CHICAGO— The concept of treasury functioning as a change agent within the organization was the theme of last week’s 10th annual CTC Corporate Treasurers Forum. With so many treasurers taking on additional responsibilities, it’s no surprise they are seen increasingly as change agents, and this shift was the focus of an opening panel discussion at the forum.
Session moderator Craig Martin, executive director of the Corporate Treasurers Council (CTC), noted that what treasurers are doing today is “significantly different” from what they did just a few years ago, he said.
Panelist Johan Nystedt, vice president and treasurer, Levi Strauss & Co., noted that treasury at his organization has become a strategic partner, involved in many aspects of the business. “My personal view of Levi’s treasury is that we have really progressed from being a classic treasury department to being much more strategic in nature,” he said. “Treasury now owns the finance committee agenda, and since I joined about three years ago, treasury has gained investor relations, business development, as well as global pensions.”
Nystedt sees his treasury department as uniquely positioned to quantify aspects of the business that are inherently difficult to measure. “We have the capital markets that we’re looking at, and we’re heavily engaged in the overall planning process,” he said. “I think that adds up to treasury being a change agent, because treasury has picked up the pieces that have fallen through the cracks.”
Panelist Steve Overholser, CTP, CPA and CFO and treasurer for salon franchisor Great Clips, gave attendees a glimpse into how his organization has grown over the past decade. When he first joined Great Clips in 1995, it had about 500 salons, and it has about 3,600 today. Annual revenues have grown from about $50 million to $1 billion. In recent years, Overholser’s treasury department has taken on a much more expanded role, becoming involved in enterprise risk management (ERM) and strategic planning for the organization.
Additionally, being a franchisor, Great Clips does not operate any salons itself. “All of our salons are operated by 1,200 independent franchise owners,” he said. “So part of our job is to act as a consultant to the franchise owners. A franchisee has to submit financial information to be approved for expansion. One of the areas that we had to expand several years ago was in financing for the franchisees. As financing got tougher and we wanted to grow faster, we had to form other relationships with lenders to really bring those to the table as well. So we act as a facilitator and a conduit.”
Scott Lampe, CPA, vice president and CFO for NASCAR racing team Hendrick Motorsports, said his organization is trying to create what it calls the “fortress” balance sheet—a balance sheet that can withstand disruptions. “Quite frankly, the way you do that is do what [Apple CEO] Tim Cook did and have a whole bunch of cash,” he said. “So what you’re trying to do is build those reserves. But what do you do with that cash? There are not a whole lot of good options right now.”
One of the areas of business development that Nystedt’s treasury department is engaged in right now is looking at the different business models Levi’s applies in different regions of the world. “It’s not to me that clear at this stage why we have one business form in one market, and another business model in another country,” he said. To remedy this, treasury is working on a framework for a more consistent business model across all regions.
Great Clips has been focusing on some of the “soft” components that came with its expansion. A recent example, Overholser explained, is the demand for hair stylists coming out of cosmetology school. “If we can’t get those candidates coming out of school, that’s going to limit our ability to grow,” he said. “So we created a model just in the last two years, where we go into cosmetology schools and provide some free education and introduce those students to our business, as an alternative to working in a full-service salon. Really, we had no idea how to put an ROI calculation on that, but we just knew we needed to do that to be able to assure ourselves a fresh supply of students coming in.”
Ferdinand Jahnel, vice president, corporate treasurer for Henry Schein, Inc., said he has seen his company expand into new countries in recent years. Strict regulations in emerging countries like China have not made it easy for treasury. “Moving capital into China has certainly been a unique challenge,” he said. “As we have become successful in those countries, it’s certainly also a treasury success story.”
Jahnel added that he also oversees risk management, which has become more complex as Henry Schein has expanded internationally. “We have a number of suppliers that sell to us from the emerging markets that often operate in countries where the insurance market is not providing the same coverage for our suppliers as we are used to in North America or Europe,” he said. “So we have gone into unique ways of securing our supply chain in those countries and working on unique coverage with some of our insurance partners.”
Lampe has also observed treasury becoming a key cog in the supply chain. Over the past several decades as U.S. labor prices increased and commodity prices fell, manufacturing moved out of the U.S. “You’re seeing those trends start to reverse now,” he said. “As we’ve become more productive, the labor inputs are going sideways and the material inputs are starting to go back up. So as that mix is starting to shift again, treasury is going to have to be more involved in that piece of it.”