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.

When It Comes to Learning, Let’s Treat Adults Like Adults

When I retired from QBE last year, I thought it might be interesting to do something totally different, so I got myself appointed as an adjunct faculty member at our local community college, where I teach courses in management, leadership, business writing and presentation skills. Since I am in the School of Continuing and Professional Studies, my students are adults.

Recently, my connection with the college led me into a project with a Maryland defense contractor, and as part of that project I did some background research on adult learners--how they learn, what motivates them to learn, and what learning strategies are the most (and least) effective. Now that I am well read on the topic of Andragogy (the art and science of teaching adults), I can tell you something you may already know based upon your own personal experiences--adults and children learn differently. Instructional strategies that work well with children do not work well with adults.

As learners, adults:

• Are wary of formal classroom learning. They may feel uncomfortable or "at risk" in the classroom since their self-esteem and ego and reputation are on the line. That being said, adults learn better in a classroom setting when they are treated with respect and when their knowledge, abilities and achievements are welcomed and acknowledged.
• Choose what they will learn. They are more strongly motivated to learn by intrinsic rewards (personal growth, satisfaction, self-esteem) than by extrinsic rewards or requirements (promotions, increase in compensation, licensing or certification.)
• Need to know why they are being asked to learn something, and why it is in their best interest to learn it. They routinely weigh the benefits of learning against the consequences of not learning. To move into a state of learning readiness, they may need to be convinced they have a critical learning gap that needs to be filled.
• Prefer learning that is problem or task-centered, not subject-centered. Ideally, content should have relevance and immediacy so they can apply newly learned concepts to real world problems and situations.
• Prefer to learn by doing. They dislike lectures and survey courses, but are increasingly fond of self-directed and self-paced instructional media such as self-study, programmed instruction, and computer or web-based training. In the classroom, active learning experiences involving problem solving, judgment, reasoning, questioning, critical thinking, exploration/research, and group relationships and dynamics are most effective.
• Need to be given time and space to integrate new ideas, particularly if those new ideas conflict with what they already know or believe.

Of course I don't have to worry about running a Claims operation any longer, but for me Claims is still a powerful personal frame of reference. Once I understood these adult learning principles (having given myself the time and space to integrate them with what I already knew, of course!), I suddenly had more informed insight and a new and potentially useful perspective into why so much of the training I experienced, and designed, and delivered at insurance companies over the years inevitably failed to fully achieve learning objectives. For whatever reason, in most cases the training just wasn't designed with adults in mind. It didn't appeal to what motivates adult learners, it didn't consider their learning preferences, and it didn't employ the most effective instructional techniques to help them learn. That was unfortunate, in retrospect, since one of the first steps in designing any instructional approach usually involves a detailed analysis of the learner group so the training can be tailored to their needs and preferences.

Perhaps your training strategies are sound, but I sense an opportunity to review and possibly improve claims training outcomes simply by incorporating and considering adult learning theories and principles that have been around for decades. If you want to learn more about those principles, just do a search on Andragogy or start here.

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 www.linkedin.com/in/deanharring/

Dog Pack Operating Model

It was starting to get seasonably warm in Maryland last week, so we decided to escape to St. Paul, Minnesota, on Saturday to enjoy one last blast of winter and take in Garrison Keillor’s Prairie Home Companion show at the historic Fitzgerald Theater. Unfortunately, winter followed us back home, setting up a white St. Patrick’s day with about six inches of snow on Sunday night.

The round trip journey between Baltimore and St. Paul is rather complicated and time consuming, so I brought plenty of reading materials, but I still had time to take a look at the Southwest Airlines Spirit magazine on the plane. I opened it to a one page article by author and dog trainer Cesar Millan, a TV celebrity who is known to many people as the Dog Whisperer.  I have enjoyed Cesar’s show, I like dogs, and I will usually read almost anything about them.  But what really grabbed my attention was the article’s opening line, where in response to the question:  “What is the key to a functional workplace?”, Cesar replied:  “This is one particular area where we can learn a lot from animals.”

I have worked in functional workplaces, and in dysfunctional workplaces, and with lots of people who behaved like animals, so I knew this article was for me. Essentially, Cesar argued that a dog pack is a model of a cohesive and effective workplace, and he described how dogs, in a pack, naturally form into three groups:

1.  Dogs at the front (the alpha dogs), the leaders who set direction.
2.  Dogs in the middle, who keep things orderly and on track.
3.  Dogs at the back (the cautious dogs) who alert the others to threats.

According to Cesar, no group in the pack is superior to any other group, and the groups complement and balance one another, and that’s why a dog pack functions well.

So I started imagining property casualty insurance companies as dog packs. Projecting Cesar’s model, the insurer alpha dogs would be the senior executives who protect the company’s capital and reputation and share price, identify market opportunities, and develop strategic plans to make the most of those opportunities.  The middle dogs would be the operations folks—Claims, Underwriting, Policy Administration, IT, Loss Control, Marketing, Distribution Management, Accounting, Payroll—who execute the strategy and interact with stakeholders and deliver products and provide services.  The dogs at the back, always nervous and on the lookout for threats and danger, would be wearing collars with tags such as Human Resources, Risk, Compliance, Legal, Actuarial, Internal Audit, Communications, Product Development, and Finance. The dog pack model seemed like a good fit.

Thinking about all of the insurance companies I have worked with and for, I concluded that the functional, successful companies were indeed organized like Cesar’s dog pack.  The different departments were clear on what they were supposed to be doing, they did it well, they complemented and supported one another, and pulled together as a team to produce the best outcomes.

But what about the dysfunctional companies, the insurance companies I have known that are now long gone or floundering? Did their workplace model contribute to their decline? I think so. I have lived through enough workplace drama in 40 years to recognize the signs of an insurance company starting to unravel. In a dog pack, trouble seems to start when dogs, for whatever reason, don’t stay within their natural groups, and get distracted from what they are supposed to be doing. In an insurance company, the straying might be fueled by personal ambition, or hubris, or a leadership vacuum, or lack of clarity about roles and decision rights, or an acquisition or merger, or even just an arbitrary or ill-advised reorganization or transformation. Whatever the reason, the wandering and interfering dogs disrupt operations and negatively impact processes and outcomes, so the company’s ability to achieve critical objectives degenerates rapidly. As the structure of the pack deteriorates,  one group often emerges as more highly regarded than the others, and it gets treated and compensated as if it is superior to the others.  At that point, any latent pack cohesiveness rapidly dissolves.  Then, one of the most reliable indicators that the end game is near occurs: the alpha dogs aggressively move into the pack and try to directly manage or redesign operations or, even worse, attempt to dictate to and control the critical financial functions that are managed at the back of the pack (particularly Finance and Actuarial).

What about those people I have worked with who behaved like animals? Unfortunately, Cesar isn’t very encouraging on that score: “I have never met a dog I couldn’t help; however, I have met humans who weren’t willing to change.”  I think I have met some of those humans, too!

I am always pleased but rarely surprised when I find inspiration in unexpected places. Thank you, Cesar Millan, for sharing your dog pack model and for unwittingly encouraging me to squint at the property casualty insurance business from a new and intriguing perspective.

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 www.linkedin.com/in/deanharring/

Your Key Number

During my years as a claims executive I was involved in many group interactions that yielded useful lessons and insights that often weren't on the agenda. Usually the setting involved a "town hall" meeting with employees, lightly scripted, where I asked and answered questions on a wide range of topics. If you have ever watched the Prime Minister's Questions (PMQ) on the BBC, my town hall meetings were a bit like that, although the attendees weren't nearly as boisterous nor the speakers as eloquent.

I still remember one of those meetings, during my first visit to a particular claims office location, in a session with a group of claims employees I had never met before. I introduced myself, talked a bit about the purpose and format of the meeting, and asked the group what I thought was an innocent, open-ended question to get things moving: "How are things going here?"

Silence, puzzled looks, finally a tentative question from the back of the room: "What do you mean?"

We were in London, so I thought my question hadn't converted well into the local vernacular. "I am interested in hearing about how well this office is performing," I explained.

A young man sitting near the front of the room shouted: "We are doing very well, thanks for asking!" He was grinning, quite pleased with himself, and the group was laughing.

"Excellent. But how do you know?" I asked him. More silence, more puzzled looks. "How do you keep score?"

We ended up having a valuable discussion, at least from my perspective. The office measured all kinds of things, but they didn't have a common balanced scorecard or performance dashboard for keeping score. So when they were asked to describe performance, they had no performance touchstone, no evidence-based view of how they were performing. Instead, they offered up generic testimonials such as "Brokers like us" or "Our underwriters rely upon us."

Of course if as an employee you don't have clarity on your goals and objectives, if you don't know what success looks like, if you are not entirely sure what is important and what you are supposed to be doing and what it looks like when you do it well, you are at a disadvantage. Brian Tracy describes it this way in Eat That Frog:

"In our world, and especially in our business world, you are paid and promoted for getting specific, measurable results. You are paid for making a valuable contribution and especially, for making the contribution that is expected of you."

He goes on to make the point that if employees don't understand what contribution is expected of them, and if they don't know what specific, measurable results they are supposed to be getting, they are probably not going to be successful.

That town hall meeting convinced me that every claims organization needs a carefully balanced set of performance measures to provide an objective, evidence-based view of how they are performing. I felt so strongly about it that I wrote an article back in 2005 for Claims Magazine, Keeping Score: Efficiency and Effectiveness in Claims Handling. So when I came across an article recently on the HBR Blog Network by John Case and Bill Fotsch entitled A Winning Culture Keeps Score, I was intrigued by their assertion that while key performance indicators are necessary, defining "winning" by using a single indicator may be more effective:

"The trick is to focus everyone’s attention on a single key number—the one number that, if improved by a significant margin, will leave the business healthier and stronger at the end of the year."

What is a key number? According to Case and Fotsch:

" A good one meets three conditions: 

· It’s directly connected to the financials. Improve the key number and you get better financial results.

· It’s not imposed from on high. Open-book companies consult with managers, employee teams, and other stakeholders to develop their key numbers. They ask: What are the biggest challenges we’re facing this year? The biggest opportunities? How can each unit best measure its contribution?

· It’s for now, not forever. Companies’ situations change. Sometimes revenue growth is the top priority; other times it’s profitability or cash flow. When a company makes progress on one objective, it may want to set its sights on another the following year."

Finally, they point out that larger companies usually "expect each unit or function to come up with its own key number."

So while I remain convinced that performance standards tied to only one component of a complicated process like claims management do more harm than good, perhaps I have been seeing this as more complicated than it needs to be. If you are running a claims organization, and you use a key number to help focus your claims teams on winning (producing optimal results), I would love to hear about it.

Just to be clear, though, despite the article in Insurance and Technology this week (Cycle Time: The Most Important Metric in Claims), I have a strong bias that cycle time isn't a realistic candidate for a claims key number!

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 www.linkedin.com/in/deanharring/

Technorati Tags: results,specific,measurable,key number,metric,performance

Rethinking the Claims Value Chain

As a claims advisor, I specialize in helping to optimize property casualty claims management operations, so I spend a lot of time thinking about claims business processes, activities, dependencies, and the value chains that are commonly used to structure and refine them.  Lately I have been focusing on the claims management supply chain---the vendors who provide products and perform services that are critical inputs into the claims management and fulfillment process. 

In a traditional manufacturing model, the supply chain and the value chain are typically separate and distinct--the supply chain provides raw materials, and the value chain connects a series of activities to transform the raw materials into something valuable to customers. In a claims service delivery model, the value chain and the supply chain are increasingly overlapping, to the point where it is becoming hard to argue that any component of the claims value chain couldn’t be handled directly by the supply chain network.

Which creates an intriguing possibility for an insurance company—an alternative to bricks and mortar and company cars and salaries--a virtual claims operation! Of course there are TPAs that are large and well developed enough to offer complete, end to end claims management and fulfillment services to an insurance company through an outsourced arrangement. That would be the one stop shopping solution---hiring a TPA to replace your claims operation.  But try to envision an end to end process in which you invite vendors/partners/service providers to compete to handle each component in your claims value chain (including processing handoffs to each other.) You select the best, negotiate attractive rates, lock in service guarantees, and manage the whole process simply by monitoring a performance dashboard that displays real time data on effectiveness, efficiency, data quality, regulatory compliance and customer satisfaction. You would need a system to integrate the inputs from the different suppliers in order to feed the dashboard, and you would also need to make certain the suppliers all worked together well enough to provide the ultimate customer with a seamless, pain free experience, but you are probably already doing some of that now if you use vendors. You would still want to do quality and compliance and leakage audits, of course, but you could always hire a different vendor to do that for you or keep a small team to do it yourself.  Your ULAE costs would become variable, tied directly to claim volume, and your main operating challenge would be to manage your supply/value chain to produce the most desirable cost and experience outcomes. Improved cycle time, efficiency, effectiveness, data accuracy, and the quality of the customer experience would be your value propositions.    You could even monitor the dashboard from your beach house or boat—no more staff meetings, performance reviews, training sessions—and intervene only when needed in response to pre-defined operational exceptions. Sounds like a no-brainer. Insurance companies have been outsourcing portions of their value chain to vendors for years, so why haven’t they virtualized their claims operations?

If you are running an insurance company claims operation, you probably know why.  Many (probably most) claims executives are proud of and comfortable with their claims operations just the way they are.  They believe they are performing their value chain processes more effectively than anyone else could, or that their processes are “core” (so critical or so closely related to their value proposition they cannot be performed by anyone else) and thus sacrosanct, or that they have already achieved an optimal balance between in-house and outsourced services so they don’t need to push it any further. Others don’t like the loss of control associated with outsourcing, or they don’t want to consider disruptive change.  Still others think it might be worth exploring, but they don’t believe they can make a successful business case for the investment in systems and change costs. Unfortunately, this may help explain why claims executives are often accused of being stubbornly change averse and overly comfortable with the status quo, but I think it is a bit more complicated than that—it all begins with the figurative “goggles” we use to self-evaluate claims operations.

If you are running a claims operation, you have an entire collection of evaluation goggles—the more claims experience you have, the larger your collection. When you have your “experience” goggles on, you compare your operation to others you have read about, or seen in prior jobs, or at competitors, to make sure your activities and results benchmark well and that you are staying up to date with best practices. At least once a year, someone outside of claims probably demands that you put your “budget” goggles on in order to look for opportunities to reduce ULAE costs. or legal costs, or fines and penalties, or whatever.  You probably look through your “customer satisfaction” goggles quite a bit, particularly when complaints are up, or you are getting bad press because of your CAT response, or a satisfaction survey has come out and you don’t look good.  Your “stakeholder” goggles help you assess how successful you have been at identifying those who have a vested interest in how well you perform, determining what it is they need from you to succeed, and delivering it. You use your “legal and regulatory compliance” goggles to identify problems before they turn into fines, bad publicity, or litigation, much as you use your “no surprises” goggles to continually scan for operational breakdowns that might cause reputational or financial pain, finger pointing and second guessing. Then there are the goggles for “management”—litigation, disability, medical, vendor—and for “fraud mitigation” and “recovery” and “employee engagement.”  Let’s not forget the “efficiency” goggles, which help you assess unit costs and productivity, and the “effectiveness” and “quality control” goggles, which permit you to see whether your processes are producing intended and expected results.  And of course your “loss cost management” goggles give you a good read on how well you are managing all three components of your loss cost triangle, i.e., whether you are deploying and incurring the most effective combination of allocated and unallocated expenses to produce the most appropriate level of loss payments.

Are all those goggles necessary? You bet. Claims management involves complex processes and inputs and a convoluted web of variables and dependencies and contingencies. Most claims executives would probably agree it makes sense to regularly evaluate a claims operation from many different angles in order to get a good read on what’s working well , what isn’t, and where there is opportunity for improvement. The multiple perspectives provided by your goggles help you triangulate causes, understand dependencies and impacts, and intelligently balance operations to produce the best outcomes. So even if you do have a strong bias that your organization design is world-class, your people are the best, and all processes and outcomes are optimal, the evaluation should give you plenty of evidence-based information with which to test that bias and identify enhancement opportunities--as long as you keep an open mind.

No matter what you do, however, there will always be others in your organization who enjoy evaluating your claims operation, and they usually aren’t encumbered by such an extensive collection of goggles. They may have only one set that is tuned to budget, or customer experience, or compliance, or they may be under the influence of consultants whose expensive goggles are tuned to detect opportunities for large scale disruptive/destructive process innovation or transformation in your operation.  On the basis of that narrow view they just might conclude that things need to change, that new operating models need to be explored. Whether you agree or disagree, hopefully your evidence-based information will be of some value in framing and joining the debate.

Will we ever see virtualized claims operations?  Sure.  There are many specialized claims service providers operating in the marketplace right now that can perform claims value chain processes faster, cheaper and better than many insurance companies can perform them. The technology exists to integrate multiple provider data inputs and create a performance dashboard. And there are a few large insurance company claims organizations pursuing this angle vigorously right now.  I fully expect the companies who rethink and retool their claims value chains to take full advantage of integration of supply chain capabilities will begin to generate improved performance metrics and claim outcomes, ultimately creating competitive advantage for themselves.  Does that mean it is time for you to rethink your claims value chain?  I think the best way to find out is to put on your “innovation” goggles and take a look!

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 www.linkedin.com/in/deanharring/

Innovate or Die. Really?

I have been thinking and reading about innovation recently, and I must say there certainly is no shortage of material on the topic—much of it with a critical slant.  That may surprise you, since no matter where you work I am sure your organization talks about innovation, believes it is already innovative, or at least plans to become innovative. Why?  Innovation is a trendy concept, it sounds cool, cutting-edge and entrepreneurial. Business schools have embraced it, and consultants have built practices around it. More importantly, many people believe the phrase “innovate or die” is absolutely true and that it applies to all businesses. So, as Dennis Berman points out in the Wall Street Journal: “Most CEOs now spray the word "innovation" as if it were an air freshener.”

William Taylor, co-founder of Fast Company magazine and blogger on the Harvard Business Review Blog Network, described it this way in his 12/6/13 blog Stop Me Before I “Innovate” Again:

“Words matter — in business and in life. I’ve always found that companies that aspire to do extraordinary things, leaders who aim to challenge the limits of what’s possible in their fields, develop a “vocabulary of competition” that captures the impact they’re trying to have, the difference they’re trying to make, the future they’re hoping to create. Almost none of these companies and leaders use the word “innovation” to describe their strategy — implicitly or explicitly, they understand that it has been sapped of all substance. Instead, they offer rich and vivid descriptions of what they hope to do, where they hope to get, and why it matters.”

Ginanpiero Pteriglieri, an associate professor of organizational behavior at Insead, puts an even sharper point on it in remarks quoted in The Experts blog in the Wall Street Journal:

“Innovation is a strong contender for the crown of business buzzword of the decade. The term has all it takes. It is ubiquitous, mysterious and, like its acolyte "leadership," it works alone and pairs well with many adjectives. Is there a problem that transformational leadership and disruptive innovation aren't invoked to solve? Is there a company whose failure is not explained by a lack of both?”

Business buzzword of the decade? Wow. In that race, the competition is steep, and the contenders are many.  By the way, a great place to check out a good collection of the “jargon monoxide” (a term coined by Polly LaBarre) contenders is The Ridiculous Business Jargon Dictionary where you can browse terms ranging from “above board” to “zero-zero split.” 

Whether or not you believe it is appropriate or well deserved, the property-casualty insurance industry isn’t often described as innovative.  Complacent and risk-averse, stolid, stodgy, and conservative are descriptors more commonly used. But let’s step back a minute—what is innovation, and how critical is it to the success of a property-casualty insurance company?

Innovation is often described as the implementation of something new—a product, a service, a process, an alliance, a market, or an experience—that creates value. So while the innovation process may begin with big ideas, it takes execution and results before it qualifies as innovation. Or, as Dr. Lewis Duncan, president of Rollins College, put it: “Innovation is the ability to convert ideas into invoices.” 

Of course, there are also other flavors of value out there to be harvested through innovation—lower costs, higher margins, new or more attractive products or services, more engaged employees, new customers, new distribution channels, happier customers, more loyal customers, enhanced reputation, etc.  Yet for property-casualty insurers who believe they are operating in essentially closed markets characterized by a high level of maturity and stability, the decision about innovating often turns on their competitive situation.  If they believe they are competing successfully (however they define that term), they may elect to avoid the costs of innovation and to focus instead on engineering incremental operating improvements, tweaking their products and operations and processes so they can continue to function competitively.

But if a company is not competing successfully, or if they aspire to grow and be profitable but that just isn’t happening, they need to step back and analyze what isn’t working, why, and what needs to be done to improve results. That’s an opportunity for innovation, for sure, but it also offers a convenient excuse to avoid or abandon any initiative or process that is new (or unwelcome or costly) and to “get back to basics.”  Getting back to basics means different things to different people, of course, but it usually involves a return to a time-tested and proven method of doing something, like implementation of well-established and widely understood industry methods and best practices. You might characterize it as the converse of innovation. Truth be told--it is much easier and more comfortable to get back to basics than it is to get innovative and develop something new to create value. And it just might be enough for an insurance company to get things back on track if their inability to compete had its roots in substandard or underperforming products, practices, services, or operations.

I do always wonder, when an insurance company goes public with its plans to embark upon an ambitious, multi-year program of operational transformation (first cousin of innovation), just how long it will take before they lose their nerve and push the “back to basics” button. I have experienced it, and I have watched others go through it, and it isn’t really that unexpected.  Innovation is often a costly undertaking that generates uncomfortable, disruptive change with no guarantee of success,  That is particularly true when the “value” that is expected to result is difficult to measure and demonstrate convincingly since it arises from something other than “invoices.”  If you have lived through any type of claims-related transformation or innovation, you know exactly what I mean.

Still, I am not convinced that all property-casualty insurance companies are necessarily entangled in an “innovate or die” predicament, at least not yet. Plenty of companies manage to stick to the basics, focus on execution, play around the edges with incremental improvements, and the market allows them to survive and sometimes even prosper.  Yet we all know there are insurance companies out there who are constantly pushing the envelope and doing whatever it takes to create value—they just don’t spend a lot of time bragging about how innovative they are or broadcasting what they are doing. Instead, they are busy trying to create distinctive marketplace advantages that resonate with customers and to give themselves an edge in pricing, costs, products or services.  Why? So they can operate with higher profit margins and grow by attracting customers away from their competitors. So even though innovation for property casualty insurers probably isn’t really a matter of life and death today, it can impact an insurer’s quality of life and general well being. Kind of like diet and exercise can for humans, I suppose.

Narrow the focus to property casualty claims operations, however, and I think the “innovate or die” predicament becomes a bit more pressing and complicated; but that’s a tale for another day.

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 www.linkedin.com/in/deanharring/

 
 

 
 
 
 
 

Leadership Toxicity

I was reminiscing with some former colleagues over the holidays and, as often happens in such situations, we were laughing it up as we shared anecdotes about some of the highly placed, handsomely paid, sometimes incompetent and occasionally "toxic" leaders we had worked with over the years.  Of course it's easy and maybe even therapeutic to laugh about such people once they are in your past and no longer part of your daily life experiences, but I think it is fair to say that the truly toxic leaders weren't ever really funny--they were dysfunctional and destructive.  If you have worked with one, you know what I mean.

What is a toxic leader?  Toxicity, like beauty, may be in the eye of the beholder, but when Dr. Marcia Lynn Whicker (Toxic Leaders: When Organizations Go Bad) classified leaders by type, she used three categories:  trustworthy, transitional and toxic. The toxic leaders were described as maladjusted, malcontent, malevolent and malicious enforcers, street fighters and bullies who destroy productivity, operate with a sense of personal inadequacy, and who are selfish and clever at concealing deceit.  It gets worse:  according to Col. George E. Reed, US Army, toxic leaders are viewed as "arrogant, self-serving, inflexible and petty" and they "rise to their stations in life over the carcasses of those who work for them." Andrew Schmidt has even developed a Toxic Leadership Scale that considers five dimensions of toxic leadership:  abusive supervision, authoritarian leadership, narcissism, self-promotion, and unpredictability.

One of my favorite books on this topic is Bad Leadership: What It Is, How It Happens, Why It Matters by Barbara Kellerman.  She describes seven types of bad leadership that are most prevalent--incompetent, rigid, intemperate, callous, corrupt, insular and evil--and illustrates them with stories about public figures from business and politics.  Several years ago, I worked with a group that used Kellerman's categories as a framework to try to articulate what bad leadership looked like in their workplace so they could root it out and eliminate it.  The finished product looked something like this:

 

Incompetent	Lacks knowledge, skill or will to sustain effective action Oblivious to his/her lack of knowledge, skill or will  Focuses on peripheral or unimportant items Gets in the way of direct reports (trips the players on their way out of the dugout) Foolishly and inappropriately confident and arrogant High maintenance
Rigid	Stiff, unyielding, smug Unwilling to consider and adapt to new ideas, new information or changing times Believes he/she has superior knowledge (smartest person in the room) Gets trapped by bad decisions (unwilling to admit mistakes)
Intemperate	Lacks discipline and self control in professional or personal habits and behaviors Has tantrums, screams, throws things, slaps the table, slams the door Substance and/or people abuser Uses inappropriate language or makes unprofessional comments Needlessly hostile and provocative
Callous	Uncaring and/or unkind Ignores or discounts needs, wants and wishes of others Acts without respect Bullies subordinates and/or treats them with contempt Makes disparaging comments about employees to other employees
Corrupt	Lies, cheats, misrepresents, or steals  Takes the credit, avoids the blame Conspires against, demeans and marginalizes others  Deals dishonestly or disingenuously with others Says one thing, does another
Insular	Disregards the health and welfare of others  Fails to listen, or listens to the wrong sources Micromanages Intolerant of alternate viewpoints Ridicules opposing opinions
Evil	Vindictive Intimidates and demoralizes others Hurtful and mean-spirited Uses pain and fear as an instrument of power

Sadly, the CEO at that company was the person exhibiting most of these behaviors, but he was a "kick down, kiss up" kind of guy and the board that had hired him apparently believed he was an outstanding executive.  I have always wondered how people who behave this way ever landed a leadership position, never mind kept it, but I suppose the more interesting question is how and why  such "leaders"  have any followers at all.  Jean Lipman-Blumen, in her book The Allure of Toxic Leaders, points out that people exposed to a toxic leader often come up with excuses to tolerate the abuse--job security, paycheck, prestige--thus the behavior goes unchallenged. So while we usually have three choices when we are facing something we don't like--(1) grin and bear it, (2) change it, or (3) leave it behind--most of us either find a way to put up with it, or we leave it behind, so we generate little or no pressure for change.  Unfortunately, this emboldens toxic leaders and encourages them to stay the course.

Then this week when I read an article in Strategy and Business entitled Are You Your Employees’ Worst Enemy? I realized that while toxic leaders are a problem, a more insidious and prevalent leadership problem might be this:  according to the article, a majority of employees surveyed, even in successful companies, viewed their leaders as an obstacle to their effectiveness.  Apparently many well-intentioned leaders get caught in a "hindrance trap", described as "a cognitive bubble in which leaders erroneously conclude that the success of their teams is a reflection of their good leadership", so they inadvertently derail their employees by:

• communicating purpose and direction poorly
• not considering organizational capacity when rolling out new initiatives
• failing to set policies to help the organization achieve superior performance

Sounds a bit like early stage leadership toxicity to me.  Is it any wonder that leadership consulting, training and coaching have emerged as high profile growth businesses?

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 www.linkedin.com/in/deanharring/