Summary
Best said it believes AIG needs to embark on a companywide strategic and operational review of its businesses. Every time the tide recedes we find out who was enjoying a cocktail while their swimsuit floated off. Companies are required to have an annual financial audit. Why doesn't every CEO, either selfishly for job security or intelligently from a core leadership skill, demand an Annual Internal Operational Audit?
Analysis
This isn't a myopic, beat up the specific company whose stock has dropped more than 50%. I'm a staunch proponent, demander and believer in the requirement of Execution-Excellence. How many NFL teams that consistently Execute-Excellently, from the front office to the individual play mechanics in the game, FAIL their Operational Audit on Sunday?
If organizations, especially the many living in denial, lethargic property and casualty companies, would pass an Operational Audit if they were a football team and everyone could watch them perform on Sunday?
To their defense, the P&C companies who also have Life Insurance divisions, have experienced some "brain drain" as the creative, entrepreneurial leaders moved from the P&C side to the Life side. Additionally, more nimble companies such as GEICO, Progressive and others have stressed the margins and operational structure over the last decade.
I'll offer a few ideas, possibly controversial, but intended to help everyone keep their suit "on".
1) Complete an Annual Operational Audit via a team of internal and external resources. Include in the agreement with the external resource a clause that PREVENTS them from being hired again for at least three years. Why? They want your contract next year and this will encourage them to do a great job not a "yes-sir" job!
2) Audit the correlation between your performance reviews / compensation plans and your external position within your industry. If you are 10% below average on your combined KPI's and your executive team is earning 20% above industry average, there is something amiss. More importantly, what other decisions is your leadership team missing?
3) Separate out changes in the industry that increase or decrease your KPI's from the changes the organization makes. That is, thoroughly understand to the nth degree why your KPI's are changing. Simple example: Revenues increase an average of 7.0% while your revenues increase 10%. Why were you 3% better? How did the top 5 in the industry do? What products, divisions and leaders were the anchors, so-so and world-beaters?
4) Stress test your organization regularly. Reward leaders who are carrying the non-performers. In operations, Execution-Excellence is a DELAYED" observation. Why? Because it requires cultural and infrastructure changes to be in place which is not a band-aid fix. Example: Customer stratification optimization - when times are tough and you're losing market share, marginal income and your expenses per policy or contract are not reducing as quickly as other industry performers, someone was asleep at the wheel while your portfolio of clients / operational infrastructure bloated unattractively. This is a multi-year fix.
My apologies for being so direct. It is not my intent to offend anyone, rather to challenge leaders to rethink their operational infrastructure.
Why is this important? The business impact of course, but the real win is in creating above industry performance that enable the organization and its employees to make a difference, financially and with their time, in the social fabric of our one world ... the game of life.
Make it happen - warmly - Jim Roncevich
