The CFO as Chief Service Officer


As Seen in CFO Studio Magazine Q3 2016 Issue


Fifteen CFOs, mostly from tax-exempt organizations, gathered at the Community FoodBank of New Jersey where they sorted and repacked food for distribution to more than 900,000 hungry people in New Jersey. What made this volunteer endeavor particularly impactful was that it was held two days before Thanksgiving. They came together as part of the CFO Studio Executive Dinner Series, and though this one was held in an unusual location, it featured excellent conversation and food for thought for CFOs of tax-exempt organizations — as well as an impressive dinner prepared by a culinary team that is part of the Community Kitchen, the FoodBank’s Food Service Training Academy.

Bob Barry, Chief Financial Officer of the Community FoodBank of NJ, led a tour of the facility, explaining all that goes into running such an expansive operation, and then hosted the dinner. Cheryl Marks Young, Chief Financial Officer of Easter Seals New Jersey, led a lively two-hour discussion of “The CFO as Chief Service Officer —Balancing Internal and External Customers, Partners, and Other Beneficiaries in Tax-exempt Organizations.”

“In our roles as CFOs, we are not just number crunchers, we are not just data crunchers,” said Ms. Marks Young in an interview. “We are human beings who serve others. The numbers and the data help us tell a story about the impact we make on the consumers we serve. That’s the story we have to get across.”

The group discussed all that goes into becoming a charity of choice. Mr. Barry gave specific examples from the Community FoodBank. He explained that Kathleen DiChiara, who started the organization by feeding the hungry out of the trunk of her car in 1975, instilled in the staff the fact that “no” is not an option.

Ms. Marks Young’s mantra is similar. “There is no room for failure in our roles because we need to continue to provide quality services to those most in need.” Since 2006, Ms. Marks Young has overseen all of the financial functions for Easter Seals New Jersey, ensuring its resources are properly allocated to achieve its long-term strategic goals.

Easter Seals New Jersey is a 501(c) (3) not-for-profit organization that since 1948 has enriched the lives of people living with disabilities and special needs, and those who care about them, by providing opportunities to live, learn, work, and play in their communities. Annually, nearly 9,000 people or families in New Jersey affected by developmental disabilities, including autism, physical disabilities, and mental illness, participate in programs designed to help them address life’s challenges and achieve their personal goals on the path toward independence.

Among Ms. Marks Young’s accomplishments is boosting funding for services by $22 million, enabling the organization to increase by nearly 20 percent the number of people with disabilities or special needs served. She has also served as a consultant and advisor to other Easter Seals affiliates across the nation by sharing her expertise in cash management, financial systems, and financial leadership.

“In my discussions, I use the numbers to tell the story about how what we do impacts those we serve and support,” she said. “It’s the lives touched that is most important. We all have state-specific and regulatory issues to contend with as well as business model issues. At the end of the day, it’s not really about all that. It’s about how we, in all of our individual businesses here, serve that end-consumer.”

Many in the group admitted not-for-profit work was not on their radar while they were in school. “My goal was to be the CFO of a Fortune 1000 company making money for shareholders,” said Mr. Barry. “Here I am in a not-for-profit for 30 years, working for shareholders who are the people we serve. We have to be there to help our respective organizations remain financially viable so we can continue serving those who are impacted by our mission.”

The participants agreed that running a not-for-profit can be a balancing act. A solid infrastructure is vital, as is balancing overhead costs. Transparency is key as well. Open communication with donors, the executive leadership team, staff, and board of directors is important, but there are many more populations that must be addressed.

Many in the room referred to the book Uncharitable: How Restraints on Nonprofits Undermine Their Potential, by Dan Pallotta, which examines the constraints put on not-for-profits by the public. A parallel theme in the book and at the CFO Studio Executive Dinner was that not-for-profits must be allowed to use the tools of commerce to thrive and accomplish their missions.

A successful Chief Service Officer doesn’t just talk the talk but walks the walk, said Ms. Marks Young. “Bob [Barry] shared a story about his staff coming in on a weekend to make sandwiches during Hurricane Sandy. That’s being of service internally to the staff as a role model and externally to the consumer we all service,” said Ms. Marks Young. “That’s what it is all about.”

She said it is important to focus on the population being ministered to. “It’s about how we serve our end-consumer or customer to live their best life, to have what it is they need, what brings value to them, and that holds true whether you are for profit or not for profit.”

De-risking Pension Plans


As Seen in CFO Studio Magazine Q3 2016 Issue


De-risking benefit and pension plans, a trend set in motion by the recession, new reporting requirements for pension liabilities, and waves of baby boomers reaching retirement age, was the discussion topic at a World-Class Companies CFO Dinner held recently at MetLife Stadium, and hosted by CFO Studio. The unfunded liabilities that pensions represent on a business entity’s balance sheet can hurt the company’s ratings from debt agencies and its attractiveness to investors. De-risking strategies are intended to mitigate three primary issues: the effects of market volatility on monies invested in the pension fund, interest rate risk, and consequences of events that do not meet actuarial assumptions, such as having a large number of employees reach retirement at the same time.

“There are always differences between reality and those assumptions,” explains Claude Draillard, Vice President, Finance, Dassault Falcon Jet Corp., the evening’s discussion leader. Two frequently encountered discrepancies are “when the population changes dramatically and when the rate of return on the assets is much lower than planned. In both cases, you need to fund those differences at some point … and that could impact your cash.”

There is no one solution related to de-risking a pension plan. “De-risking can take widely different forms once you have analyzed your population,” said Mr. Draillard.

Some de-risking strategies include offering retiree buyouts or purchasing an annuity that effectively transfers pension obligations to a private insurance company. “Is it in your company’s best interest to offer retirees a lump-sum payout instead of monthly pension payments? These are questions that must be kept in mind,” says Mr. Draillard. “It’s important to analyze the situation all the way to its final outcome.” He adds, “Decisions made today about pensions will have their full effect for the company’s financials in as long as 30 or 40 years.”

New Job for CFOs

Pension plan management, once an assignment of the benefits department, is now on the finance agenda. The actions the CFO takes depend on the circumstances of the company’s populations and how the pension plan relates to your long-term strategy, explains Mr. Draillard.

“There are many questions regarding this. Where is the emphasis in your company? Is it in keeping cash for the short term or is your company more interested in making sacrifices with an eye to the future?” he asks.

“Pensions are an important tool in the box to help with retention,” says Mr. Draillard. His company’s plan is richer than most in order to do so. “It has become not only a retention tool but it helps us attract seasoned professionals. Aircraft mechanics make up a shrinking population. A pension is meaningful to a mid-40s [FAA-licensed] professional. It isn’t as important to millennials as it is to these seasoned professionals.”

Cash-flow Negative

According to Cerulli Associates, a leading research firm specializing in asset management and distribution trends worldwide, America’s pension system will turn cash-flow negative this year. This deficit will continue to increase as baby boomers retire. “This has significant impact on CFOs and must be kept in mind when creating a de-risking plan,” asserts Mr. Draillard.

A CFO Studio business development partner, Isaac Buchen is Leader of PwC’s Pension Risk Management practice. At the dinner he recommended “a series of steps that will allow plan sponsors to understand the nature of risks embedded in the current plans, establish key risk-management approaches, and embed a culture of periodic monitoring to make sure that the risk-management steps are having the desired effect.”

Mr. Buchen explained in an interview that “plan sponsors generally have four levers at their disposal to address pension risk:

• Benefit lever or changes to the plan design, including offering lump sums to terminated vested participants,

• Investment lever or changes to the overall asset allocation,

• Contribution lever or developing a strategy of how to fund the plan and potentially making non-cash contributions, and

• Insurance lever or buying annuities for participants from an insurance company.”

As the dinner discussion drew to a close, the group gathered in the Jets Green Room at MetLife Stadium overlooking the field where the CFO guests watched the New York Jets play the Buffalo Bills.

Participants left the discussion with an understanding that there is a clear trend toward de-risking benefits and pension liabilities, and that the actual approaches taken are many, depending on the industry, the composition of groups covered by the pensions, and strategic priorities.

Inside Football


As Seen in CFO Studio Magazine Q3 2016 Issue


As Philadelphia Eagles CFO Frank Gumienny told more than 100 finance executives in attendance at the CFO Studio Reception to introduce the Q1/Q2 issue of CFO Studio magazine, “I don’t just work for the Eagles. I am an Eagle!” Mr. Gumienny oversees all accounting, ticketing, human resources, IT, merchandising, and travel operations for the team. He is also CFO of Lincoln Financial Field. Gumienny spoke in an engaging, off-the-cuff manner, describing the job he’s had for 19 years, providing a fascinating glimpse at life in an NFL franchise. The event was held at Galloping Hill Golf Course in Kenilworth, NJ, recently.

He talked about passion: “We’re in the passion business. Our customers feel that passion and we bring passion to our customers, so we look to hire Eagles; it has to be who you are.” He described the democratic way the Eagles organization eats meals together, with players, his finance team, and others often mingling. He enumerated the top revenue sources (TV’s the biggest, then corporate sponsorship, ticketing, merchandise, and parking). He even addressed the hottest topic of the day, the signing of Quarterback Sam Bradford to a two-year contract extension, saying, “I’ll get the actual signing details when I get back. A lot of times we’ll meet and talk about what we’re going to spend and when we’re going to spend it, and then I’ll see that in the negotiation it’s been changed. And really, it’s my job and the finance department’s job to make it work.”

Answering a question about player negotiations, he said: “I don’t get involved in the specifics but I do get involved in talking to the players about taxation once they sign and what their check’s going to look like.”

A question about whether Moneyball (some baseball franchises use “Moneyball” analytics in their scouting and management) is applicable to football got Mr. Gumienny talking about some of the intangibles in football that make a big difference: teamwork, camaraderie, and “game day harmony.” He said, “It goes back to what’s important in every business: teamwork, hard work, working together, and everything that CFOs do, with your finance team and your organization in general.”

Copyright 2017