As Seen in CFO Studio Magazine Q2 2017 Issue
-BY JULIE BARKER-
ROB FALZON, A 33-YEAR PRUDENTIAL MAN, CONTINUES TO LEVERAGE HIS DIVERSE EXPERIENCE AND OUTSIDER’S EYE TO PUSH FINANCE TO ITS TRUE POTENTIAL
From his office on the 23rd floor of Prudential Plaza, Rob Falzon looks out at the cityscape of Newark and reflects that an executive office is a very pleasant perk. But it’s not everything.
Reorganized out of a managing director’s job and the corner office that went with it in 1992, Falzon went to work in a cubicle, where he learned real estate investment banking, an area of Prudential’s business that was entirely new to him. “It was something that I had limited qualifications for and no experience in,” he says. He figured, though, that he’d gain skills and know-how. Ten years out of grad school at the time, he gambled that he’d make up ground. He threw himself into the new job, and, in less than five years, was again a managing director. From banking, he jumped to another new field: real estate investment management. Falzon spent a decade or so traveling extensively, with dual offices in Parsippany, NJ, and London, U.K., ultimately becoming CEO of Prudential’s European real estate business.
Twice, then, Falzon climbed to success before having to reboot, though the skills he’d developed in real estate investment banking positioned him for the role he took in Parsippany. He calls this career path “nonlinear,” counting “four very different jobs,” including his current one as CFO of Prudential, “in the time that I’ve been here.”
Others might say he took unnecessary detours, but he insists he accrued significant benefits from his professional journey: He learned to think about a whole range of external constituents, whether they were shareholders, debt investors, analysts, rating agencies, or other outside stakeholders. Falzon also picked up “knowledge and sophistication around a broad variety of capital markets, everything from debt to equity and the hybrids that exist in between, and U.S. and international markets, and how those markets function.” He says he uses this knowledge of a variety of constituents and capital markets in his job today.
The New Jersey native returned to Prudential’s Newark headquarters as Treasurer in 2009; three and a half years later he was named executive vice president and chief financial officer, watching over one of the world’s largest financial services institutions, with over $1 trillion in assets under management as of Sept. 30, 2016. His vision as he builds his own high-performing Finance team is based in part on his own experience, which has been marked by fascinating opportunities but no set path. He believes the unusual direction he took has not just broadened his skill set, but has sharpened it, too. It’s no surprise, then, that he advocates individual mobility in career development.
But beyond that, something else has resulted from his peripatetic years: He tends to view the Finance organization as a new frontier. He sees enormous possibility in what Finance does, saying its complexity and potential for impact is underappreciated. He looks at this function— and those who know its language and are fond of its clarity—as a means to enhance value for the entire organization.
Financial Role in Driving Performance
Falzon, 57, is particularly proud of an initiative his department undertook to ensure, as he puts it, that there’s “a good line of sight between operating performance of the businesses and the reported results that we provide, whether to shareholders, bond investors, or to regulators.” The Finance team looked back over five years at adjusted operating income, the main business earnings performance measure, and GAAP reported income, noting the “breakage” between the two.
The analysis identified that 85 percent of that breakage came from two areas: 1) the treatment of currency exchange rates in Prudential’s international business, and 2) the way guaranteed lifetime income living benefit features were treated in the company’s retirement business. Falzon viewed “breakage” in the retirement product line as having no small importance, as guaranteed lifetime income solutions offer growth potential for Prudential, given the demographics of the U.S. and the paucity of Americans’ nest eggs.
In the case of currency exchange rates, Prudential revamped the Japan organizational structure to alleviate the problem, where solid business trends were sometimes obscured due to non-economic volatility included in GAAP net income. In the case of the retirement product, says Falzon, “where market developments created volatility in our hedged risk, we revised the asset-liability management strategy and combined the management of risks essentially into a single entity.” This approach helped improve stability while contributing to higher free cash flow.
The exercise set out to make sure the operating performance of the businesses and the reported results were reasonably aligned. “Reducing complexity and volatility, and improving predictability and clarity, can have a significant impact on…how investors value the company,” says Falzon. “That’s an important issue for the company, not just for Finance.” According to public disclosures, the company’s book value per share grew nearly 14 percent in 2015, the year Prudential took steps to mitigate the effects of foreign exchange rate re-measurement on reported results.
Skill Sets for the Future
In order for the Finance organization to enhance value in that way, Falzon says his team members needed a mix of skills. Those skills fall into two areas: the traditional, technically oriented skills, like accounting and reporting of results; and business performance and growth skills, such as strategy and analysis. “Our best people are the ones who can do both of those really well,” he notes.
Continuing on this skills categorization tack, he says technical accounting and corporate finance skills are table stakes —everyone in Finance needs those. Interpersonal skills are what will help individuals “rise in the organization and lead— leadership and creative problem-solving require the development of soft skills.”
Falzon considers developing talent to be so important that he devotes a significant part of his time to it. Because the talent needs of his and all businesses are under constant pressure from disruptive forces requiring new proficiencies, he is a strong believer in taking a long-term view of needed competencies, and serves on the advisory board for Rutgers Business School. Falzon distinguished himself at Rutgers as an undergrad, winning Phi Beta Kappa membership while earning a B.A. in Economics. (He also has an MBA in Finance and Accounting from Columbia University.)
In helping people to progress in their careers, Falzon encourages them to recognize that they need a mix of skills. Careers spent in a silo aren’t going to develop that breadth of skills, he points out. Young people “ought to be looking at lots of lateral movement” as they build those proficiencies, “as opposed to thinking that every change is going to be a change where they’re moving up the corporate ladder,” he says.
Falzon describes the Prudential as being “maniacally focused on talent.” Finance has a requirement that all employees get 48 hours of formal training per year. Leadership programs for new college graduates, new MBA graduates, and seasoned executives are available, as well as specialized training.
“We’re about a culture focused on our talent, diversity, and inclusion and high levels of collaboration,” he says.
Creating a Global Community
On Falzon’s team of approximately 2,000, roughly one third work outside the United States. He travels regularly to Japan, where Prudential’s single-largest international office is found, and is taking steps since becoming CFO to create a more connected global Finance community. This begins with defining elements that are common to finance, “so no matter where in the world they sit, they know what it means to be part of the global Finance community.”
Understanding, for example, that everyone on the team deals with the month-end close develops cohesion, a sense of mission, and a common experience, says Falzon. In meetings to discover common ground, something else becomes clear: “Whether you’re in the U.S. or Tokyo or Seoul, you know we’re making investments in your professional development and that you have opportunities to progress as a professional, both in terms of the types of experiences you’ll have and career opportunities,” he says.
And there’s another layer to this. With a sense of community and common culture, you get a stronger team and financial processes, Falzon notes. “If you have a sense of belonging to the global Finance community, you have a shared construct in terms of what’s important — if that’s common, you’re going to find that individuals will rally around our objectives, conduct themselves ethically, and treat each other in such a way that’s consistent with our company values.”
Falzon, the Jersey boy who discovered his own pathway, is not a lone wolf. Rather, he is a big believer in community. In 2016, Falzon launched “Finance Forward,” the vision for creating the Finance organization of the future. And to make this vision tangible, going into 2017 and beyond, he’s kicked off a virtual global road trip to even further engage employees everywhere. In addition, he hosts meetings with 60 top leaders, U.S.-based town halls where people live-stream from satellite locations and the replays are made available to global offices. Falzon also takes time to visit offices from Shelton, CT, to Seoul in person.
He says these efforts to enhance connection across the globe are intended to enhance business outcomes and build stronger talent by focusing on collaboration, sharing of best practices, and professional development. It’s one of the most important and enjoyable things he undertakes each day.