VideoBlack & Veatch CFO Karen Daniel got started early in finance. As a high school student, Daniel, now 51, worked for the Internal Revenue Service helping to process tax returns. Maybe that's why she likes the idea of mentoring employees in the ways of finance, right from the start.
Indeed, as part of its ongoing management training, Black & Veatch, a privately-held global engineering and construction company, requires managers to attend a session that focuses on value creation. Daniel points to Steve Stark, a project manager with responsibilities for engineering, procurement, construction, and now working capital. "When I took the ... training it helped me understand the bigger picture of how the financial elements of a project fit into the overall company's financial objectives," says Stark. He adds that the training expanded his perspective on how meeting project goals can affect the company's bottom line "beyond the profit/loss metric typically monitored at the project level." For instance, Stark says his "value-based management" training covered how cash flow directly affects the company's working capital, and how "timely cash management" helps fund general operations and investment in other parts of the business.
As CFO, who heads a 200-person finance department, Daniel believes that driving the "value creation" message to all levels of the company helps keep the employee-owned Black & Veatch on track.
Daniel, who started her career at KPMG Peat Marwick before moving to Black & Veatch's internal audit group in 1992, points out that her company has very little debt on its balance sheet and has a credit facility if needed. But like many businesses, Black & Veatch, which generates $3.2 billion in revenues annually, has been affected by the global financial crisis. Yet, while its revenues and earnings were down in 2008, the company remains profitable. (Daniel shared net income and change in revenue numbers with CFO.com on the condition that the private-company metrics would not be published.)
- "Our metrics are basic — earnings and cash — but they have a significant impact … what's most important is that every project team has the responsibility of understanding and performing against their working capital position" — Black & Veatch CFO Karen Daniel
CFO.com talked with Daniel about heading the finance function at a private company, making her way through the current financial crisis, and giving everyone a smidgeon of corporate finance training.
The whole economy sunk and took corporations with it this year. What affected Black & Veatch's numbers most?
I think you see there is the reflection of rising costs in our industry around the equipment and various other things that we use to execute our projects, as well as rising labor costs. The slight dip in revenue is, I'm sure, the reflection of the economy beginning to slow down a bit in 2008.
Do you your numbers for 2009 look stronger?
If you're defining 'stronger' as more profitable, yes. In 2009, I think you will continue to see top line declines in our industry to some extent. But companies like ours that focus on profitability have found ways to increase profitability compared to last year by operating more efficiently.
Can you give an example?
We always strive to execute our projects well, and whatever state the economy is in does not change that. As for operational efficiency, that goes all the way from leveraging our resources around the globe through to our integrated global workforce, and through to gaining efficiencies through technology. We are in a continuous improvement mode, despite the economic conditions, and that really has allowed us to continue being profitable.
To capture operational efficiencies, how is your finance department structured?
We have what we call a decentralized finance organization that works hand-in-hand with corporate finance. There are five business lines — energy, water, telecomm, government, and enterprise management solutions, which is our consulting division. Each of those operating units has a senior finance officer who has a dual reporting relationship to the [corporate] CFO and their division president. When it's most efficient and effective for work to be done at the corporate level, we do all of that. For example, tax and treasury is all done in the corporate finance group. But the activities where it's important for us to be close to our projects are handled by the unit CFOs, such as project accounting support and certain planning and budgeting activities.
Where does your internal audit function report?
It has dual reporting responsibilities as well. Internal audit reports to me as [corporate] CFO for administrative purposes and to the chair of our audit committee [for functional purposes.] Our board is comprised primarily of independent directors as defined by the Securities and Exchange Commission. The audit committee is comprised solely of the independent directors
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