to find and retain good people has become more difficult;
2) In specific treasury areas, for example, investment management, the role of treasury is becoming more buy-side-like; however, the comp packages have not kept pace. “We cannot compete for the same talent with money managers,” said the treasurer of one cash-rich company; and
3) Finally, a period of robust economic growth has put a strain on the job market overall. The unemployment rate in October, at 4.4 percent, was the lowest since 2001. With employees’ out-of-pocket expenses on healthcare and pensions rising—and the value of ESOs declining—corporate treasury’s ability to hire and retain the best has fallen farther behind.
Cost-center mentality
One big issue for many treasuries is that while their staffs are underpaid, they need to come up with concrete performance measures to prove that they are adding value, beyond cost savings via streamlining of processes. While treasury’s role is broadening, treasurers have struggled to develop more qualitative, yet meaningful, measures of success to capture treasury’s impact on the enterprise.
The shift away from profit-center treasuries (mostly for good reason) has robbed treasury of the easy way out, i.e., a positive P&L contribution or at the least the ability to cover its budget and pay performance-based bonuses. If cost-cutting is its mantra—and not necessarily in business-meaningful ways—treasury’s ability to demonstrate how it adds real value is further impaired.
Barring a shift to a service-level agreement approach, whereby treasury would charge its internal constituents for its services, it remains hard to translate treasury’s role into dollars and cents.
Meanwhile, the desire to go beyond efficient processing is forcing treasurers to look outside the box. “I’m looking for a different mindset,” reported a treasurer at the recent Annual meeting of the Association of Finance Professionals (AFP; see related story).
“I don’t want the typical transaction person; I need someone who is going to look at things holistically, e.g., look at the whole process then break down each issue and analyze it: ‘is this the right process? Can it be done better? Does it fit into the grand scheme?’”
Farm it out
One way treasurers have sought to liberate their staff from grunt work, as well as quickly scale up to accommodate growth and handle resource-intensive functions, is to outsource some of their work. Ironically, the cost of outsourcing falls as companies scale up, because they can negotiate bigger discounts. While many companies have long relied on banks for services such as lock boxes, or regional liquidity structures, the current trend is to seek outsourcing solutions in other areas, for example:
• Treasury accounting. Outside specialists such as HedgeTrackers, Reval (for FX) or Clearwater and custodial banks (for investment accounting) can maintain subject-matter expertise and use scale and systems to more efficiently execute treasury accounting. Because these areas are so complex, internal accounting departments typically relied on treasury to prepare the entries.
• Hiring the experts. Another way to do more with less is to outsource the management of the investment portfolio to professional managers. Most treasuries rely on outside managers for any strategy beyond the very short term (see related story). Money managers have the staff, credit-research and systems capabilities to handle increasingly complex portfolios (see related story).
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The importance of paying more A recent survey conducted jointly by Watson Wyatt Worldwide and HR association, WorldatWork, revealed that 71 percent of the top performers at 1,100 companies reported that their comp package was one of the top three reasons to stay (or leave) their positions. In contrast, their employers figured that promotion and career development opportunities were more important factors. Argue for resource The good news: less than half of the top performers in a related survey (smaller sample) said that they actually left their jobs because of pay. Yet clearly, paying top performers more is a very effective way to keep them. “I know my staff is underpaid and have tried to argue for more, but management’s response is that to date, there’s been little turnover,” one treasurer lamented. “I guess I have to see one of my best people leave, before I get the OK to pay everyone more.” |
The in-house solutions
There are strategies that treasurers can use “at home” to hire and retain staff, without necessarily handing out big bonuses:
• Trade down to go up. One approach is to “source” less-expensive MBAs and develop them through a structured rotation program; another is to internally recruit staff into treasury positions.
“I have had great success recruiting staff out of AP into junior treasury positions,” one treasurer reported. While the knowledge base is not identical, the skill set is relevant.
Another treasurer reported that he spends a lot of his time actively recruiting MBAs and brings them into treasury for an 18-month rotation; the training program involves stints in other parts of finance. “You have to hope that they will come back,” he said.
Depending on the size of the company’s finance organization, recruiting at graduate and undergraduate schools can be a substantial pipeline. One treasurer said that his company routinely brings in 60-80 undergrads every year. “I am amazed at the level of knowledge some of these newcomers bring to the table,” he said.
There are two problems with this approach:
1) Size matters. Rotations only work for large companies with a broad-enough finance organization to keep people motivated and retain top talent. Small treasuries have a harder time attracting talent on this basis: “I try to rotate people within treasury,” one treasurer said, “but it’s not as effective.”
2) No time to learn. An overly rapid rotation schedule robs the company and its staff of the chance to develop true expertise. The first 12 months are mainly about learning the job, and before long it’s time to move on. “Basically, no one stayed in his or her position long enough to see the results of the programs that were put in place,” said one treasurer who for years worked at a giant multinational with an aggressive finance rotation program. The result was a culture of no accountability.
Plus, moving staff quickly through various areas of finance does not give practitioners a chance to experience the impact of economic ups and downs. Of course, with economic cycles sometimes lasting five to ten years, it’s hard to keep people in the same job through the entire cycle. “People expect to move every two to three years, no matter what,” commented another treasurer.
• Find non-monetary comp. Because treasurers are often unable to pay more, they are on the lookout for challenging, cross-functional projects. “I try to ensure my staff members get to be on these bigger projects, even if they don’t have an active role; being involved gets them exposed to other areas,” said one treasurer (see sidebar).
• Provide a career path. Finally, another approach is to provide top performers with more responsibility and a better title, e.g., Assistant Treasurer. That role should include overseeing entire processes or practice areas.
Here again, smaller treasury teams typically stay as “flat as a pancake,” as one treasurer put it; however, there’s clearly a benefit to working in a small treasury group: everyone has a chance to get a taste of everything, often allowing staff to quickly accumulate valuable experience.