It wasn't too long ago that being named treasurer was pretty much the end of the road. After all, it's never been too hard to find treasurers who appear to have reached a dead end. They're still contributing to their companies and making nice incomes, but they aren't in the running for executive positions. Instead, they are frequently pegged as experts in foreign exchange, financings, banking products, and so on, and the executive team prefers that they stay focused on these somewhat exotic functions.
What a difference a credit crisis makes. Today, almost daily, companies announce the hiring of treasurers many with nontraditional resumes. Such was the case with Norma Corio, the former head of JPMorgan's restructuring group, who this past August accepted the invitation of JPMorgan CEO Jamie Dimon to take on the role of treasurer. Corio's selection, in her own assessment, was an indication that JPMorgan wanted a dealmaker as treasurer. "This firm should always be focused on funding and capital-raising," she told The Wall Street Journal.
Despite appearances, 2008 may turn out to be a very good year in which to have been treasurer. The tighter credit markets have hammered home to many CEOs the value of strong treasurers and the skills they can offer in helping companies to obtain the financing they need, says Russell Boyle, head of the U.S. financial officers practice with Egon Zehnder International, Inc., a global search firm.
The increasing complexity of the financial markets also has brought the spotlight back to treasury, says Paul Forster, chief executive officer with Indeed.com, an online job search site that closely monitors the supply and demand of finance professionals and the skills they wield.
While Forster foresees a move back to the basic financial instruments, the more complicated ones are here to stay. As a result, having first knowledge of them as well as risks they pose remains a prerequisite for any Treasurer. Still, in light of the economic crisis, the knowledge most valued by company leadership at the moment is how to keep cash flowing through their companies.
All eyes fall on the treasurer. Perhaps, unlike at any time in their careers, treasurers are today their company's point person on the front lines of the credit crisis.
"It turns out that if you have to raise $50 billion, not everyone in the finance organization need to be involved," Citigroup CFO Gary Crittenden recently told Business Finance. "The treasurer has to be involved, and a few people on their team."
For many treasurers, this means that they become the central conduit of information regarding the tightening credit situation and the relative health of their company's banking partners. During the past few months, this role has come under increased scrutiny as the market has been shaken -- along with the confidence of finance executives. Fearful of a tightening credit market and bank failures, certain treasurers have begun hoarding cash by using credit lines they don't actually need. This in turn has put pressure on the banks to raise their credit standards.
A recent survey by the Federal Reserve found that 60 percent of U.S. banks had tightened their standards on loans to midsize and large businesses, while 80 percent of banks had increased the rates they were charging on such loans (see chart).
The bigger the challenge, greater is the demand for strong treasurers. There is no question that a growing number of companies consider the treasurer's role an effective launching pad for the CFO position, given the critical role that corporate financing and refinancing currently play with many firms, says Eric Rehmann, co--managing director of the financial officers practice with recruiting consultancy Korn Ferry International.
This is a shift from the past few years, in which the controller's position often was given top billing, as executives focused on getting up to speed with Sarbanes-Oxley and other new regulations.
John Barpoulis, now senior vice president and chief financial officer, joined USEC Inc., a Bethesda, Md.-based supplier of enriched uranium fuel for commercial nuclear power plants, in early 2005 as vice president and treasurer. He advanced to CFO about a year later.
Barpoulis, who earned a bachelor's degree in physics at Vassar and one in engineering at Dartmouth -- as well as an MBA at Dartmouth -- started his post--grad school career as a financial analyst with U.S. Generating Company, now part of PG&E Corp., which developed, constructed, and operated power plants.
Barpoulis's role evolved from financial analyst to vice president of treasury. All of his positions were instrumental in helping Barpoulis to learn how to manage his current responsibilities, he says. For instance, preparing financial analyses on proposed power plants exposed him to project structuring and gave him experience in supporting and leading financing transactions using both debt and equity. He notes that he helped raise capital for both investment-grade and high-yield projects, for every type of energy project -- including coal, gas, wind, and biomass -- through all stages of the business cycle.
To succeed at his role, Barpoulis had to understand the projects' objectives and operations, while keeping in mind the lenders' and investors' concerns. At the same time, Barpoulis learned the operating aspects of treasury and cash management. "Treasury was a great avenue to understand the company from bottom to top and get exposure to all aspects of the business," he says.
A case in point: Several years ago, when working with banking partners to draw up loan covenants related to the company's investment in a $3.5 billion plant that would employ new enrichment technology, Barpoulis needed to balance management's need for flexibility in running the business with the bank's concerns that the funds be used appropriately.
When issuing a revolving line of credit, lenders want to know that the money will be used for short-term purposes. The company, of course, wants to ensure that it also has long-term financing available to meet its long-term capital needs. One solution was to provide the ability for USEC to incur the long-term debt it needed, while including a limit within the credit facility that caps the borrowing the firm can do if the credit available within the revolver drops to certain level and the company would be spending the money on capital projects.
Admittedly, Barpoulis, who spent about 14 years with U.S. Generating, experienced several years in the mid-1990s when it seemed as though some of his peers were moving into controller positions and then advancing. Such an opportunity didn't present itself, so Barpoulis used the range of projects on which he was working to gain exposure to different projects and financing approaches. "While lateral assignments may seem limiting," he says, "they can broaden your exposure outside of treasury in ways that can help your career path."
Although Barpoulis did end up moving to a new company to get to the CFO role, he says that such a move is not always necessary. What is important, he says, is to continually challenge yourself and to understand how the treasury function will help the organization to meet its broader goals. "You can't just optimize treasury on its own," Barpoulis says. "You need to create world-class operations but do it in the context of the business."
As Barpoulis's experience shows, treasury can play a strategic role in many organizations -- particularly those that have to raise large amounts of money, need access to the global capital markets, and operate around the world in complex organizational and legal structures, Boyle says. The treasurer's role provides exposure to these third parties that most jobs under the operational finance umbrella, such as divisional controller, don't. While such positions are critical, their focus is internal.
At the same time, a treasurer hoping to advance can't let his or her position become a "career unto itself," Rehmann notes. Treasurers typically have five to six years before they need to move on, he says. At that point, they've pretty much seen all of the financings, cash flow, and foreign exchange challenges they need to learn how to manage through them. "If you stay too long, you get to be seen as only a treasurer," Rehmann adds.
"You'll get locked in because you have expertise," adds Jeffery. The objective is to gain not only technical knowledge but also business insight and advisory capability.
Particularly valuable for treasurers who want to move on to bigger and better posts is gaining experience in accounting, perhaps through a stint as controller for a business unit, says Rehmann. This is particularly true for would-be CFOs, who will oversee both areas.
It's usually easiest to get this on your way to the treasurer role, rather than once you're already there, Rehmann adds. Admittedly, this often means stepping outside one's comfort zone and can require relocating. Still, the experience is valuable. "If you can get that experience, it broadens you beyond treasury," Rehmann says. "It gives a good perspective on what makes a business run."
Mark Faurie, recently appointed chief financial officer with Seegrid Corporation, a Pittsburgh-based developer of industrial robots, brings a mix of treasury and control experience to his position. After earning an economics degree from Princeton and a master's in industrial management (the degree now is an MBA) at Carnegie Mellon, Faurie joined accounting firm Ernst & Young on the audit side. In this, he veered from the traditional MBA path into consulting. He reasoned that the audit role would help him both obtain his CPA and later become a CFO.
After 13 years at Ernst & Young, Faurie moved into the treasurer position at Rapidigm, a privately-held IT services firm. He handled most banking activities, as well as day-to-day cash management and tax planning. He also oversaw the due diligence process when the company was sold. "The treasury function rounded out my experience," Faurie says. Given that Seegrid is a start-up, Faurie's experience in maintaining banking relationships and forecasting and managing cash flow is particularly valuable.
Just before taking the job at Seegrid, Faurie spent about a year as CFO at Solar Power, where a large number of his responsibilities focused on the control side, particularly financial statement preparation. This experience also is proving to be critical. "In small companies, in particular, the senior financial person should know his or her way around GAAP. If you come straight through treasury, you may not have that," Faurie says.
One company that appears to clearly recognize the value of CFOs who bring both treasury and control experience to their positions is Avista Corporation, a $1.5 billion energy company based in Spokane, Wash. Ann Wilson currently is vice president and treasurer with Avista Corporation, having been tapped for the role after spending several years in control and audit roles with both Avista Corporation and its energy trading division, Avista Energy.
After earning a degree in business economics from the University of California at Santa Barbara, Wilson, a CPA, worked in public accounting. She then spent several years in internal audit with Egghead Software in the mid-1990s and another stint in internal audit with Washington Water Power, a precursor to Avista.
Wilson next moved to Avista Energy, an energy trading company that now is part of Shell Energy North America (US), L.P., as controller. Her title notwithstanding, Wilson's job responsibilities extended to treasury, as she handled day-to-day cash and liquidity management. "I gained a lot of experience on that side of the house, even though I was primarily a controller," Wilson says. For instance, one responsibility was collateral management, or making sure that the company had the cash or credit facility available to maintain its trading positions.
This led to a promotion to the controller position with Avista Corporation. Because it's a much larger company, with a $200 million capital budget and $1.5 billion in annual revenue, her responsibilities focused on typical controller responsibilities.
Wilson remained in this role for about a year, before switching to the treasury department. "The company benefits from my experience in the controller role, and this lets me get experience as treasurer," she says. For instance, Avista has issued tax-exempt bonds. While the bond term is to 2035, they contain a put provision allowing bondholders to put them back to the company. As a result, they need to be included within short-term debt. "As treasurer, you're more concerned with the covenants of the debt but not the accounting implications," Wilson says. Her experience as controller enhanced her understanding of the issues.
Moreover, having a background and contracts within accounting encourages collaboration between the departments, Wilson says. And, when discussing strategy and financial forecasts, because Wilson intimately understands how Avista has performed -- her focus isn't limited to liquidity and the balance sheet -- she can discuss the future more knowledgeably.
Wilson was chosen as an internal candidate to replace Avista's CFO when he retired. She considered the opportunity, before deciding to take herself out of the running because she preferred to gain more experience first. "This isn't the right time," Wilson says. "Utilities are complicated, and it's a critical time with commodity price pressures, environmental concerns, and the politics around that. You combine this with rate pressure on consumers, and it makes it a critical time for the industry."
However, Wilson definitely sees a CFO role in her future and says that her experience in treasury will be a key attribute, she says. Others agree. "If you're a strong business partner, the skills you will bring as a treasurer are transportable to the CFO role or to head of a business line," Jeffery says.
Treasury Career Guidelines
While the treasurer's office need not be a dead end, treasurers need to carefully plan their advancement plans, experts agree. "You have to be strategic in breaking away," says William Dale, a former treasurer and now chief financial officer with Blue Dolphin, a Houston-based energy company. Some guidelines:
1. Find a way to gain leadership experience, says Craig Jeffery, managing director with Strategic Treasurer. Volunteer to lead a cross-functional project group, such as an ERM implementation. Not only is the experience itself useful, but also it helps to build credibility.
2. If feasible, consider moving to a smaller company, says Russell Boyle, head of the U.S. financial officers practice with Egon Zehnder International, Inc. In many small companies, everyone shoulders a wider range of responsibilities, which can be an advantage in moving ahead. "Look for jobs and companies that will develop you so that you don't get pigeonholed."
3. To gain others' cooperation when working on cross-functional initiatives, you can ask, persuade, and cajole, says Mark Faurie, chief financial officer with Seegrid Corporation. At some point, however, their cooperation may need to be tied to their pay, he adds. Gaining cooperation may be less of a challenge with younger employees, who are more accustomed to business information moving through an organization and aren't as used to hoarding it, he adds.
4. You also need to speak language that people understand, Jeffery cautions. Start throwing around terms like "optimizing working capital," and you're likely to see eyes glaze over. Translate concepts into words that employees who are sharp -- but happen to be experts in other areas -- can understand.
5. It's trite but true: You need to network both inside and outside your firm, says Boyle. Spending even a few minutes talking with colleagues within and beyond the company can be beneficial. This is especially true in a challenging economic environment, as treasurers need to work more aggressively with their colleagues in operations to accurately forecast cash from operations and maximize the cash generated.
6. Gain a partner perspective, Jeffery says. In other words, you need to understand your colleagues' business, as well as how your skills can help them. While a treasurer's primary role may be to secure funding and manage liquidity, your broader role is to help the company achieve its objectives. "You can bring analytical insight and intellectual rigor" to the business operations, he says.