Crisis brings out the best in people.
CEOs wisely do all they can to avoid it, yet without the intensity of looming losses or a sudden controversy, employees can become lax.
Keeping the troops motivated in good times as well as bad is part of the legacy Bob Moone will leave behind at State Auto Insurance Cos. when he retires this spring.
“Complacency is something we have to constantly guard against,” says Moone, who will officially leave the company in May.
That’s especially true when a company has been doing well.
“We’ve had a pretty good run of good performance,” Moone says, in his characteristically modest style.
How does $1.14 billion in revenue and $125.9 million in net income strike you? How about State Auto’s repeated profits in an industry noted for red ink?
“The last time the industry as a whole was profitable (as measured by underwriting profit) was 1978,” Moone says.
Comparatively, State Auto has generated an underwriting profit in eight of the last 11 years. The company was also named the Best Managed Company in the Insurance Industry this year by Forbes.
Moone credits motivated employees with making the difference. Here are four key strategies he and his company have used to help foster among employees that continued drive to succeed.
Expect good performance
Setting performance goals is an obvious first step to challenging employees to succeed. It certainly isn’t a groundbreaking tactic, Moone says, but it works — if done correctly and across the board.
Goals can’t be set by a supervisor and assigned to an employee. They also can’t be vague or unattainable or completely disconnected from the company’s mission.
“The goals, which are typically four or five specific objectives, are determined in conversations between the employee and his or her supervisor or manager so it’s a collaboration,” Moone says. “The goals have to be very quantifiable. They must be designed in such a way that the employee can see that accomplishing these objectives will, in fact, further the company’s overall objectives.
“I think it’s been extremely effective in a number of ways. It makes people understand that they are valuable.”
It also makes them see that — regardless of a person’s title or position in the company — everyone plays a significant role, and every role affects others.
Take, for example, the maintenance department. The appearance of the corporate headquarters on East Broad Street downtown not only reflects how well the maintenance workers are doing their jobs but leaves a lasting impression on visitors which, in turn, can impact the company itself.
“If you would’ve walked in here and seen dirty floors, unpainted walls, ragged carpeting, that would say something about our organization,” Moone says. “The fact that we have folks that take great pride in maintaining the physical plant I think makes an impression on our agency partners, our policyholders and the community in general. So everyone throughout the organization has a role to play.
“Some people say, ‘Well gosh, I’m not selling insurance,’ but really, you kind of are. The way you answer the telephone can help sell insurance and help paint a picture, a mosaic of what State Auto is all about.”
That’s why developing clear, mutually agreed-upon goals for every one of State Auto’s 2,000 employees has become a critical part of the company’s culture. It reinforces how individual achievement feeds corporate success.
“If constructed properly, the employees themselves really don’t need to have … a discussion with their supervisors about on-the-job performance,” Moone says. “They know what their objectives are. They know themselves — I hit them or I didn’t. I think that’s very useful in maintaining their focus and their motivation.”
Share rewards frequently
Although there is no direct monetary reward associated with State Auto’s employee goal-setting program, a second motivational strategy does connect dollars with performance.
“Of everything we’ve ever done here in my 36-year tenure, I don’t think there’s been a single program that’s had more impact on overall performance than what we call QPB: Quality Performance Bonus,” Moone says. “That’s a bonus that’s paid on profitability.”
Essentially, it’s profit-sharing.
“The premise is if employees work hard, focus on the strategy, execute the strategy and that strategy produces an underwriting profit, we want to share that profit with the people who worked to make it happen,” Moone says. “That’s not unique. What is a little bit unique is that bonus is paid on a quarterly basis. So at the end of every calendar quarter, we calculate where we are, and if there was a profit, the employees share in a percentage of that profit. And, by the way, it is shared equally.”
State Auto has 10 field offices plus a corporate headquarters. Each office is assigned a weight each quarter depending on its contribution to profitability, but employees within each office are given an equal percentage share of the profit.
“So my percentage of participation is the same as everybody else’s in the home office,” he says. “I think that’s an important concept. It says something about the way we want to manage the company. It’s very egalitarian.
“QPB has really affected things because it has given people that tangible and immediate reward,” Moone says. “They did well and they don’t have to wait for 12 months or 14 months or whatever it might be in order to see the benefit of that. They get that immediate feedback that reinforces the positive behavior.”
That’s not to say that every quarter turns out the way employees expect.
“There have been some times when we’ve done everything right,” Moone says, “but a Katrina comes ashore. You’re not going to have a profit in any quarter when Katrina or a Katrina-like event hits.
“At one point, there was some wishing that perhaps we would exclude those losses. After all, what can I do to prevent a hurricane? But actually, there are some things we can do. We can be aware of and control our exposure to coastlines. It would be very easy to write lots and lots of business up and down the East Coast and the Gulf states. It also wouldn’t be very prudent.
“By controlling those exposures, you make your own luck, in a sense. But at the end of the day, we’re all in this together. We share in the rewards or, in this case, the misfortune.”
Don’t settle for second best
“A third motivator is what I would call a culture of winning,” Moone says. “It seems to me — and I’m an old psych major, so maybe I overanalyze this sort of thing — that people want to be associated with a winning organization. To come in every day, do your best and work pretty darn hard to make good things happen, and then go home at the end of the day or the week or the quarter or the year and see that the company hasn’t achieved its objectives … then it seems to me that you invested all that time and energy and creativity for no tangible or quantifiable benefit.”
If, however, you have a culture of winning, the hard work and long hours seem more worthwhile.
“Eight out of the past 11 years, we’ve generated an underwriting profit,” Moone says, noting that one of the three years the company failed to do so was a break-even year, and the other two would have generated a profit if an unprofitable business hadn’t been acquired during that time. “That culture of winning is an important aspect of motivation. It reinforces the kind of behaviors that led to it.”
Too much success, however, can create other problems, so vigilance is key.
“It is possible in the face of continued success to think, ‘Gosh, we’re pretty smart here and we can do just about anything and it’s going to come up roses,’ “ he says. “That’s not the case. You have to look at it every single day.
“By having that kind of attitude and recognizing the downside of complacency, I think we’ve continued to have our successes. But we always balance those successes with the things we still need to do. You’re never perfect.”
For example, Moone says, State Auto has posted record-breaking financial results in nine of the last 11 quarters.
“But if you look at the press releases, it’s almost as if that didn’t happen,” he says. “We say, ‘Yeah, we’re proud of this. It’s another record-breaking quarter, but we still have to concentrate on these things.’ It’s a philosophy of making sure that people feel good about what they have accomplished but never to feel that we are so on top of our game that we don’t need to be constantly vigilant, totally committed to continued execution of the strategy.”
Talk to employees
It sounds so simple, yet few CEOs actually make the time to chew the fat with employees.
“In my mind, there’s nothing more critical than communication,” Moone says. “It’s got to be frequent. But it also has to be varied because you reach different people in different ways.”
Moone knows of what he speaks. He flies all over the country to meet face-to-face with field employees each quarter. He chats with employees via e-mail and through intranet forums regularly. And every new employee is given the direct dial number to his office.
“It’s all a way of building relationships and trust and openness from the very earliest part of their careers,” he says. “We want people to be open and candid. We want to be sure everybody is on the same page.”
Yes, it’s time-consuming. He gets 10 to 12 phone calls and an estimated 150 e-mails a day from employees. He also spends more than 100 days on the road each year.
“It takes a lot of time, but this job is not 9 to 5,” he says. “I suppose some people would argue, ‘Is that the best use of your time?’ In some cases, maybe there could be some filtering that could or should take place, but I’m able to do it and I think people appreciate the fact that they do have that access.”
The proof is in the personnel data.
State Auto’s employee turnover rate for 2005 was 6.4 percent — including retirements. That’s nearly half the industry average of 12.6 percent.
“I think part of the reason people continue to stay is because of the open, frank, honest communication,” he says. “I have a feeling that doesn’t happen in every organization.
“It’s an extremely valuable and necessary part of our success strategy. And it gives me enormous comfort. You can sit in your office and you can look at large losses, or you can look at profiles of business and all these things … but going out into the field and actually seeing and talking about the good work that’s taking place is really uplifting. People are so dedicated and so energized and so creative. So it’s worth the sacrifice in time.”
HOW TO REACH: State Auto Insurance Cos., (614) 464-5000 or www.stateauto.com
