Treasurers committed to becoming a strategic partner to their organization need to measure their performance internally and externally to arrive at a balanced assessment.

Some questions treasurers might ask in relation to internal performance measurement:

• Am I delivering on our treasury plans and goals?
• Am I contributing to strategic value?
• How am I supporting a performance-driven treasury culture?
• Can I drive and demonstrate continuous improvement in treasury?

If these and other questions are keeping you awake at night, then let’s examine the key components of performance measurement.

Key performance indicators

Treasury KPIs should focus on a number of areas, including but not limited to:

• Performance against market treasury benchmarks, e.g., relevant interest rates, currency and commodity indexes
• Productivity measures, e.g., administration cost per processed treasury transaction, number of transactions supported per treasury employee
• Strategic value generated, e.g., contribution to ROI, free cash flow, economic profit, lower WACC
• Strategic value generated against cost to serve, e.g., value generated versus cost of, and incurred by, treasury
• Contribution to major business decisions and advice, e.g., location of subsidiaries, M&A, capital expenditure, funding new business ventures, budget and strategic parameters
• Forecasting accuracy, e.g., cash flow forecasts
• Controls posture, e.g., number of control breaches, internal audit ratings
• Internal view of treasury, e.g., results of surveys of internal customers
• Treasury transformation projects, e.g., progress against project plans, milestones and objectives.

Where possible and appropriate, KPIs for these areas should be tracked over a number of periods and/or versus corresponding periods to identify improving or deteriorating trends in performance, allowing for actions to address any issues.

Performance reporting

Once the KPIs are prepared, they need to be analyzed and reported. A system that can report the information efficiently, engagingly and quickly will allow time for analysis and insight, as well as gain the interest and commitment of report users and decision-makers. The latter point should not be underestimated, as comprehensive but unappealing reports may be problematic in getting engagement and so may miss the mark in communicating your performance story.

The use of different reporting tools, methods and forms will be important in getting engagement and quality decision-making. Additionally, dependent on the audience for reports, the level of detail presented will need to be appropriate and fit for purpose with the ‘less is more’ mantra a useful guide and marker.

Staff support and performance management

If the treasury staff involved in the KPI program are insufficiently skilled, experienced or motivated to successfully run the program, this will hinder the program’s success. These staff need superior system and analytical skills, as well as a strategic and holistic view of their role in treasury’s performance and contribution to strategic value.

Ideally, once a program has been established, maximum benefit will be gained by linking the treasury KPIs to the performance agreements of key treasury staff. This will then provide the necessary feedback and incentive for staff to track and utilize the KPIs under their control to improve performance. 

Fulvio Barbuio is Head Corporate Treasury & Risk, Australian Broadcasting Corporation.

The opinions of the author are his own and do not represent those of the Australian Broadcasting Corporation.

A longer version of this article including discussion of external assessment through benchmarking will appear in an upcoming edition of AFP Exchange.