Tag Archives: work culture

How to Apply ‘Lean’ to Insurance

If you’re like many employers, you say you run your business in this order: people first, process second and profit last. But for employees and customers alike, they feel as if it’s: profit first, process second, then people last. With 60% to 70% of your employees disengaged, it’s not time to change the way they think, but the way you think first.

If you do, you’ll make more money by putting things in the right order.

How you run your business indicates how you sell. With more agents “spreadsheet selling,” just based on numbers, learning how to identify and remove root causes of customer problems has gone by the wayside. One could argue that few producers even know how to sell anything other than spreadsheets. When there are other alternatives for customers, however, spreadsheets add no real value in customers’ eyes.

Toyota’s definition of adding value, along with that of other companies that have adopted the principles of lean manufacturing, is the one to study when trying to improve your business and help customers improve theirs, too. At Toyota, it really is people first, process second and profit last.

Before we get to how to apply Toyota’s thinking to insurance, let’s study how its version of lean manufacturing made its way from America to Japan.

Early on during World War II, America was in desperate need of quality and speedy production to build machinery to fight and win the war. Tanks, airplanes, guns and submarines were in short supply when Japan surprised America at Pearl Harbor.

The U.S. government turned to the Training Within Industries program to educate American manufacturers on how to improve quality and reduce costs while increasing the rate of production. With a crisis threatening to destroy everything we knew, we developed an enlightened sense of purpose. American executives listened and changed the way they looked at people and how they built things. The principles of lean were born.

After WWII ended, Gen. Douglas Mac Arthur was given full responsibility to rebuild the Japanese economy. When he arrived, he found devastation, burned-out cities with no functional capacity and people existing on just 800 calories per day. He also discovered he had no way to distribute propaganda necessary to convince Japanese citizens about what Americans wanted to achieve.

With quality Japanese radios in short supply, MacArthur turned to Bell Labs, which turned to employee Dr. Walter Shewhart for help improving radio communications. Shewhart, who was unavailable, recommended that 29-year-old engineer Homer Sarasohn be sent to Japan, to teach statistical quality control. Sarasohn then spent four years working closely with Japanese scientists and engineers, improving their knowledge about how to best manufacture and sell goods and services.

When Sarasohn left in 1950, the reins of teaching continuous improvement were turned over to Dr. W. Edwards Deming. Deming expanded on what Sarasohn began, and lean manufacturing took hold at hundreds of companies, including Toyota, one of the many Japanese companies Deming consulted for until he died in 1993.

Today, Toyota is known for its driving principle; respect for people is the core to the culture. All decisions for improvement are made with this principle in mind. Even when it comes to reducing labor costs, respect for people is at the forefront. For example: Toyota has never laid off a single employee. It has, instead, turned to employees to improve their processes by finding wasteful steps and activities that impede value customers demand.

And when it comes to profitability, Toyota’s profits in 2013, exceeded Ford, GM and Chrysler combined, even though Toyota built roughly half the number of cars.

So, how can you as an insurance agent/risk manager use the same concepts to grow and improve your business?

Quite simple:

  1. Improve capacity by first engaging employees in identifying wasteful activities. Then reduce or eliminate the activities. Activities such as:
    1. (T)ransporting something.
    2. (I)nventory–keeping too much or failing to meet customer demand.
    3. (M)otion–looking, reaching or stooping to get something that isn’t in its best place.
    4. (W)aiting for information. How often do you wait while someone else produces material? How much time is spent waiting for loss runs, proposals, and other data?
    5. (O)verproducing information. For example: sending out copies of emails to multiple parties unnecessarily–emails that take time to be read by each recipient.
    6. (O)veranalyzing information or taking too much time to make a decision.
    7. Creating (D)efective information that must be redone. Certificates, proposals and routinely changing human resource policies come to mind.
    8. Failing to maintain a (S)afe working culture.

These are, based on the initials, the TIMWOODS of waste, and identifying them is your starting point.

  1. As capacity improves, employees have more time on their hands. The first cost you’ll reduce is overtime. That’s because employees will meet production demands better. Remember, you’re looking for reducing, or eliminating altogether, processes and activities that add no customer value. A secondary benefit? Employees won’t feel that their valuable skills are wasted on activities they don’t enjoy anyways.
  2. As capacity improves, share what you learned about your improvement efforts with customers and their supply chain. You’ll be busy with ample prospective opportunities.
  3. Then offer to work with customers and their supply chain to teach them how to use what you’ve learned.
  4. Develop strategies using your new capacity to expand your business. Focus on creating opportunities that reduce risk and improve internal and external customer efficiencies. That’s value through the eyes of your customer.

Don’t believe lead times matter within the service industry? Look at what Western Union accomplished: Lead times were reduced from 22 days to just 19 minutes.

  1. Before improvements
  2. After improvements

Lean has benefits to offer the entire insurance and risk management community. We’ve prioritized profits over processes and people and missed out. It’s time to re-order our priorities.

 

How ‘Cascades’ Can Build Work Culture

Most of us have heard the phrase: “Culture eats strategy for breakfast.” It could be restated as, “Your actions speak louder than your words.” This means that management can dream up any strategy they want, but their behaviors and actions are what create the culture of an organization.

Culture drives how efficient an organization’s processes are. Culture drives the success or failure of an organization. Culture is the product of leadership decisions or the lack of decisions.

The best-articulated corporate vision and strategy are of no value if they cannot engage the hearts, minds and work habits of employees at all levels and convey a purpose beyond just profit.

A vision states where an organization wants to go; a strategy defines the path to get there; and the work culture describes how business processes are actually executed along the path toward the vision. The health of a work culture can range from a contagiously high-performance work culture to mediocre or all the way down to a disruptive, confrontational culture that can’t get much done on time or done right the first time. A disruptive culture can trump the best vision and strategies every time. On the other hand, if a work culture is nurtured and groomed to align with a carefully crafted vision and strategy, the positive momentum could be unstoppable.

Figure 1 shows possible scenarios of vision, strategy, culture and performance alignment and misalignment. Business process performance (small white arrows) is more correlated with the work culture (small red arrows) than with the vision or strategy (big blue arrow) of an organization. Work culture — not vision or strategy — culture drives business performance. The challenge presented by this dilemma is that the work culture is an invisible force that is hard to measure. It shows its good side when you watch it and only displays its bad sides when you look away. The work culture is the product of complex cascade effects inside an organization and is as much affected by leadership actions as it is by the lack of appropriate actions. If left unattended, it will create its own random world of hidden agendas, which will probably not be aligned with the priorities of the organization.

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Figure 1
– 3 Possible scenarios of vision, strategy, culture and performance alignment

Corporate visions and strategies are usually rolled out in formal three- to five-year plans. Work culture management and monitoring is too often not in sync with that plan and referred as an “HR thing,” even though it is the gate-keeper of business performance. If you do not understand and actively manage the work culture, it will manage you.

Measuring Cascade Effects Risks

It would be wonderful if we could just plug a measurement device into an organization to check its health and the risks of cascade effects (Figure 2). The work culture defines how employees work with each other through communication, coordination and cooperation. It generates multiple slow-motion and rapid chain reactions, ripple effects and cascade effects that greatly affect the mood and attitude of the organization. It predestines an organization for success or failure.

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Figure 2
– The challenge of measuring work culture health and risks

How can we measure the health of invisible cultural chain reactions that can drive the success, mediocrity or failure of an entire corporation? I suggest a series of management and employee surveys and brainstorming assessments to test for the presence of 56 different elements of risk that can be present at any level in an organization. (See Figure 3 for a partial view of the survey.) The culture assessment tool shown in Figure 3 should be used for at least three different levels of management in an organization. These three levels of perception will offer triangulation data points, which will show how common or diverse the perceptions are that describe the organizational culture.

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Figure 3 – Partial view of a gamified organizational health survey

The Organizational Force-Fields That Drive Success or Failure

Chain reactions, domino effects, ripple effects and snowball effects are similar in that they are defined by the single acts that created them. Once triggered, they will play out their effects depending on the amount of resistance the system presents against them. Cascade effects are different. They are fueled by a hierarchy of multiple interacting triggers at different levels in the system.  Time delays between cause and effect are common, making the direct correlations between cause and effect more difficult to identify. Each element of the cascade effect can create dramatic outputs involving as many as three degrees of separation, rippling through an organization. There are three types of organizational cascade effects:

  • Destructive tsunamis of non-cooperation and negativity
  • Expanding groups of  status quo herd followers
  • Constructive waves of cooperation, empowerment, motivation and positivity

If all of the cascade effects are present in an organization at the same time, the result will be conflict, employee frustration and lack of momentum in the right direction.  A random mix containing equal parts of motivated, frustrated, positive and cynical employees co-located for 40 hours a week is not a formula for success; it is a recipe for mediocrity or even disaster.

Positive Organizational Cascades

These are acts of positivity that multiply and can also spread from person to person. In 2010, researchers from the University of California, San Diego and Harvard published the results from their experiments in an article titled: “Cooperative behavior cascades in human social networks.” They showed that cooperative behavior can be just as contagious as bad behavior. They showed that positivity can spread from person to person to person by displaying random acts of cooperation, generosity and other positive behaviors. This creates a cascade of cooperation that influences dozens of people who were not involved in the initial trigger event.

Mediocrity and Consensus Cascades

These cascades are the result of contagious personal decisions to blend in with the crowd and not make any waves (also known as “group think”). Many researchers, including those from the computer science department at Carnegie Mellon University, have confirmed this phenomenon. Forces in organizations and society like peer pressure, blending in, the herd mentality and the band-wagon effect can cause an individual to follow the herd, even if that violates personal preferences and value systems of what is right and what is wrong. This is often done to save one’s reputation in a group and gain acceptance. Efforts to achieve team consensus can create the same phenomena, resulting in conclusions that might not always be the best ones. Teams can assign a “devil’s advocate” role to a participant to deliberately challenge “herd decisions” to counter this cascade effect.

In 2013, Forbes wrote an article titled: “Brainstorming is Dead…,” which summarized recent criticism by many about how creative people can get suppressed by other personalities during brainstorming events when the main priority is to get consensus on all brainstorming conclusions. Forcing consensus is as useful as it is dangerous. To avoid ineffective and dangerous group-think cascade effects, group decisions should build on each other’s ideas, when possible, to create innovative hybrid solutions and not pick one idea and totally discount another idea that might have a flicker of genius.

Negative Organizational Cascades

These are acts of negativity that multiply and spread from person to person in an organization. Risky, combative and uncooperative behaviors all have the unfortunate ability to multiply and spread to three degrees of separation from the original act. This can have a negative impact on dozens and even hundreds of downstream people not involved in the initial negative triggering acts. Negative human interactions can break the bonds of humanity and teamwork. These cascades can destroy the work culture, effectiveness and performance of an entire organization.

The Broad Influence of Cascades

Behavioral researchers have demonstrated with team experiments that positive, mediocrity and negative cascades can all have affect three degrees of separation (friends of friends of friends). Other researchers and computer models have determined that only three to four degrees of separation is what separates everyone in the USA, and only six degrees of separation separate everyone in the world. Exceptions to this rule are the secluded tribes in the Amazon jungle and other remote places. Yes, the world is smaller than we think, and actions really do speak much louder than words. Actions and behaviors can reach beyond the horizon and into different time zones.

The Organizational Forces Survey

The Organizational Forces Survey tests the health of the individual organizational forces that drive chain reactions, cascades and other behavior propagation phenomena. This survey asks participants to assess the presence of positive and negative organizational forces shown in Figure 4 by identifying the forces they believe to be present. This survey is given to all levels of employees and management.

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Figure 4
– The Organizational Forces Survey used to assess the health of the work culture.

Figure 5 shows an example of survey responses, using the form in Figure 4, that were attained from the survey for three different levels in an organization: top leadership, middle management and non-management. One sign of healthy communications between management and employees is when organizational risk assessments are similar between different levels in the organization. However, that is not the case here.

In this survey response example, top leadership rated the health of the work culture as overwhelmingly positive (green). They perceived their environment to be a Grand Organization in the making. Unfortunately, non-management employee responses to this survey were at the opposite end of the scale (red). They rated the forces in the organization as overwhelmingly negative, filled with high risk and knocking on the door of a Grand Disaster. Middle management rated the work culture as mediocre (yellow), with some responses slightly positive and others slightly negative. This group of employees was apparently influenced by perceptions of top leadership and non-management.

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Figure 5
– The range of survey responses from various levels in this organization shows major discrepancies in their perception of the health for the organizational work culture.

Conclusion

Grand investigations are often done after a loss of life disaster occurs, such as a NASA space shuttle disaster, a passenger airplane crash or an accidental employee death on the job. However, it is hard to find this level of effort and analysis applied to prevent such disasters. Deep and thorough disaster investigations often find flawed undisciplined leadership practices and organizational cultures at the root of the problems. It is also common to discover a zealous ambition to grow the business without really ensuring that a healthy work culture foundation is put in place to safely support such expansion.

Huge opportunities for organizational productivity improvements still exist today by cultivating a high-performance work culture. Breakthroughs can be made when organizations appreciate the fact that  “culture eats strategy for breakfast,” a phrase coined by Peter Drucker, a famous management consultant, educator and author. True organizational greatness can be achieved when organizations look beyond trying to just manage the bottom line and learn how to manage, analyze and monitor the cultural forces and cascade effects that drive success or failure.

A grand vision and strategy can only revolutionize a company when the work culture is healthy, engaged and aligned with those concepts. Taboos on talk must be broken. Open, frequent and candid communications must exist between all levels in the organization. Employee issues and concerns must be addressed in a timely manner as proof that a functioning communication and countermeasure system are in place. Only then can an organization really have a chance to break its barriers to greatness.