I raised two boys, or, maybe more correctly, they raised me. I was lucky – at the end of the process I have “two sons” who make me proud and whom I love dearly. I was unprepared to be a parent when I became one, but through trial and error, the grace of God and some blind luck I survived. As I reflect back on the experience, I also got a “PhD” in management and leadership. I now realize that parenting, like business, gives the organizational “parent” the opportunity to react to behavior or influence the growth, development and maturation of the child.
As I ponder the process of change and growth in the marketplace and in organizations that serve this global economy, I see parallels. Change is the transition from today through tomorrows. How we address this determines the success – ours and our organizations’ and their members’.
Will we react and manage the behavior of our followers and the change that comes at us, or will we be a leader and design the future we want and grow the people who are our organization?
In a conversation with a friend named Beau (he’s twice the parent I am; he and his wife, Kaci, are raising four children and doing a great job) we concluded that the world of parenting is a great laboratory for management and leadership issues. Consider babies and their crying as a metaphor for the people in your organization.
Babies cry when they are hungry or wet or have some other discomfort that needs fixing. They can’t effectively articulate their issue, but they can manipulate us as the caregiver (manager/leader) through their whining until we solve their problems (and ours, by quieting them). Let’s compare two options: pacifiers and breastfeeding.
Pacifiers have no nutritional value, of course, and left to pacifiers alone a child will starve to death. (In some countries a pacifier is called a “dummy.” Think about that.)
Breastfeeding, on the other hand, is the safest, best and most natural means of nurturing a child. Breast milk alone can sustain a child for the first six months of life. Breast milk and breast feeding are about growing together – a most intimate link between the mother and child. Breast feeding is not about quieting a child but about developing that child. It is a living system. It is the best.
As the head of your own organization, you know that change happens. It makes you tired, sometimes overwhelmed and causes great discomfort in the people you call your team or family. Do you manage the change by handing each “whiner” a pacifier just so the person will shut up and get back to work and leave you alone? Do you accept the responsibility of leadership and do what needs to be done to design tomorrow?
Do you take the time to grow each team member, quieting the person through intimacy and nourishment, making the person better-prepared for tomorrow?
Remember: A pacifier alone will ensure starving, while “breastfeeding” will guarantee growth.
1. Decades ago in the Louisiana legislature, a contentious debate was raging over a law requiring motorcycle drivers to wear helmets. Representative V. J. Bella stepped to the podium in the Louisiana House with a stool, a sledgehammer and a watermelon.
He placed the watermelon on the stool and slammed it with the sledgehammer. He walked to the microphone, stating, “Enough said!” The legislation was approved.
2. Tomorrow, I’m speaking to a business group. I have 90 seconds to send a message. My left hand will hold a dollar bill. My right hand will also hold a dollar — in the form of 100 pennies. My narrative will be brief.
I’ll drop the dollar bill and let it float to the ground. I’ll roll it up and throw it as far as I can. I’ll reinforce the obvious with, “This is a dollar bill.”
I’ll hold up the 100 pennies and toss them in the air. I’ll clarify the not so obvious with the following: “This is also a dollar. It has the same value as the dollar bill. The difference between the two is the bill was a cohesive unit when I tossed it — the dollar in pennies were individual units — not cohesive.”
Occasionally, an enthusiastic manager or leader decides it’s time for a bold step into the future. It’s time to shake things up. It’s time to turn the organization on its head. That may be the right thing to do, but it does not come without risk. To make such a bold move — YOU MUST BE CERTAIN YOUR TEAM IS A COHESIVE UNIT focused on shared values and goals and not just a bunch of individuals driven by their perception of what’s good for us – without knowing what “us” thinks and feels about someone else’s great idea!
3. Presenting to a client organization, I placed the six individual dolls that were part of a nesting doll on the podium.
I held up the first doll and explained, this is you. I then positioned “you” into the second doll – stating, this is you in your family. I followed with – this is you and your family inside of your job/profession/business. We advanced to this is you, your family, your job or profession or business inside of your community. The fifth step was you, your family, your job and your community inside of the marketplace. I closed with this is you, your family, your job, your community and the marketplace inside of the global economy.
I then held up the single assembled mass and said – this represents your COMFORT ZONE. You know where you fit and what surrounds you. Even if you are miserable – you are comfortable. That’s the good news. The bad news is – each and every entity (doll) stacked in here will change drastically in the next few years, and if you can’t or won’t be flexible and adapt you will be crushed by those changes.
No one stood and applauded – but I could tell they heard the message and were squirming with my presentation and the threat it represented to their COMFORT ZONE.
From “The Portable Do It!” by John-Roger and Peter McWilliams we learn:
“The bad news about the comfort zone: The comfort zone is never static. It is either expanding or contracting. If you’re not consciously expanding the comfort zone, it contracts. In the heating and air conditioning trade, the point on the thermostat in which neither heating nor cooling must operate — around 72 degrees – is called “The Comfort Zone.” It is also known as “The Dead Zone.”
A few weeks ago, I spoke to about 20 professionals attending a program about their future and the future of their organizations.
I talked about tomorrow. They were more worried about today.
I wanted to venture into tomorrow and look back to today. They just wanted to get through today.
I discussed purpose: Why? They were more concerned about strategies and tactics: How?
My metaphor was a blueprint. They wanted a to-do list.
I was thinking effective (doing the right things). Their concern was efficient (doing things right).
Leadership was my target. Management was their aim.
I quoted Stephen Covey on leadership, “Begin with the end in mind,” because leaders focus on the horizon, a vision for the future. They were thinking management (“Begin with the beginning in mind”), because managers stare down at their desk, facing their challenges du jour and being constantly interrupted with issues about operations and people.
THE MISTAKES WERE MINE!
I misread my audience.
I was there to discuss change management, to talk about solving problem and capitalizing on opportunities as we move from today through tomorrows. (Note the “s” on “tomorrows.” You face a tomorrow every day – one at a time.)
I should have realized that, as John Kotter put it, “management is still not leadership.”
He said: “In fact, management is a set of well-known processes, like planning, budgeting, structuring jobs, staffing jobs, measuring performance and problem-solving, which help an organization to predictably do what it knows how to do well. Management helps you to produce products and services as you have promised, of consistent quality, on budget, day after day, week after week. In organizations of any size and complexity, this is an enormously difficult task. We constantly underestimate how complex this task really is, especially if we are not in senior management jobs. So, management is crucial — but it’s not leadership.”
He added: “Leadership is entirely different. It is associated with taking an organization into the future, finding opportunities that are coming at it faster and faster and successfully exploiting those opportunities. Leadership is about vision, about people buying in, about empowerment and, most of all, about producing useful change. Leadership is not about attributes; it’s about behavior. And in an ever-faster-moving world, leadership is increasingly needed from more and more people, no matter where they are in a hierarchy. The notion that a few extraordinary people at the top can provide all the leadership needed today is ridiculous, and it’s a recipe for failure.”
Don’t repeat the mistakes I made with my audience. Be sure you know and understand the questions (both those being asked and those folks are afraid to ask) before you provide answers. Then make sure the answers you provide are correct and understood by the audience you serve. Communication is the negotiating of meaning. If the audience is not “catching” what you are “pitching” it might be well intended and thought provoking or ego or noise or a hope and a prayer but it is NOT COMMUNICATION!
Insurance leaders, you spend every day helping customers plan for the future, and you know that disaster can strike anyone, anytime.
But have you done all you can to prepare your company for what the future holds? Whatever lines of insurance you sell, there’s just one policy for company longevity: a strong leadership pipeline.
Unfortunately, many insurance companies forgo this essential coverage. Last year, Deloitte found that just one in three insurance companies believes its future leaders are prepared to respond to tomorrow’s business challenges — despite 87% citing leadership development as a priority.
What’s so important about leadership development? For one, leadership quality cuts straight to the bottom line. Equity analysts place, on average, a 16% premium on company stock prices when they see effective leadership. But when they perceive a company’s leadership is ineffective, analysts discount the company’s stock price by about 20%.
Strong leaders build value because they know people are an insurer’s greatest asset. They recognize that empowering team members pays off in loyalty, reduced turnover and enhanced customer service.
I’ve seen my company through nearly a quarter of its centennial life, and through the course of my career I’ve learned a thing or two about insurance leadership.
Like many of us — be honest — I didn’t grow up dreaming of a lifetime in insurance. California Casualty was my first job out of college, though, and it’s been the incredible career I never expected. The company’s mix of challenge, inspiration and flexibility has helped me grow from sales consultant to team manager to vice president.
But I’d have never reached the position I’m in — not to mention stayed for two decades — had I, too, not learned from strong leaders. Now it’s my turn to find the company’s up-and-coming leaders, and I look for five traits in tomorrow’s standard-bearers.
First and foremost, effective leaders have integrity. Integrity is difficult for some, but it’s actually a simple concept: People with integrity do the right thing even — and especially — when no one is watching. In our industry, policyholders depend on us to fulfill our obligations, often when they’re most vulnerable.
That’s why California Casualty created a written code in 1965 to act as the company’s moral compass. It champions integrity and the singular importance of doing the right thing for our customers. The code reminds me — and future leaders — that it’s better to fall short of our goals than to meet them through dishonesty.
Strong leaders must also be able to influence others, and I’ve seen firsthand the importance of inspiring, motivational leadership. Before any sweeping change, my company informs key influencers and involves them prior to the full-staff rollout. This creates buy-in and helps them serve as role models to team members who might not feel as comfortable with changes, and provides hands-on leadership experience before they truly take charge.
Confidence, tempered by humility, is another quality I’ve found is essential for insurance leaders. These leaders surround themselves with team members whom they can learn from — and whom they can teach — when exploring issues and making tough decisions.
Confidence also means being transparent with your team. I don’t always make the right decision, but I’m confident that, if I make a wrong move, my team and I will work together to adjust, learn and improve.
Alongside confidence, I look for flexibility balanced with accountability, which helps to unlock a team’s potential. When I first became a team manager, I learned that my sales strategy didn’t necessarily work for others. I had to step back and recognize that there’s more than one way to exceed targets.
There’s one final trait all successful insurance leaders share: strong communication skills. To build a successful team, you must clearly articulate goals and the drivers behind them. At our sales rallies, we talk about targets, of course, but we also seek to understand the “why” behind our numbers.
We recently implemented underwriting changes, for example, that made it more difficult for sales consultants to sell policies. Taking time to discuss policies’ loss ratios and profitability issues has helped our sales team adapt to these changes and improve the company’s future.
With all the important qualities an insurance leader must possess, it’s tough to find tomorrow’s perfect leadership team. But once you’ve identified promising candidates, you’ll need to help them rise to the challenge.
First, start with face time. Get to know tomorrow’s leaders on a personal and professional level. To help them define what they want to achieve — both in their current role and in the next — work with them to create short-term and long-term goals. Boredom lurks behind turnover, so setting “stretch” goals is a great way to keep up-and-coming leaders engaged.
Second, find opportunities to let them shine. Never underestimate delegation as a leadership-building tool. When employees are given ownership, it builds their confidence, showcases their talents to others and prepares them for their next positions. I give young leaders opportunities to assist with recruiting and hiring, mentoring new associates, and leading annual meetings.
Next, give them a say in company decisions. Employees at all levels have fresh ideas that can benefit the company. By giving them a say, you nurture growth, learn their thought processes and cultivate buy-in at the same time.
Finally, build bench strength. Don’t wait for a position to open. Employ an approach of continuous development to ensure you can tap the right talent when you need it. Plan ahead as you hire: Employees who understand technology and analytics will be increasingly important for insurance leadership.
In the end, insurance leadership isn’t about titles, nor is it about sales figures. In our industry, it’s our job to be there in policyholders’ times of need; we have the chance to truly improve lives. So while I may not have always dreamed of an insurance career, it has been an incredibly fulfilling one. Now it’s my job to find new leaders who feel that way, too.
Banking and insurance chief executive officers (CEOs) think it’s time for their chief financial officers (CFOs) to shine. But many also have deep misgivings about whether the finance function — and its leadership — is ready to deliver real value to the business strategy.
Winds of change keep blowing
Anyone that thinks that the financial services industry has been slow to change has clearly not spent much time in the finance function. Indeed, the last decade — the past 5 years in particular — have been all about change for finance executives.
Change has been driven from all sides: new accounting standards, increased capital adequacy and/or solvency rules, heightened reporting requirements, new regulatory directives and the recent shift towards more integrated reporting are just part of the change sweeping through the financial services industry and flowing into the finance (and risk) functions at financial institutions.
At the same time, bank and insurance CFOs also need to support the organization and its business strategy. New products are being introduced, businesses are being sold or acquired, non-strategic assets are being divested and new markets are coming into scope. And with each change, the finance function has needed to respond.
Rise above the fray
While bank and insurance sector CEOs seem to sympathize with the plight of the finance function, most clearly expect their CFOs to rise above the challenge. In a recent global survey of more than
370 CEOs commissioned by KPMG International, 67 percent of financial services respondents said they expect the role of their CFO to increase in significance over the next 5 years, the highest percentage among all c-suite executives.
The problem is that few of these CEOs seem to think their finance leadership is currently ready to take on this high profile role. The same survey found that just 53 percent of the financial services CEOs thought their CFO was viewed as a valuable business partner
by the business. Only around a third of respondents believed that their CFOs truly understood the challenges they face as CEOs. Just 19 percent thought that their CFO was currently playing a critical role in supporting the CEO and the board. Simply put, the data suggests that CFOs of financial institutions still have a long way to go if they hope to live up to their CEO’s expectations.
Taking an enterprise-wide view of performance
A number of CFOs at the top global banks and insurers are now starting to focus on developing and improving their enterprise performance management (EPM) capabilities. Essentially, they are starting to recognize that — by combining financial data with operational and customer data through the latest wave of integrated EPM solutions — CFOs can start to take a leading role in helping to dynamically manage the planning and execution of the business strategy.
EPM delivers benefits across the organization. At the finance level, improved EPM capabilities enable finance functions to optimize their finance operations and dynamically generate more value-adding reports, allowing the finance function to become a more vital business partner across the enterprise.
It can improve the speed, relevance and access to the type of performance reporting and analysis that creates real business insights when and where it is needed most: in the business. And it can help create better alignment between the organization’s diverse back-office functions (such as risk, capital management, compliance and operations) to drive better end-to-end decision making based on a single set of balanced key performance indicators (KPIs).
Improved EPM capabilities also allow the finance function to become a better — and more strategic — business partner.
In some cases, this is achieved by driving valuable forward-looking analysis and planning through the EPM’s integrated business and financial planning features. Using these advanced EPM functionalities enables finance functions to better anticipate and even predict business outcomes, leveraging sophisticated ‘what-if’ scenario-based analysis capabilities based on key business drivers, events and relationships. And, in doing so, it can help the finance function become more integrated with the organization’s sales and operations planning processes.
This forward-looking EPM feature is especially important for financial institutions, as new accounting standards like IFRS9 for financial instruments and IFRS4 Phase 2 for insurance contracts (both life and non-life) forces them to disclose fair market values and net present value (NPV) calculations on their financial assets and liabilities. This, in turn, will likely make results more volatile and more transparent, which will lead organizations to demand even greater control than they have today.
Many financial services organizations are also seeking to improve their end- to-end performance in key areas such as customer performance. Some have even defined new roles specifically to support improvements in their end- to-end processes. As a result, some organizations are finding that EPM helps deliver a consistent end-to-end framework that ensures consistency in definitions, improves connectivity to show correlations and encourages the reuse of data to improve reconciliation.
Aligning the Risk and Finance functions of insurance companies with EPM
For insurers, one of the big benefits of EPM is closer alignment between the finance and the risk functions.
Creating this alignment is more important today than ever. The finance function is critical to measuring and reporting financial metrics such as gross premiums, investment returns, claims paid and overall profitability, while the risk function needs to estimate the technical reserves based on a complex array of actuarial models covering insurance, market and operational risks. Together, these two form the basis for the all-important equity and solvency ratios of the company.
The latest generation of insurance- specific EPM systems can bring both worlds more closely together. Not only are they able to generate the usual financial and certain regulatory reporting requirements, but they can also support the integrated business planning and management reporting needs of the company through innovate data cubes, on-the-fly dashboard generators and real-time analytical capabilities.
From discretionary to mandatory
Perhaps most importantly, a strong EPM capability can enable management to make better business decisions. It can help improve speed and access to information. Leveraging new technologies (such as those on offer at the KPMG Data Observatory), EPM can deliver improved visualization and analytics capabilities, thereby empowering the organization with competitive insights. And it can make sure everyone is looking at consistent data from the same source, improving decision- making confidence. Essentially, it can help management answer the big questions that they are struggling to answer today.
This is exactly what CEOs say they want from their CFOs. Indeed, when we asked CEOs of large financial institutions what their CFO could do to deliver more value, three initiatives boiled to the top:
1. applying financial data analysis to help the organization achieve profitable growth;
2. using financial data analysis to create and implement new operating models; and
3. finding ways to turn the regulatory environment into a competitive advantage.
All three can be achieved through improved EPM capabilities.
As a result, most CFOs are starting to recognize that investing into EPM is no longer a discretionary activity. It is a source of potential competitive advantage, a way to better manage regulatory requirements and a path to improved efficiency and cost savings. As such, EPM is quickly becoming a mandatory capability for finance functions in the financial services industry.
More than just a reporting tool
We have used words like ‘discipline’ and ‘capability’ when we refer to EPM, rather than ‘software’ or ‘solution’. That is because EPM is much more than simply a tool or software package that is ‘bolted-on’ to consolidate and analyze global data from existing ERP systems. In fact, the real value of EPM comes only when the organization — led by the finance function — starts to turn that data into real, reliable and actionable insights. And that requires a holistic approach to EPM that spans the enterprise and the whole operating lifecycle (as illustrated in Figure 1).
To start, organizations may want to consider flipping the historical ‘plan-do- check-act’ approach on its head. Indeed, creating a robust and appropriate EPM program requires finance functions to start with the ‘act’ (i.e. what insights does the business need in order to act), and then ‘check’ what information is required and whether it is available. Only then should finance functions move onto the ‘do’ of building the solution and, ultimately, the planning that can be achieved once the information is available. Once EPM programs are in full swing, finance functions can then go back to the traditional and continuous ‘plan-do-check-act’ lifecycle process and culture.
Become a value player: Solve the business’ problems
Securing ‘buy-in’ from the business for a new approach to EPM is not easy; fatigue with new change programs is high and executives are competing fiercely for resources for their own programs. But buy-in is critical, not only at the executive level but throughout the business and across the enterprise.
In this busy environment, CFOs may want to start by helping the business answer one specific (yet critical) management question: “How can I best help you achieve your business goals?” Maybe it’s about finding the optimal pricing mix for their products and services. Maybe it’s about identifying the right acquisition targets to drive profitable growth. Or maybe it’s about identifying the most profitable customer segments and channels.
The key is in working collaboratively with the business to solve their problems and then using that opportunity and outcome to drive greater appetite for more advanced EPM capabilities within the business.
Bank CFOs leverage EPM to become more strategic
Most banking CFOs are already well on their way to moving from being a scorekeeper to becoming a business partner. But EPM enables CFOs in the banking sector to move one step further by allowing the finance function to combine multiple sets of data — financial, customer, risk and operational, for example — to provide the organization with deeper, more valuable and more strategic reports.
Our experience suggests that the ability to leverage and adopt new technology and approaches will be key. Some of the leading banking CFOs are already using data visualization and predictive analytics to collect, analyze and communicate key data sets. And early adopters are now investing into robo-advisors and other automated technologies that can reduce or eliminate manual intervention.
A business-led approach
When we work with banks and insurance CFOs to create stronger EPM lifecycle discipline and improve their EPM capabilities, we focus on creating a holistic enterprise performance management model and approach that recognizes the transformation
that is required in process, people and technology to allow CFOs to drive real value from their finance teams.
In doing so, we lead our clients through a business-led technology transformation that instills the necessary EPM awareness, capabilities and skills across the enterprise and throughout the business, helping CFOs meet the evolving and increasingly sophisticated demands of their organization.
Questions to evaluate if your organization needs improved Enterprise Performance Management capabilities …
Doesyourexecutiveteamhave real insight into the group’s true profitability by product, service/ channel, country/region and customer?
Is your organization combining financial, operational and customer data to make better decisions and create a competitive advantage?
Are you able to anticipate future regulatory changes and use those insights to gain entry to new markets using innovative channels faster than your competitors?
Do you know which channels currently provide the best growth and profitability and do you have a plan for optimizing them?
Are you able to conduct collaborative planning across all of your business functions to optimize investment decisions and improve shareholder return while at the same time maximizing capital efficiency?
Reprinted from (Regulatory Challenges Facing the Insurance Industry in 2016,) Copyright: 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
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