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Helping Employees Understand the Bottom Line

 

Submitted by Terry Miller, Vice President and Treasurer, State Fund Mutual Companies

One of State Fund’s 2006 strategic goals is to provide employees a higher level of understanding the Company’s financial performance and the key business drivers. To create this culture, State Fund Mutual (SFM) began by clearly communicating expectations to employees and by encouraging them to take steps to increase their knowledge of the business drivers.

One might question the usefulness of such a goal. However, Peter Drucker, noted author and management guru, who recently passed away, found over the years that successful enterprises are learning and teaching institutions. Furthermore, his studies of successful companies proved that for a company to be successful over the long haul, training and development must be built in at all levels. In addition, he found that training, development and learning is a continuous process at successful companies.

For SFM, we have made the decision that financial education is a strategic focus going forward. If we’re going to profitably grow the organization in a highly competitive business, then we need every person in the organization to invest in understanding key business indicators. We see internal financial education as a capital investment.

Through interviews of other companies; reading studies done by the likes of Drucker, Collins and McKay; combined with our own experience at State Fund, we have found that the benefits of education reach far and wide. Some of the benefits that we have experienced are:

  • By creating and sustaining dialogues within departments and teams about financial results, the level of understanding of key business drivers has increased, which in turn helps employees understand and appreciate their role in meeting financial targets.
  • Opportunities to communicate and reinforce organizational goals are created.
  • While teaching and reviewing financial goals, opportunities for improving financial results are discussed.
  • Dialogue provides an opportunity for feedback and encourages cross-functional discussions within the organization.
  • Senior management becomes accessible to all employees.

In order to gain these benefits, SFM recognized the need to provide accessible resources, more learning opportunities, and especially a commitment to devote time to learning. To meet the needs, SFM:

  • Posts monthly financial results on the front page of the employee intranet site.
  • Publishes monthly financial results in a semi-monthly employee newsletter.
  • Discusses results in regular team and department meetings.
  • Provides information tying financial performance to every job in the company.
  • Offers quarterly financial reviews in the form of small and casual seminars.

In case you think that we are all alone in this endeavor, we do want you to know that State Fund Mutual is not the only organization putting a strong emphasis on understanding business drivers. Texas Mutual, Pinnacol Assurance, Louisiana Workers' Compensation, SAIF and Arizona incorporate financial performance and financial education into their company goals.

For example, in Texas, expectations and business objectives are driven down to every employee through individual performance management where financial performance is incorporated into the company’s performance management program. Texas Mutual President Russ Oliver communicates business results quarterly. Lynette Caldwell, senior manager human resources, says “teaching is critical,” and employee feedback supports understanding financial performance. At SAIF in Oregon, the chief actuary, underwriting vice president and chief financial officer hold a class for all new employees called “Understanding Insurance Finance.” In addition, the CEO and CFO hold a financial briefing each quarter that is web cast to all employees. Jerry Dykes, SAIF CFO, states, “providing employees with an understanding of how the work they do at the desk level affects the financial results improves performance.”

In closing, I would like to leave you all with a couple of questions. If we expect employees at all levels of the company to help the company be more competitive, more effective and ‘on top of that’ to be more accountable for the job they do, should we not help them understand how their job fits into the financial picture? Wouldn’t it be wise to also show them how the things within their span of control affect the financial picture? Is it not every executive’s job to make sure the people making underwriting and claims decisions know what affect their decisions have on the company’s results?

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