What Got You Here Won't Get You There

 
That’s the catchy title of a 2007 book by Dr. Marshall Goldsmith, an award winning author, business thought leader, professor and executive coach who heads the Marshall Goldsmith Group of consultants (mission: to help successful leaders get even better) and maintains the free Marshall Goldsmith Library. He has written and/or edited 35 books, mostly about leadership, learning, change and personal improvement. I found a copy of this book at a library sale recently, and I recommend it, but that’s just background.

Some weeks earlier, I had agreed to help kick off a senior management meeting at a company run by some former colleagues of mine who had escaped from an insurance company claims environment nearly 20 years earlier to start up their own specialty claims business. Over the years their business flourished, expanding in scope and size to the point where the founders knew it was time to pull together their management team and discuss what needed to be done to move the company to the next level. They wanted me to help set the proper tone for their meeting by talking about change challenges and reviewing some of the things successful companies do, and don’t do.

Since I was heading off on vacation, I thought I would spend some of my leisure time preparing by re-reading my favorite articles about successful companies, and by reviewing some of the many notebooks I had filled over the years with on-topic material. I also brought along Goldsmith’s book, and read it through one rainy day. If you haven’t read it, I think I can give a quick overview without spoiling it for you. The theme is that most of us have bad habits, and even if those bad habits somehow helped to get us to a certain level, they might just prevent us from moving to or being successful at the next level. When I read through the habits (like delusional thinking, denial, overconfidence, failing to listen, dismissing feedback, failing to plan, blaming failures on external, uncontrollable factors, and allowing distractions to interfere with achieving objectives) I started feeling a bit uneasy, even embarrassed, because at one time or another in my career I knew I was probably guilty of all of them.

But then it hit me—Goldsmith was writing about personal, individual habits, but companies are collections of people so they have their own habits and ways of doing things (their culture.) Entrepreneurs imprint their own habits on their company, so they directly influence their company’s success through their imagination and insights, their willingness to take chances, their resiliency, their commitment, and the unique set of skills, behaviors and attitudes they bring to the effort. Through scrambling, innovating, scraping by, doing without, overextending and even overpromising, the successful ones keep their businesses going, and growing. Of course it’s not a linear path to success--they lurch, they make mistakes, then they recover and learn from them. But one fine day they realize they are actually making it, competing successfully in whatever business niche they selected. At that point one of two things can happen:

• They celebrate, relax, and begin to suffer from the “complacent lethargy” that Jim Collins and Jerry I. Porras (Built to Last) called the “We’ve Arrived Syndrome”
• They start to dream about expanding their business, diversifying into other products and services, entering new markets, making acquisitions...you know, taking their business to the next level.

Maybe both things happen. But if they get past the dreaming and start in on the planning, they often realize that the skills and behaviors they used to get their business going and help it survive may not be the ones they need to make it thrive at the next level. So what’s a company to do at that point? Of course that’s what my former colleagues wanted to get into at their meeting.

So at the management meeting I ended up sharing with the group some of the most impactful (to me) things I have learned about successful companies, such as their tendency to operate with three perspectives simultaneously: strategic, governance and control, and execution. Sounds reasonable, but juggling those three can be complicated and counterintuitive at a smaller company, where managers often prefer to stay within their comfort zone and focus on execution. But even with flawless execution, a company still needs both a winning strategy and a capable governance/risk management protocol in place to ensure long term success.

Successful companies tend to share certain characteristics:

• They have strategic clarity
• They have objectives and performance metrics that encourage behavior that supports their strategy
• Their rewards are aligned with achievement of those objectives and performance metrics
• They provide regular, constructive feedback to individuals regarding performance against objectives and metrics

Successful companies share certain capabilities:

• Talent (knowledge, skill and will)
• Speed (capacity for rapid, meaningful change)
• Learning (across silos and boundaries)
• Shared mindset (on the same page)
• Accountability (willingness to accept responsibility for behaviors and results)
• Collaboration (leveraging relationships, sharing work and responsibility)

I had the management team do a quick capability self-assessment from two perspectives, rating themselves as a management team, and then rating their company as a whole on a scale of 1 to 10 in each of those six capability areas (1 means no capability and 10 means industry leading capability) and flip-charted the results. That’s an easy and quick exercise that often produces interesting insights into potential conflicts and barriers to success.

We also unpacked the three performance categories often associated with talent in a knowledge-intensive business: KNOWLEDGE, SKILL and WILL.

• In the claims service business, KNOWLEDGE involves understanding the law, regulations, contracts and policy forms, as well as understanding what customers want and knowing how to deliver it within necessary margins of compliance, speed, service and accuracy.

• SKILL usually refers to doing, not knowing. Employing best practices, interpreting complicated coverage situations, correctly calculating a business income loss or reinsurance penalty, investigating, evaluating, negotiating, resolution, recovery, communicating with stakeholders, etc.

• WILL refers to the commitment, desire, discipline, or motivation to do something and do it well.

Finally, I urged them to accomplish four things in their meeting:

• Create strategic clarity. Agree on what business they are in, and what business they want to be in, and articulate what they need to know and be able to do in order to be successful.
• Complete a stakeholder needs analysis and develop a shared view of who their stakeholders are (potentially anyone with a vested interest in how well they operate their business) and what those stakeholders need in order to be successful and content.
• Take another look at the capability self-assessment summary (the flipchart) and do an honest and critical assessment of their capabilities, particularly their talent. Do they really have the talent and the ability to meet stakeholder needs better, faster and cheaper than their competitors? If not, where are the capability gaps and how will they close them?
• Carefully consider the WILL component of talent within the framework of change and business evolution. Determine what steps to take to influence attitudes and motivation and move their management team, and their company, from compliance to commitment.

I enjoyed seeing my colleagues again, and meeting their management team, and I heard later that their meeting went well. A few days after that meeting I came across this quote I used in an earlier article, attributed to German writer and politician Johann Wolfgang von Goethe (and also, variously, to Leonardo Da Vinci and Bruce Lee):

Knowing is not enough; we must apply. Being willing is not enough; we must do.

In the talent context, it sounds like whoever said this believed in execution. Knowledge and will alone were not enough—he considered skill, the ability to do the necessary things well, to be the critical component of talent. I see it a bit differently, believing that success in almost any human undertaking requires all three elements of talent (knowledge, skill and will.) To me, skill is derivative, developed through the combination of knowledge (understanding what needs to be done, when and how) and will (practicing and perfecting) but I suppose that’s one of the reasons why people find the talent topic so fascinating.

For a thoughtful look at talent management in the 21^st century, check out this Harvard Business Review article from professor Peter Capelli. And for an interesting overview of how taking a strategic approach to talent management can help power innovation, growth and market advantage, take a look at this Talent To Win whitepaper from PwC.


Dean K. Harring, CPCU, CIC is a retired insurance executive who now enjoys his time as an advisor, board member, educator and watercolor artist.  He can be reached at dean.harring@gmail.com or through LinkedIn or Twitter or Harring Watercolors

Competence: A Blend of Knowledge, Skill and Will

For most of my years as a Chief Claims Officer, I carried a notebook with me constantly. I used it as a journal, capturing meeting notes, assignments, commitments, requests, details of conversations, lists of people I had to see, and tasks that needed to be accomplished. I also logged ideas or topics or quotes that struck me as interesting or potentially useful. Each weekend I would review my notes, then categorize and prioritize the items into action lists for the coming week, month, quarter and year. A notebook would last me about three months, except in very busy times, and I still have most of those notebooks. This past weekend I was flipping through an old one, and I came across a quote I had written in block letters, attributed to German writer and politician Johann Wolfgang von Goethe:

“Knowing is not enough; we must apply. Willing is not enough; we must do.”

Funny how a simple quote in a notebook can provoke vivid memories. I was immediately able to recall the situation I was facing when I scribbled that note. I had been in place as the Chief Claims Officer for a large, troubled insurance company for a little more than a year. One of the premier US management consulting firms had been in residence the entire time, helping to do a baseline loss cost leakage study. It was a very tense situation. Just to be clear, there are some inconsistent definitions out there now, but when I use the term "leakage" I am referring to the amount paid on a claim above and beyond what should have been paid. Leakage is generally reported as a rate, a % of the total amount paid on a claim (or sample of claims), so if $10,000 was paid on a claim that should have been resolved for $9,000, the leakage rate would be the amount overpaid ($1,000) divided by the total paid ($10,000) or 10%. Leakage rates under 5% were considered acceptable back then, but the baseline numbers I was seeing were at least three times that number, across all lines of business, so I knew I had a problem.

While a properly executed baseline leakage review reveals, by line of business, where in the claims handling process leakage is happening, it's the root cause analysis that pinpoints why it is happening. The only good news about leakage is that it is easy to eliminate if you have access to a candid and dependable root cause analysis.

I remember being disappointed with the original root cause analysis because it concluded that training was the remedy for the leakage problem. In other words, claim handlers were making poor loss cost management decisions because they hadn't been trained appropriately--they didn't have the level of knowledge necessary to handle claims properly.

I knew it couldn't be that simple. I had looked at closed files myself and I had seen breakdowns in core claim handling that couldn't be fully explained by lack of knowledge. Best practices were being ignored by claims handlers and their managers, file documentation was substandard, the prevailing claims management focus was passive and tactical (process based) rather than active and strategic (resolution based), and there was an alarming lack of urgency evident in the files. Something else was going on.

We dug a bit deeper, and it didn't take long to conclude that our primary leakage root cause did indeed involve a competence gap, but the gap had three different components: knowledge, skill and will. Think of knowledge as the process of learning and understanding how to do something. Skill involves applying that knowledge in a practical setting to produce desired results. And will, as we considered it, was all about attitude, character, determination, discipline, and the desire and willingness to work to produce the best outcomes. Competence requires all three--knowledge, skill and will. In claim handling, that means the claim handler has to know how to handle claims, be skilled at applying that knowledge, and be willing to diligently work at producing the best results.

While training can close a knowledge gap, and hands-on training, guided practice and mentoring can help improve skills, will is a "hearts and minds" challenge--it involves determination and choice. People decide the degree to which they are willing to apply their knowledge and skills and efforts in any given situation based upon well known motivators. Of course today we tend to talk about employee engagement (the extent to which employees feel passionate about their jobs, are committed to the organization, and put discretionary effort into their work), not will, although the concepts are basically the same.

It turned out our most significant competence gap component back then was will, not knowledge and skill, so additional training on its own would never would have solved that leakage problem. Once we understood that and knew where else to focus in order to create an operating environment conducive to producing better outcomes, we managed the leakage number below 5% within about 12 months.

Many thanks to Johann Wolfgang von Goethe, who according to my notebook played at least a supporting role in illuminating the true nature and breadth of the root cause problem we were facing!

Dean K. Harring, CPCU, CIC is a retired Chief Claims Officer and an expert and advisor on Property Casualty insurance claims and operations. He can be reached at dean.harring@theclm.org or through LinkedIn or Twitter.