Best Practices and Thought Leadership in Treasury Management

Ahead: Best Practices and Thought Leadership Senior Treasury Management

>

June 2013

Dear Reader,

Welcome to Ahead: Best Practices and Thought Leadership for Senior Treasury Management.

The purpose of this publication is to help senior treasury executives better manage and lead

their team. It’s a timely topic because treasurers are expected to lead as never before.

For years treasurers were expected to provide short-term cash solutions—payroll, accounts

payable and receivable and then invest the rest.

Everything changed with the onset of the 2008 financial crisis. Senior management

demanded more visibility into corporate cash and treasurers responded remarkably well,

providing up-to-the-minute data. Treasurers’ outstanding response during the fiscal crisis was

not lost on the c-suite and board of directors. They invited treasurers into the boardroom and

offered them a growing role in charting corporate strategy.

The post-2008 environment for treasurers, then, is filled with promise and peril. Along with

greater respect within the organization treasurers are expected think and act strategically, to

deploy their staff and the company’s cash more prudently than ever before. Performing tradi-

tional treasury processes are merely part of the new reality. Now, they must lead and inspire.

We hope Ahead will do just that—keep you out in front of these new challenges. It offers

wisdom from the finest leaders in society: the United States military, Silicon Valley and Wall

Street. And it offers case studies from treasury executives across a variety of industries: high

tech, pharmaceuticals and financial services to name a few.

The Association for Financial Professionals, a global network of more than 16,000

corporate treasury and finance professionals, strongly believes in the work that you do. More

importantly, AFP believes in your value as treasurers.

We hope this publication informs and inspires you. We believe that learning from your

peers and intellectual leaders not only will make you a better treasurer. It will make you a

stronger leader.

Sincerely,

Ira Apfel

>

10 Leadership Tips from General James Conway 1

Multiplication 2

Board Games 5

Aim High 8

Following Through 11

Dell’s Virtual Treasury 14

Crisis Management 17

Building Bridges 19

Background Check 22

Don’t Skip a Beat 25

In the Beginning 28

New Ground 30

Ahead: Best Practices and Thought Leadership

Senior Treasury Management>

www.AFPonline.org ©2013 Association for Financial Professionals, Inc. All Rights Reserved Page 1

Ahead: Best Practices and Thought Leadership for Senior Treasury Management

Up CloseBackground: 34th Commandant of the U.S. Marine Corps

Lesson: How to improve your leadership style

By far the most popular speaker at the 2012 AFP Annual Conference was Gen. James Conway, the 34th Commandant of the U.S. Marine Corps.

Attendees sang his praises long after he spoke at the Executive Institute luncheon.

As Conway said in his remarks, everyone in attendance at the event are already leaders in one sense or another or they wouldn’t be there in the first place. Given that, the general gave audience members 10 tips they could use to “tweak” their leadership style. Here they are:

1. Do the right thing. (If you do, then you’ll never have to be looking over your shoulder.)

2. Communicate. (Be careful what you say and how you say it.)

3. Be careful with your old friends. (As you grow successful in your career,

don’t forget your friends. Stay in touch with them.)4. “Power Down” (This comes from tank commanders!

Empower your subordinates, but you are still the person responsible.)

5. Keep your head down. (Stay focused. And stay with your people.)

6. Don’t be a Jekyll and Hyde. (Be steady and constant. Don’t be so emotional that no one knows who they’re going to get on any given day.)

7. Keep your sense of humor. (It goes a long way.)8. Crisis Management.

• Identify the problem• Continue to gather info• Make assumptions• Develop courses of actions (at least three)• Debate• Execute

9. “Officers eat last” (Be gracious. Your staff needs the strength to carry out the plans.)

10. Be a PATRIOT!!So having read this list, are there a few things you might

need to tweak in your leadership style? I know I have a few things to work on!

Craig Martin, Executive Director, Corporate Treasurers Council and Producer of the Executive Institute

10 Leadership Tips fromGeneral James ConwayCraig Martin

>

>

©2013 Association for Financial Professionals, Inc. All Rights Reserved www.AFPonline.org


>

When Multipliers: How the Best Leaders Make Everyone Smarter was published in 2010, the book instantly became a new classic in business

thought leadership. In Multipliers, author and former finance professional Liz Wiseman describes a type of leader that every manager should aspire to be—one who increases the capabilities of everyone around them. The opposite of multipliers are diminishers, according to Wiseman, those who reduce the capabilities of their colleagues.

Getting the most out of staff is particularly important to treasurers, who are enjoying an increasingly high profile in the office. Wiseman, recently spoke with AFP.

MultiplicationAn interview with Liz Wiseman, author of best-selling MultipliersIra Apfel

Up CloseBackground: Ex-finance practioner

Lesson: Leaders ask probing questions

>

XX



AFP: First question: What made you want to switch from finance to doing research and consulting about leadership?

Liz Wiseman: Well, the transition started earlier. My undergraduate degree was in finance. But I just had this interest in studying the learning and the people side of business. And so, when I went back to graduate school, I studied organizational behavior and I went to work for Oracle where I put my finance work to heavy use, but it was in managing a really large budget. Then they asked me to leave the company’s learning and development function, and I led Oracle University for a number of years. And that’s when I got to really not only be in management myself but study leadership and the people around me.

But when you move into management roles, your value starts to come from a different place, and instead of being the one to have the answers, your primary value comes from asking the right questions and pointing your team and the people around you to the right problems so that they can come up with the answers. And it’s a really difficult shift for a lot of us to make.

Tim Brown is a CEO of IDEO global design firm, and I think he said it really well. He pointed out that as leader, probably the most important role we can play is asking the right questions and focusing on the right problems, and he points out that it’s very easy to get sucked into being reactive to the problems and questions that are right in front you. And certainly, if you run a treasury operation, it’s very, very easy to do this. But it doesn’t matter how good the answer you come up with; if you’re focusing on the wrong questions, you’re not providing the leadership you should. And I think one of the fundamental shifts that leaders can make to be more of a multiplier is shift out of the mode of having the answers, start to ask the questions and let the people around you find the answers.

I find that the easiest way to do this is to see if you can lead something, a one-on-one, a quarterly business review, with nothing but questions—I call it the extreme question challenge—and I’ll say more about that in October. What if you could only ask questions, could you lead? Could you get your team to the right answer?

AFP: Folks who are not used to doing this may fear that they’re delegating too much authority or maybe being passive-aggressive and not being “leaders.”

Wiseman: Oh, sure. I think there are some people who said, “Wait a minute. If I’m not the one who has the answers, where is my value?” But I think it’s the fundamental role of leadership. And if you want to be the one to have all the answers, you best serve your organization by staying in an individual contributor role, an analyst role.

AFP: Based on your experience as someone who used to be in finance, where are opportunities to act as a multiplier with your staff and to ask those questions that get them thinking and raise the knowledge of the treasury group?

Wiseman: Because I began my career in finance, I do understand that there is a lot of routine and cyclical work. I think my first job was resolving audit errors. If you’re in an environment where there’re a lot of routine transactions and

X “When you move into management, your value starts to come from a different place, and instead of being the one to have the answers, your primary value comes from asking the right questions and pointing your team to the right problems so that they can come up with the answers. And it’s a really difficult shift for a lot of us to make.”

AFP: What would you say would be the first step to help treasurers improve their multiplier skills?

Wiseman: First, you have to ask what is a multiplier? A multiplier is essentially a leader who uses his or her intelligence, knowledge, skills, capabilities, business acumen, financial acumen and intelligence to amplify the intelligence of people around them. People around multipliers are able to use all of their intelligence and to grow, that they literally get smarter and more capable. And in terms of becoming more of a multiplier, there are a couple of fundamental shifts that are helpful, that are just at the core of all the things that we found that multipliers do. The first is making a shift from having answers to asking questions.

When I began my career in finance I was a cost accountant for IBM. When you’re in a role like that, your job is to solve the problem, to have the answers, to come up with the data.



you want to play the role of challenger and be a multiplier to your team, you might think, “How do I give people harder work, problems they’ve never solved before? How do I raise the class of challenge that I’m giving to my team?” This forces them into a mode where they haven’t solved this problem before. So, rather than just do more of the same, we’ve got to re-think and we’ve got to step back and reflect on how we grow intellectually.

Few professions develop greater capability by doing more of the same type of work. You know, if you throw more knives at a knife juggler, they get better at what they do, but for the rest of us, we have to be given harder problems. And so, when you’re in this environment of transactional, cyclical work, I would encourage managers to step back and say, “How do I give people harder problems?” Or another way to look at it is, “How do I supersize someone’s job and give them a role or a piece of work that exceeds their capability above their pay grade, so to speak?”

And that’s the way that a multiplier gives out work. They supersize someone’s job and give them a role that’s a size too big, like, okay, you’ve never tackled these kinds of problems before. They up-level it, so they’re doing more challenges, not just more of the same type of work.

AFP: I’m wondering, how can treasurers act as multipliers when they’re reporting to senior management or the board, or should they even try?

Wiseman: You know, it’s a fabulous place to take on the role of multiplier. A multiplier is someone who uses their intelligence to amplify their intelligence of people around them. It’s not a model of, “Gee, I don’t know what we should do. What do you think?” It’s coming to the table to the executive committee with all of your own intelligence and ideas and using that to catalyze intelligence and ideas in others. It may be bringing in a recommendation, but then

also asking for other people to weigh in on that. It might be holding a debate.

You know, we find that what multipliers do is they tend to frame issues and let people weigh in and debate. I was part of Oracle’s management committee and sat in on a lot of these management committee meetings and executive committee meetings, and I noticed that when people would come in to participate in those committee meetings, the most senior-level leadership, the ones that did well came in prepared, they came in with a point of view, but they came in willing to learn from the other senior leaders or from the more senior leaders and willing to engage their intelligence as well.

Let me give you what I think is one of the finest examples of this. I was doing a little bit of coaching work at Apple, and I got this assignment which was to work with an executive to get him what they called “Steve-ready” or “Tim-ready.” And what that meant is, help work with this person to get them ready to go in and present or pitch to Tim Cook and Steve Jobs, which is a bit of a hazardous assignment.

AFP: I’ll bet!Wiseman: So I went and talked to people who were really

good at this and I asked one executive, “How do you work with Steve?” And he said, “When I need to go to Steve, my team and I, we do our very best work and we put together a plan and I take it to Steve. ‘Steve, here is what we’ve done. Here is our proposal. What can we do to make this better?’”

Well, Steve engages. He knows what to do with that question. And he doesn’t look the executive like, “Gee, you haven’t done your job.” He’s like, “Wow. This is a sandbox. This is playtime for me.” And the executive walks out with his team’s best work made even better by utilizing the genius of the people above him in the organization.

>



Board GamesInteracting with the board of directors is a demanding but essential task for treasuryAndrew Deichler

The current business environment has forced treasurers to expand beyond their traditional duties, adding financial planning and analysis and accounting,

among others. Despite the added workload, treasurers’ core responsibilities must remain the top priority so they can adequately prepare for the one group whose focus is squarely on the bottom line: the board of directors.

So says Peter Copestake, Executive at Residence at Queens University. Copestake certainly knows what boards want to hear from treasurers, and vice versa. A former treasurer of Manulife Financial Corp. and chairman emeritus of AFP of Canada and the Society of Canadian Treasurers, Copestake currently serves on several boards, including the Board of Directors of the Canadian Derivatives Clearing Corp. and member the Board of Directors of Manulife Bank.

Copestake explained the three types of interactions treasurers have with their board: the first two are formal and occur monthly, quarterly, or annually, and the third is offsite.

Up CloseBackground: Peter Copestake is a former treasurer of Manulife Financial Corp.

Lesson: Treasurers today must expect to interact with the board

>

>



In the first type of interaction, the treasurer comes before the board, usually once a year, and presents the areas for which he or she is responsible: the policies, compliance with policies, and any kind of material risks. This also is a good time for treasurers to tout some of their successes, he noted. This interaction is really more of a presentation and should contain minimal discussion.

The second type of formal interaction concerns transactions. Most treasurers are responsible for the liability side of the balance sheet, including all of the funding interactions that treasury has with counterparties. In public markets there are many material issues that the board has to approve, and those transactions are very formalized.

Similar to aforementioned formal board report, Copestake noted that the treasurer does not want much discussion during these interactions. “You don’t want discussion at a board level—trust me,” he said. “All of your managers—your CEOs, your CFOs—will have their own views on how to communicate with the board, and you’re part of that team so you also have to put the messages out that they want to deliver as part of your message.”

Offsite, informal meetings with the board in which treasurers discuss the inner workings of the company comprise the third type of interaction for treasurers. Copestake noted that this might be the most important interaction because it is truly where you gain the confidence of the board, as well as your fellow managers. “I would advise everybody to try to have—at least once a year—an offsite meeting with their boards to talk about what treasury does and what risks they manage, and how the plumbing works in the organization,” Copestake said.

Copestake explained that it is absolutely essential that the boards and upper management understand how the “plumbing” of the organization works. “If they don’t understand that, they don’t understand the business,” he said.

Treasury needs to display the mandate, the performance, and the value added to the board. Copestake urged attendees to adhere to a value-added model because all treasury departments have goals at the board level. Rather than characterizing treasury as a cost center or a profit center, Copestake views it as an economic center. “An economic center is where you add value. Sometimes it’s the operations group that you are adding value to but it never shows up in your bottom-line,” he said.

Treasurers must also communicate foreign exchange issues to the board. Copestake noted that Manulife’s FX polices were primarily concerned with maintaining lower volatility in its capital ratios. “We decided to hedge our capital and leave our balance sheet and income statement open to a broad range. It’s naturally hedged because it’s a global book; we’ve got every currency in our book. So, what we’re exposed to—because we’re Canadian reporters—is capital adequacy and the impact of U.S. dollar foreign exchange on our capital levels. So an appreciating U.S. dollar was good for us. But a depreciating U.S. dollar—we had to hedge against that,” he said.

Capital funding and management also need to be addressed in the board room, because they are the “end all, be all” for companies all around the world, Copestake said. It is important to ease the board’s anxieties over capital allocation, but still make them aware of the risks. “You’ve got to manage legal entity flows; where is the money going ‘up’ and where is it going ‘down,’” said Copestake. “We call that capital mobility and I think it’s one of the biggest challenges for treasurers going forward. When I’m discussing it with boards, they always think they can see their reports on a consolidated basis, and they don’t understand there are separate entities down there, each of which stands alone, has its own taxes and regulators, etc., and they all need their own capital. Everybody thinks of

Key issues treasurers need to focus on in the formal meetings with the board start with liquidity management and the policies that surround it.

Formal presentationsKey issues treasurers need to focus on in the formal

meetings with the board start with liquidity management and the policies that surround it. “We have to communicate that the board has approved of the policies, that we are compliant with the policies, and where our positions are, relative to the policies,” Copestake said.

it as a pot; it is an important role for the treasurer to say, ‘You’ve got 300 pots here, not just one.’”

Clearly, almost every treasurer is involved with operating cash flow, so they must bring that before the board. Other issues treasurers might need to discuss include cash management systems, travel and entertainment, payables for vendors, internal audit issues, and fraud prevention. It is

>



also important for treasury to show the board its efficiencies; every department has targets and when you meet them, you want to highlight those achievements. “This is the plumbing; how it sticks together,” Copestake said. “But you have to encapsulate it in a small way.”

Importantly, Copestake added that treasurers have a legal responsibility to discuss treasury’s compliance with policies and current risks that the department is taking. “You might get pushed by your CFO, or the CEO might say ‘I want to paint this great picture.’ Some companies are like that. But you’ve got to make sure that your job is covered,” he said.

Informal presentationsFor the offsite, more relaxed meetings, Copestake would

explain to board members what treasury does. “We’d all meet, in some nice resort somewhere, sipping on our cocktails, and I’d explain, ‘This is what we do. This is how treasury works,’” he said.

At these off-sites, Copestake showed board members

The 3 Treasury/Board Interactions

1. Formal, on-site, annual presentation. Treasurers present their responsibilities to the board, including policies, compliance with policies, and any kind of material risks. Also a good time for treasurers to tout successes.

2. Formal, on-site, monthly and quarterly presentations. Transactions that must be approved by the board. Treasurers present the liability side of the balance sheet, including all funding interactions that treasury

has with counterparties.

3. Informal, off-site, infrequent interactions. Treasurers discuss the inner workings of the company with the board. Possibly

the most important treasurer/board interaction because it is where treasurers gain the confidence of the board. Try to have at least one a year to educate the board about treasury’s role and functions.

the customers who presented the company with money that they would eventually want back, investments run by the investment division, business units making sales and dealing with customers, and treasury operating the flow of the cash between all of the different groups. From there, Copestake would discuss the different ways treasury would receive funds, how those funds were allocated, asset liability management (ALM), hedging and trading programs, raising money internally, funding subsidiaries, all in a simple model.

“That’s how I described what I did and it was pretty encapsulated. It’s not for formal board meetings; it’s for off-sites and for your management team,” he said.

Following the financial crisis, boards have become more panic-stricken and met with treasury more frequently in order to get pertinent information quicker. “Are the risks appropriately covered off, and have they been properly addressed? What are the contingencies? What’s our backup? All that stuff became more paramount,” Copestake said.

>



Alison Cornell has her sights set on being the best CFO on the planet. Cornell, CTP, is chief financial officer for Covance Inc., a $2 billion public drug

development services company in Princeton, NJ, with global operations in more than 30 countries.

Cornell is driven to achieve success in her career, helping her company be successful and sharing of herself. Her self-described “out there” approach to her job and her coworkers helped earn her several Covance Senior Management Awards: Torch of Strength Award in 2006; the Process Award in 2007 and again in 2010; and the company’s People Award in 2011. Even before assuming the post as CFO, in her former role as a vice president at Covance, Cornell had 365 reports located around the world, and met with each of them over the course of a year, either in person or by telephone.

“I would send to them questions in advance,” Cornell explained. “I would ask: What challenges are you facing? How can I help? And what are we doing to develop you?

Aim HighCFO Alison Cornell, CTP, sets high goals for herself and othersDavid Weldon

Up CloseBackground: Alison Cornell,CTP, is CFO of a $2 billion company

Lesson: Leaders meet all staff in person

>

>Alison Cornell meets with women and children at a clinic in Nepal.



The conversations helped me to understand each person as an individual—their strengths and motivations. After each meeting I created action items, and I took action right away.”

Those action items took a variety of forms —literally anything that would help the employee better do their job. It was a totally different experience for employees, many would confirm, and was why Alison won the People’s Award.

Cornell joined Covance in 2004 as vice president of the company’s Late Stage Development Services, where she was responsible for the finance activities for Covance’s Phase II-IV, cardiac safety and interactive voice response services. She was a key member of the clinical development leadership team, and played a critical role in transforming that business into a major growth driver for the company. Cornell successfully designed and executed programs that significantly decreased day’s sales outstanding and also has been a driving force in the evaluation and lowering of the company’s capacity and cost structure.

In 2010, Cornell was promoted to vice president of Global Financial Planning and Analysis, where she was responsible for 75 percent of Covance’s worldwide finance staff, end-to-end financials, value-added business analytics, business development, controllership, resource management and contract management. She was promoted to CFO in 2012.

For all of her efforts, Cornell was recently named one of New Jersey’s 50 Best Women in Business by NJBIZ, a weekly business journal for New Jersey.

Starting out

Cornell originally wanted to be a clinical psychologist and graduated with high honors from Rutgers University with a degree in psychology in 1983. She later earned her Master of Business Administration from Rutgers in 1998, graduating with honors.

Cornell completed her undergraduate studies in just three years, taking an unpaid internship at AT&T her final year. When a formal hiring freeze was lifted, she was able to secure the first available full-time job, working in the finance department as a systems analyst and designer.

That was the start of her professional career. Cornell later became an auditor at the firm, and then a senior internal auditor. In 1988 she was promoted to manager of performance metrics, marketing and sales operations in the Data Systems Group. That led to the position of forecast manager for a year, and then district manager of Business Network Sales. It was at AT&T where she met her husband, David De Yong, III, an IT project manager. They’ve been

married more than 21 years.Cornell recalls working at AT&T to be a very political

environment. “As a woman in finance, you needed to do two to three times the amount of work that a guy did,” she recalled. “But I decided if that is what it is going to take to make it to the top, that’s what it is going to take.”

In 1994, Cornell was promoted to division CFO at AT&T Business Network Services, a role she would perform for four years. She then assumed the role of financial vice president of forecasting, performance and investment analysis until 2003.

Cornell then decided to take some time off. She earned her Certified Treasury Professional status from AFP and obtained her six sigma green belt. Since she had received a generous financial package from AT&T, there was no hurry to take her next job, she explained.

She would look for the right company for her, one that offered her the opportunity to achieve the career goal she had set for herself almost 10 years earlier: to be the CFO of a publicly traded company.

Eventually, Cornell interviewed at Covance. When she met with the CFO, she shared her career aspirations, which essentially meant she ultimately wanted his job. As luck would have it, the company was looking for a successor to the CFO, a role Cornell would assume in May 2012.

NepalCornell was nominated for the NJBIZ Top 50 Women in

Business Award by Susan Reed, an executive at Resources Global Professional who had several employee placements under Cornell at Covance. Reed knew her from her previous position at AT&T.

The nomination to New Jersey’s top business women did not come as a surprise; Reed had to tell Cornell about it for contest purposes. The challenge was how to accurately and adequately capture Cornell’s varied career contributions, and in particular, the latest chapter of her life—Nepal.

Cornell is executive sponsor to a maternal and infant health program, sponsored by the Covance Charitable Foundation and operated by CARE Nepal, designed to help women in Nepal gain control of their reproductive health. Cornell recently returned from a trip to Nepal, where Covance is helping to establish 15 birthing centers in two of the poorest regions of the country. Nepal has one of the highest infant mortality rates in the world.

“We decided to focus on Nepal because they have one of the highest infant mortality rates,” said Cornell. “They



have poor healthcare; a poor educational system; and most people are impoverished—all the things that lead to high infant mortality.”

A year ago, Covance met with officials at CARE to launch efforts in Nepal. Covance had just finished a four-year program with CARE in Rwanda.

“When that program wound down, we went back to CARE and said, what’s next?” Cornell said. Covance placed three criteria on its next endeavor: that company employees could get directly involved; that the program be sustainable after Covance left; and that the efforts have a ripple effect through the larger community.

In 2012, Covance began assessing what was needed most to help women have safer deliveries. The needs were many—but above all, clean and sanitary facilities, staffed by skilled medical professionals. The company has committed $300,000 over three years toward the efforts, and a variety of fundraising efforts are slated for this year to supplement that. Work on building centers began in 2012. Covance also is making an impact on the educational front.

“One of the reasons that many girls drop out of school at an early age—12-13 years old—is because they don’t have separate bathroom facilities for boys and girls,” said Cornell. Covance is therefore devoting some of its efforts to building new bathroom facilities in a number of schools.

To ensure that its efforts are bearing fruit, Covance organized the recent trip for six employees, including Cornell, to spend a week traveling through the region where

the centers are being built or planned. “It was a very eye-opening and rewarding experience,” said Cornell.

The good news: efforts were going well, women were organizing to form support groups around the center, and CARE was being very frugal with the money from Covance. This “ambassador tour” will be repeated each year, for the next two years.

Big goalsThat Cornell should now find herself in an ambassador

role for Covance comes as no surprise. It is in the areas of communications, diplomacy, negotiation skills, and advocacy that she feels she really excels. She also claims to use her psychology degree “every day.”

Cornell has mentored several senior women executives, helping them to develop and execute on their own career plans, and has actively participated in the Financial Women’s Association. To other women in the financial field, Cornell advises that they set their sights high, not to settle for second best, and be prepared to work very hard. “Believe in yourself: you own your career,” she said. “It’s up to you to define what that career will be. Have a goal in mind, and set your mind to it. Take advantage of every opportunity given to you, and be open to the fact that there may be bigger plans in store for you.”

Added Cornell: “My goal is to be the best CFO on the planet. I still have a lot to learn. I believe God has a plan for each of us, and that you’re where you are for a reason.”

“Believe in yourself: you own your career,” she said. “It’s up to you to

define what that career will be. Have a goal in mind, and set your mind

to it. Take advantage of every opportunity given to you, and be open

to the fact that there may be bigger plans in store for you.”

>



Fundamentally, long-term business success is rooted in the quality of the underlying business plan and the coordinated execution of the plan.

From a company’s leadership team through the entire organization, there needs to be buy-in and cooperation to help achieve the short, intermediate and long-term goals laid out in the strategy.

Needless to say, the ideas that drive a company’s corporate strategy and goals are vital. It’s what we at United Capital call the “Strategic Framework.” 1

How to move from setting goals to delivering resultsGary Roth

Following Through

Up CloseBackground: Gary Roth is CFO of United Capital Financial Advisors

Lesson: Leaders obtain buy-in on short and long-term strategy

>

>



Too much or too littleIn addition to creating a strong business plan, managing

the successful execution of the plan requires vigilant monitoring and responsiveness to the potential need for course corrections. With the challenges and opportunities that arise on a daily basis, it is easy for business leaders to abandon their own strategy when making day-to-day decisions that could impact the longer-term outcomes for the business itself.

When the business plan is ignored, it renders the strategy meaningless; it’s something you file away to collect dust. It’s not uncommon for leaders of the firm gather for some sort of strategic summit. The goal of these planning meetings is to set the agenda for the coming year, and is typically commemorated by some document intended to serve as a guide. Unfortunately, too many businesses fail to refer back to these documents during the following time frame. Without regular monitoring, the goals set at these events are bound to be met with failure. If they are somehow achieved, it is because of luck or coincidence.

On the other hand, there can be a tendency to over-adjust—to meet every week and ask, “What are we going to do now?” --not giving projects or initiatives an opportunity to develop or work. This is particularly true in companies that are high-growth oriented. Revising your strategy too often can create overreactions, confusion and chaos among the company leaders and employees. The goal should be to review your strategy on a regular enough basis that you can make adjustments that can help you achieve your company’s priorities, but to not review it so often that you wind up lurching from strategy to strategy throughout the year.

Your right fitA framework to consider is to convene once or twice

per quarter. If meeting twice a quarter, the mid-quarter discussion should be a review, not a course correction, unless there’s something seriously wrong. Then, when reviewing at the end of the same quarter, plan for what you are going to do for the next, while reviewing the wins and losses from the previous three months. Weekly meetings may be considered, to talk about how the company is operating at the granular level. The main point is to avoid making strategic shifts unless there are drastic internal or external circumstances that call for it. This is being saved for the strategic discussion on a quarterly basis with everyone whose voice should be heard—the CEO, C-suite, middle

management team and the employee set. If a significant corporate development is made, all parties should be aware of the shift, and agree to do it and understand the impact.

Communication is (still) keyQuarterly meetings offer a more controlled setting

for proper feedback. Honest feedback is needed so an organization can make adjustments on a semi-regular basis without getting to the end of the year and asking, “What happened?”

A few major principles:• Convene a more diverse group of employees than

you might normally consider to ensure your strategy meetings welcome different voices and ideas.

• Don’t have the CEO lead each meeting; he/she should be a participant too. Consider bringing in an outside party; it is important for the CEO to hear varied opinions and ideas.

• Questions to continually ask include:- What have we learned about our strategy in the last

quarter?



- How have we changed the field of play in our favor in the last quarter?- How did we fall short of our potential in the last

quarter?From those three questions, derive what changes, if any,

you should make to the strategy. As you address those three critical questions, you’ll find yourself learning what worked and what didn’t work. By taking the extra step and inquiring about how you changed the field of play and what was learned during the course of business, it can help determine what necessary changes should be made. It forces you to keep the design of your strategic plan front and center.

As a CFO, reporting is in my DNA. Making sure others adopt a unified reporting mechanism isn’t easy, but implementing a system of some sort is critical for success.

Even if you’re only on track for two or three big goals for the year, they do cascade through the organization as important tasks to complete.

Keep a paper trailAs a CFO, reporting is in my DNA. Making sure

others adopt a unified reporting mechanism isn’t easy, but implementing a system of some sort is critical for success. Even if you’re only on track for two or three big goals for the year, they do cascade through the organization as important tasks to complete. Appoint a leader or representative of each department to be held accountable for the initiatives under their stewardship that support the execution and the completion of the strategic goals. Ask, “Are we on or off track,” “Have we achieved our goals,” and “Are there any adjustments that are needed?” Each question helps support and accomplish the top-level goals.

A living, breathing tracking mechanism like a dashboard that shows who owns each initiative helps clarify matters. Rank each in priority; how important are they in terms of impacting and meeting goals? If necessary, what can be ignored for now? In the end, this report can be reviewed quarterly and items can be added, removed or adjusted.

As a business graduates from a start-up to established or even a leader within its industry, the complexities can then come from every corner. The ability to track achievements, wins and losses will help keep everyone laser-focused, honest and concentrating on the task at hand: delivering results.

This execution plan is relevant to a wide range of growth- oriented companies and those with a management team large enough where the coordination and alignment is important.

Gary Roth is chief financial officer at United Capital Financial Advisers, LLC. He is responsible for the execution of the company’s business plan and for coordination among the key operational functions of the company. He serves on the executive committee and the board of directors.

1. The structure we use is based on “The Breakthrough Company: How Everyday Companies Achieve Extraordinary Results,” by Keith McFarland, Random House/Crown, 2008.



Global Treasury Structures

Dell’s Virtual TreasuryCompany 4: Dell’s Virtual Treasury

Dell’s organizational model takes treasury into the

next generation. While many companies start by re-

gionalizing, then fully centralizing (with some hybrid

execution), this technology giant has moved a step

further, dispersing decision-making through power-

ful technology. While treasury is a fully centralized

function, it’s not necessarily run out of the U.S.

Treasury leaders head regional groups all over the

world, and even staff in the U.S. can work frequent-

ly from home.

Up CloseBackground: Thomas Luttrell is treasurer of Dell

Lesson: Fully centralized treasury need not be run solely in the U.S.

>

>



Luttrell reported. They have partnered with the rest of fi-nance in this center and have been very pleased with the local talent pools. “We have more of our cash planning activities taking place within the regions, but the actual positioning and movement of cash comes from the center of excellence.” The company is currently experimenting with how it would work were the cash planning to be handled by at the center of excellence as well. “Right now liquidity planning is handled regionally with globally consistent standards.”

Capital Markets and FX are run out of the U.S. The com-pany needed to have market-facing people during the New York trading hours. Debt funding is also primarily done from the U.S. headquarters, but local needs are handled on a regional basis. The supply chain finance program is run out of Asia in order to be closer to the bulk of the end users.

“We are continually thinking through the right balance of practicality and efficiency while looking for ways to get dif-ferent treasury experience into other parts of the world for the purpose of career development,” Luttrell said. To enable leadership to work effectively in foreign locations, treasury has undertaken a deliberate staff-development effort, and has worked to develop staff globally. “We want people to get a global experience,” he said. That does not necessarily mean living abroad, “but having teams on global projects cooperating closely.”

VirtualizationUltimately, this treasurer foresees the actual location of

staff and leaders will become less relevant because infor-mation flows are seamless globally and the technology to support everywhere-access is already present. “In the U.S., we don’t have any real offices for treasury. There’s open seat-ing and most people work from home a couple days a week based on where they can work most efficiently.” Conse-quently, there’s really no need for people to be in the office full time anymore. “We do stay tightly connected to our adjacent functions,” Luttrell said. “We balance physical and virtual connectivity to make sure we operate effectively.”

Everything, including trading, can be performed regardless of location. And the organization-wide emphasis on a global view means there are deliberate communication mechanisms in place to facilitate collaboration regardless of location. The treasury management system is running securely within the company’s network walls. This enables users to log-in and execute their approved level of trade or payment.

OrganizationDell has completely centralized its treasury operation, but

it runs key functions out of various locations around the globe and has lost any resemblance to the typical U.S.-based organization. “We are a global treasury unit,” explained the incoming treasurer, Thomas Luttrell. “We have people scat-tered around the world with some regional concentration as well as several ‘one offs.’” Primarily, the company handles treasury activities and decision-making through centers in the U.S., Europe, and Asia, but there are also locations around the world with a smaller local presence.

Corporate treasury has decision-makers or process heads based in the regional centers from where a global process will be led. Historically, it has done a journey from transaction-oriented to more strategic treasury operations. “With better systems and processes, we’re able to support a big, complex organization with fewer touch points and more throughputs, allowing greater time for the more strategic projects,” accord-ing to Luttrell.

Initially, core-type treasury activity was centralized in the U.S. But to better serve its internal customers, “we shifted closer to the end user process,” Luttrell explained. This move-out to the regions has been unfolding, particularly over the last couple of years as the company implemented a global treasury management system.

As a result of this technological shift, “we’ve been able to put in place more consistent global processes and have better visibility to our global cash,” he said. The globalization has meant treasury operations, regardless of location, “are all talk-ing about the same things. People are on the same page.”

Luttrell acknowledges that some organizations have strived to leverage their payments factories/SSCs by co-lo-cating treasury activities and talent in the same geographies. His organization elected not to go this route. Instead, the company is relying on tight global connectivity to develop a very virtual model.

What’s Where?The treasurer is based in the U.S. with senior reports

based in different locations.Cash management is handled out of Europe. One recent

change, which perhaps stands out, is the shifting of cash management leadership outside the U.S. to Europe. “We have moved most of our cash management activities for the world into a European center of excellence,”



Luttrell realizes the hybrid model, with less emphasis on physical presence, has its challenges. “What we have to find out over time, as you change people’s roles and bring in new talent, is whether you can make the relationship and con-nections of working across function transferable,” he won-dered. So far, “people are very adept at it; they like it. We’ve given people flexibility within the work environment.”

As a treasurer, Luttrell acknowledges that the fact his staff is scattered globally requires a thoughtful approach. “When we meet, we expect that some people will be in the room and some on the phone.” So, yes, there has to be some adjustment, and “you have to be deliberate about it and put in place some formal communication to ensure they’re on the same page. After all,” he said, “the flow of information is 24 hours a day.”

As a result, it’s not unusual for staff in different parts of the world to have reporting relationships with someone on another continent. The company runs a matrix organiza-tion: “We’ll run these functions that report to a functional leader, but we have site leadership as well, where more developmental work is done on a site leadership model.”

Pushing ForwardWorking toward a truly virtual model is one of trea-

sury’s main goals. “As we continue to evolve our systems, we are able to improve efficiency and standards across the world. That may mean roles are able to shift their loca-tions with time,” Luttrell said.This means product and service suppliers to treasury have to adjust their practices as well. Banks can be surprised when they show up to this company’s headquarters location expecting to talk about a range of topics that may have been traditionally hosted in a headquarters location but are now in differ-ent locations.

The businesses are also connected into the same tech-nology. Working out of distributed locations around the world, “we have good integration with the business across a number of functions to help forecast the cash flows of our receipts and disbursements.” Luttrell can’t overesti-mate the importance of a global, single system. Because so many people are feeding information into the same database, “we can get a good look at liquidity, beyond a positioning type timeframe.”

Luttrell realizes the hybrid model, with less emphasis on physical presence, has its challenges. “What we have to find out over time, as you change people’s roles and bring in new talent,

is whether you can make the relationship and connections of working across function transferable,” he wondered.

>



The sovereign crisis in Europe has highlighted the need for sound operating practices in the region. To withstand the crisis and its possible adverse

outcomes, companies need to ensure continuity of operations by protecting and mobilizing liquid assets, securing funding, and managing foreign currency exposures.

Banking consolidationAs a result of the merger between Stanley Works and Black &

Decker in 2010, Stanley Black & Decker became an $11 billion company with approximately 30 percent of its revenues generated in Europe. The merger brought duplication across most of the European continent, with multiple cash pools and number of local banks and bank accounts. The complexity of the European banking landscape did not allow for control over the regional cash, and with an ongoing financial and sovereign crisis the company embarked on a project to streamline its liquidity and cash management in Europe.

In today’s uncertain times, treasurers not only need to know where the cash is but also how to access to it. Structures need to be put in place to ensure cash is moved and stored in a country where lower risk exists. At Stanley Black & Decker,

Crisis ManagementHow one treasury group navigates European operationsKen Shuyama, CTP

Up CloseBackground: Ken Shuyama, CTP, is director of international trreasury for Stanley Black & Decker

Lesson: Social fundamentals are the best—sometimes only—way to resolve a crisis

>

>



the choice was to consolidate the multiple pools into cash concentration structures (zero-balance) with one bank. While the winning bank was chosen due to its track record of service, leading cash management platform and connectivity with our company’s ERP, having low European sovereign exposure became equally important for the decision. Great systems and liquidity structures are irrelevant if your bank faces interruption of service due to financial stress.

Zero-balance structures allow local clearing in each participating country with real-time sweeping that moves funds to the header account. The advantage of this setup is that cash physically moves to the legal entity and country of our choosing. In comparison, notional pools allow the movement of cash to a selected country but, each participating entity remains the owner of its cash.

Zero-balance or notional pools are not the only way to secure the regional cash. Since these structures take time to implement, a short-term solution is to use simple sweeps from a local account say in Greece or Ireland to another account owned by the same entity in another country such as the UK, The Netherlands or Germany. This mechanism protects the value of the deposits entities in troubled countries from the potential departure from the euro and the subsequent devaluation of a newly introduced currency.

Access to creditAs many European banks repair their balance sheets, access

to credit suffered. Consequently, weaker banks face increased funding costs during a time funding is scarce to begin with. This impact naturally trickles down to companies operating in the region—it could be your company, your customers or your suppliers. A full shutdown of credit has not occurred but, banks are shifting their lending to creditworthy clients.

Companies operating in Europe may want to accelerate the collection of cross-border invoices particularly from clients in troubled countries; likewise, companies want to ensure continuity of their supply chains. Receivables financing helps accelerate settlement of receivables and in doing so, companies reduce or eliminate the cross-border collection risk and have access to funds otherwise not available until the invoice’s due date. In a receivables financing program, participating suppliers issue invoices to the company according to payment terms. Through a bank, the company identifies the invoices that are ready to be paid and the supplier can choose to receive payment before the due date, at a discount. The accelerated collection serves as a supplement to short-term credit in troubled times.

Managing foreign currency exposuresAn adequate foreign currency hedging process starts with

the collection of underlying exposures across the company. Many multinational companies have offsetting trade flow exposures that allow for a reduction of the residual net exposure to a currency. It is easy to identify natural offsets when two subsidiaries have the same currency pair exposures going in opposite directions. However, complex supply chains bring exposure combinations (currency crosses) that make the calculation of the net exposure to a currency more difficult.

Netting of exposures is achieved when each exposure is split in its two components (short and long) that are translated to a common currency (typically USD). Companies with diversified supply chains and markets may see significant reductions to their exposure when compared to their gross exposures. Moreover, exposure netting helps prioritize the currencies to focus on and determine the necessary level of hedging.

When dealing with Europe in its current state, it is important to not only understand trade flow exposures as indicated above but also, understand other types of foreign currency exposures resulting from non-operational activity. The use of intercompany loans among subsidiaries creates additional exposures that are often hedged. Even though intercompany loans between two euro functional subsidiaries do not create foreign currency exposures, treasurers need to pay attention to the country within Europe where the subsidiary is. A subsidiary within a country that may end up leaving the euro would have all its intercompany balances, including loans, with other euro functional entities become foreign currency exposures.

Additionally, leaving the euro may mean that subsidiaries in such country may not be able to repay their euro-denominated loans. Knowing the potential impact of a country breaking away from the euro and devaluing its newly created currency will determine whether action is necessary to change the way the affected subsidiaries are funded.

Even without knowing how the European Union and the euro will look like in the future, treasury departments need to understand that Europe is no longer the stable and relative low risk environment that it used to be. Solid treasury practices and processes are always important; during these times, they may be the only way to navigate the crisis.

Ken Shuyama, CTP, is Director of International Treasury for Stanley Black & Decker, Inc. He spoke about treasury operations in Europe at the 2012 CTC Global Corporate Treasurers Forum.

>



Building BridgesMaking strategic planning workTrac Pham and Jeff Morrison

When it comes to plotting long-term growth in a fast-changing environment, an inflexible strategic plan is highly vulnerable to collapse. Companies

that consistently fail to attain their long-term goals rarely suffer from a shortage of good intentions. Instead, the usual suspects include:

• No strategic planning and/or planning that’s too limited in scope and flexibility

• A strategic plan that is not effectively linked to operating goals

• Strategic planners who fail to:- Achieve genuine buy-in from the firm’s key decision-makers- Communicate specific actions that decision-makers

must take to properly execute the plan (quarter after quarter, year after year) in order stay on track with long term goals

Up CloseBackground: Synopsys is based inMountain View, CA

Lesson: Strategic plans must be flexible to succeed

>

>



- Offer a menu of viable short-term trade-offs/options, allowing key decision-makers to achieve the ends through a variety of means after “first contact with reality” scrambles the finance department’s neat and tidy models.

A balancing actMany companies start the planning process at a disadvantage,

choosing time horizons that are too short. They might manage for the next quarter and current year instead of several years out. Even when firms integrate a multi-year view into their planning process, there is often a disconnect between long-term strategy and the annual budgets and quarterly plans.

All too often, executives develop ambitious business strategies (e.g., invest and grow in emerging growth segments or expand into market adjacencies) tied to specific revenue and profit goals, which are derailed the moment tactical considerations arise, such as the need to meet near-term revenue or earnings expectations. Because the strategic goals are not linked to tactical goals, many managers lose sight of the long-term goals.

Of course, no amount of planning will eliminate the need to make difficult short-term decisions. Management will always have to make trade-offs to balance long-term growth with short-term targets. In our experience, the most reliable way to achieve this balancing act is to build bridges between long-term strategic “ends” and a menu of short-term tactical “means.” The end goal should be fixed and non-negotiable, the tactics varied and adjustable.

For such a plan to work, finance must understand the company from both financial and operational perspectives. It must know how to translate broad multi-year objectives into specific quarterly targets. It must also present every management stakeholder with a range of viable options, allowing a business unit manager to scrap Plan A for Plan B if the former proves undesirable or unattainable. Most important, finance must ensure that C-level decision-makers truly buy-in and hold their direct reports accountable for the execution.

Birth of a notionOur multi-year planning model was born in the months

after the financial crisis of 2008. The impact of the crisis broadly impacted our customer base to varying degrees. Many customers delayed their purchases, others asked to renegotiate payment terms, and some unfortunately filed for bankruptcy. As the problems accelerated, we developed various financial scenarios for the current year and the next two years. As we did this, two issues came to the fore—issues that spurred the

development of our new planning process.First, our multi-year software licensing business model

presented both an opportunity and challenge. A key characteristic of our business model is that the majority of our revenues are recognized ratably over several years, which dampens the near-term impact of severe negative (and positive) events. As a result, the full impact of the recession wouldn’t negatively flow through our revenues until sometime in the future. However we needed to reduce our cost structure to align with where we thought revenues might be in the future while simultaneously balancing the risk of over cutting expenses and jeopardizing our technological lead. Second, we believed the recession offered major opportunities to invest in adjacent markets and to acquire technologically strong but financially distressed companies. We worried that our downside planning might cause us to be too cautious about expansion when we should be more aggressive.

We knew the recession would eventually end. The question was: Where did we want to be when it ended? To answer that, we needed a model that would allow us to maintain a steady, unalterable course toward our long-term ambitions via short-term tactics that could be quickly adjusted to changing realities.

What follows is a step-by-step outline of the planning process we developed.

Synopsys’ multi-year planning processStep 1: Set your ambitions. Our three-year ambition was

to grow the company by 50 percent while also consistently increasing our profits and cash flows. We believed this combination of revenue and profit growth would not only create significant shareholder value, but also strongly position Synopsys as the clear leader in our field, the Electronic Design Automation industry.

Note that we use the term “ambition,” not “target.” We kept the strategic goals broad; it’s the tactical goals that are translated into specific, actionable steps.

Step 2: Work backward to build a roadmap that achieves the ambitions. Once broad ambitions are chosen, the planning team works backward to determine ways to achieve them by breaking down a high-level plan into more detailed components. We focus on the key business drivers and metrics that are under our control. Obviously, it is during this stage that we determined whether the ambitions chosen in Step 1 were achievable and where the key risk areas lurked. Often, several iterations of modeling are required to complete this.

In mid-2009, Synopsys was trading in the low teens. We aimed to drive that price to $30 per share through



sustainable long-term earnings growth. In tandem with senior management, we calculated which steps would be needed to achieve that price—an ambition that seemed audacious at the time. Finance took the $30/share ambition, translated it into a set of financial statements for 2012, and worked backward to 2010, identifying the revenue growth, profitability, cash flow, and capital structure that were needed.

From there, we determined how much of our financial goals could be realized through organic expansion versus mergers and acquisitions.

Finally, we broke down the plan based on our key business segments. We then asked each business leader: “If this is our growth plan, how much can you contribute to the growth and how much should come from M&A?” For these conversations to be successful, it was essential that we understood the critical strategic, financial, and operational drivers of these business segments. Otherwise, our ambitions, targets and tasks would have lacked credibility.

Step 3: Get buy-in from key decision-makers. The planning process must be ongoing, interactive and collaborative, involving every level of management from the CEO and CFO on down. We don’t just broadcast the plan and solicit feedback. We conduct extensive discussions and negotiations to ensure that the numbers will eventually add up to our goals. There’s no point in having the leadership team agree with broad ambitions and not with the specific tasks. This “socialization” process also ensures that the business leaders understand, commit, and are held accountable for reaching the agreed targets.

Step Four: Run all decisions through process filters. Once the tactical targets have been selected, they are weighed against the priorities and obligations of the business leaders and the organization. The most useful aspect of the process is that it simplifies discussions and clarifies the decisions that must be made. We view all potential investments and how we allocate resources and capital in context of our strategic aims. We’ve also shortened the typical negotiations taking place between business units and corporate planning during the annual budget cycle because we have a clear prioritization process.

Step Five: Keep the process alive. Finance can’t be the lone champion of the plan. It must achieve enough buy-in, generate commitment from business leaders, and have C-level support, to ensure that the process is sustainable. Senior managers can encourage a “snowball effect” by linking strategic goals to management performance objectives and variable pay targets.

Also, the plan must be continually revisited, updated, and revised in response to changing circumstances. We

accomplish this by updating a rolling forecast of the three-year plan every six months. Finally, we consistently measure and report progress against the financial ambitions.

Thanks to the multi-year strategic planning process, Synopsys is expected to grow its 2012 revenues to $1.8 billion from $1.3 billion in 2008. Since 2008, Synopsys has added $1.4 billion to its market value (+40 percent); returned $0.9 billion to shareholders through stock repurchases; acquired 20 companies; added 1,700 employees world-wide, and overtaken its competition to establish strong market leadership position.

Process benefitsStrategic plans can fail for a variety of reasons. For us, a key

concern we wanted to address was managers losing sight and focus of the “big picture” goals. Every manager makes dozens of key decisions a year. By the time you reach the executive level, the decisions, variables, and inputs to be managed have grown exponentially. Good planning takes these variables into account, and provides enough flexibility to achieve every strategy through a variety of tactics. Because the ultimate aims are “baked in” to the operating plan, managers are less likely to get lost in the tactical details.

Above all, the process presents major decisions in simple, stark terms. Whether the decision relates to allocating our R&D investments, M&A options, or finding the right balance of revenue growth versus profitability, our strategic planning process provides the context and framework to crisply evaluate different options. Ultimately, the decisions we choose and the actions we take are determined by how it will help achieve our ambitions.

CaveatsIt is important that this process be implemented in whole,

not just in part. The approach is less likely to be successful unless all key components are implemented. If you don’t get buy-in from the top, or socialize the assumptions across the broader team, or link strategy to specific operating goals, you’ll just waste time on Excel models and PowerPoint presentations.

We can’t stress enough that lofty, long-term aspirations must stay fixed, but the roadmap and tactics must be as flexible as necessary. The success of the process hinges on striking a balance between worthwhile ends and practical means—of ensuring that management never gets mired in a swamp of never-ending details and variables.

Trac Pham is Vice President of Corporate Finance for Synopsys Inc. Jeff Morrison is Director of Corporate Planning.



Vanguard global operations manages a broad lineup of more than 170 mutual funds, ETFs, and other products, with close to $2 trillion in assets under

management. Embracing the company’s mission statement—to take a stand for all investors, treat them fairly, and give them the best chance for investment success—anchors the staff ’s commitment to the Vanguard Unmatchable Excellence (VUE) program of continuous improvement.

VUE permeates Vanguard’s culture and is wholeheartedly

embraced by the staff, especially the treasury department.

The idea that “VUE is for everyone” is one of four tenets

that guide Vanguard and its staff practice daily, along with

“it’s about the client,” “execute flawlessly,” and “give it a try.”

Vanguard’s Fund treasury staff passionately demonstrate

everyday excellence and feel profoundly connected to the

treasury value system of reducing expenses, increasing

performance, managing liquidity, and safeguarding our

How Vanguard’s corporate culture drives liquidity managementRobert Freiling, CTP, and Erik Williams

Background Check

Up CloseBackground: Vanguard manages $12 trillion in assets

Lesson: Treasurers have a duty to embrace their company’s mission and teach it to staff

>

>



assets. In short, the treasury staff act as financial stewards of

our organization.

Our Fund treasury leaders value staff members’ opinions,

encourage their engagement, and enable their trusted voice.

This strategic model is not only sound, but also practical.

Fund treasury leaders act as coaches enthusiastically

refining the tactics of our staff, striving to mature them into

indispensable partners for our clients and aligning them with

roles that best use their unique treasury talents and strengths.

A primary example of this continuous-improvement

culture is the success of our Process Improvement Pipeline

(PIP) program, in which non management staff drive

innovation and move the organization forward. Their

ideas, innovative yet thoroughly tested, have focused on

such treasury-related topics as cost reduction, cycle-time

improvement, increased revenue, improved client service

and reduced risk. Participation in this pipeline has grown

tremendously and in recent years has approached 100

percent, while reflecting approximately four improvement

ideas per staff member.

Vanguard has embedded the concept championed by best-

selling author Jim Collins—a so-called BHAG (Big Hairy

Audacious/Aggressive Goal) concept within our corporate

culture. At the local level, each of our Global Fund treasury

teams establishes aggressive yearly goals that staff initially

develop and present for approval to senior leadership.

BHAGs unify the spirit of the team toward a clear but

challenging finish line.

BHAGs inspire staff to reach new performance levels,

breaking through the most challenging barriers. Close to

half the aforementioned PIPs are cultivated during BHAG

sessions in which staff leverage various six sigma and risk

and control tools, analyzing data and engaging stakeholders

to help define and clarify which steps add value and what

specifically is critical to quality.

The depth of VUE knowledge within Fund treasury is

a key driver of our goal of flawless execution. We actively

manage the breadth of this knowledge throughout our core

treasury process teams, allowing self-provisioning of VUE

tools and methodologies. Our teams use VUE dashboards

to track, analyze, and present to management on the status

and effectiveness of their core processes and to identify areas

that need addressing.

Treasury dashboards are aligned with cash management

and money movement organizational goals and include

metrics covering accuracy, timeliness, efficiency, cost

effectiveness, risk mitigation and staff development.

Team placemats are an extremely effective tool for our staff

to provide the status of core process metrics, BHAGs, and

support metrics, and they include dedicated space for analysis

as well as updates on VUE improvement projects. Staff

members own the placemats, customizing the components

to be used for discussion at their staff and our Fund Treasury

departmental meetings, called VUEpoint meetings. The

significance of using the placemat is its ability to deliver

manageability to the metric review process. Placemats provide

visual clarity to over one hundred treasury metrics.

The monthly VUEpoint meetings allow managers and

staff to review the functional teams’ metrics through their

placemats. They discuss the status of processes, problem areas

and events from the previous month. Because VUEpoint

meetings are held at the team level, just-in-time in-depth

analysis can be accomplished through corrective root-cause

analysis and improvement of processes. A team can take

action very quickly.

Additionally, the team integrated core elements of its risk

and control governance program with the placemat metric

process. The leadership group actively oversees department

risk models, which are built to identify the greatest areas of

internal and external treasury risks based on the probability

of occurrence and risk significance. The dashboards metrics

within the placemats align with and ensure the adequate

monitoring of these risks by the treasury staff. This added

monitoring step contributes to the opportunity to increase

adequacy of control activities.

Our VUE ambassador program enables management

and staff to collaborate in implementing our six sigma, or

VUE, best practices. Within each functional team, a single

ambassador acts as the catalyst to promote the improvement

culture. Ambassadors are charged with engaging team

members and facilitating the preparation of each teamwide

dashboard. The ambassador meetings promote and discuss

How Vanguard’s corporate culture drives liquidity managementRobert Freiling, CTP, and Erik Williams



VUE best practices and obtain ambassadors’ feedback on

VUE’s effectiveness within their teams.

VUE accomplishments are ingrained in the Fund Treasury

culture and play a significant role in recognition. Individual

staff recognition, team events, staff promotions, and other

general forms of recognition are heavily influenced by a staff

member’s application of VUE and VUE accomplishments.

As part of our PIP program, leaders collaborate at the end of

each year to select “PIPs of the Year”—improvement ideas

that had a significant impact.

Staff members have hands-on knowledge of business

processes and the corresponding risks. Intrinsic to the team is

the value we place on carrying out key internal controls, which

are critical to ensuring flawless execution. Metrics drive detailed

review of the adequacy of the corresponding controls.

The staff diligently look out for possible risks presented

by various risk drivers, including significant market changes,

new products and new service providers. These drivers

are evaluated during planning meetings and appropriate

controls are determined and put in place. Process failures,

such as a missed service level, are evaluated in an open

forum to engage the staff in risk-mitigation solutions. These

events are thoroughly documented and tracked using team

treasury risk models, providing the opportunity to study the

adequacy of controls.

Vanguard’s Fund treasury team has emerged as a talent

destination, attracting a high-caliber and diverse group of

individuals who develop into sound treasury professionals

enthusiastically embracing a sustainably sound VUE, or

Six Sigma, culture. Staff members engage and collaborate

with business partners in assessing processes, and mitigating

risks aids in the maturation of our data-driven management

culture. Our treasury staff act as the shareholders’ emissaries,

consistently asking “why” and not “who,” questioning

everything, thinking it through, and doing the right thing.

Robert Freiling, CTP, is Senior Manager, Fund Treasury Services

at Vanguard. He spoke at the 2012 AFP Annual Conference and

was also a speaker at the 2010 and 2011 AFP conferences

Erik Williams, Cash Manager, Fund Treasury Services. Also,

speaker at the 2012 AFP Conference

Vanguard’s Fund treasury team has emerged as a talent destination, attracting a high-caliber and diverse group of individuals who develop

into sound treasury professionals enthusiastically embracing a sustainably sound VUE, or Six Sigma, culture.

>



Merger and acquisition activities present a unique set of challenges to treasury professionals for a number of reasons:

• High profile. Treasury activities will receive scrutiny across senior and board level ranks within your organization; to what extent depends upon the magnitude of the transaction. Rarely is the performance of treasury so actively monitored.

• Higher level of complexity involved compared to normal treasury processes. Issues of strategic direction, negotiation tactics, culture and operations weave their way into the underlying fabric of the transaction and need to be considered and accommodated.

• High risk. Given the number of moving parts to monitor, the chances of upsetting a delicate equilibrium are high. Should an oversight by treasury occur, it will effect treasury’s reputation within your organization’s deal team.

Keeping your treasury operations running smoothly after an acquisition

David Waltz and Elizabeth Davis, CCM

Don’t Skip a Beat

Up CloseBackground: David Waltz is assistant treasurer of Integrys Energy Group

Lesson: Treasurers plan for the M&A process

>

>



• Infrequent. Since M&A transactions are not a routine occurrence, it is difficult to practice and prepare for the actions required of treasury to help complete the deal.

Given these factors, it is incumbent on the treasury professional to best prepare for this situation by keeping the 4 P’s in mind.

ProcessThe three general stages to the M&A process are: pre-close,

closing (often referred to as “Day 1”) and post-close (often referred to as “Day 2”). As the transaction progresses between these stages so do the nature of activities.

Pre-close is dominated by data gathering, decision-making and prioritization. Decision-making during this round involves activities such as how the transaction is to be financed—cash on hand, bridge loans, issuance of long-term debt and/or equity.

Day 1 and Day 2 activities, in contrast, are more execution-like in nature. Wiring funds, signing and delivering documents, and initiating activities towards integration are important components. For Day 1 especially, building in the capability to deal with “Mr. Murphy” of Murphy’s Law fame is advised—inevitably, stress-inducing scenarios such as the critical transfer of funds being delayed, or the one last (yet important) legal document attachment requires the signature of someone who is not immediately available.

Because there are tight deadlines within the process, prioritization of your activities and decisions is critical. Spending the time to develop the perfect Day 2 integration plan is meaningless unless Day 1 occurs flawlessly. Furthermore, while it may be advisable to consolidate your payment processing operations, if the risk of overwhelming the current operation is great enough, you might decide that a seamless customer experience is a preferable outcome even in the face of some inefficiency.

PartnersOrganizations exist in order to accomplish things

individuals either could not do alone or could not do alone efficiently. The M&A process brings this fact of organizational life into stark relief; treasury will interact with other functions inside and outside the company that are not typically in daily activities.

The Business Development group takes the lead in sourcing and initiating deals, and as a rule, does not involve the rest of the organization until a deal is far enough

along to warrant an expanded effort. “Far enough along” is a subjective perception—in one case a treasury group was notified on a Monday that it needed to arrange bank accounts by that Friday!

Information Technology also can play a critical role. In one situation a group’s treasury workstation used numeric ID codes to account for subsidiaries, whereas the acquired entities had alphabetical ID codes. Given that the ERP systems would not be merged for another 6-12 months, the treasury group needed to overcome their system limitation, and IT was able to provide the critical assistance that allowed them to do it.

It is critical to be proactive in establishing relationships with the groups that will be of importance during the M&A process, preferably long before a transaction occurs. Meeting occasionally with members of the business development team and discussing the timeline of various activities you will perform will help prevent being brought in too late. See what your bankers have available, and research it prior to a transaction, and then share the information with the other groups that you will be working with and see what perspectives they can add.

PlanningIn an M&A transaction, treasury’s planning activity is

undertaken to meet three main objectives: • Avoid fatal flaws or deal landmines that would endanger

the transaction• Achieve Day 1 capability• Establish as smooth a road as possible towards Day 2 objectives.A list of questions treasury will need answered include:• What account structure are we going to utilize and

which banks will hold those accounts? • What levels of liquidity and sources of funding will we

need to secure on an ongoing basis? • What mix of treasury products and services, such as

depository, disbursement, payment cards, payroll, etc. will be required to achieve full Day 2 functionality?

Every company will answer these questions differently based on experience, current preferences, bank relationships, long-term objectives, current industry practices and other factors. While some companies issue episodic RFP’s, others find advantage in a long-term relationship where valuable tacit knowledge and experience are developed.

It behooves the treasury professional to develop an operating philosophy that considers where the firm’s preference falls amongst the continuum of alternatives that



address the planning questions. Become familiar with the bank services map (see template) approach and develop different scenarios in order to test where these are consistent and where they are more opportunistic.

PerformingUltimately, a successful M&A transaction occurs

because a high number of coordinated activities were successfully executed.

Treasury is the main executor in certain areas of the transaction—bank account set-up and transfer, real-time funds flow initiator and monitor on closing date, and deal financer to name a few. In other areas, treasury is a part of a much larger team whose task is execution in such areas as pre-close due diligence, contract compliance, SEC filings, etc.

The performance objectives during pre-close are two-fold. First, surface any potential deal-killers as early as possible in the process. This is beneficial because it allows time for the issues to be addressed and resolved so the deal can continue, or avoids a lot of time, money and effort being wasted on a

deal that cannot be closed.Second, devise operating assumptions and contingency

plans based on the information available and on the information that is not available. M&A deals are often very foggy environments, and decisions will need to be made where there are still plenty of unknowns.

Being a positive contributor to the deal team allows treasury to shine. Offering a range of potential solutions for a problem that has surfaced ensures that the legacy of your involvement was one where all were “rowing in the same direction” and got things done.

By putting all the P’s together your treasury team adds value. By being a meaningful participant in your organization’s next M&A transaction, treasury’s seat at the table is ready for the trusted advice and results-oriented action you offer internally.

David Waltz is assistant treasurer of Integrys Energy Group. Elizabeth Davis, CCM, is vice president of treasury services, J.P. Morgan.



Three years ago, Cardinal Health spun off its $4 billion medical device subsidiary. As a newly independent conglomerate of semi-

integrated businesses with a global manufacturing and sales footprint, CareFusion had all the complexities of a major multinational corporation. The challenge and opportunity was setting up an effective but lean treasury function within uncompromising deadlines.

When Amar Duvvur joined as the new treasurer in May 2009, the treasury department also had to be established as all treasury activities were previously performed at the parent company. Prior to the spin-off from Cardinal, the function would need to staff up and operate independently while at the same time raise debt capital and arrange a credit facility.

In the BeginningCase Study: CareFusion builds a treasury team from scratchIra Apfel

Up CloseBackground: Amar Duvvur is treasurer at CareFusion

Lesson: Creating a treasury group is a challenge and an opportunity

>

>



Duvvur decided that treasury would first be spreadsheet-based and daily operations labor intensive. For example, daily cash management in the United States involved manual cash balance entries, calculations and cash movements among 10 bank platforms using fax, e-mail and bank portals. After the spin-off, treasury would need to repeatedly reinvent itself and work closely with the business units to become a top performing treasury function while maintaining a lean organization.

A two-step solutionThe solution was to design and implement a multiyear

initiative to meet the immediate needs of the new company in the short term while at the same time rolling out a platform that could efficiently scale and support business growth plans over the long term. The blueprint was developed by Duvvur and Assistant Treasurer David Charlot, both of whom had significant experience at Fortune 50 treasury organizations with strong support from the new staff.

Early on, the team realized that the only way to develop such a cost-effective platform was to harness “big-company” technology coupled with small company nimbleness. Cost-effective, productivity-enhancing initiatives were adopted, such as global payment netting, bank structure simplification, treasury workstation integration, online FX trading implementation and bank group realignment.

Treasury was built around a few core principles: • A lean organization staffed with talented generalists• Strict prioritization with a clear articulation of what

treasury should do and should not do• A focus on operational simplicity built on a centralized

structure in a disciplined control environment• Staff empowered to drive change on key initiatives• Close partnership with other corporate and operating functions. In two years, the department reinvented itself twice while

remaining true to the long-term strategy established up-front. The team is adept at embracing change while incorporating the best of “lessons learned” with each change by updating procedures and policies.

Lessons learned The solution will continue to serve treasury indefinitely,

Duvvur said, because “its tenets are applicable to nontreasury functions and treasury functions in other companies.” Some examples:

• Treasury executives need to establish a simple, clear and comprehensive governance structure.

• A well-designed policy structure enhances understanding and decision-making. “Treasurers must rationalize and update well-considered policies regularly,” Duvvur said. Start with a master policy for broad consumption. “We published a comprehensive 15-page treasury manual rather than issue numerous separate treasury policies,” he said.

• Rationalize processes and controls, but adhere to the ones you keep and ensure they cover your material risks. “A proper process and control structure will enhance your performance and evolution, not impede it,” Duvvur said. “Train and motivate talent to work with change. Give them as much as they can handle.”

• Don’t push your inefficiencies on other organizations — it’s not good enough to be efficient yourself. “Treasury should help the businesses be efficient in managing treasury-related matters,” Duvvur said.

• Recognize there is opportunity cost to every decision to deploy resources. “Regularly review historical practice and discontinue any task that does not deliver measurable results,” Duvvur said.

Duvvur acknowledges that other treasury groups before CareFusion’s have ramped up from nothing. What is perhaps novel about CareFusion’s solution, he believes, is that the catalysts for change were quickly institutionalized in many small but significant ways to produce a function that, as a whole, could “punch above its weight” and work collaboratively with other functions to develop shareholder value.

“With an elegant structure underpinned by proven tools, our treasury team can pivot quickly to face new opportunities on a systematic basis while relying on a disciplined control environment,” Duvvur said.

In two years, the department reinvented itself twice while remaining true to the long-term strategy established up-front. The team is adept at embracing change while incorporating

the best of “lessons learned” with each change by updating procedures and policies.



Developing and retaining talent is a challenge for any treasury department. Even though the U.S. job market is still struggling, an

individual with the right combination of education and experience can be a hot commodity. How do you attract the right people? And once you find them, how do you keep them from straying to greener pastures once they’ve gained some expertise?

Microsoft’s treasury department takes an aggressive approach. Treasury employees are exposed to a broad spectrum of responsibilities—in areas they probably never expected—to further their careers. Microsoft management believes that extra experience is often what keeps staff content.

“We give people a much broader opportunity set to grow their careers in,” said George Zinn, corporate vice

New GroundMicrosoft’s treasury department keeps talent by introducing employees to new territoryAndrew Deichler

Up CloseBackground: George Zinn is corporate vice president and treasurer of Microsoft

Lesson: Developing treasury staff by giving them opportunities they never expected

>

>



president and treasurer at Microsoft. “It will almost push people to ‘uncomfortable’ growth.”

OnboardingZinn told Exchange that across the entire organization,

Microsoft targets the “best and brightest” candidates, even if they are not the most experienced ones. “The truth of the matter is, if they’re good, they can figure it out,” he said. “Over time, those are the people that are really more successful at the company.”

The primary challenge Microsoft faces in attracting and retaining personnel is paying “Main Street, not Wall Street” wages, Zinn explained. Microsoft’s treasury department is not typically looking to hire deeply experienced treasury and finance veterans. “We’re much better off finding people early in their careers that are hungry and have them come in, drink the Kool Aid, and love the fact it’s not only an interesting company but also an interesting geography to live and grow in,” he said. “I think that’s where we found our success in terms of on-boarding.”

Additionally, members of the Microsoft treasury staff are exposed to broad asset classes, broad capital, corporate finance issues—more areas than the typical treasury staffer experiences.

Anita Prasad, general manager, treasury capital management at Microsoft, told Exchange that when new employees join treasury at the junior level, they tend to be very green, pointing out that there are no treasury curriculums in MBA programs. “So we’re really getting them prepared, giving them a broader treasury perspective, how the cash moves, etc.,” she said.

Microsoft treasury also encourages a lot of individual development, Prasad said. “For example, in the middle of the first year, we go through a career review,” she explained. “The manager will focus on key opportunities for every individual on their team to grow in the areas where they need help.”

Additionally, Microsoft treasury has launched a number of programs to further develop employees. One such initiative is its job shadow program, in which employees are assigned to shadow longer-tenured employees at other Microsoft locations. “Treasury is mostly in Redmond, but we have teams in Reno, Dublin, Singapore, Ft. Lauderdale, London and Beijing,” said Prasad. “Folks can go and spend a couple of weeks shadowing someone in a different part of treasury in maybe in a different country, so they can understand what they do and how it all fits together. That has been really well-received. Even if you don’t switch roles after that, it’s at least

giving you a better appreciation of how we are connected; how our daily jobs really further the goal of treasury.”

Retention Given the different functions within treasury, as well as

the size of the company, Microsoft is often able to retain employees by helping them move to a different role, either in treasury or in the broader finance organization, noted Prasad. “It may even be a move to a different country, depending on what they’re looking for,” she said. “We refer to it usually as ‘export of talent.’ It’s talent that is grown, cultivated, developed in treasury and then we see these individuals broadly across the company. It could be in a finance organization, an operations role, in a sales organization—it is a very different spectrum of places where they land.”

Zinn believes that having employees traveling throughout the organization makes treasury function better. “They not only bring treasury expertise to their new roles, but they bring us into projects that we otherwise might not hear of,” he said. “The opposite is true as well—as treasury is viewed as a great destination point for someone’s career, those folks bring a perspective from the rest of the company that gets us in tune.”

Zinn explained that he likely earned his current position because earlier in his career at Microsoft, he performed a CFO role in the intellectual, property and licensing group, which was entirely unrelated to treasury. “So when it came time that the treasurer role opened—I don’t know that I was necessarily better qualified than some of the other people that were in contention for the role. But I certainly had a broader view of the company than someone with just treasury experience and I could bring that back to treasury,” he said.

Managers at many organizations do not want to let their best people leave to work in another department because they realize that doing so will likely make their jobs more difficult. However, Microsoft sees cross-company moves as a boon to both the individual and the organization. “I think a great test of a good manager is someone that’s willing to offer up that top talent to go have some interesting and different experiences, whether it’s a short-term rotation or a long-term career change, in order for the company to benefit as a result,” said Zinn. “That is truly how you develop and retain top talent. If you do not create those experiences and opportunities for people, they end up just finding a job at another place—because the good people can.”



Treasury’s job shadow programMicrosoft’s job shadow program was originally designed to help facilitate career development in treasury after the 2009-2010 recession hit. For the first time, Microsoft was trimming overall headcount, said Brad Faulhaber, director of portfolio manage-ment, who heads up the program. “At that time there was a drop-off in the cross-group movement of talent,” he told Exchange. “Prior to that, it was really common for people within finance or treasury, after a couple of years on the job, to move to a new position. But that really dropped off as employees were worried about whether their job would be around in a year.”

Faulhaber explained that the program was not originally targeted toward new em-ployees; it was an opportunity for existing employees to meet different treasury staff members around the organization and familiarize themselves with what they do. “Even now, we require shadow applicants to have been on the job for at least a year before they try to shadow, because it is designed help you think about where you might want to be in your next role,” he said. “But it has doubled as a way to get to know the rest of the treasury organization.”

Treasury is mostly centralized in Redmond, Wash., but the credit services team is split up into many locations, such as Reno, Dublin, Singapore, Ft. Lauderdale, London and Beijing. “It’s really been a good opportunity for folks from Redmond and folks from the credit services team to go back and forth between those offices. You get to know what it’s like to either be in Redmond if you’re out in the field, or to be out in the field if you’re normally in Redmond,” said Faulhaber.

Microsoft treasury runs two sessions of the job shadow program every year. The department looks for about eight to 10 shadow hosts who are willing to have people sit with them and their teams for three days to a week. Treasury then provides that list to the rest of the staff, and people apply for the program. “We have a centralized team that matches the shadows, based on their interests,” said Faulhaber. “Once the matches are made, the individuals touch base and figure out a good time for the shadow to take place. The responsibility of the host is to make sure that there is some good content available while the shadow is going on.”

Having good content is essential so that staff members really get a feel of the work in action at a given location, Faulhaber noted. “For example, I host one or two a year, and I work in the investment team,” he said. “So someone will come in, sit with me at the trading desk, and watch me manage the investment portfolio. I’ll also set them up with different people on the team, like someone else who sits in my area that covers a different asset class, someone in our risk group, or in our operations team. I think of it more as a Redmond or a trading room shadow, rather than someone just specifically shadowing me.”

>

About the Association for Financial Professionals

The Association for Financial Professionals (AFP) headquartered in Bethesda, Maryland, supports more than 16,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, financial tools and publications, career development, certifications, research, representation to legislators and regulators, and the development of industry standards.

General Inquiries [email protected]

Web Site www.AFPonline.org

Phone 301.907.2862

Corporate Treasurers CouncilThe Corporate Treasurers Council is the executive-level membership of AFP. The CTC features tailor-made products, events and exclusive networking opportunities all year long for treasury and finance executives that address the latest industry insights, trends and best practices and will provide guidance, practical tools and the validation needed to move forward in making critical decisions.

When you join AFP and have the title of corporate treasurer, assistant treasurer, chief financial officer, vice president of finance or controller, you are automatically enrolled in the Corporate Treasurers Council (CTC) and have access to CTC products and events. For more information go to www.corporatetreasurers.org

Best Practices and Thought Leadership in Treasury Management

Economy & Finance

Transcript of Best Practices and Thought Leadership in Treasury Management