Some CFOs have tough jobs that require making tough decisions. For Steve Pace, CFO of the Big 12 Conference, the hardest decision may be which bowl games to attend (he has helped negotiate Big 12 schools appearing in seven of them on an annual basis). His job has had him playing golf with former Washington Redskins quarterback Joe Theismann, being interviewed on the red carpet at the ESPY awards, and attending all of the Big 12's Rose Bowl appearances -- including Texas's dramatic win over USC in 2006. He regularly attends the Final Four games of the NCAA men's basketball tournament and has front row seats for the Big 12 conference tournament.
Few finance professionals have as much fun in their career as Pace, who has served as CFO of the Big 12 Conference since 1996. The Big 12 Conference manages the league sports of its 12 member schools: Baylor, Colorado, Iowa State, Kansas, Kansas State, Missouri, Nebraska, Oklahoma, Oklahoma State, Texas, Texas A&M, and Texas Tech. In addition to football, the conference activities cover 21 additional sports ranging from basketball to cross country. Steve Pace helps to keep the financial score while maximizing the returns to the schools.
Steve Player: Many readers believe that you have one of the coolest jobs in finance. How did you become the CFO of the Big 12 Conference?
Steve Pace: Some of my early clients provided exposure to this opportunity. I developed industry expertise serving as an auditor and outside consultant for the Southwest Conference beginning in 1978. We also did work for the State Fair of Texas.
While we were serving the Southwest Conference, four of its previous members agreed to merge with the Big Eight Conference to form the new Big 12 Conference in 1995. This led to the other members moving to other conferences and the end of the SWC. While assisting with the wind-down of the SWC, I was asked to help further develop the financial model and infrastructure to establish the Big 12. In the course of doing that work, they offered me the CFO position.
When the job offer came, I had been doing a lot of consulting and expert testimony. I looked at the 30 weeks per year that I was traveling and the headaches of dealing with lots of deadlines and a high degree of stress. While these engagements were good for business, the stress of continual interaction with lawyers was wearing me down. The more I thought about it, the more I decided that it was a job offer I couldn't refuse.
Player: As CFO, what roles do you have to play in serving the Big 12 Conference?
Pace: My role as CFO is to bring a different perspective to the discussion. With my background from working with both privately owned and publicly held companies, I seek to bring an entrepreneurial viewpoint into an organization composed of people from a not-for-profit, higher education background. This enables the conference to look outside the box at nontraditional ways of operating and improving conference finances.
Player: What are some examples of this?
Pace: The way we conduct championship events is one way. We have negotiated partnerships with the host venues that help to improve the conference revenues. The venues benefit from tax revenues generated by added visitors filling their hotels and restaurants. It also provides media exposure for their city. Our partnerships seek to create mutually beneficial ways while providing a great backdrop for our events.
Another example is the numerous multiyear bowl game agreements. Currently, the Big 12 has agreements to send teams to seven bowls, including a guaranteed participation in the Bowl Championship Series. In addition to the financial benefits, these agreements help to increase the collegiate experience for the universities selected as well as help them build their alumni relations.
We were also able to negotiate a conference-specific television contract increasing revenues and exposure for our member schools. We are looking for additional ways to expand our media partnerships and branding relationships in very visible ways.
One of the key things we helped develop was an item you have likely never heard about unless you are in university finances. This was the development of the member participation subsidy, which is the reimbursement policy for the member schools who participate in championship events. Similar to corporate revenue- and cost-sharing, this agreement is critical to balancing the often competing member interests by establishing an equitable way to reward schools for participating. This effort required working with athletic directors, business managers, and financial officers from the member institutions to agree on equitable sharing of revenues generated. Even though all of our schools are great institutions, they have very divergent structures, sizes, and needs.
Player: How has the conference changed over the time you have worked with it?
Pace: The most obvious change would simply be the growth in revenues. In 1995, the conference was at $55 million. In our current year, we are projected to bring in over $135 million. Those additional moneys go to supporting student athletics, which can be seen in the number of scholarships offered, the enhancements to both training facilities and performance sites, and in the elevation of the universities' profiles. Exposure to these sporting venues raises the profile of the entire institution.
We have also seen revenues and support grow from the NCAA. This is primarily due to the increased popularity of the NCAA men's basketball tournament. The road to the Final Four creates a March madness that captivates the entire country. I am excited to be able to count on one or more representatives from the Big 12 to be in the hunt for the championship. When that happens, I get lots of calls from old friends -- usually seeking tickets to the game.
We are also excited about how this added exposure helps us to provide a higher profile for women's sports. This support has elevated the profile of the NCAA women's basketball and softball tournaments. We count on Big 12 champions there as well.
The conference has grown and matured in many other ways as well. Over time we have been able to develop deeper levels of trust and understanding among our institutions. We better understand the needs and motivations of each institution and the role that athletics plays. Our members are some of the most prestigious and advanced higher education institutions in this country. Our challenge is to continue to grow with them as they evolve to support their constituencies.
Player: Steve, much of your job seems to be focused on consulting with other league executives on ways to grow the revenues of the league. How can a CFO play the role of growth champion for their company?
Pace: Lots of finance professionals view revenue growth solely through price increases. While this is one way, there are many others. I am focused on using my experience working with entrepreneurs to try and find innovative ways to grow revenues. You need to look for nontraditional sources to find new revenues. Our expansion to include a Big 12 championship game is an example of this.
We have also had success with our baseball and softball tournaments. Currently, we are expanding the ways in which fans can view our events. In addition to network television and radio, sports telecasts can now be broadcast by cable outlets, over the Internet, and via wireless phones. These efforts have allowed us to also focus on creating value by treating the conference itself as a brand.
While growing revenues, these outlets help us to expand how families can view their college athletics (even if their child plays only a supporting role). We believe that this also helps our member institutions with their recruiting when competing with schools that do not have this exposure. It's one of the ways in which we make our members more successful.
Player: How have these changes impacted the role of your finance team?
Pace: Early on, we set up the finance function in a supporting role. Much of the routine transactional work was outsourced. For instance, we use ADP to process payroll. Our focus is to establish control systems and allow them to run very efficiently.
Since we are involved in most contract negotiations, our planning and ability to predict revenues is very high. Our partnerships are structured that way. Our costs are also predictable, so we can monitor results very simply. I can run multiple scenarios and tell very closely the financial results that we will generate.
In areas that we find challenging, we seek ways to improve our automation and support. One such area was the recurring payment of game officials. While these are relatively simple transactions -- you are paying each official for calling a game -- they happen in diverse locations and have a high degree of redundancy. Each school making a payment must collect all of the tax information for each game official. Since these payments require tax reporting, each institution must have policies and procedures to accurately capture this information and make appropriate filings. When you consider 21 different sports with multiple contests in each, you begin to see the complexity that is growing. Frankly, it's a lot of work.
We had to deal with it at the conference level due to the events we sponsored. But we knew that each member had to deal with it as well. We saw the redundant efforts as an excellent opportunity for using a shared service company to make it easier on everyone, including the officials, who each received multiple tax documents from each school he served.
Over the past year, we have moved to solve this problem. I create a service company, PayOGFE. The company name stands for pay for officiating game fee expenses. It serves as a consolidator of all these fees, simplifying the reporting to both schools and officials. Under the system, schools pay a flat amount per game for each official. PayOGFE makes the payments to the officials and handles all of the tax reposting and filings. This reduces the burden on the schools and on the individual officials by consolidating efforts. Tax information openly needs to be completed only once.
In addition to the Big 12, PayOGFE is processing for the Big 10, Big South, Conference USA, and the Southland conference, as well as Marshall University and Florida State University. In addition to expanding to the other major conferences, we are looking to add high schools, beginning in Texas. This will further improve our economies of scale.
Player: That's quite an entrepreneurial approach. What caused you to decide to create a service company to meet this need?
Pace: Well, initially we tried to find an existing service company that would provide this service. But, frankly, this type of work does not fit their business model. Companies like ADP or Administaff focus on recurring employees. The very nature of PayOGFE's client institution is in paying officials under an irregular pattern. So it became very apparent that we would not be successful in attracting existing providers.
Next, we examined how the Internet was reducing transaction processing costs in many ways. We then looked at the economies and potential process flows that could be established to facilitate remote data capture and processing. As we evaluated the situation, we became convinced that we could successfully develop the tools to make this a viable service company. We have designed this so that it runs as a virtual company. The key manager works from Arkansas. Input is gathered and processed remotely.
To protect our members, we independently raised the venture funds to launch this product. So far, we are very encouraged by its progress.
Player: It is amazing what the Internet is enabling if we just keep our eyes open to potential innovation. What other innovative changes do you see coming in sports?
Pace: I believe that the fans' appetites will continue to increase as alumni seek expanded platforms on which to watch their favorite teams. The reductions in production costs will open up more sports that are currently cost-prohibitive. This will help lesser-known sports spread to younger generations. It will also provide avenues for better coaching (via the Internet) at an earlier age. This should result in continued improvements in each sport as more kids can pick from a variety of interests.
The advantage we have in live sports is that they provide a constantly changing drama. The outcome of a sporting contest is not predetermined. It will often surprise even the most knowledgeable sportscaster. If you need examples, just look at our football conference championships. I think that you will find this particularly true at the college level, which works to develop athletes and leverage the power of the team.
Our challenge is to continue to think innovatively and to monitor what we have already created to continue to improve. For instance, the current bowl situation will require continued monitoring to make sure that they remain viable for both the schools and the host venues.
Player: Your role seems to require many interfaces with consultants and employees, with colleges and universities, with personnel from other conferences as well as your own. It also seems to span the gamut from high-dollar sports like football and basketball down to sports with little or no external revenues. How do you interface with so many?
Pace: My background in public accounting provided the core of my training in communications. As an auditor, I had to deal with everyone from the CEO to the warehouse clerk. They each played a key role in the tasks I was fulfilling, which I found could be easier or more difficult depending on how I interacted with them.
Later in my career, I did a lot of expert testimony work wherein I learned how to be precise in communication as well as concise in answering questions. Communicating across a wide spectrum of people is a key skill for all finance professionals. This is particularly true as we communicate financial concepts in ways operating personnel can understand.
Player: When you graduated from college, you chose to join a small CPA firm rather than one of the Big Four (or Eight, as it was when you graduated). Why did you choose that path and how has it impacted your career?
Pace: My objective in joining a small CPA firm was the opportunity to take key responsibility sooner. I was eager for advancement. I wanted equity ownership quicker (which I achieved at age 29). Working for a smaller firm gave me the opportunity to work with higher-profile individuals sooner. While our clients may have been smaller, I was working directly with the top executives much sooner. Our engagement teams were smaller, so you had to do quality work as your results were readily apparent.
This exposure to senior client executives provided a quicker platform to other referrals. What I found was that if you did great work, clients would remember you, and referrals led us to some fairly sizable opportunities. Working for a small firm provided a wide variety of engagements, including public and private company audits, government contract reviews, public offerings, and work on three separate multibillion-dollar savings and loans. Working for a small firm provided direct access to entrepreneurs, which helped provide lessons I would later use at the Big 12. It also allowed me to begin providing consulting services as well as attest work.
The lessons I learned in mergers certainly helped me to assist in forming the financial structure of the Big 12. Accounting grads should certainly consider the benefits of a small firm.
Player: Your background is interesting in that it includes being both a CPA and a certified fraud examiner. Has this additional training come in handy?
Pace: Yes. The fraud training helped teach me the benefits of being precise and how to look for things that might not be immediately obvious. It taught me how to be complete and thorough in evaluating situations or projects. This helps in the evaluation of contracts and proposed business situations. It allows us to avoid a lot of potential future conflicts. I like to explain my job as two key components: (1) helping the distributions to member schools grow each year and (2) making sure that the financial side of the Big 12 stays out of the newspaper by running smoothly.
Player: What advice could you provide to those envious of your current situation? What could they do to improve their job satisfaction?
Pace: The first thing I would have them ask is whether they are satisfied with their current job. As I stated earlier, I took a hard look at the amount of travel I was enduring as well as the stress levels. The income might have been higher, but was I really better off?
I also looked at how well I had prepared for this opportunity. I firmly believe that it was this preparation that created the opportunity. I had had an interest in sports since I was a kid. While I quarterbacked my high school football team, I knew early on that my playing days would be limited. This is one reason that I took up golf and tennis, which I still play.
While I was in college, I got a part-time job working for the Dallas Cowboys at Texas Stadium. Most college students can find a similar opportunity if they just apply themselves. The job with the Cowboys gave me a leg up in working for the State Fair of Texas and eventually the SWC. The other work helped me to round out the package.
So I would urge people to think about their dream job. Then evaluate the skills you need to be successful in that job. And then look for the moves that will get you in position. I think that you will also find that the old saying is true: The harder you work, the luckier you get.
Player: One final question: Whom do you root for on Saturdays?
Pace: I root for the teams that are working hard to improve in their sport, but I am also rooting for the ones that bring in the most revenues for the conference.