Norwich Union Insurance’s work on value innovation and tipping-point leadership is clearly paying off. Profits are up and staff turnover is down, but it’s been a difficult road 

For the past six years, senior managers at Norwich Union Insurance, the UK general insurance arm of Aviva, have been working with leading academics at Insead Business School in Fontainebleau, near Paris. Much of that work has centred on W Chan Kim’s and Renée Mauborgne’s research into value innovation and tipping point leadership. 

Earlier this year the company’s top 75 directors met at the business school to review their progress. They are progressing well, if the latest set of annual figures is anything to go by. Norwich Union’s chief executive, Patrick Snowball, who moved into financial services after a 20-year army career, describes the results as "stunning, simply stunning". It is a view shared by analysts. Roman Cizdyn, an insurance analyst with Commerzbank Securities, says: "Norwich Union’s results surprised the market." But, as he explains, although the company has outperformed the opposition, most analysts think the sector has peaked and "now they’re managing for the downturn".

Perhaps with this in mind, the Norwich Union leadership team remains far from satisfied, as HR director John Ainley explains. "This time at Insead, we challenged ourselves to avoid polite conversation and to have real conversations from the gut about what matters in our business," he says. "It caused the temperature to be raised, not by the board telling people to change, but by our directors challenging themselves. We finished the Insead sessions with the question: ‘What prevents you from doing what you know should be done?’"

Ainley, who has driven much of the leadership strategy work at Norwich Union (see below), is looking for open feedback about performance. "If we discover what’s really happening, we can put it right," he says.

Snowball recalls that in the early days it was more about making sure that as the company came out of the merger with CGU – which had made it very operationally focused – everyone understood what they were going to do next. The CEO was concerned about how to take forward the big programmes that had been identified – in particular, the ones related to behavioural change. The company’s intention is to become a service provider "with insurance at the core of the proposition and care at the heart". The reasoning is that over the next five to 10 years, the power of retail brands in the UK is expected to dominate customer access, customer retention and customer relations. 

"Real change in leadership behaviours was needed to define what we meant by care and how we were going to demonstrate it," says Snowball. "We needed the clearest type of thinking because these are intangibles." It was this challenge that brought him to Kim and Mauborgne.

The academics got the Norwich Union team working with value innovation. The company was attracted to it because it drives organisations to offer better value in the marketplace while pushing for a drop in their cost structure.

"The process makes you look at what you eliminate and reduce, before you look at what you create," explains Snowball, who gives an example of eliminating "unnecessary interference" and then creating "respect" as two changes in its care strategy that came out of the process. He does not hide from the fact that it has still been tough. "It’s been difficult,"he says, "and it still is, particularly with something like care – caring for each other, caring for customers. The value innovation process drove us to think about what care means in industry. We talked to our customers and staff, then we’d return to Renée and Chan to make sure we were on the right track."

The difficulty of building an organisation that could act on the new care behaviours demanded of them led Norwich Union to apply value innovation to leadership too. As Mauborgne explains, the resulting leadership strategy involved three strands: "cut through to serve" was aimed at the bulk of the company’s 13,000 employees and meant putting the customer first; "liberate" was for the middle managers; and the more reflective "mountain lake" was for the senior managers.

To define these leadership strategies, the value-innovation process involved senior managers and employees across the company so the entire organisation would understand the meaning of compelling leadership at each level of the organisation. 

Mauborgne says: "Things are often disjointed, with top management thinking they’re moving the organisation one way and the rest of the ranks not understanding where they are supposed to be going or why. 

"Value innovation works to overcome this by developing a clear strategy that articulates the ‘as is’ leadership behaviours and the desired ‘to be’ behaviours. These one-page strategy canvases can then be distributed up and down the ranks," she says.

"So whenever someone is having difficulty now, and they have these tools, they can say ‘you need to liberate me’. Or if someone needs to do something for a customer and thinks ‘I’ll do it this afternoon’, they should have an alarm going off in their head that says ‘wait a minute, I’ve got to cut through to serve’. Immediately it shifts their mindset and they’re more willing to put the customer first." 

Kim and Mauborgne’s tipping-point leadership was then employed as an implementation mechanism for all this, because it allows a company to achieve substantial change fast with limited costs. Ainley says: "Activity builds momentum, and that momentum gradually tips you into a different way of doing things. It’s not a traditional project management approach. It’s more about keeping at the message, looking for your kingpins and getting them to talk to someone else. Over a period of time, the organisation will tip into a different way of doing things." 

He adds:"There’s a danger that it sounds like we’ve moved to some sort of anarchic system, so it’s really important that you have discipline in the way you implement it."

Among the changes have been substantial amendments to key performance indicators. For example, one was related to how much time employees spent on the telephone – that has now changed to what they do to satisfy the customer. Similarly, the dress code in certain areas has gone. As Ainley says: "These guys are on the telephone: they’re not facing up to customers."

Another issue related to disjointed middle management. Research pointed to a big gap between the executive directors and the next tier down: they did not feel empowered or that what they did made a difference. The answer was to ask two of these managers to each put a team together and report back to a conference with their proposals – many of which were taken up. 

Of course, the path Norwich Union has taken – to become a service provider with the most powerful retail brand in insurance – can only work if the shareholders are satisfied that its core activity is being done properly. 

"To do that, you have to be the most cost-effective, best quality provider," says Snowball. To help achieve that aim, some 600 people have been taken out of the organisation (approximately 60 of them from HR). "It saved us £50 million a year. But if you try to do ‘care’ and ‘leadership’ and take that number of people out, it’s not easy." 

Not easy, but service levels and customer satisfaction levels within Norwich Union insurance have never been higher, the firm has posted big profits and there has also been a significant reduction in staff turnover – the Norwich call centre has seen resignation rates fall from 42 per cent to 11 per cent. All of which shows the value of employing strategic people management. 

As Kim and Mauborgne say: "What people can and want to do are very underestimated capabilities. Another is HR’s ability to unlock it."

ARE YOU STRATEGIC?

Worryingly, Insead academic W Chan Kim says that Norwich Union Insurance HR director John Ainley is in a minority among the ranks of senior personnel people. Worrying because, according to Kim, who has worked with the senior management teams from many UK companies, it is far from common to find a strategic HR director. "In my experience, the CEO normally does strategy and HR is the execution arm," Kim says. "You hire and fire – you just get it done. So John Ainley is distinctive. From the beginning, he has moved the concept of strategy as well as being involved in the execution of it." But ask Ainley whether he considers himself unusual as a strategic HR director and he is surprised by the question. "I have always believed and worked on the premise that HR is a core part of any business and I would expect to be involved in strategy. If I was not, I would work somewhere else," he says. He does concede, however, that Kim’s comments are cause for concern. "I wonder if there is an expectation issue here for HR people," Ainley says. "If they are concentrating on the delivery of just an HR service, then they are carrying out only a part of the role – and if you stick to your silo, you’ll get stuck in your silo."  But how do you involve yourself in strategy? "If you are not a natural part of the strategy process, then insert yourself into it; be assertive, show what you have to offer," Ainley says. "If you add value, no one is going to turn you away."  Kim’s Insead colleague Renée Mauborgne elaborates. It is about asking the right questions, she says. "Do you know what your business competes on?"she asks. "Who are the key people that should be involved in strategic change? Are you telling your manager about the key negative obstacles that impede your business? HR directors are well positioned to have insights on these issues, but they too often fall silent here. They shouldn’t." Ainley agrees. "HR directors should be asking these questions, because they’re not asked often enough,"he says. "For example, do we know what our customers really experience, rather than what the research tells us? Do we know what makes our business effective and what we would, frankly, be better off without? Who are the few key people in our business who, if asked to create, would deliver real value?" It would seem that many HR directors are failing to do justice to the position, and Ainley, for one, is in no mood to make allowances. "If you don’t involve yourself in strategy as an HR director, you don’t deserve to be an HR director," he says.

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