Greetings from The State of Change

Due to gas prices, there might not be as many of us taking long road-trip vacations this summer. But if you were to hit the road, you’d certainly want to take along a map.

There’s nothing like a good guidance system (even the old-school fold-out variety) to get you where you’re going. Sure, it’s all about the journey, but you don’t want to end up in some cow pasture when your destination is a suite at the Hilton. That’s the sort of transformation your vacation doesn’t need.

Sorry to take your mind off your vacation, but let’s take travel planning back to the office. How often have you mused about the future, looked down the road and wondered where it would lead? If you’re like many of us, this recent business climate has you scratching your head. For quite a while, the signposts have been obscured in fog.

To some extent, what is happening in today’s employee benefits world is not much different than what happened in the technology world a decade ago. Many tech firms were built on a business model that focused on the technology without figuring out how to generate revenue from the technology. Ultimately, they succumbed to those firms that knew how to turn a profit, firms that understood how to effect the quickest transformation. Many employee benefits firms could end up with a similar fate if they do not take steps to transform themselves.

John P. Kotter’s book, Leading Change (Harvard Business School Press, 1996), which is still one of the must-read books for any executive who wants to lead transformation efforts, involves the following eight-step process.

Establishing a Sense of Urgency

A sense of urgency is essential to gaining the needed cooperation in your firm. This is particularly true when your people are comfortable with the status quo. It requires you to raise the urgency level. What direction can you take?

• Create a crisis. We already have one, and it’s called healthcare reform. This one should be a no-brainer.
• Eliminate excesses. To bring home the urgency, cut out country clubs and company-owned cars, and set limits on travel expenses. Pull back on any taken-for-granted perk to emphasize the gravity of the effort in the minds of your staff.
• Set high targets. Aim above “business as usual” because that will not work to achieve urgent goals. You might get aggressive with new sales goals, organic growth rates, improved profit margins, etc.
• Bring in consultants. Use consultants to drive a wedge into the organization. Believe me, I have done this many times, and the results are amazing for creating a sense of urgency.

Creating a Guiding Coalition

Transformation is incredibly difficult. In all my years in this business, I have never seen just one person set the tone for a transformation. Building a team to support and drive the transformation is always an essential early-stage requirement. Key steps in building a coalition include:

• Draw from positions of power. You need key leaders on board, recognized by others, as the foundation of your firm.
• Match with expertise. Multiple skill sets are necessary to drive all the areas of transformation. Tied closely to positions of power, individuals with specialized expertise are viewed differently from others in the firm.
• Deliver credibility. Does your transformation coalition have a reputation for being movers and shakers? A coalition of idea-only people does not create the credibility necessary to transform.
• Leverage leadership. In the end, the coalition must be the key leadership in the organization, and your people need to recognize that. You need both management and leadership skills in your coalition. Management guides the process while leadership drives the transformation.

A final thought on your coalition: People with big egos or those who create mistrust through their actions have no role in your coalition. You need a coalition of individuals who create trust among themselves and with your employees but who also can develop a common goal that is sensible, reasonable and appealing to all.

Developing Vision and Strategy

Your coalition needs to develop and execute a solid vision and strategy. Vision refers to a picture of the future that clearly shows what your employees should be striving for. These are some common aspects of a solid vision:

• Imaginable. It conveys a picture of what the future looks like.
• Desirable. It appeals to the long-term interests of employees, clients and other stakeholders.
• Feasible. It includes attainable goals and objectives.
• Focused. It provides guidance in decision making.
• Flexible. It allows for individual initiatives and alternative responses in light of changing conditions.
• Communicable. It can be shared in a few minutes.

Finally, a good vision will have the following attributes:

• It is ambitious enough to take employees out of their comfort zone.
• It results in a better product or service for a client.
• It takes advantage of fundamental market and industry changes.

As this relates to the insurance industry, a vision is very easy to design. The result should be a clear image of the firm three to five years down the road.

Communicating the Change Vision

Creating the vision is only part one. The real power of a vision that will lead your company’s transformation comes when most of your employees (if not all) have a common understanding of its goals and objectives. Transformation can occur only when your employees are motivated by a shared wish for a desirable future.

This essential communication is often the most difficult part of the process. I have often pondered why people fail to communicate effectively. First, there are too many MBAs in the world who feel they need to speak in jargon that only a few understand. Big mistake. We are talking insurance, not building the next NASA shuttle. Key elements in communicating a vision include:

• Simplicity—Keep your message free of jargon.
• Metaphor, analogy and example—A verbal picture is worth its weight in gold.
• Multiple forums—Take the message to big meetings, committee meetings, memos, emails, and, last but not least, social media. Spread it like a virus.
• Repetition—Never stop communicating the message, over and over.
• Leadership by example—Your coalition group must lead by example.
• Explain inconsistencies—Be able to explain inconsistencies that can undermine the credibility of the vision.
• Give and take—Communication is a two-way street. Talk, but listen.

Empowering Employees

While the term “empowerment” is often overused, this is a critical concept in transformation. Empowerment in transformation means allowing a broad base of employees to take necessary actions by removing barriers that might block them from executing your vision. What are these barriers? Typically they fall into one of four categories: structures, skills, systems and supervision.

To effectively empower people to implement change, you need to:

• Make structures compatible with the vision. Unaligned organizational structures create landmines for needed action.
• Provide training. Without the right skills, employees will feel disempowered and feel as if they were set up to fail.
• Eliminate employees who create barriers. Nothing impedes empowerment like key employees or managers who undercut the need to change. Eliminate them.

Structural problems in the insurance industry provide great examples of how empowerment can fail. In our world, the vision is to deliver certain resources and services to a client, yet the firm fragments the resources and responsibilities in different divisions in the company. I have seen this many times with large firms.

Another example of structural barriers comes from the desire to improve the effectiveness of client service, yet an agency bases its client service teams around producers, not clients. This results in an incompatible organizational structure that also creates silos and impedes communications. Unfortunately, the insurance industry—while based on a simple business model—creates many barriers to transformation.

Generating Short-Term Wins

Along with good communication and empowerment techniques, finding ways to have short-term wins is important because transformation can take years to accomplish. A short-term win must be:

• Visible to a large number of people who feel a sense of accomplishment
• An unambiguous success, meaning there can be little argument
• Clearly related to the change effort.

Short-term performance improvements help transformation in several ways:

• By providing evidence that the sacrifices—and there will be many—are worth it. Some wins along the way will help justify the short-term costs and lead to the most important effect: sustained momentum.
• By rewarding “transformers” with the positive feedback that builds morale.
• By fine-tuning the vision and strategies. As you revise your vision and strategies, you provide the coalition with concrete data on its transformation goals.
• By undermining cynics and critics. Results speak louder than words.
• Fire up the “momentum train.” Ultimately, short-term wins provide the most important driver of success: momentum. Creating a snowball effect can turn neutrals into supporters and reluctant supporters into active transformers.

Consolidating Gains, Producing More Change

Don’t let short-term wins or even what appear to be victories stop the transformation process. One of the classic errors is letting up before the transformation is complete. It is easy to do this, particularly after experiencing the inevitable short-term sacrifices. When the momentum train stops, starting it again becomes even harder. To consolidate gains and produce more change, consider these steps:

• More change, not less. Use short-term wins and victories to tackle additional, bigger projects.
• More help. Bring more people into the coalition to help drive change.
• Boost leadership. Charge senior leadership with the mandate to reinforce change efforts, maintain clarity on vision and continue to drive a sense of urgency.
• Reduce unnecessary interdependencies. To drive long-term change, leaders and managers must identify unnecessary interdependencies and eliminate them. It is essential that leadership always looks at the vision, long-term goals and objectives and removes any barriers or roadblocks.

Anchoring New Approaches in the Culture

As you are working on all these fronts, you also must pay attention to your firm’s culture. Culture is the foundation of any firm, but when it comes to transformation, it’s often the last consideration. This is not because your firm’s culture is least important but because in transformation it is quite possible that the behaviors and shared values of the old culture won’t be compatible with the new vision. It is often impossible to fully integrate the vision of transformation into the old culture. If transformation is done properly, the culture of your firm is changed throughout the stages I have described above. Culture is not something that can be manipulated easily. Culture changes only after you have successfully altered peoples’ beliefs and attitudes. Therefore, culture often is the final step of the transformation process.

So how do you anchor change in culture?

• Come last, not first. Recognize up front that changing norms and shared values come in the end, not at first. While the coalition may “get it” right away, the bulk of the firm needs to see it.
• Rely on results. Changes in culture will come after it is clear that new processes and strategies actually work and benefit all stakeholders. Results are the only way to accomplish this.
• Continue communication. You can never stop communicating successes and how they positively affect stakeholders.
• Accept a level of turnover. Sometimes the only way to change a culture is to change the people. Turnover is likely and, more important, acceptable. Your team must recognize this.
• Depend on succession. As a firm evolves through transformation, it is critical that new hires or promotions are compatible with transformation and the new culture. If not, it is easy to sink back into old behaviors and norms and lose the majority of the new culture you have built.

Some areas of the insurance industry are changing more quickly than others, and your firm must transform to survive. You have to decide whether you can tackle a transformation, and you should understand that it’s not easy. I have worked with plenty of firms that fully understood the process and maybe even started down the road to transformation only to toss in the towel and decide to sell. It is better to realize your inabilities than to become irrelevant.

The industry is truly at a crossroads. For those who are willing to transform, the future is incredibly bright. It is full of opportunities and rewards. For those who can’t make the change, sell now or forever hold your peace.