“Work-Outs” and “Rapid Results Initiatives” are now a natural part of the language of the U.S. insurance professionals working for XL Group, where a culture of collaboration has taken hold over the last three years, according to the chief executive.
Executive Summary“Work-Outs” and “Rapid Results Initiatives” are now a natural part of the language of the U.S. insurance professionals working for XL Group, according to Seraina Maag, CEO of XL’s property/casualty insurance operations in North America, who describes examples of how XL has used the two GE-style methods, along with other steps she took to shake up the culture of what she calls an “underperforming and shrinking business” back in 2010.
Seraina Maag, CEO of XL’s property/casualty insurance operations in North America, explains that changing the culture was part of her mandate when she signed on to grow what she describes as an “underperforming and shrinking business” back in 2010.
Work-Outs, more commonly associated with General Electric Co. and Jack Welch, the former chairman of GE, and Rapid-Results Initiatives (RRIs), a similar business strategy method developed by Schaffer Consulting, were part of Maag’s culture-building toolkit, as she participated in them during a prior position at Zurich Insurance Group.
Since Maag joined XL, her group has used Work-Outs and RRIs more than 30 times, she reports, explaining that the two approaches essentially bring together teams of people from different disciplines within an organization to solve a specific problem in a very condensed time frame.
“There’s not a real big difference” between the two methods, she says. With Rapid-Results, you spend less time. A Work-Out is a bigger project, she says, noting that XL’s first Work-Out involved a two-day meeting at a nearby off-site hotel among a group of professionals charged with figuring out how to launch a North America construction business in 90 days.
“If you have a smaller problem, you can get people together for half a day or a day,” she says, noting that a Rapid-Results Initiative might be designed around the task of boosting the top line—having the team work together to set a goal and then developing specific takeaways on what they have to do to achieve it. “Then you check in after 30 days, you check in after 60 days, and you check in after 90 days, and you measure everything.”
“We really found that it was very invigorating for the teams,” Maag says.
During an interview with Carrier Management at XL’s New York City offices, Maag went on to describe in detail the construction Work-Out and a cross-selling RRI. Asked a more general question about the willingness of employees to carve out time from their work schedules to participate in such approaches, Maag says: “The timing was right. The organization was ready for something new.”
“People want to be part of something exciting and growing and new. So when we started the construction business, it wasn’t hard to get people excited.”
Attributing part of the success of the first Work-Out to the leadership style of Gary Kaplan, the construction division and Work-Out leader, Maag adds, “What was really important is the people saw early successes. Success makes you feel good, right?”
The earliest success came at the end of the two days, when the group presented 16 recommendations to Maag. “Where a decision needed to be made in order for them to move forward, we decided pretty much there on the spot: ‘Yes,’ ‘No’ or ‘You may have to do some more work around there.’”
“People felt really empowered” because things were moving quickly. “That hadn’t happened in the past,” she says.
Recalling other cultural changes that occurred with that first Work-Out during a presentation she made at the IICF Women In Insurance Global Conference in June, Maag says that some of the people involved in the Work-Out had been at XL for more than 10 years but had never actually been in the same room together.
Re-energizing the existing staff and building the construction business in North America to $200 million in premium from $0 within two years are not the only positive changes that coincide with Maag’s recruitment to XL in September 2010. Since that time, XL’s North America P/C divisions have attracted upward of 70 new professionals by Carrier Management’s count (based on press announcements; we stopped counting when we reached 70).
And Work-Outs are not the only steps she’s taken to fuel double-digit growth for XL’s P/C businesses overall in the last two years. She also inverted the organization chart, replaced the leaders of nearly all the businesses that would ultimately report to her and took down her office wall.
Building a Cultural Foundation
“Initially I frowned,” Maag says when asked why she decided to join a company she described as “shrinking and underperforming” during her presentation at the IICF Conference. “What am I doing?” she recalls asking herself during her interview with David Duclos, then XL’s chief executive of insurance operations, who was among the executives leading XL out of a crisis that began in 2008. “The business I was running was a lot larger in terms of premium than here,” she says, referring to her prior position as president of Zurich North America Commercial’s Specialties business unit.
Maag, who joined Zurich in 2002 to head up the investor relations department at a time when loss reserve charges and asset-value writedowns imperiled financial strength ratings and analysts’ views of the Swiss insurance giant, notes: “There’s something to be said about a company that comes out of a crisis. It’s a different dynamic, and if you can unleash the potential that’s been held back during crisis, then a lot of great things can happen.”
“What I found is everybody puts their own agenda aside and focuses on what needs to get done on the collaboration. Everybody puts the company hat on, and it’s very, very powerful.”
Recognizing the underlying strengths of XL, Maag says that she was attracted by the possibility of being able to build a business and put her own stamp on the organization. “We wanted to bring XL back to what it used to be—entrepreneurial and solutions-oriented,” she adds. “We lost that a little bit throughout the crisis, so we wanted to go back to our roots and what made XL such a great company.”
Upon joining XL, Maag found that it had a lot of bureaucracy. “It needed a new vision,” she says, recalling that one of the first steps was “delayering” the organization.
To explain exactly what she means when she uses this term, Maag describes the first management meeting she held with all her direct reports, during which she realized that only two “businesses”—property and casualty—were represented at the table. “I had more support functions [than] businesses,” she says, recalling that there were eight or 10 representatives of those functions present at the carrier’s management meeting.
“This is upside down,” she recalls thinking, going on to explain that while support functions are important, they aren’t the drivers of cultural change. The support functions were consolidated under a newly created chief operating officer position. And rather than having divisions like excess casualty, environmental and programs reporting into a casualty business leader, and a similar situation on the property side, Maag “delayered” them so that eight separate divisions would report directly to her.
She then went on to assess the leaders of the eight separate areas, deciding to replace most of them. “Some of the people are still with us,” she says, explaining that they just weren’t the “right people for the right jobs.” In selecting a new president for each of the eight segments, “I was looking for more of a leader that had a vision and could take the business to the next level.”
Before the appointments, “we tended to have very technical underwriting talent” at the helm, she says. Noting that these are very good people, she gives an example of a former casualty business leader who now holds a chief underwriting officer title.
As for the folks who became the new business leaders, “it’s not that they’re not technical,” she adds, noting that some were promoted from within the organization and others hired from outside. They just had a different skill set that XL needed, she says.
“I also paid close attention to making sure I felt that there was a good cultural fit with the team—that the team would collaborate in terms of the culture.”
“I was really looking for accountability and collaboration. I wanted a leadership team that could think beyond just their areas of responsibility and could collaborate across.”
Culture Beats Strategy
Maag believes that the way in which a carrier differentiates itself in the marketplace is through its culture.
“Culture eats strategy for lunch,” she said at IICF. In a world that is flat and increasingly transparent—where “whatever we do, everybody sees”—competitors can copy products released by XL, but “they can’t copy culture.”
But you can’t simply dictate a change in culture in an effort to create one that is entrepreneurial, even if you take apart hierarchies, empower the front lines of businesses and replace functional bureaucracies with networks of problem-solvers for operations, finance and underwriting to support businesses as Maag did.
And you can’t encourage collaboration in an office environment that’s built like a maze, she says, noting that the network of cubicles with high partitions that she weaved her way through in her early days at XL prevented people from communicating with each other.
Taking the first step to open the space, Maag had builders come in to tear down her corner office wall over a weekend. “I would not ask something of our people that I wasn’t willing to do myself. So to ask them to give up their privacy, I had to say I’m giving up my own,” she says, noting that the next step was to lower those partitions.
The absence of an office wall also meshes with a general philosophy she has about leadership. “I think today we all have to be comfortable leading from the middle and not from the front like we used to do,” she said at IICF.
Asked during her interview with Carrier Management to explain this further, Maag gives an example of how times have changed. “Today, I was riding the elevator up with an intern, and they’re not afraid to come and talk to you. When I was growing up, I would have died.”
“The reverse has to be true for you. As a leader, you can’t be up in the ivory tower anymore. You have to be comfortable being part of the people. You have to lead, but you have to be comfortable leading from the middle. You can’t isolate yourself. Increasingly, I think that trend is true.”
That means tearing down walls and throwing pizza parties on Friday to hear what the less experienced members of the XL North America team are thinking. “It’s the future. Top-down doesn’t work that much anymore.”
Culture of Accountability
Beyond building a culture of collaboration, part of Maag’s charge was to create a culture of accountability at XL.
“The best way to do that is to show it through metrics. What gets measured gets done,” she says. “One of the things that was lacking here was a focus on metrics and really looking at the numbers and understanding where you are in terms of performance vis à a vis your budget. [Now] we have quite a rigorous process around measuring where we’re at. And we don’t just have one measurement. We look at a lot of different things,” she says, citing examples such as metrics around growth, new product development, rate change and mix of business.
Accountability is also “about communicating, as well, what you expect from your people,” Maag says, noting that on an employee call at the beginning of the year, she talks to the North America team about what XL’s expectation is—“how we’re doing, not just in terms of the numbers but also in terms of our strategic levers.”
Then on quarterly follow-up calls, she provides a progress update. “Everybody knows where you’re going, what’s expected of them and how they can contribute” to push the strategic levers.
XL North America P/C has four such levers that it looks to deliver on—with the letters N-A-P-C used as an acronym to represent them: N, for new technology; A, for attracting, retaining and developing talent; P, for portfolio management; C, for the “customer and broker relationships.”
“I’m the owner for talent. I think the CEO owns the talent, and our chief operating officer owns the technology and processing,” while chief underwriting officers attend to portfolio management. “That’s all about the underwriting side and making smart underwriting decisions.”
Turning to the customer lever, Maag says, “We talk a lot about out-behaving in the marketplace.” Echoing her sentiments on culture, she says, “Everybody can copy insurance products today. But nobody can copy how you deliver the product. The how is much harder than the what.”
“We talk about how people are behaving, how they’re listening to the customers. Are they responsive?”
Rapid Results and Winnovation
Asked how XL North America measures its progress in out-behaving the competition, Maag offers as an example metrics around cross-selling success. “The more products you’re able to bind in one client—that speaks to out-behaving. Not everybody is doing that, and we do measure that.”
RRIs were the method that XL used to kickstart cross-sell initiatives, Maag says, noting that the cross-sell RRIs have worked so well that they’re not needed anymore. “You want to make sure people don’t get RRI-ed out,” she adds.
The teams still get together to develop new cross-sell plans and to measure progress, but they make the meetings very efficient. Noting that meetings used to last two hours or more, she says, “You just can’t sustain that because you lose people. They get bored.”
Asked whether XL has had any RRIs that haven’t worked out—where teams did not meet their goals—Maag says that doesn’t happen.
“It won’t fail. It’s just not an option. We would take corrective action,” she responds, noting that monthly check-ins are built into the process and that a bit of competitive spirit keeps RRI participants moving forward. “We’ve had situations where teams have struggled, and they weren’t where they were supposed to be in 30 days. But then you catch up with them [so] you can correct it.”
In the case of the cross-sell RRIs, Maag notes that five were launched across the country in different regions. “Then we had these check-in conference calls at 30 days, and one team was way behind. You don’t want to be behind if you see everybody else [succeeding]. So there’s a bit of competition going on,” she says, reporting that at the next checkpoint, the lagging team typically moves out in front.
In keeping with the spirit of competition that Maag and her team thrive on, the group has a Winnovation competition each year—based on the idea that the company can “win by innovation.”
This is a grass roots effort that allows employees to suggest improvements ranging from process changes to new insurance coverage offerings, she says, noting that the first winner came up with the idea for CapAssure—a combination of a surety product and subcontractor default insurance.
The soon-to-be announced winner for 2013, entitled to a $5,000 prize, was a closely guarded secret at the time of the interview with Carrier Management. But beyond monetary rewards, Maag suggests that excitement around the Winnovation program really stems from individual employees’ desires to have their proposals—developed from direct interactions with customers or day-to-day work in operations—put into action.
“We’re looking for ideas. I just want our people to have the mindset of ‘Yes, if we see that something is not working, we can actually raise that and it can be changed. Because we’re in a large corporation, it doesn’t mean that it has to be done [the current] way.”
Maag, who frequently refers to the desirability of running the business more like a technology company than an insurance company, likes an environment where brainstorming comes from employees and not executives in conference rooms. “Innovation from the top may be structured, but it’s really dumb. Innovation from the bottom up is chaotic, but it’s really smart,” she said during her IICF presentation.