Several years ago, at the ServiceMaster Co., a stressed-out treasury operations staff finally had had enough of putting out fires, running from one ASAP project to the next–only to find at times that what seemed so desperately mission critical to one division might not really have been needed at all. It was time to develop defensible, consistent priorities when it came to projects. Treasury ops was "working a ton of hours trying to complete projects helter-skelter for whichever business unit screamed the loudest," recalls Brian J. Qualizza Jr., director of treasury operations. "We were reactive. We were frustrated.
We decided we had to make a change."
To Qualizza, the answer was simple to say, hard to accomplish: Develop a more orderly process and maintain control over it. The four-person treasury operations team was undaunted. After fewer than a dozen meetings, it issued an ambitious annual agenda for project selection and prioritization, putting itself at the center as each project's manager. "We wanted to take the stress off the business units," Qualizza observes. "And we have a better completion rate when we are in charge." Another key advantage of having treasury call the shots, Qualizza points out: Treasury can look beyond the needs of one division and select projects that can be replicated across multiple business units.
The process was straightforward: Each of the nine business units owned by the Downers Grove, Ill.-based conglomerate would choose four to six projects that they most wanted to see accomplished. Treasury ops would then review the proposals, looking for how much time the project would take, its payback and whether it could be used in other business units. "All projects are evaluated with appropriate metrics," Qualizza emphasizes. "Some are chosen because they represent high dollar value, while others are more qualitative, but all are measured in the best ways we can devise. The emphasis is on measurable results."
Once an agenda is set, tentative assignments are made within treasury ops, and the collective project proposals for the coming year are presented to the treasurer for approval. Having the treasury ops resources to call upon proved very useful to units with limited resources. Treasury ops would even be measuring results and preparing all reports on the completed projects. "We feel like we're valued customers, getting excellent customer service," says Patty Turbak, controller of ServiceMaster Acceptance Co., a finance captive that lends to franchisees. "Their attitude is that they're here to help us. They don't dictate; they listen. And they take responsibility for making things happen."
Music to any treasurer's ears? Definitely. But how many can even hum the tune? Unfortunately, according to treasury pros, not that many.
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"Most treasurers believe that treasury should be strategic and involved in financial activities of business units," notes consultant Stephen Baird, a Chicago-based principal of Treasury Strategies Inc., Chicago, "but there's often a shortage of resources, and essential treasury operations have to come first. Also, some divisional CFOs view active involvement of corporate treasury in their operations as interference and resist it. And sometimes just the way corporations are structured creates barriers to productive cooperation."
ServiceMaster has moved a long way towards accomplishing what treasuries across the country should be trying to achieve–institutionalizing treasury's role in the business units and quantifying its value to them. But business unit partnering has always proven difficult–either because of resistant business units or resistant treasury staffs. Programs that have been successful are almost always a top-down effort spearheaded by the CFO and treasurer, such as the one at Prudential Financial Inc. led by CFO Richard J. Carbone and former treasurer C. Edward Chaplin, now CFO of MBIA Inc.
While it's often a struggle to get treasury involved in business unit financial operations, it's worth the effort, Baird insists. "If treasury doesn't grow into a strategic role, it will be marginalized as its own operations are automated. I've seen companies where the treasurer is no longer a senior officer. And treasury is the steward of the company's capital. To ensure that it is used most efficiently and that the company reaches its ROE potential, treasury has to be involved. Treasury involvement is critical to compressed cycle time, reduced investment in working capital and even improved customer experience, he points out.
At Prudential, senior treasury staff have two roles. One of them is as the embedded treasurer of each business unit. They also have a specialized role to play within the corporate treasury.
What makes the program at ServiceMaster so unique–it was an idea that originated within the treasury ops staff itself. And while treasury is acting as an extension of the business units, it is also demonstrating leadership when it comes to which projects should be implemented and when. "The treasury group is leading the way, coming up with ideas for where we can improve, selling them to the business units and bringing these ideas to fruition," notes Al Sutherland, corporate vice president of finance, whose responsibilities include remittance processing.
So, which projects has treasury ops tackled so far? The program started in 2003, with an inaugural enterprise-wide direct deposit initiative. Suggested by treasury, the project involved human resources and IT. Within a year, participation had doubled to 70%, Qualizza reports.
Since then, the team has completed more than 100 projects and has a dozen works in progress or on the block ready to begin. Other projects have included a program that boosted ACH transactions from 15,000 to over 30,000 per month and another aimed at significantly reducing credit card fees.
The big, enterprise-wide project of 2006 was an overhaul of the merchant processing operation for credit card acceptance. "Once they found out that we wanted to bring more of the processing of credit card payments in-house," reports Jeff Cox, assistant vice president of finance and controller for Merry Maids, the residential housecleaning subsidiary, "they helped us find a software vendor with the right product and worked with us all the way through until it was up and running satisfactorily. They helped us get to a more efficient process and took most of the pain out of the transition. They're very good at listening to the business units and sticking with a project until it is satisfactorily completed."
And this was no small-scale effort. "We moved to a new processor," Qualizza explains. "We got better, more integrated technology. We negotiated lower fees and found ways to qualify for lower interchange rates. We got better reporting."
The final metrics on that project were not complete at press time, but the indications are for sizable savings. "The merchant processing project alone will save us over $1 million a year," Sutherland ventures.
But even with such a big program on its plate, there was capacity to attempt more last year. For instance, another project helped SMAC identify the reasons for kick-outs at the bank lockbox and make changes to reduce those exceptions.
One attractive element of the ServiceMaster program is its attempt to develop accurate and consistent measurements of value. "We got more scientific as we gained experience," Qualizza reports. "We found ways to make the metrics more precise and gained skill in project management."
ServiceMaster treasury has even avoided the bureaucracy that can accompany internal partnerships; in fact, unit managers claim they are more efficient and less bureaucratic across the board. "We used to meet monthly to complain about banking problems," Turbak recalls. "Now we meet quarterly. There's an agenda. And the treasury ops people use their close relationships with the banks to follow through while we go back to our regular jobs. It's quite an improvement."
Treasury marshals whatever finance resources are needed, and business units bring their accounting and IT staffs to the table as needed, Qualizza explains. "Often the IT people and the bankers don't speak the same language, so our treasury team serves as the dictionary to make sure clear communication takes place," he points out.
Most meetings with business unit execs are electronic, since treasury is in Downers Grove and most business units are headquartered in Memphis. "We could be in the same building as the business units or clear across the country, and it would still work," Qualizza insists. "Treasury takes the initiative, but the business units buy in and have ownership of the projects."
No doubt, many treasurers are probably shaking their heads: How do they find the time? It boils down to one of the other things high on treasurers 'to do' lists–automation of routine tasks to leave more time for the value-added activities. "We have an automated, secure wire system that is very efficient. It takes us no more than three hours to get the wires done," Qualizza reports. "We have the cash position set well before 11 a.m., which gives us afternoons to work on projects." And it helps that managers are working managers. "The cash manager and I don't just supervise. We get our hands dirty, too," he notes.
While it may look like ServiceMaster's treasury ops voluntarily took on extra work, the new system is actually easier, Qualizza insists: "Our stress level is way down. We aren't constantly bombarded by surprises any more."
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