ANALYSIS

CalPERS’ redesign creates CFO role

CalPERS will introduce a new leadership organisation design next year, which includes for the first time a dedicated chief financial officer function coordinating all corporate finance functions including cash flow.

The organisational structure and processes initiative recommended at a November workshop that there be a new leadership organisation design for CalPERS.

There will now be eight divisions, all reporting to the chief executive, with the chief investment officer, chief actuary and general counsel also having reporting lines to the board.

The other new divisions are policy, product development and thought leadership; and a program services and customer support function, in addition to the existing operations and external affairs divisions.

CalPERS will introduce a chief financial officer that reports directly to the chief executive, and will be responsible for coordinating all corporate finance activities.

At the moment corporate finance activities are performed in six different areas across the fund, including cash forecasting in the operations, performance and technology area of the investment office.

There is also a complex movement of cash – including the investment office, custodian, state treasurer’s office, stat controller’s office and the fiscal services division of CalPERS – without a single point of accountability for cash management.

Importantly the CFO will have responsibility for the oversight of the office of enterprise risk management, which will create increased accountability and internal strength.

This will place risk in a function that directly interfaces with the entire enterprise, ensuring wide access and standardising links across the organisation.

In the workshop presentation, the initiative reported this new design is an important step to creating an organisation that promotes end-to-end customer services, enterprise-wide risk intelligence, flexibility, nimbleness and efficiency, innovation and thought leadership and internal strength.

The conclusion to move CalPERS structure along functional lines, where previously it was organised as a hybrid according to customer type, product offering and functional expertise, came from various inputs, including board and staff interviews, executive workshops, benchmarks, surveys and input from management consulting firm, McKinsey.

Through these inputs, it was concluded that it is important for CalPERS to excel at customer service, improve external thought leadership and increase accountability.

The choice of organisational design, as well as along functional lines, was to consider product focused business units or customer-segment focused business units. After evaluating and scoring each of the options it was decided organisation across functional lines was the best choice for CalPERS.

This new structure introduces a new functional group that focuses on policy and program design, distinct from program services and customer support activities.

This change will allow the fund to place an emphasis on thinking and innovation. It also focuses on efficiency by actively engaging with and shaping the external environment.

A separate functional group will also be formed dedicated to program services and customer support activities, across both retirement and health.