Leading a global treasury team with Fred Schacknies

So welcome to this week's Treasury Career Corner podcast where I interview treasury professionals about their treasury careers. Each week I talk to treasurers about how they built their careers, where they are now, and where they see both themselves and the treasury profession going next. In this week's show I'm joined by Fred Schachnes, the senior VP and treasurer at Hilton Worldwide, headquartered in Virginia. Hilton Worldwide, as many of you will already know, are an American multinational hospitality group. In 2018, they were recognized as one of the best workplaces to work in. And in recent years they've moved back from, well, they've been both a public, a private and more recently a public company again, which I'll ask Fred to perhaps explain a little bit more detail in the show. But as you treasury guys love your facts and figures, I just wanted to highlight a couple of their numbers because I think they're truly amazing. So Hilton Group have 16 world class brands, 5,500 properties, 895 rooms, 109 countries and territories. Get your head around that lot and they've in their hundred year history welcomed more than 3 billion guests. And I've been one in the past and be very happy sometimes on the podcast I give a detailed introduction to our guests. But rather than that today, what I want to do was get Fred to tell us about himself rather than me ruin it for all you guys kicking off into it. Fred, you've got a degree from Brown and an MBA from New York. Maybe talk us through your first moves into the world of corporate treasury and how you started out, if you would.

Sure thing. Thanks Mike, very much for the opportunity and glad to be joining you today. After college, I started out actually on a trading desk, somewhat through happenstance. I knew coming out of college that I kind of wanted to focus on economics. That was my degree. And the reason being I was just sort of quantitatively oriented. But I think what I found interesting about economics was it's something that kind of had a social impact too as well. I mean, it's really just as much about psychology as it is about math. So coming out with that economics background, I kind of decided to go into finance and stumbled into treasury really by way of a trading desk. Not that I saw myself as a trader per se, but that's where an interesting opportunity came up. And so the first five years I spent trading currencies and interest rates and doing sales as well, having done that, and that was a fantastic and fascinating place to spend a couple of years, but I didn't really have any Particular idea of what happened, what transpired in that value chain that I was on before me or really after me. As fascinating as those kind of microseconds are between bids and asks and price changes, I wanted to get a bigger picture of a better understanding of what was going on in the entirety of the finance value chain. I decided to go back, get an MBA and then from that went into the corporate practitioner world. That's something I'd gotten a glimpse of having spent some time in corporate sales desks as well, speaking with corporate treasurers and understanding about their perspectives, the problems that they faced and really how it fit in with the bigger picture of the issues their companies were dealing with. Having gone through, having got my MBA work then for three companies. The first one was Lucent Technologies or what was then Lucent Technologies based in New Jersey, after that with what was then Constellation Energy based in Baltimore. And now for the last 10 years or so have been with Hilton here in Virginia.

And with those roles at Lucent, that was your sort of introduction to treasury, if you like, you came into it so you focused on sort of in house banking of things or how did your treasury career grow because you're the global treasurer of Hilton, so you got it done pretty well through those years.

Yeah, it was an interesting transition to go from a trading desk with a mindset of a trader and into that of a corporate treasury practitioner. And obviously you've got to shift your objectives, your framework, your risk perception, everything else that you look at. So the problems that Lucent was dealing with at the time, being a growing global multinational company, the time lots of issues with global liquidity, with global risk, and those are the kind of things that somebody who works in a trading desk probably has a good sense of. Most of the issues that I focused on when I was at Lucent had to do with dealing with kind of global growth and the financial consequences of that. So in house banking, yes, was definitely one of the big successes there by implementing a very successful in house bank platform in terms of what it was able to achieve, but also in terms of how it did it, in terms of technology and process, everything else, it really did have some positive financial impacts for the company in terms of ability to repatriate cash, in terms of ability to get our arms around risk. And so, you know, lots of good lessons learned there about, I think, how to things that companies should look at with rolling out that type of platform.

And from technology and telecoms, you then made move into America's energy choice Constellation or explain those guys and it was a move of location as well.

It was. And partially based on the fact that my. I'm from the Baltimore area originally and my family was nearby there. And this move happened shortly after our first two children, we have twins, were born. So the idea of being closer to family sort of grew in significance in terms of career choice. So interesting, you know, change in terms of not just location, but industry. Everything kind of from the utility management side to longer term projects of nuclear power plant generation and to the kind of the day to day volatility of trading activity. So had an interesting portfolio with treasury challenges, let's say.

So what then happened with Constellation as they evolved or changed what happened with the group?

So the company, very successful in lots of different activities, ultimately was acquired by Exelon. And it just so happened that around the same time that that transition was going on, Hil Hilton was relocating from Beverly Hills to Northern Virginia. So an opportunity came up at Hilton that I think was just, you know, too good to pass up, kind of going back to. So my roots and interests really lie with international, with global enterprise and the challenges of international finance. And Hilton having, as you mentioned earlier, a really profound global footprint, which is really absolutely fundamental to who we are. That was an exciting opportunity. I myself was one of those 3 billion folks that you kindly pointed out at the beginning. And so it's just kind of one of those brands that a majority of people have a very positive affiliation with and myself included and having traveled quite a bit myself as I have, the idea of being part of an institution that sort of fosters international travel was certainly attractive in and of itself.

You joined Hilton back in 2009. Where was it in its journey, if you like, because you've been there, what, nine over nine years now. And throughout that time it's changed a lot as a company. Treasury to one side, we'll dig down into that. But how was it different?

Yeah, so as I mentioned, I joined immediately after the relocation from California to Virginia, which came shortly after the company was acquired by Blackstone and was taken, taken private. A number of profound changes there in terms of leadership, the ownership, in terms of kind of the entire corporate leadership team. But the timing of that, ill fated though it was in the downturn of kind of 2008 and 9. It was a, you know, that was a rocky time for a lot of companies, you know, and Hilton included. And so lessons that I had learned in terms of managing liquidity and dire straits at two companies prior certainly came into play as well. And I think though that Hilton has a very strong franchise, very strong brand, and withstood all the cash flow tests during that period very soundly and has really solidly rebounded since then.

So as you went through that downturn and recovered, the company changed as well. You went back to public, and there were a couple of different changes. How did that change and affect you guys in treasury and your role and what happened?

Yeah, so it definitely is an interesting transition point. The company being private for a number of years was an essential phase in its development, I think. I mean, a number of changes had to happen in terms of not just the physical location of the company, but in terms of the makeup of the organization, in terms of refreshing a number of the brands, in terms of integrating a number of the corporate activities, and really just revitalizing the entire corporate enterprise. And I think those types of decisions, many of which are very expensive and many of which are very painful, are often, I think, best executed under the umbrella of a private institution. And I think that's a lot of those changes are what Hilton was able to make. And I think in the. In the years that followed, I think the leadership team has done a fantastic job of exactly that, of really revitalizing the corporate enterprise and the franchise. So from that, you know, the company, I think, has rebounded very successfully in terms of sponsoring organic growth, not just of net units of hotel rooms and hotels, but also in terms brands. All of that, obviously, was being done by a PE investor, was done with the expectation of eventually returning to the public markets. And so that was done in 2013. The company went through its actually second IPO, the first one being a couple decades earlier. So that transition back into the public world, I think by that point, I would say it really wasn't that tremendous of a change, because by the time we'd gotten into the tail end of this ownership phase, many of the corporate controls that you would normally associate with public life, you know, were already in place. Many of the disciplines in terms of management structures were already in place. You know, there was a bit of a transition in terms of our main owner being from sort of the, you know, sole to majority to minority to now, you know, entirely disinvested. You know, there was some change there in terms of who reports what to whom, but really in terms of all of the installation and the growth of the kind of the corporate engine behind it all, I think was already in place.

And with that, throughout the time that you've been there, in the nine and a half years, a global multinational, you've led teams US and UK and overseas and different integrations with treasury globally. What's it been like for you leading a global treasury team? What's your leadership style for those guys? Are you hopping on a call every week or how do you spin the plates for each of the different locations, as it were?

When I got to Hilton nine years ago, I was actually the only person on my team here in the head office and everyone else was either in one of our hubs in Memphis or outside of London. And so I had literally no connection to them other than telephone and email and whatever data they were able to share in whatever format. To answer that question about how does one lead a global team? It's putting in place a stool of people, process and technology and that has to span globally for all of those things to come together. In terms of the technology, which was a large piece of focus for several years, it was just getting all of the different offices on the same technology platform. Without that, it's impossible to share data, much less intelligence. So that was a key focus for really the first five years, I think, of being here. But along with that is aligning process and making sure that everybody's working under the same set of policies and according to the same standards and according to the same goals. The, the last piece there of people, it's the hardest one to realign and it's the most important. You can't do that without a certain amount of face to face. And I do travel to try to get in front of the other teams. Maybe not as much as I could. As much as you can, you know. Yeah, as much. As much as one can, you know, it's putting other people in front of their faces too. So, you know, we're trying to be more mindful about building connection, not just at my level, but up and, you know, up and down the organization. Getting people to the point where, you know, even if you're in a different location or a different continent or different time zone, you know, it's knowing what your colleagues are doing so that if you call them up, you know where they are in their day, in their workflow, everybody's essentially working as part of the same team, you know, even if they're not co located and again, getting to that level of sort of people alignment, you can't do it without process and you can't do that without technology.

Fred, you talked there about all pointing one direction. Everyone processes everything. But how do you come up with those goals? What's the ethos for the treasury team at Hilton Worldwide?

That's a great question. I think aligning everybody around the same purpose, around the same goals really does start top down. And I think to give credit where due, I think Hilton and the leadership here have done a tremendously good job at defining that at the corporate level and pushing it out. And so our vision, mission and values is all very clear. You know, we all know that whether we're working in one side of treasury or the other or accounting or anything else, you know, it's all going to the same goal as a hospitality company. But you know, pushing that down more tangibly into what does that mean for finance, what does that mean for Treasury? You know, all derives from top down mission statements. And you know, for my role, it's up to me to sort of take what's, you know, what's given to me at the, you know, from CFO level down and articulate that to my team and pull them behind a common purpose. And we say this is why we do what we do. We don't do it to manage cash, we don't do it to trade currencies. We do it to make sure that our goal, which is to fill the earth with a light and warmth of hospitality, is something that we can continue to fulfill. And so obviously then that all sounds very good. But then it comes down to some tactical matters of treasury management. It's aligning everybody around a common set of goals and a purpose and making sure that everybody knows, know how what they do every day fits into that, those common purposes. And so you know, from, from kind of corporate to finance to treasury and you know, it parcels out into, there's matters of cash management and operations, there's matters of banking, there's matters of financial risk, there's manage of liquidity. Everybody hopefully understands how what they do ties into the goal above them and the goal above that.

When people actually look through your profile perhaps on LinkedIn and look, there's, you guys have won some awards now. What have those been? You've got a Pinnacle Award through the afp. Alexander Hamilton. What have those been for? Not just saying oh we did this project, thanks very much, but how did it come about? Or give us some examples there.

The first of the three chronologically was the Pinnacle Award, the grand prize from a couple years back that was related to work we had done on cash flow forecasting, which really was kind of a byproduct or was in reaction to the company's transition from private to public and with the ipo. And it was in response to some changes in how we had to manage cash and so to sort of. To react to your question earlier about, you know, what did it mean to transition out? I guess at a more tactical level, you know, there were some other, other reactions. And so, you know, the cash flow forecasting requirements of a public company versus a private one, it sounds simple. You know, it's a large event and as you can imagine for a company of our size and it's something that, you know, you can throw loads and loads of bodies at but, you know, there's better ways of doing it. And that's kind of the gist of what we did was really just kind of building a better mousetrap when it came to forecasting methodology. It was, you know, I guess the secret sauce of it was taking that data that was available, which, you know, that's not always perfect, and making the best use of it by kind of just applying some statistical overlays and some kind of rational conclusions to sort of normalize and to kind of build a forecast where imperfect data was, you know, or where the data wasn't perfect, I guess.

Yeah. And you actually got a result that was actually meaningful.

So yeah, and it's, you know, we got a, you know, from that, it was for that point of our transition, we got a process that was really, by all accounts kind of, you know, fte wise more efficient and still providing a great output in terms of intelligence.

And then a couple of the other projects again. Is that the evolution of Treasury? You've seen it through or what's been happening?

Yeah. And so the other two projects, I'll sort of respond to them together. One was related to global liquidity and one was related to global risk. And to be fair, you know, they kind of go hand in hand. Each one of them was sort of a large and multi year project by itself, but collectively they kind of, they speak to sort of Hilton's ongoing growth overseas. And as you kindly noted earlier, you know, we're in 109 countries and territories now and continue to grow and you know, harking back to earlier days of my own career at Lucent, not dissimilar challenges of any company that exists and is growing in many places around the world, you know, presents loads of challenges in terms of, of managing liquidity efficiently, avoiding trapped cash, getting it back in a way that's, you know, friendly from a perspective of tax and accounting and treasury. And, and so, you know, the cross currency aspects of that were challenges that we needed to get a better handle on. The kind of the liquidity visibility aspects of that we need to get a better handle on. And you know, each of those was a, was a multi year project in its own right and grateful and thankful that for getting so little recognition for each of those. Each one of those is obviously a team effort and it was good to draw some attention to the work that many members on the team had been doing.

And that team, how are you structured? And you know, what would you say has been key to the success of that team? What's your ethos?

And you know, our team is organized with kind of a, We've got a regional treasury organization that sits in three locations and looks after cash and banking and is really the sort of liaison to the operational finance world on all matters relating to Treasury. And then we have two corporate based teams, one that's sort of aligned to kind of front office responsibilities and really looks after the managing of risk and liquidity. And another essentially a middle office team that looks after the systems, process, controls and data that flows in and out. In terms of central ethos of building that team has been, I think, striking a balance in terms of diversity of skillset, of background, of mindset, of personalities. And you know, I think we do have a good, healthy diversity on all of those fronts. And you know, I mean, if anybody on the same expertise, you know, you wouldn't really get a lot done and you wouldn't grow very much, you know, and part of that, the benefit of that diversity is just bringing lots of different, different viewpoints, you know, and often and often healthy disagreements on things, which is something that I absolutely value, you know, in my, in my own team, having open debates on topics and coming to, I think coming to a better outcome than you would if everybody just said, yes boss, that sounds great.

Yeah, that's how we do when you talk about diversity, widening that sort of definition. You know, we've looked at the women in Treasury. I did a Women in treasury month actually was very successful. It was quite an interesting one because there were a couple of my guests who. And these were ladies and they said, well actually it doesn't matter, Mike. You know, it's about, you know, not just gender, it's about equality with, you know, looking at disabled people, looking at different people coming from different ethnic backgrounds. It's a, you know, a much wider issue and that's what they were definitely supporting. But you say about the diversity and the different makeup of the background, how do you try and encourage that? Or what's your sort of thoughts around that?

In my own career experience, I've had the unique opportunity to experience diversity and the lack thereof on a couple of fronts. The first five years of my career I was working in Saudi Arabia on an entirely male company. Thankfully, after that, every other organization I've worked in has been roughly 50% female and kind of within the treasury domain, sometimes even more than that.

Yeah.

And so, you know, I will say having experience one extreme there and then, you know, I definitely favorite the kind of diversity of gender as well as other dimensions of opinion. Have also worked overseas, have worked with a number of folks from really all parts of different worlds. And you know, I can say firsthand, I mean, I do very much favor diversity in terms of not just ethnic or, you know, national or cultural. There's lots of different factors there that influence how people think about things and address them. And I do very much favor, you know, diversity on that front as well. But I mean, even besides that, there's people who, some are more sort of, you know, organized than others, conceptual than others. Some are more faster or slow thinkers, some are more introverts or extroverts. I think each one of those dimensions influences how somebody views a problem. Fundamentally, that's what any of us are trying to do, is just deal with the problems, you know, be they kind of short term or long term. Having that breadth of background and experience, I think ultimately makes you better problem solvers as a team.

And when you're, you know, taking that the further on step when you're recruiting, what are you looking for in terms of those people?

Yeah, I think, you know, anybody who walks in the door looking for a job in treasury is almost certainly someone who's, you know, at least sort of quantitatively minded, hopefully kind of logic minded as well, you know, and I think that applies for anybody who's looking for a finance job in general. I think for what I find interesting and what's kept me in treasury for all of my career has been, you know, the unique characteristic of, I think, you know, everything we do in treasury just having this profound immediacy, you know, everything has a kind of a real tangible immediate impact and short time frames and imperfect information often and usually with material impact. That type of thought process, I think, takes a certain type of personality to it. Someone who, I think there's a level of maturity and confidence, but I think also a level of even risk tolerance, I think, which is sort of. You don't hear treasurers talking about the benefits of risk tolerance too often. But the reality is that everything we do, you know, recommending a decision on something or making a decision on Something everything we do is we're taking some risk on because nothing that we react to has perfect information. My framework, coming from a trading desk, that's what trading is. You know, it's making time crunch decisions with material impact based on imperfect information.

How has world of treasury changed, would you say? And where do you see it going next?

I think everything I describe there, I think is what makes for a thoughtful treasury practitioner. But the special ingredient, the one that makes a perfect candidate, I think is the ability to communicate and to interact and to manage people, you know, whether it's up, down or sideways and you know, to demonstrate leadership potential. Put that in the context of, I think where treasury is coming from and going to. In the end, all we're doing is not even managing money, we're managing information for the most part. You know, we have to appreciate the fact that the role of capital and technology relative to the role of labor will continue to shift in our industry just like every other. Some of the advice that I've given to folks is say, assume that at some point during your career you will be partially, if not fully automated out of a job. That may or may not happen, but I think it's a good assumption to make because all of us, whether it's in treasury, whether we're managing cash or risk or we're at the treasury level or anything else, I mean, we're all just basically human algorithms, some of us a little fuzzier than others. But when you think about, in terms of, think about your job as you would describe it to a software engineer, hopefully you'll be in a better position down the road to continue to be one of those folks that's kind of solving problems.

When you said that, I've had a number of these conversations obviously and spoke to Mark, actually just this, this week's episode just come out from Johnson Controls and he talked number one about communication skills. He started very similarly actually in more of a sales role before he kicked off his career in earnest with Johnson Controls and, but he said those communication skills he learned in that sales role really helped him and that's one of the things he sees from his team. But then we also moved into the technology space and, or talking about that. And one of the things we sort of, you know, and I've talked with a couple of other people is it seems that the pyramid of treasury, if you like, has, you know, it used to be this, you know, big wide triangle, but now it's gotten narrower and there are still those similar, there are still roles in treasury, you know, people aren't going to be automated completely out of jobs, but instead of having two more junior people just doing a more junior turn the handle type job, actually you're going to need one more senior person, not senior senior, but an operational type person who will supervise, you know, make sure that everything works. So there's still a need. It's more the thought strategic problem solving, which sounds like you're, you're seeing as well.

Yeah. And you know, to the point about communication, you can't be effective in that role of not only problem solving, but then articulating the problem to, you know, everybody you're working with without those communication skills. So I think, you know, it absolutely key to any, to the success for anybody in that role.

Okay. And then looking back at you and your history, if you like, what would you put down as some of your success factors? You're the treasurer of Hilton Worldwide. What would you put it down to?

I'll expand it a little bit beyond myself to the success of others. I've observed as well in the course of my career. And at one level it comes down to finding the problems that need solving. Having worked in four different companies and four different industries on the one hand, kind of every company feels that they're unique and each one of them is unique in their own mind. I'm sure in the end the treasury issues that span across them are more similar than they are dissimilar, but the context different for each company, the prioritizations are different for each company. So, you know, I would say as a matter of career success, you know, make sure you're, you're bringing the right tool to the right job, terms of figuring out what problems are most prioritized for the company that you're part of. Beyond that, other bits of career advice I would pass on and is to try to get the broadest career path you can. I myself, for one reason or another, have been fairly specialized in what I've done. You know, I think frankly if I could go back, I'd like to have experienced a broader selection of different functions on my way up that ladder, you know, and so I would, that's something I would encourage others to do too, is experience different ways of thinking, you know, different types of problems and experience working with different types of people too. Tying all those things together though, the ability to manage people up, down and sideways and the ability to communicate is absolutely fundamental, I think, to anyone's success.

Amazing. Well, I think, you know, I think it was. We wrap up today's show and Fred said it was gonna be okay. We'll put it in the show notes his LinkedIn link so you can perhaps connect with him if it's appropriate. And everything else, you know, you've obviously given back through the afp, you're on the board there and everything else. And looking, you know, just to wrap up today's show, what advice are you gonna give to, you know, one of those guys who says, right, actually, I want to be the treasurer of Hilton or I want to be involved in the AFP or want, you know, want to emulate yourself. Any other things you'd say?

Yeah, I think getting involved is key and I think that applies to probably any. Any role in any type of industry. I think, you know, having spent my career in treasury, you know, on the one hand, I would say it's a perfectly good place to spend your career. On the other hand, I would be. I'd be disingenuous if I didn't say that. Opportunities to do things elsewhere too, because I've not experienced any of them. But, you know, joking aside, I. Bending your career in Treasury, I mean, it's. It's obviously great for folks who are, you know, particularly quantitatively oriented, particularly logic oriented. You know, as I said, I think, you know, the ability to kind of be able to take confident risks based on imperfect information and to deal in the immediacy of the now, I think are also characteristics that, you know, if that sort of appeals to you, then treasury is a great place to spend your career. Don't underestimate kind of the importance of people. And the importance and dealing with people is about communication and whether you're dealing, whether your career is in treasury or takes you anywhere else. You know, I think those lessons will apply no matter where you are.

A great summary, I think, from Fred. Thank you very much for your time today. As I said before, if you want to connect with Fred, feel free. Look at his LinkedIn link. I look forward to my next day at Hilton.

That's great. Thank you very much, Mike, for the opportunity and we're looking forward to having you.

Great stuff.