It wasn't long after CEO Dave Cote hired his new CFO Dave Anderson in 2003 that $34 billion Honeywell International Inc. began to feel the heat--in this case, from a re-energized company. After the company's share price took a nosedive in 2000 and other financials looked less than robust, the two men helped to lead the Morristown, N.J.-based maker of aerospace, automation and control, specialty materials and transportation products and solutions into a period when no record was safe--last year, it achieved record sales, record income, record cash flow and a 40% increase in share price. In the five years from 2002 through 2006, net income rose to a very positive $2.1 billion from a negative $254 million, based on sales of $31.4 billion, up from $22.3 billion.
Earnings per share went from a 31-cent loss to $2.51, and free cash flow climbed from $1.7 billion to $2.5 billion. Less conspicuous to the public, a world-class treasury operation also started to ring up impressive results in one area after another, pushed by an Anderson mandate to engineer a functional transformation of the whole finance operation. The goal was clear: "Partner with business units and create shareholder value," recalls John Tus, Honeywell's treasurer. "We had to create one common set of global treasury processes that would support outstanding financial performance and staff productivity." Honeywell wins the top Alexander Hamilton Award this year for sustained excellence across a broad spectrum of treasury activity. Not only has Honeywell taken two gold awards this year for cash optimization and automation projects, the company has at its core a strategy of world-class treasury operations and deep involvement with business units that has kept it in the winner's circle over the years.
Tus attributes his treasury organization's success to an
operating model focused on the power of one common set of global treasury processes applied to a broad range of activities. It relies on teamwork and communication. Prior to the start of each year, Honeywell's global treasury organization meets at its headquarters to review business unit plans, including decisions related to capital allocation and structure. Global process owners report on the state of each treasury process. At that time, they outline performance benchmarks, strategies to achieve them and progress achieved to date, along with a timeline for future progress. "A key product of this meeting is a clearly defined set of treasury goals and objectives aligned with achieving Honeywell's planned financial performance for the next year," Tus explains.
Weekly teleconferences help the team stay abreast of global financial markets, Honeywell's businesses and progress being made on treasury's goals and objectives. Teamwork extends beyond treasury as global tax, controllers, legal, and business unit personnel all come together to address the status of cross-functional projects taking place throughout the world. "We accomplish a lot more in these weekly sessions than we ever could by exchanging e-mails," explains Jim Colby, Honeywell's assistant treasurer. Tus supplements these meetings with annual operating reviews in Europe and Asia that cover treasury's regional performance with the business units as well as the performance of Honeywell's relationship banks.
An integral part of treasury's strategy is the treasury systems roadmap.
Honeywell currently runs SunGard's Quantum workstation, as well as internally developed programs that provide daily cash and investment visibility. The treasury team includes two software engineers who work with the financial staff to implement software solutions that automate data flow. Currently Honeywell runs a suite of internally developed software that automates many processes. "We will continue to leverage internal systems development as long as the business case supports an economic payback and tailored third-party solutions do not exist." Tus said.
Tus attributes much of Honeywell's recent success in treasury to a corporate culture that attracts and motivates talented people. "The strength of this department," he insists, "is that we are one treasury organization that spans the globe. Whatever we accomplish, we do it as a team.
"While we engage in technical and sophisticated activities, we maintain a lean staff (29 professionals throughout the world), so that exposes our people to greater experience than they might get on a huge staff, and it forces them to be more responsible and accountable," Tus explains. "In fact, we make a point of seeing that their career expectations are met or exceeded. This is a place for people who want to grow and develop. I rate my own performance based on how effectively I help people succeed."
Tus himself came to Honeywell from the controller's organization at Allied-Signal, acquired by Honeywell in 1999. A CPA, he stayed in the accounting world until 2003, when he was named Honeywell's treasurer.
That accounting background, he says, helps him "understand the financial impact of everything that treasury does and is responsible for."
Having two IT professionals embedded in the treasury staff has enabled Honeywell to produce valuable tools not available in the commercial market, including a Web application that populates forms and automates workflow around processing letters of credit and bank guarantees. It also has invented a foreign exchange (FX) Web tool that automates the flow of information between its online FXall foreign currency and trading system and its SunGard Quantum treasury workstation, eliminating a lot of manual rekeying. The FX program currently enables one person to process, hedge and document all transactions impacting Honeywell business across over 250 business units and 40 currency pairs. That project won silver for Honeywell in last year's AHA competition. "As we look to the future," Tus summarizes, "teamwork, our focus on advancing the power of one common set of global treasury processes, and the partnership that we established with our businesses will enable us to continue creating value."