Are Corporate Treasury Positions Being Undervalued?
If you asked business-school graduates to describe the characteristics of a dream job, their answer would probably include the chance to make a real difference, high-visibility interaction with top management, and a decision-maker in corporate planning. In other words, the characteristics of a position in corporate treasury. But judging from anecdotal evidence and student surveys, that's not what B-school students think. Instead, many see the department as an "also ran"- a consolation prize that lacks the cachet of say, investment banking. However, according to experts from institutions like Wharton, and companies like eBay Inc. and Cisco Systems, graduates who overlook corporate treasury may in fact be passing up a very valuable opportunity.
Despite a slow economy that has forced many companies to trim their hiring plans, savvy firms are always on the lookout for executive and other talent that may offer a competitive advantage. Treasury is one such department, and is often willing to pay competitive salaries for both capable, newly minted graduates and experienced employees.
But managers and officers complain that relatively few students show an interest in a treasury career, seeing it at best as a stepping-stone toward a CFO spot, or at worst as a less-than-significant job that can get lost in the corporate shuffle. This perception is misguided, they argue, noting that in today's globally connected environment, the treasury department can offer hands-on exposure to cash control, risk management, debt placement and many other responsibilities.
"Today, treasury is a value-added function and the people who work there have a chance to make a difference and demonstrate their value to top management," says Jennifer Ceran, Vice President and Treasurer of eBay. "Treasury can be an excellent career goal in itself, or it can be a stepping stone to the CFO office."
For example, both a treasurer and a CFO are heavily involved with issues like cash flow and management of capital-critical areas that can spell the difference between a company's success or failure if not carefully managed.
Ceran notes that in the past, treasury was often seen as being limited to transactional responsibilities, "Today though, when electronic communication systems enable delivery of critical information within seconds instead of days, treasury's responsibilities have grown significantly," she says. "In a modern treasury department, the emphasis is on analyzing and managing risk and supporting the business in solving complex cross-functional business issues instead of simply processing wires, gathering financial information and preparing reports for the CFO."
As a survey of Wharton's MBA Class of 2002 indicates, many business-school students apparently haven't received that message.
Out of more than 700 graduates, only 4.3% indicated they were entering the corporate finance/non-banking segment. While the numbers were up compared to the prior year's class, in which the field only drew 3.4% of its graduates, the percentages are dismal when compared to such fields as consulting (26.6% in 2002) and corporate finance/banking (24.1%).
For corporate treasury departments, that can mean problems down the road, when current leaders retire. As Michael Useem, the director of Wharton's Center for Leadership and Change Management and a professor of management at the university notes, grooming the next generation of leaders is a long-term process.
"A first step for building leadership is to identify those whose leadership skills will need to be developed during the years ahead," he writes in a Financial Times article. " Some managers have a head start in acquiring leadership capacities, but everyone can improve. It is a learned capacity, albeit one that for many proves very difficult to master."
It's definitely not an obstacle to Ceran, who recently joined eBay after serving as Assistant Treasurer with Cisco. Her original goal, after graduating from the University of Chicago's MBA program, was investment banking, "but along the way I found myself in the treasury function and realized that it's a very rewarding experience. What is great about working at a young company like eBay, is that you get to apply the skills you gained at more mature organizations to build a treasury function for an up-and-comer. That can also be extremely rewarding for an MBA student "
She says the department makes use of an individual's multiple skill-sets and offers unique exposure; and a wide variety of responsibilities that can include debt funding, international currency exchange, international finance, and portfolio management. At one time, the treasury function may have been somewhat limiting, but not anymore, she asserts.
"The treasury function has seen some dramatic, positive changes over the years," she adds. "Back in the 1980s, for example, treasury would have to call the bank every morning to get the company's cash position for the previous day. Now, real-time information is available online with many banks. Exchanging information with overseas subsidiaries meant faxing a request and hoping you'd get a reply within a few days. And there was no single database-Europe had its own system so it was nearly impossible to get a consolidated view of the risk portfolio. Today, of course, integrated systems and best-practice techniques mean that treasury executives analyze information instead of spending their time aggregating it."
Ceran says she's aware that treasury careers are not on the A-list of many B-school graduates, but says they are unnecessarily limiting themselves.
"Business-school students should do more research before they dismiss a treasury position," she says. "I try to let them know that treasury can give them the opportunity to understand a company's business model and how the management of capital plays a vital role in realizing the company's strategic goals. This turns out to be a very valuable skills set for banks who often look to hire experienced people later in their careers who understand how corporates really make decisions regarding investments, foreign exchange, debt/equity funding, etc".
Indeed, the post-Enron environment-where companies appear to be abandoning a more flamboyant model, and are instead replacing it with one that reflects a more principled underpinning-may play to a treasurer's strengths. Back in the 1960s and through the early part of the 1970s, for example, CFOs were considered high-level bean counters, with responsibility for budgeting, and accounting and internal reporting functions. They also handled treasury-related responsibilities, including cash management, and securing capital through the issuance of debt or equity.
As global markets became more intertwined during the late 1970s and early 1980s, the gap between the treasurer and the CFO widened. While treasurers did not appreciably expand their responsibilities, the CFO function became more strategic, taking on the responsibility of exploiting such new financial instruments as mortgage-backed securities and other derivative products. Finally, in the late 1980s, CFOs eagerly moved into the forefront of the emerging mergers-and-acquisition frenzy that reached its peak in the 1990s. By then, the leap from the treasurer's office to the CFO's had turned into a chasm, and treasury positions were sidelined, at least in the minds of many MBA students.
Then, following the fall of some high-flying companies-which were done in by accounting and other scandals-and as the economy contracted, many companies sought to exchange their "showhorse" CFOs for "workhorse" ones. As John Percival, an adjunct finance professor at Wharton noted in an interview, "Now they're going to be more and more of a sounding board on growth strategies and whether they make sense from a financial point of view."
In other words, it sounds like a position that's tailor-made for a person with treasury-related experience.
For David Holland, the Vice President and Treasurer of Cisco, treasury is a key position. "If business school graduates have a negative perception of Treasury, then perhaps the schools need to change the curriculum," he says with a chuckle. He rotated out of investment banking and into a treasury slot, and plans to stay in the area. "Treasury is a very interesting function that really lets people hone their MBA skills. You're at the heart of corporate planning, ensuring that resources are allocated properly, and plugging into enterprise-wide strategies and projects."
Besides advancing your own career, the high-wattage nature of the treasury department may also offer a unique opportunity to help your teammates to advance. "One of the reasons I was able to qualify for my current position at eBay is because I had the opportunity to work for and be developed by David Holland," notes Ceran. "There are some amazingly talented people in treasury."
Despite the obvious enthusiasm, Holland does sound a note of caution. "I'd advise newly minted graduates as well as anyone seeking to change their job to do a fair amount of due diligence before moving into a treasury slot," he says. "At some smaller or less-progressive companies, treasury may be limited to simply transferring and tracking cash. But that's more of the exception than the rule today."
When Holland joined Cisco about four years ago, the company was still developing its treasury group, which gave him the chance to make a big difference in shaping the department. "We devoted a lot of time to mapping out our group," recalls. "We wanted our operations to reflect Cisco's business philosophy and that meant, among other initiatives, using Web-based technology to provide seamless services."
As an example, he notes that many of his department's functions operate on a digital platform, enabling internal and external clients to be securely and effortlessly linked. "We provide secured, seamless tie-ins to parties that range from our bankers to our governance board," he reports. "There's been a sea change in the treasury function in recent years. Just four years ago we were alone in our approach, but now it seems like everyone's jumped in and adopted the strategy."
Holland says this Web-oriented strategy also enables him to maintain a lean department. "We operate with less than 30 people," he comments. "Many similar-size companies have 200 or more people in their treasury department."
According to Holland, students should avoid tunnel vision when they enter the job market. "We've never had a problem recruiting, because people know we develop and rotate people, exposing them to a variety of learning and business opportunities," he says. "There was some competition from high-salaried Wall Street positions, but overall we continue to hear from people who have solid background in capital markets, finance, business theory and strategy, and in quantitative concepts."
So in the final analysis, perhaps students have underrated treasury-related careers. Peter Degnan, Director of Wharton's MBA Career Management Services, thinks that may be the case.
"Many students want 'pure' corporate finance and strategy experience, and Treasury just doesn't appear, to them at least, to have that allure," he says. "In fact, though, they can get some very good deal-making and capital markets experience in the area. As a career option, it can be a great opportunity to see the inner workings and funding issues of a company. But many students run with the herd, which explains the continued draw of positions in consulting and investment banking."
Web Links:
The Changing Role of the CFO
How to Groom the Leaders of the Future
(Financial Times) Wharton MBA Career
Report (pdf)
(Note: While the report title
refers to the “2001” survey, the class of 2002 is profiled on Page 12).
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