by Stuart Baldwin - Event Management Software · PDF fileIn 1920’s this man Alfred Sloan was the CEO of ... compliance style of management work. At the start of the 1900’s when

© 2013 The Positive Companywww.thepositivecompany.com

The Engagement Gap3 big opportunities for our supply chain relationships

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by Stuart Baldwin

Introduced by Stuart Ballantyne

Illustrated by Cameron Prudames

http://www.thepositivecompany.com




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Introduction

We are really pleased to be launching a new development to the ILC solution which completely supports our ambition to help our supporters to become “Better Tomorrow”.

All too often media advertised “White Papers” are low on informative content and the shortest summary of presented material followed by the longest advert for high cost services and solutions!

We are committed to making our “White Papers” always being a high quality summary of topics and information which will support our aspiration of making our members “Better Tomorrow”. It will be a continuing feature of our events that you will receive high quality value adding summaries of key presentations either in the shape of video or white papers.

One of the stand out sessions of our recent highly successful ILC Home Claims Conference was lead by Stuart Baldwin and looked very specifically at the behaviours we all too often demonstrate when we are working together. The “Why do we say one thing and do another” dilemma?"

So much focus is given to the “What” and the “Why” of claims handling that the “How” is often given little or no consideration and as such the cleverest and best conceived ideas, projects and business plans consistently fail to deliver because they fail to take account of the natural and instinctive behaviours displayed by Insures and Suppliers alike when they are just told to do something without explanation or context.

For the first time ever ILC and Stuart Baldwin have put this issue on the agenda for claims people and we hope you enjoyed it on the day and reading the white paper now.

As ever we’d love your feedback on the white paper, if you like the concept and how we might be able to improve on it. In the meantime enjoy reading the summary of what was an outstanding presentation by one the real thought leaders in behavioural improvement in the UK.

Best Wishes

Stuart Ballantyne

I Love Claims




The Engagement Gap 3 big opportunities for our supply chain relationships

In this short ebook we are looking to draw parallels between what we know about the performance of people at work how that might relate to the performance of the insurance claims supply chain. We will explore two fundamentally different approaches, the compliance approach (do this or else) and the engagement approach (were people are empowered to achieve things because they want to) and I’d like to start with the story of how we got here.

In 1920’s this man Alfred Sloan was the CEO of General motors. He was one of the first people to become famous for really making a hierarchical, compliance style of management work. At the start of the 1900’s when the modern corporation was born, they needed structure, so they looked to what they knew, the industrial revolution and the army. So modern business was originally conceived as a top-down hierarchy and its command-and-control structure became the model for the men who were putting together railroads, steel mills and banks. Those are our foundations, what we have grown up from, the style most managers learned from their manager, but in recent years a different way has emerged. Modern organisations like Google go for Engagement over Compliance. They empower, and trust people so much that famously they allow people to work on whatever they want for 20% of their time. Out of this 20% time have come most of their major innovations like gmail and ad-sense.

You can draw a line from the Compliance management styles of the 1920’s through to the Engagement styles of today and say that every organisation is somewhere along that line, and there is a right place for each one of our businesses to be. You can also say that most businesses are trying to move away from compliance and more towards engagement for 3 good reasons.

1. Compliance jobs are mostly in the far east now.

2. You cant treat people like horses any more, they will just leave.

3. We can gain significantly more from people when they are engaged.

... but how much more ?




According to Gallup and the CIPD engaged employees are:

How does this impact bottom line? In a Towers Watson study, organisations in the top quartile for engagement were 40% more profitable than organisations in the bottom. Most of us are looking around for where that extra 10% comes from, how we can find growth, year after year, and the level of engagement and performance in our people is an obvious answer.

Ten years ago Dr Daniel Goleman one of the worlds best known psychologists did a now famous study on the effectiveness of different leadership styles, he identified several distinct styles of leadership that all had a very specific impact on results, performance and culture.

The style that had the most positive effect on results and culture was ‘Visionary’, this style makes it clear to people how their work fits into a larger picture and empowers them to find their own way there.

The style that had the most negative effect on results and culture was ‘Compliance’, in this style people are just told what to do and closely controlled. But, there is a time when compliance is helpful; it’s when your in trouble, when you need to grab something with both hands and sort it out, but if you use compliance all the time people get demoralised and turn off. You have to move out of crisis mode quickly and use compliance sparingly.

" © 2013 The Positive Company"www.thepositivecompany.com



So the science of what drives human performance at work is pretty clear, but how clear are we on what drives performance in our supply chain. I would argue that in large part it’s the same things, it’s still mostly about people. So the obvious next question is, how are we leading our supply chain relationships are we leaning more towards engagement or more towards compliance. The research we have suggests it’s largely compliance. I think we could say that whilst we are making a great effort to slowly change the way we manage our people inside our businesses, we have not yet made that same effort or even really decided that that would be the right way to go in managing our supply chain relationships.

I believe Engagement is significantly more powerful than compliance for driving our collective success and making us ‘better tomorrow’, and across 2013 Stuart Ballantyne from ‘I Love Claims’ led a research study in to the challenges facing insurers and suppliers in the claims supply chain. From this research he and I saw 3 key insights, 3 areas that are worth looking at more deeply now. In each area we will consider at some industry opinion, look at what we could do that might be a little different to where we are now and explore some of the psychology and science behind why that might be important.

1. MetricsHow are they helping us and how are they hurting us. From the research data we have picked a selection of real comments made in the last few months by insurers and suppliers on the subject of measurements and metrics.

Suppliers

1. “Contract SLA's put in place by insurers either add no value or drive wrong behaviours with our suppliers e.g. customer contact SLA's when there is no value in the call at that time.” 2. “They clearly want to reduce cost - but take asbestos tests - When requesting an asbestos test we are often denied because that's the process and we’re told we should take what they call a common sense approach, even when it is obviously needed. It is a constant battle and there are occasions when we have funded the tests ourselves on the grounds of H&S. If one of these cases goes wrong it'll cost them.” Insurer

1. “We give clear metrics and measures to suppliers when we set contracts up but I also get the feeling the feeling that second they receive them their first priority is to see how they can frig the numbers and make money or create revenue streams that will be hidden from what we tell them we want to measure. Its like squeezing a balloon — you save money in one area and they move the cost to another.”

Businesses that are technically led can have a tendency to rely too much on metrics and often prefer to solve problems by inventing new processes rather than changing behaviours. If we are interested in moving towards a more engagement driven culture, this is what I think we might consider, that could make us ‘better tomorrow’.




‘Greater freedom from burdensome command and control, to by guided by a smaller number of simple metrics in line with a shared purpose.’

Why does that matter? Lets look at some of the psychology, because carrots and sticks, incentives and punishments, do not work in the way we think they do.

This is the candle problem created in 1945 by the psychologist Karl Dunker. It has since been used in lots of behavioural science experiments.

Looking at the picture to the right, your task is to attach the candle to the wall so the wax doesn’t drip on the table, using just the things on the table.

After about 7 minutes most people work out how to do it, as you can see below.

The secret to solving the puzzle is to get past what psychologists call functional fixedness. You look at the box and you see it only as the thing the pins live in, but it can also have another use.

Psychologist Sam Glucksberg from Princeton University used the candle problem to test the effectiveness of incentives on performance. He put people into two groups. Group 1 was the control group who did the test normally and were timed to establish norms. Group 2 were incentivised to complete the task as quickly as possible. They were told that if they were in the top 25% of their

group they would receive $25 and if they were the fastest in their group they would get $50. So the question is:

“How much faster did Group 2 (the incentivised group) solve the problem than Group 1?”

The answer is perhaps not what you would expect, it actually took the incentivised people in Group 2 on average 3.5 minutes longer to complete the test than the non-incentivised participants in Group 1. We will talk about why in a minute.

Professor Glucksberg then presented the problem differently. This time he started the test with the pins out of the box (as in the picture to the right). Everything else he did the same. There were two new groups, the first one a control group with no incentive and the second offered the same cash rewards for performance. So the question is: This time, which group completed the candle test the fastest, the incentivised group or the non incentivised group?




This time, the second group, the group incentivised by a cash reward completed the test significantly faster than the group without an incentive. This is of course the opposite result to the first candle test, so, how come? Well when the drawing pins are out of the box it’s a pretty straight forward and easy task.

And this is what we know about incentives, they work for straight forward, basic tasks but for anything that requires any level of creativity, cognitive reasoning or engagement, not only do carrots and sticks not drive performance, they can reduce it.

Well meaning metrics can often drive the wrong behaviours and can cause more damage than good.

• Sears imposed a sales quota on it’s car repair staff and workers responded by over charging customers and doing unnecessary repairs.

• General motors had a policy to never stop the production line (unlike Toyota who had a pull line to enable any worker to stop the line if needs be) and they produced thousands of cars that needed to be returned or corrected after production.

• Traders selling sub prime mortgages in 2007 were more focused on their bonus numbers than the financial health of their institution or country.

This understanding that well meaning metrics drive the wrong behaviours asks us to think about how we use metrics and measurements and to consider if we might prefer:

• Less command and control and intrusion.

• More empowered behaviours.

• To be guided by small number of simple metrics in line with shared purpose.

And speaking of purpose, thats the second principle.




2. Purpose

Do we all want the same things and are we set up to all be able to win. Some thoughts we heard in the research.

Insurer 1. “They don’t really understand our business well enough. They’ve often designed a new product or solution that they are trying to sell to the market and their sole aim seems to be to convince us that we should use it. Regardless of whether it fits in with the way we work or our systems. I wish for once they would tell us that one of their products wasn’t the best thing in the market – Id be more likely to trust their claims on their other products.”

Suppliers

1. “The need for procurement functions to squeeze out the best deal, ignoring commercial realisms. This can lead to a race to the bottom in terms of quality.”

2. “When the auction closed we were the winners and expected to be told of our success, however we were told the contract had been awarded to someone else with no explanation or feedback as to why we were unsuccessful. On the whole I find many insurers want you to jump through hoops, prepare proposals and travel to them at their convenience, but then you hear nothing and in many cases they avoid your calls, a simple "no" and reasoning behind it would be courteous.” To develop an Engagement driven culture, this is what I think we might consider that might make us ‘better tomorrow’:

‘To be united behind shared aims where everyone can win’

A collective where people feel they are making a meaningful contribution to a larger purpose, and where it is accepted that everyone can be successful. Why does that matter? Let’s look at some of the psychology.

There is a gap between what science knows and business does. If the candle test shows us that targets and punishments don’t drive motivation and performance in the way we though they did, then what does. It turns out, the single biggest drivers of motivation, is knowing that what you do matters, that your actions are contributing to a bigger aim.

In May of 1961 JFK famously said “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to the earth.” When he spoke these words, he had no earthly idea how they were going to do it. They didn’t have the " © 2013 The Positive Company"

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science, they didn’t have the technology, they didn’t have the people, but he knew that by uniting his nation behind a common purpose he would bring out their best efforts.

The Chinese army has a punishment they use on their troops. They order their soldiers who have committed some infraction to dig a big hole, a task that may take six hours or more to complete and then they tell the soldiers to fill it back in again. Why? Because there is nothing more soul destroying than work without purpose.

Real and Lasting Motivation, does not come from hitting KPIs, avoiding threats, achieving bonuses, or pay rises. Motivation comes from within when you take action every day in line with something you care about.

When you think about it, we do have those shared aspirations:

• We all care about improving our products and making things better for customers.

• We all care about making money.

• We all want to come to work every day to do good, and enjoy it.

And with that idea comes our last principle.

3. Confidence

To what extent do we have confidence and trust in each other and how does that hurt us and how does that help us. Some thoughts we heard in our research about confidence and trust:

Insurer

1. “Lack of trust creates intrusion and cost — trust is the core ques7on when dealing with suppliers. Yes, its necessary and prudent to have contractual clauses that give work providers recourse if things go dras7cally wrong, but central to any successful rela7onship is a shared benefit of working together that is fair.”

2. “If I could trust a supplier to tell me when things aren't going as well as they need to I could oFen help them by reducing volume to help them get things back together in the short term and minimise customer detriment. All too oFen though we find out through customers and then we have to go in heavy handed.”




Supplier

1. “The reason I don’t want to work with X is that on their claims, there is a huge lack of trust. If we do not have a skip on site & want paying for waste disposal we have to photograph our lads puMng the waste in the back of a van with the number plate clearly visible & then the waste being removed from the van & put in the skip. If we miss off a photo they refuse to pay us. I hate the fact that I’m not trusted & our lads regularly forget to take the photo. On the next job we usually order in a skip which the neighbours or maybe other builders who are just passing some7mes dump their rubbish in. The insurer then argues we didn’t need to use a whole skip & ask for money off, when we explain they say it’s not their problem & we should use a skip with a lockable lid. So on the next job we do but these cost more. This goes round & round in circles as we argue, fall out & resent one another as we both waste one another’s 7me arguing about something that costs between £60 to £200. The next job we revert back to the photos & the bags of waste & the whole process starts all over again. Here are 3 unforeseen consequences of that situa7on: 1. Whilst arguing about waste we lose focus on doing a great job for the customer, our guys put more focus on photographing bags of waste to not get a bollocking off me than giving love to the claim

2. We end up choosing not to work for that insurer, I think of them as being a penny pinching useless insurer when the reality is they are probably a very good company and I tell as many people as I can to avoid them.

3. The Policy holder feels that we are more interested in skips than her & feels undervalued. Our coordinators roll their eyes & sigh when they get queries from that insurer and focus on what the insurer might argue about more than serving the customer.”

Sometimes in this area I see how much people might enjoy trying to exert power over others and use it to build up their own ego. They might need to show they have more technical knowledge to feel superior, or need to win an argument to build up their sense of self esteem rather than focusing constrictively on the best outcomes regardless of right or wrong. These normal human behaviors drive compliance rather than engagement, but this is what I think we might prefer, that could make us ‘better tomorrow’:

“To believe in and trust each other, developing empowerment and autonomy.”




Why does that matter? Well lets look at the psychology.

Confidence and trust in each other is about our mindset, about what we are choosing to focus on, because how we think drives how we behave. If we are focused on why an insurer is a pain in the ass and always trying to cause us trouble, that is what we will see. And if we are focused on why a supplier will always do us over if they are not screwed to the floor that is what we will get. This works because of one simple unavoidable psychological truth.

What you Focus on you get

Just like in Skiing, where you point, thats where you go. This is just how our brains are set up, let me show you what I mean.

In 1998 Daniel Levins and Daniel Simons Harvard created an experiment called the door study. In this experiment a researcher walks up to a pedestrian and asks them for directions . As they get into their conversation two men carrying a large door or painting walk in between the researcher and the pedestrian meaning they momentarily can’t see each other. In this moment the researcher swaps places with the guy carrying the back of the painting and the pedestrian is now talking to a completely different person. Only 50% of the time does the pedestrian notice they are now talking to a completely different person.

Of all of the information that comes in to our brains we only process a tiny amount, only 0.001% of all the data we get reaches our conscious mind. This is great news, our brain does not distract us with the things that are not important. There is a part of the brain called the reticular activating cortex which does this job for us, it ensures the brain filters for only things we care about, want or need to be alerted to. How does the brain know what we care about, we tell it by what we choose to focus on in our lives. This focusing repeatedly over time creates habits or filters which drive the way our brain interprets the world around us and the experiences of our life.

How does this impact how we treat each other at work? In 1999 Dr. Marcial Losada was studying the relationship between the ratio of positive to negative feedback in a team and the performance of that team. What he found was that just for people to be okay, neutral they need a ratio of 3-1 positive to negative feedback. This has become known as the Losada line, the point below which you do not want to cross. For high performing teams the ratio is 6-1 positive to negative feedback.

When you focus people on what’s good and what is working, they




will give you more of it. In order to do this, you must first be focused on and filtering for what is good and working. This begs the question, what are we filtering for and focusing on in our supply chain relationships?

Gallop did a study of more than 10,000 people in to strengths at work. They found that only 1 in 5 people were able to focus every day on what they were best at, but those who did were 38% more productive, 6 times more likely to be engaged in their jobs and 3 times more likely to have a high quality of life out side of work. The connection between strengths and engagement is huge, so why are we so bad at it?

Well, imagine the child who comes home from school with their report card and they have 2A’s, 1B and a D, which result might get the most attention from the parents. It’s the same at work, we are hardwired to focus on whats not working, when in-fact our greatest opportunity is to focus on what is working and create more of it. On the spread sheet, the 5% loss and how to mitigate it will get much more attention than the 5% increase and how to make it 10%. We are obsessed with making things average, yet when you look at really successful people and companies they are not average, they stand out in very specific ways.

Let me wrap up the bigger idea and clarify the point.

If we believe Engagement is more powerful than compliance for our collective success and want the 3 things we have explored here:

1. Shared purpose where every one can win. 2. Simple metrics in line with shared purpose. 3. Confidence and trust in each other.

It starts with a mindset shift, a choice to look at things differently. Because the way we approach everything, in life and in work is just a choice, even in incredibly difficult circumstances. In 2008 Randy Pauch was a lecturer was at Carnegie Melon university in the United States of America, at this university they have a tradition called the ‘last lecture’ where they would ask their faculty to give a speech like it was the last one they were ever going to give, so they could talk about anything at all. The kicker for Randy was, this was the last speech he was every going to give. He was 47 years old and dying of pancreatic cancer. The speech he gave was remarkable, it was life lessons he was leaving behind for his two young boys, but for me there is something even more remarkable about him, this is one of the things he said.

“you’d better decide early on if you are a Tigger or an Eyore. Tiggers are energetic, they are optimistic and they have fun, and never underestimate the importance of having fun, I am dying soon and I am choosing to have fun today, tomorrow and every day I have left.”

Randy has died now, but his legacy is huge, millions of people have watched his lecture on you tube and every time I listen to him, he makes me think, ‘what excuse do I have to not at least try to choose how I approach the most difficult of circumstances in my life and work’." © 2013 The Positive Company"

www.thepositivecompany.com



And that’s the thought I would leave you with; as you contemplate the supply chain and your business:

Might we just choose to think a little more about Engagement over Compliance. Yes, Engagement is harder it demands more from us, but harder is good; if we choose Engagement we will achieve more, enjoy more and make life better for customers, our companies and our selves.

Stuart Baldwin

The Positive Company

Say hi here: Email me

Visit the Positive Company website here: www.thepositivecompany.com

Research and Insight by Stuart Ballantyne, I Love ClaimsIllustration by Cameron Prudames


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by Stuart Baldwin - Event Management Software · PDF fileIn 1920’s this man Alfred Sloan was the CEO of ... compliance style of management work. At the start of the 1900’s when