Knowledge Center: Publication
The virtue of challenging conventional wisdom4/10/2018 Brian Klapper
All organizations have their own lore. That’s often a good quality—for example, when an experienced employee passes along a company’s best practices to a new staffer. Sometimes, however, organizations carry on doing things only because that’s the way they’ve always been done. No one can quite remember why, and no one bothers to ask.
Making changes in an organization may be as straightforward as posing the obvious question: Why are we doing that? It’s a question that doesn’t get asked enough. The following case study, adapted from a real-world example, shows how a frontline team inspired a big change in a company’s operations by questioning the conventional wisdom.
The CEO of a Fortune 500 insurance company worried that his company was not well positioned to compete with nontraditional, Silicon Valley–style attackers. This highly regarded firm was financially conservative, an approach that had served it well for decades. As befitting such a company, it moved slowly.
The CEO decided, however, that speed was critical to success in the future. He asked, “How do we become faster across all our lines of business?” This meant, for example, making quicker decisions and speeding up product launches. To enable these changes, he sought to build a culture of distributed leadership, where decisions were pushed down to those closest to the customer. And he wanted the company to take more risks. “Historically, we have taken three shots and scored three times,” he said. “We want to be thought of more as an organization that takes ten shots and scores seven times.”
The CEO had tried for a few years to move the organization in this direction. He communicated the goals at town halls and on the employee website. But the message never seemed to stick. “It seems as though, whenever I mention it, the employee base seems to really love it; it’s intuitive, and they gravitate toward it,” he said. “Why do you think we’re having such a difficult time getting it implemented?”
At one point, a light bulb went off for the CEO: a shift in mind-set and corporate culture was required. “We need to change not just the hearts and minds of people in our workforce,” he realized, “but also the way in which they work. Otherwise, it’s just talk.”
To that end, the company undertook many projects aimed at speeding up company processes, ranging from rethinking the underwriting process to closing the accounting books more quickly to building more flexibility into the timing of the declaration of its quarterly dividend. Another initiative focused on improving specific parts of the customer experience.
One project that illustrates the paralyzing role of conventional wisdom in an organization dealt with overhauling the firm’s qualified domestic relations order (QDRO) process. This task involved holding money for a couple after a divorce and then dividing the assets according to the agreement between the pair and sending funds to each party. This is not a pleasant time in most people’s lives, and the parties involved of course would like to be done with the process as soon as possible.
The process of receiving a couple’s paperwork, setting up an account, finalizing the details, and sending the money took 100 to 150 days, depending on the type of investment vehicle. This lengthy delay prompted a huge number of inquiries to the company’s call center, with dissatisfied, disgruntled former spouses calling up and asking, time and again, “Where’s my money?” The company also had to write letters to customers updating them on the payment status, given the extensive delays they experienced.
The company understood that something had to change. At first, executives aimed to cut the time to do the work by 40% and the amount of labor by 30%. But when the five-person frontline team—mainly benefits staff and actuaries—assembled by the company looked more closely at the issue, it concluded that the cuts weren’t enough. “Say the process takes 100 days,” one team member said. “Cutting 40% still leaves us with a 60-day process. These people want their money. Why are we holding it for 60 days? It simply doesn’t make sense. We’re still getting calls to the call center after day 30. We still have to send letters every 30 days. Why can’t we make this a 24-hour-turnaround project?”
To start, the team focused on the 103 days required to process and divide the proceeds of a defined-contribution pension plan. What it found was mind-boggling. The actual amount of labor required to process a QDRO was just 6.25 hours. The team members were told that 85 of the 103 days were due to a state statutory waiting period. So they asked the compliance department to confirm the 85-day requirement.
In fact, there was no such regulation. Where did this information come from? Research determined that, 40 years before, the company had made an error in a pension split that cost it $5,000. So managers created a waiting period to make sure they would never distribute the assets without the ability to get money back in case of an error. As it turned out, the company had made no such mistake in the intervening 40 years. The 85-day waiting period was nothing but a misunderstood—and unchallenged—bit of corporate lore.
Once the team made this determination, it quickly jettisoned the 85-day waiting period and turned its attention to the sources of the 18 remaining days of delay. It found that these involved lack of prioritization, poor scheduling, and too many hands involved in the work.
The team decided to experiment with the next set of defined-contribution QDROs the company received. Team members would try to turn around the work in 24 hours based on a new process they had devised. Besides junking the 85-day holding period, they found additional time savings in paperwork preparation; reviews for process completeness; whether and when the assets were legally available for release; and notifying the parties that the funds were ready for release. When it came down to it, the team found that it could process a QDRO in less than a day, at which point the money could make its way to the beneficiaries as a check or a wire transfer.
In conclusion, the team cut the cycle time for the defined-contribution benefit by 99% (103 days to less than 1 day). It found it could reduce the amount of labor required to process a QDRO by 60%, from 6.25 hours to 2.5 hours. As a result, the company could do the same volume of work with half the number of people. But the company was growing, so it was able to process twice as much work with the same staff size.
The team accomplished these results in two weeks. Most companies can improve the efficiency of a process by 15–20% without much struggle. By challenging the way people think about things, however, big breakthroughs become possible, as this insurance company found. And there is no shortage of “85-day conventional wisdom” hurdles to overcome in the business world.
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