Lorenz is not the only treasurer beginning to conclude that lean is not necessarily mean–or even efficient. Insufficient staff or an inadequate skill set can force treasuries to put important process overhauls on the backburner, like the ones Lorenz and Dunn initiated, and shortchange analysis of data. In the most extreme cases, being too lean can result in errors that can easily cost a company more than the price of one or two additional employees. While the ideal has been to rely on automation and outsourcing to take up the slack for most of the past decade, one can be too eager in the pursuit of fashionable leanness and end up anorexic.

"In general, many treasuries may be a little too lean for the strategic responsibilities they should be taking on–and that ends up costing the company," says Robert Warren, vice president of corporate development and former treasurer of $3 billion Diebold Inc. "In most organizations, it's hard to get a higher headcount. Treasurers know what they have to do, but they can't always execute on it. So they look for alternatives to bringing in a person–they shift duties, outsource or automate when what they really need to do is [hire someone]. But before they get to that point, there's a lot to evaluate, and they don't always have the manpower to do it."

A Catch-22, no doubt. But some treasury consultants will tell you that the blame for the leanness may rest with the treasurers themselves for avoiding functions that would help them be more strategic, or failing to think strategically about the responsibilities they have. "The only time most treasurers take a scientific look at staffing is when they have to defend against cuts," reports Craig Jeffery, who is managing director of Strategic Treasurer LLC, based in Atlanta. "The reality is that many treasuries are lean because they were not providing tremendous strategic value. They weren't adding much or weren't showing it, so they were an easy area to cut."

Warren agrees. "The burden of making the time to pitch the proposal and do the analysis belongs to the treasurer," he says. "If the CFO is pushing the treasurer, then the treasurer is not doing his job. He or she should proactively look at how to be more strategic."

Of course, there are always best-practice treasuries, like the ones at Microsoft and General Electric, with staffs that could fill any executive recruiter's most expansive wish list. They have always put being strategic at the top of their priorities. But after living lean for years, there are notable treasurers bucking the reduction trend and fighting for their rightful place at the strategizing table.

Jennifer Ceran, the treasurer of eBay Inc., has spent her four years at the $6 billion online auction site gradually, but purposefully, building muscle in her treasury. "When we were founded in 1995, and still when we went public in 1998, treasury had a staff of two, but as our revenue and our global footprint grew, it obviously became too much for two people to handle," she reports. "You need the right core headcount. Technology is no substitute for a smart, dedicated person. You want the people managing risk, not collecting and tabulating exposures."

These statements would make sense to any treasurer, but the trick is to convince senior management. "As we grow, management is always asking treasury to do more," Ceran observes. "We have a lot of conversations where treasury essentially says, 'We're not currently staffed to support that activity. If you want us to pick up that responsibility, here are the additional resources we think it would take to do it right.' We're always weighing the value additional treasury support could bring against the cost of providing it."

At one point, a single person managed both eBay's investments and foreign exchange activity. As the workload increased, so did the risks. "We made the case for having separate people dedicated to each activity and got the green light to hire," Ceran recalls. "When we acquired PayPal, we essentially had to build two treasury operations, one to support eBay's corporate activities and one to support PayPal's product activities."

Fast-growing companies have to anticipate the need for additional treasury staff, she insists, and it's Ceran's strategy to add treasury muscle before the heavy lifting starts. "When I started, I talked to other high-growth technology companies like Apple and Cisco, and they all advised me to hire ahead of the curve, not wait until the need was urgent," she notes.

The company with the lowest ratio of treasury headcount to revenue does not necessarily have the most efficient treasury, Ceran insists. "In fact, I'd rather not be in either the highest quartile or the lowest quartile when it comes to headcount relative to revenue," she says.

Theoretically, optimal treasury size should be determined scientifically, through a cost-benefit analysis and ROI modeling. A skilled but relatively inexperienced treasury analyst (fresh MBA) can cost anywhere from $75,000 to $150,000, including benefits, says Allen Geller, who is managing director at Raines International in New York. The rule of thumb in some shops, he notes, is a value/cost ratio of 3:1 to justify a hire; $100,000 in salary should translate into $300,000 in cost savings annually.

At eBay, Ceran uses ROI metrics to make the case for adding a position. The projected value added has to exceed the all-in cost of the staff increase almost from day one, Ceran explains. But once a person has been added, the actual ROI delivered by that additional position is not calculated at eBay.

Instead, the performance of the whole staff is measured against preset goals and benchmarks. If the addition of the person does not boost the performance of the whole staff by the expected amount, the whole treasury carries the weight of that underperformance. "We don't measure performance by the person," Ceran says. "I worry about the implications of measuring the ROI of a specific individual, rather than the team and its end-to-end process. The new position is justified if it makes the team stronger. But we're definitely measured. We always have to report what we did and how it compares to what we said we'd do." However, "no treasurer goes around looking for ways to hire staff based on the value a person could bring. That's not where it starts," Geller says. "There's always a bias against adding staff. But if an issue crops up where control is lacking, because of a new business or a new risk factor, then they start the analysis–but they will always look at other answers, too."

Automation is the first place treasurers turn for help. "Often, automation comes after cuts that forced a company to work more efficiently," says Strategic Treasurer's Jeffery. But the staff automation replaces isn't the type of staff treasurers should be considering to build muscle. "When people look to add staff, the success usually comes from linking it to how treasury can act strategically, like optimizing working capital. Any treasury with a large [operations] staff is far too large in ops and probably short on analytics."

The next alternative is outsourcing. While treasuries are increasingly resorting to it to execute and even develop their investment strategy, Ceran took the opposite tack. Outsourcing investment "just doesn't make sense for us," Ceran insists. "We are generating our current return with the overhead of half an FTE and the use of some excellent systems that track performance and handle accounting. If we outsourced, the investment firm would charge a certain number of basis points on our portfolio. That would cost us several million dollars, and we'd have to pick up that much additional yield to cover the cost. We already have investment bankers helping us. Paying a staff person to manage the investments and oversee potential outside investment firms is definitely a better solution for us."

Some treasurers have the enviable, although challenging, task of building treasuries from the ground up, either because companies are young but exponentially growing, like Ceran at eBay or Brent Callinicos at Google, or because a division has recently been split off, as is Rick Moss' situation at $4.5 billion Hanes Brands, which was spun off from Sara Lee Corp. in 2005. "On my first day, I was the only treasury employee," notes Moss, a 15-year treasury veteran and now senior vice president and treasurer at the Winston-Salem, N.C.-based company. "We had the opportunity to start from scratch. The CFO and I planned it together and we were strongly focused on where we could add the most value." There was no artificial ceiling on staff size based on a treasury's tradition.

As Hanes offshored more of its textile manufacturing to Asia, an Asian treasurer position was created that Hanes is now working to fill, explains Moss, who had been CFO of a Chattanooga pharmaceutical company before being hired by Hanes. Getting people depends on proving that you know how to make the investment pay off, Moss says. "You gain credibility by getting results," he insists. "When you're seen as an agent of change in your company–and the changes work–you become respected. It's important that I'm seen as a credibility builder, not an empire builder."
For treasurers, building credibility is usually uniquely tied to enhancing working capital management. "Any treasurer who is fulfilling his or her duty is helping working capital," says Strategic Treasurer's Jeffery. "They should own working capital and liquidity and drive the concepts in their organizations. That should mean taking on accounts payable and accounts receivable. And with these increased responsibilities, some are getting more people."

Risk management is another area that has thrown treasury into the spotlight and opened up the opportunity to hire. "A significant number of treasuries are picking up enterprise risk management," says Raines International's Geller. "It's a logical step up from financial risk management, which is already in treasury. So the degree of risk exposure becomes another reason to add."

So far, muscular treasuries are still the exceptions. But at a time when automation projects are paying off and most of the Sarbanes-Oxley work on controls has been completed, treasury staff size is holding steady and even showing slight gains, according to the latest Treasury Strategies Inc. (TSI) survey. "In the 1980s, organizations began to see the value of cash management because of the high rate environment. That all led to the creation of treasury as a real function and the addition of cash managers," observes Mike Gallanis, a Chicago-based TSI partner. "We are getting calls from executives asking us what they should be doing, given the markets and high operating cash levels. We could be seeing the start of a renewed push to more aggressively manage funding, investments, volatility, working capital and capital markets activity."