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Thought Leader in Action: At Walmart

How do you manage risk when your company is the biggest employer in the U.S. other than the federal government? Very carefully — and very well, if you’re K. Max Koonce II, the senior director of risk management at Walmart, until recently, when he took a senior position at Sedgwick. You do that partly by taking advantage of an extraordinary amount of data to identify potential problems, to use outcomes analysis to greatly shrink the number of litigation firms you use, to be highly selective about doctors used for workers’ comp and even to set up a full-sized, in-house third party administrator.

But let’s begin at the beginning:

Koonce was born in Mississippi, but his family moved to Bentonville, AR, where he has lived most of his life with his wife and family. He attended Harding University, a private liberal arts university located in Searcy, AR, where he graduated with a BBA in economics. Thinking that economics was not as challenging a career as what he aspired to, Koonce attended the University of Arkansas William Bowen School of Law to obtain his J.D.

He was immediately hired by Walmart upon his graduation in the ’90s and was given the responsibility to set up Walmart’s internal legal defense system for the roughly 30,000 Walmart employees at the time. He and his in-house team of legal aides handled all of Walmart’s workers’ comp and ultimately much of its liability claims. The program worked so well that the governor of Arkansas appointed Koonce as an administrative law judge for the state workers’ comp commission in 1997, with Walmart’s blessing. With Koonce’s departure, Walmart eliminated the internal legal program and transferred its litigation to outside legal firms.

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K. Max Koonce II

By January 2000, Koonce was appointed by the governor to the Arkansas Court of Appeals. With a vacancy in the State’s Supreme Court, Koonce ran for State Supreme Court in a partisan election. During the campaign, he shared fond memories of attending all kinds of civic events, fundraisers and county fairs around the state. When he failed to get elected, Walmart brought him back to head its risk management program that same year. The program grew dramatically with his return.

Apart from the U.S. government, Walmart is the largest employer in North America. Nearly 20 million people shop at Walmart every day, and 90% of the U.S. population lives within 15 minutes of a Walmart. If Walmart were a country, it would be the 26th-largest economy in the world. Walmart manages 11,500 retail units in 28 countries; generates $482 billion in annual sales; and has 2.2 million employees (1.4 million associates in the U.S.). Koonce exclaimed that there was no other retail company to benchmark to, so his risk management department had to make up its own risk benchmarks. Interestingly, with a tightly managed work culture and such huge numbers to work with, Walmart’s risk management statistical and actuarial claim calculations have proven to be consistently accurate for many years.

Walmart’s risk management department has grown over the years to more than 40 risk management support personnel. Walmart divides its risk portfolio by working with two competing insurance brokers. Koonce said he had an incredibly talented and dedicated team of risk management professionals working at headquarters in Bentonville. “The analytics and metrics achieved by my experts,” he said, “were as good as any in the insurance industry.” He said that no relevant risk factors in Walmart’s operation went unnoticed.

Walmart’s workers’ comp program is designed to include specific doctors and medical facilities to ensure consistent care of any injured workers. Walmart manages detailed feedback from all of its employees to continue to fine tune its workers’ comp program. Koonce stated that risk management has always been a part of the Walmart culture, going back to its founding by Sam Walton in 1962; Walton wanted to help individuals and communities save money while ensuring that the company’s operations adhere to ethical decision making, good communication and responsiveness to employees and stakeholder.

Using an “outcomes-based” approach to litigation management, Walmart’s team relies on claims data analysis and metrics to choose, evaluate and consolidate the number of workers’ comp attorney firms. Max notes: “This approach forms tighter relations with a smaller number of lawyers to create a ‘one team’ approach to litigation.” In California alone, for example, the mega-retailer reduced the number of legal defense firms from more than 20 to three. The outcomes-based litigation strategy relies on a multivariate analysis using Walmart’s own claims data. Metrics are used to benchmark attorney performance and align specific lawyers with cases depending on claim facts and knowledge about an attorney’s unique skills and experience. At Walmart, claims examiners generally choose specific defense attorneys to maintain a continuing team relationship.

Besides retail store risks, Walmart also manages the largest private trucking firm in the U.S. and delivers more prescriptions than any other retailer. Asked if he had experienced any highly unusual claims during his tenure at Walmart, Koonce said that Walmart is all about awareness, control and consistency and that claims were nearly always within an expected parameter (i.e. slip-and-fall claims) and not horrific, as some employers experience. Each store location, including Sam’s Clubs, have conscientious safety response teams that sweep the stores periodically during their shifts and respond immediately to any safety hazards like floor spills.

A unique feature of Walmart is its subsidiary, a third party claims administrator (TPA) called Claims Management Inc. (CMI), at which Koonce served as president. Located in nearby Rogers, AR, CMI administers the casualty claims, including workers’ compensation, for all Walmart stores. Although most companies with national operations use insurer claims administrators (for non-self-insured operations), or multiple regional TPAs, Walmart’s CMI operation is a sizable TPA of its own with 600 employees. As Koonce explains, “CMI provides the claims oversight the company feels is desirable to maintain good control, communication and consistency.”

Unlike most national companies, Walmart has been able to maintain a highly efficient and focused risk management program through a tight-knit organization consisting of mostly local or regional employees who live and work in Benton County, AR (pop. 242, 321). Most of Walmart’s managers have been employees who have worked their way up the corporate ladder. Sam Walton once said: “We’re all working together; that’s the secret.”

Koonce left Walmart in September to serve as senior VP of client services for Sedgwick Claims Management Services. He was succeeded by Janice Van Allen, director of risk management at Walmart, who started as a store department manager in 1992. Koonce said he’s doing what he loves most at Sedgwick — helping risk managers achieve success with their internal programs.

Thought Leader in Action: At Starbucks

From the You Can’t Make This Stuff Up Department: Steve Legg took an important step on his path to becoming the director of risk management of Starbucks to avoid having what looked like a bad pun on his business card. He had earned his Associate in Risk Management designation, but that meant his name appeared as Legg-ARM. So, he says, he went on to earn his Chartered Property & Casualty Underwriter (CPCU) designation, because it is listed before ARM. His card now (safely) reads “Steve Legg, CPCU, ARM.”

But I’m jumping into the middle of the story, in this second in our series of Thought Leaders in Action. (The first, with Loren Nickel, director of risk management at Google, is here.)

To begin at the beginning, I’ll provide a summary of Legg’s background, then follow with the story of how he earned his prestigious position, some detail on Starbucks and how it manages risk and some insights from Legg for other risk managers.

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Steve Legg

His bio

Legg, who is 46 years old, has been at the Starbucks headquarters in Seattle since June 1997. His responsibilities include global corporate property and casualty insurance and risk financing for the company. Legg reports to the treasurer of Starbucks and heads a risk management team of 13 professionals, with two-thirds involved in claims management and the balance working in risk financing and risk transfer, its risk management information system (RMIS) , internal reporting and captive management. Starbucks has 22,519 stores in 66 countries, with a targeted growth rate of 1,650 net new stores during this fiscal year. Starbucks, the name inspired by Herman Melville’s novel Moby Dick, has one of the most recognized logos in the world. Its mission statement, developed by its founder Howard Schultz, is “to inspire and nurture the human spirit one person, one cup and one neighborhood at a time.”

Before joining Starbucks, Legg worked as an independent insurance broker, as well as in a claims capacity for Crawford & Co. Legg served on the board of the Washington state chapter of the Risk & Insurance Management Society (RIMS) for seven years, serving as president of the chapter during the 2005-2006 year. He has been an active participant within National RIMS and has served as a speaker to other insurance industry groups, such as the CPCU Society, the Professional Liability Underwriting Society (PLUS) and the Marine Insurance Association of Seattle. He has a degree in political economy of industrial societies from the University of California at Berkeley.

His story

Legg grew up in Kirkland, WA, on the east side of Lake Washington. Nicknamed “the little city that could,” Kirkland is the former headquarters for the Seattle Seahawks and Costco. Kirkland Signature is still Costco’s store brand.

“I grew up interested in a lot of different things, but I wouldn’t say with any degree of certainty that I knew what I wanted to do for a living,” Legg said. “I was intrigued with going somewhere else to study, so I attended UC Berkeley. I was interested in crisis management, and I just happened to be at Cal when the 6.9 Loma Prieta earthquake [1989] and devastating Oakland Hills firestorm [1991] hit. From those experiences, I thought I might pursue law school.

“As things turned out, my first job was back in Washington state working as a claims adjuster for the branch manager of Crawford & Co., hired by our mutual friend and industry colleague Katrina Zitnik, who was later director of workers’ comp for Costco, 2001-2013. We handled the huge Boeing workers’ comp self-insured account. There were around 100 employees in that office alone. My specialty was working with chemical-related claims, which was really fascinating, before I moved over to liability claims. By my second year there, I started to really understand what risk management was all about.”

From that experience, Legg went on to achieve his ARM designation. “It may sound corny, but I didn’t like the way it looked on my business card as Legg-ARM, so I went on to pursue my CPCU,” Legg said.

“With that formal insurance education, I went to work for a regional insurance brokerage in Kirkland where I learned a lot about insurance and other facets of risk management.” Legg said: “I came to this realization that I didn’t want to handle claims or broker insurance. I wanted to be on the buyer’s side of all this – tending to insurance and a whole lot of other things.”

In 1997, Legg was hired by his predecessor at Starbucks, which had gone public in 1992. At the time he joined Starbucks, the company had about 1,000 stores in the U.S. and Canada and just a few new locations in Japan. Legg describes his experience at that time in risk management as more of a buyer of insurance, but his job responsibilities quickly deepened and expanded with the global spread of Starbucks. He assumed the director of risk management position in 2006 when his boss and mentor retired and became active in the management of Starbucks’ Vermont captive.

The evolving company

Legg explained that the organizational structure is set up based on three key global regions: (1) the Americas; (2) EMEA, which is Europe, Middle East and Africa; and (3) CAP, which is China, Asia Pacific. “Our biggest push is in the CAP region, especially China, which presents a lot of opportunity,” he said. Although that region has a tea-drinking tradition, Legg pointed out that Starbucks owns the tea company Tazo and more recently bought Teavana and its 300-plus stores, providing a high-end, specialty tea product that has become popular at Starbucks locations. He said Starbucks’ specialty coffee and expresso beverages have also become very popular in tea-drinking cultures.

Starbucks has also expanded its offerings in premium pastries (it bought La Boulange), food and merchandise offerings, and it recently began providing beer and wine in selected areas of the country. “Evenings at Starbucks had been under-utilized,” Legg said, “so with the rollout of beer and wine we’re able to serve additional patrons.”

How Starbucks manages risk

Serving 66 countries with various laws and customs, Starbucks has a global quality assurance organization work with business units that are immersed in foreign locations. “Risk management and legal principles are practiced with our people that understand and are sensitive to local government, culture, customs and laws,” Legg said. “Starbucks wants to provide appropriate food and beverages, and we have a global safety security organization, as well, that makes sure that we are tending to the different types of risks these different and diverse cultures hold. Safety and security are fundamental components in the initial and on-going training of our partners.”

When asked about the challenge of identifying, evaluating and treating risk in far-flung global operations, Legg noted that there is a common thread regardless of demographics that relates to keeping stores well-managed, clean, secure and hazard-free. He added that a global design team works with individual markets to address issues that mitigate any unusual risk factors, which could include something as simple as adjusting counter and stool height. Store components are designed to provide for each locale’s needs while Starbucks maintains the quality and consistency that its customers expect.

As for dealing with its insurance and reinsurance markets, Legg noted that Starbucks collects a significant amount of data on all of its locations to enable its internal team and underwriters to have the geographic information they need for modeling. North American operations are mostly self-insured via large retentions and deductibles; Legg points out that first-dollar and low-deductible insurance policies are far more common, accessible and prevalent in other parts of the world. Compulsory insurance requirements differ across jurisdictions — in many parts of the world, for instance, workers’ compensation as we know it is not available, and injuries or illnesses among employees (which Starbucks calls “partners”) are addressed in different ways.

“Regardless of the transfer or retention of risk, Starbucks feels that no one could ever care as much about our partners and our brand as we do,” Legg said. He added, “We inspire and nurture our partners and customers… through providing good products, friendly service and by contributing to our communities. It’s an important part of our culture and what makes this brand so strong.”

All eligible full- and part-time Starbucks employees receive comprehensive health coverage and equity in their company, referred to as “bean stock.” In turn, employees typically volunteer more than one million hours each year in helping their local communities. Starbucks has also set up agronomy offices in different countries around the world to help origin farmers to better manage their crops and businesses. “It’s really important all up and down the chain from the front-line stores to the source of the company’s most precious commodity to have a seamless connection,” Legg said.

His suggestions

I asked Legg what coaching suggestions he has for people entering the field of risk management.

He said, “I think to be successful in risk management that it helps to have a good understanding of a number of different disciplines like accounting, finance, law, etc. Most importantly, you need to have the ability to think critically through things to make good decisions and to then have the ability to communicate well and to influence others. Knowledge without good communication skills won’t equip you for this career.

“I find myself guiding and teaching other people in the organization every day, helping them develop their own risk assessment philosophy in what they do day in and day out. We in risk management can’t be there all the time, so our job is to train others throughout the organization to make good, sound risk management decisions.

“Be open-minded and flexible. Risk management staff needs to identify and admit their mistakes, correct things and be able to change course as needed.”

Legg added with a laugh, “You think you know in detail how things are, then you find out you really don’t know how things are.”

The Era of Free Agent Employees

Where does a company brand begin and end? Does it embrace the employees — people who are the brand — or suffocate them?

More and more, I’m being asked by people — in both the corporate sphere, among those trying to control the brand perception, and by individuals attempting to expand their own platform and network — what are the dimensions of personal branding, and how does it fit with the corporate brand? What is personal branding? How do you do it? What’s the real value of the “[insert your name here] Brand”? And how do companies use it to their advantage?

Unfortunately, official corporate reaction generally is, “Why should I invest in employee loyalty when they’re at work scrolling through LinkedIn contacts and job postings, attempting to leverage the corporate brand as they are looking for their next job?”

We have all become keenly aware there are fewer and fewer retirement parties and gold watch presentations these days. We are fixated on our next gig because — well, because, what other option is there?

The employer-employee relationship has changed dramatically over time. Any perception of reciprocal loyalty has evaporated, along with the time cards and company picnics. We are no longer searching for the job of a lifetime, instead, we’re in search of a lifetime of jobs.

A wisely led company should recognize that personal branding is an important issue for employees and should encourage it. A study by Brightedge says, “Companies that have a greater proportion of their employees on LinkedIn have more followers on their company pages.” This means employees will improve equity-brand trust by attracting other great employees, improving brand reputation.

That’s a good thing.

Sadly, many times companies fail to recognize the benefits. They don’t realize these free agent employees can be strong assets to their company if they are recognized as thought leaders.

How did this employee free agent mentality start?

Roots of an Issue

Capitalism is, intrinsically, a dynamic system of supply and demand. Financial and intellectual capital jets about these days faster than ever. Markets grow and collapse right and left.

Once upon a time, it was good advice to tell college kids to prepare for careers with multiple stops and regale them with stories of that slow but steady climb up the corporate ladder. Now we tell people of all ages: Prepare for multiple careers!

This change has created what I call the free agent employee model, which has caused a rift in company and employee relationships. Why? Because companies assume these “free agents” aren’t looking for long-term commitment (e.g., the Careerbuilder.com report that says 76% of full-time workers would leave their job if the right opportunity came along.) But how should employees think about job security and company loyalty, especially when facing the likelihood of downsizing, right sizing, re-organizing and lay-offs along their career paths?

Check out N.F.L. free agents, a large talent pool of players willing to join the team offering the highest bid. This “jumping ship” approach reminds me of the show “Shark Tank,” except it’s not limited to fledgling entrepreneurs or N.F.L. athletes — it’s now everyone.

Look at Millennials; they’re the ones who have seen their parents adapt to the aftermath of the recession, and they’re the ones who will continue this free agent way of thinking. Actually, 50% of the workforce will be made up of Millennials by 2030, according to PEW. Companies need to take note by putting an emphasis on employee engagement.

Employees Need Lovin’ – Even Free Agents

Companies that fear and want to crush the free agent mentality are missing important opportunities to capitalize on employees’ personal branding.

If employees feel a sense of fulfillment when working for us, which is employee engagement, and have a strong connection with their manager, which again is employee engagement, then they’re more likely to commit to our company and become brand advocates, which can help bring in more customers and new employee talent right to our doorsteps.

Remember, employees will stay for the right manager, not the right job – and will leave for the same reason.

When you think about it, it’s the front-line employees who are dealing with the customers every day. They’re the ones who help build the relationship between the brand and the customer. Who wouldn’t want to encourage that? And they’re the investment that represents the brand as much as the CEO every day.

However, executives tend to think their role plays a bigger part in the public’s eye than employees. According to a recent New Weber study, “50% of executives expect that CEO reputation will matter even more to company reputation in the next few years.” In fact, the Edelman Trust Barometer says, “Employees rank higher in pu blic trust than a firm’s PR department, CEO or founder. 41% of us believe that employees are the most credible source of information regarding their business.”

What if companies engaged and promoted their employees more? Would the numbers reflect it? Would companies focus less on CEO transparency and public and media relations and more on employee engagement?

Moving Forward

The post-recession way of thinking is here to stay – at least in the foreseeable future. If we want our employees to start being loyal, then we’ve got to meet them halfway. We have to embrace their free agent way of thinking. And we have to engage them. Then, maybe we can stop looking over employees’ shoulders, fearing free agency, and give employees a company they believe in promoting.

5 Musts for Being a Thought Leader

Your clients and prospects are inundated with information online to help them solve their problems. Some of the information is genuinely educational; most of it, though, is self-promotional or generic. How do you stand out and get noticed as the one they should turn to for help? One way to break through the clutter is to focus on thought leadership.

What is a thought leader, and why do you want to be one? There are lots of definitions, but I like this one from Forbes:

“A thought leader is an individual or firm that prospects, clients, referral sources, intermediaries and even competitors recognize as one of the foremost authorities in selected areas of specialization, resulting in its being the go-to individual or organization for said expertise … [and thereby] significantly profit[ing] from being recognized as such. “

As the go-to expert, you’re likely to profit in many ways. Regardless of whether it directly brings in new business, thought leadership helps to differentiate you from competitors, expand your reach and build relationships and trust with your audience. You’re also educating people and promoting deeper and more informative discussions, which is a public service.

That all sounds great, but how can you be a thought leader?

1. Understand your sweet spot. In his book, Epic Content Marketing, Joe Pulizzi defines the sweet spot as “the intersection between your customers’ pain points and where you have the most authority with your stories.” Take the time to really research your audience’s needs and concerns. Then consider what expertise and insights you can offer to help them. Don’t spend time talking about areas where you are not well-informed and don’t have much value to add. Focus on what you know best that can assist your clients.

2. Differentiate your message. Your strongest competitors will be trying to do the same thing you are doing – providing valuable content. Know what they are saying and doing and look for ways to be even better or different. For example, focus on a narrow niche, survey the industry and share research, have an opinion, identify trends and provide insights. Give specific and actionable strategies taking into account whatever new developments are occurring. The point is to go beyond sending out a typical client alert that sounds just like the ones from every other firm. The Forbes article provides a great example, but we’ve all seen examples of thought leadership. We know who is going above and beyond.

3. Have a strategy and goals and align the two. Being a thought leader is a lot of work, and you want to be clear about what you’re doing, why you’re doing it and what you hope to get out of it. Seems pretty obvious, but the reality is that too many firms start down a path without thinking it through. For example, you have an attorney who happens to be a prolific writer and speaker in a specific area of the law. The problem is that area is not very profitable or high-priority for the law firm. How much effort do you want to put behind promoting expertise that isn’t a good fit for the firm? Or maybe the thought leadership is great and would be good for the firm, but it’s not being seen by the right niche audiences. Sometimes, firms focus on getting the content piece right but spend less time making sure the promotion and distribution is getting to their target market. You need to bring both parts together in a strategic way; otherwise, how are you going to profit from being a thought leader?

4. Write, speak and share information consistently. You can’t be a thought leader if you don’t put your thoughts out there. Write articles, blog posts, whitepapers and books. Curate and comment on other people’s content. Speak at online and live events. Create video. Use social media. You don’t have to do them all, but put out content in different formats to maximize your reach and appeal to different audiences. And do this regularly. Thought leadership is a long-term strategy. People have to hear from you on a consistent basis. An occasional article or speech isn’t enough, even if it’s really great. Of course, there are lots of ways to repackage that great content to get more life out of it, but make sure you’re doing that. You must be visible on a regular basis.

5. Cultivate relationships with other experts, influencers, industry professionals and media. As you develop your thought leadership, reach out to other authorities. Gather and share their insights with your audience, make introductions and give referrals and offer to help them with their content. By assisting others, you’re getting your name out to key contacts in your field and developing deeper relationships, and it’s likely at least some people will reciprocate by helping you. It will also make your thought leadership better-informed because you’re incorporating insights from others.

Becoming a thought leader is a long-term commitment and a lot of work. However, successful firms know the investment is worth it, to not only survive but thrive against the competition.