2019 Policyowners' Examining Committee Report
2019 Policyowners' Examining Committee report
Northwestern Mutual has always put our policyowners first. As your company, it is critical that we deliver strong performance today while also transforming to meet the needs of clients both now and in the future.
Through our trusted advisors, personalized planning process, and leading products, we help our clients live their dreams today and beyond. To deliver on this, we have to continually transform the experience we provide while maintaining the financial strength and superior product value that have served us well for generations.
Since 1907, a group of policyowners has been given unrestricted access to the company to independently evaluate its operations, management and strategic plans. Each year, the committee's findings are reported to senior leadership and the Board of Trustees. This is the 2019 POEC's complete report.
It has been an extraordinary experience serving on the 2019 Policyowner Examining Committee. The company has long made transparency a hallmark of its culture and we appreciate the openness and candidness of its people. We are encouraged by the company's steady commitment to its compelling and long-term values—mutuality, financial strength, exceptional products, exclusive distribution and quality leadership. We also commend the company's leaders for pursuing an aggressive transformation agenda even when things are going well for the business, embodying their commitment to always putting clients' interests first and ensuring the long-term success and vitality of the company.
Of note, the company has clearly made progress since the last Policyowner Examining Committee meeting. We saw a senior management team that appears to have gelled in the face of change, engaged middle management, and a good mix of long-tenured leaders with deep company knowledge and newer leaders bringing fresh, outside perspective. A team of leaders has now become a Leadership Team. We also saw real advancement with North Star, which is the company's ambitious program to transform the client experience. It includes an integrated vision for the digital planning experience over the whole customer life cycle, and also integrates the client, field and home office experiences. Comprehensive change of this magnitude requires continued focus on people and culture strategy, and we believe that will require the leadership team to consider new strategies to engage the organization. Step-change will not occur overnight, but the leadership team appears to have a well-considered go-forward plan that will result in its goal of a performance-based culture.
Key areas of focus
While the company is well-positioned relative to competition, we see six areas for further focus and emphasis to accelerate the company's transformation:
Transformation structure and communications
While North Star remains an essential element of the future business strategy, there are other major transformational programs underway that appear to be equally as vital for the company's success. These areas include technology and data modernization, distribution, and people and culture. While each enables the success of North Star, these are also major transformational programs in their own right and are critical to the company's progress. We suggest framing each of these major transformations in one schematic and plan to more clearly define work efforts, identify interdependencies and help foster clear, compelling organizational communication and engagement.
In addition, other innovative ideas, outside of North Star, should be pursued in parallel with the same rigor and enthusiasm. As an example, the company could consider partnerships with complementary financial service firms providing ancillary products and services. Northwestern Mutual exists for the benefit of its clients; we believe the company can play a valuable role as a catalyst in bringing together partners that are relevant for the client.
While there are multiple transformation efforts underway, we believe none are more important than distribution. We urge the company to think boldly and act swiftly regarding its exclusive distribution model. This model, in which the company's products are sold exclusively through its own representatives, is a foundational pillar of the company. Yet, we are seeing some signs of challenges. In order to deliver on the company's aspirational goals, the distribution strategy must shift from incremental improvements to transformational change, and we believe this can be done within the current exclusive distribution framework. The committee submits the following thought starters for the leadership's consideration: 1) set an ambitious goal to improve under 5 year financial representative retention; 2) establish national training for financial representatives; 3) create a segmented brand strategy to serve different ethnicities and cultures; 4) attract and deepen bonds with the intergenerational customer base; and 5) expand the reach to geographies that are seeing growth in population and affluence, but are underserved by Northwestern Mutual. In addition, the importance of diversity in the field force cannot be overstated. While there are signs of progress, these wins need to be scaled nationally. The keys to remaining relevant for the long term include a sense of urgency, execution at scale, bold and consistent experimentation and continued strong partnership with the field force.
The success or failure of the company's transformational priorities depends on technology. We commend the leadership for balancing the investments in new technology and modernizing legacy technology. "Technology debt" is a tax on all of the company's transformation efforts; therefore, the resolve to modernize existing technology must be unwavering. We also see that the company has a clear opportunity to be thoughtful and intentional in designing and implementing the enterprise architecture for the future, and then approaching legacy modernization in that context.
Data is the modern-day fuel for companies—enabling both growth and a rich, personalized customer experience. It is an asset, the new electricity. We urge leadership to take on enterprise data as a key transformational priority for the company. An enterprise data backbone, which will provide a solid foundation for the data intensive experience-based capabilities that the company aspires to deliver, will be critical for the success of North Star and other major transformation efforts. The installation of the enterprise data backbone should happen in parallel with the rest of the technology infrastructure modernization. It will also be important to identify uses cases for data in partnership with business areas, and then prioritize and implement them.
Productivity and efficiency
Big, transformational change is hard and expensive. The company should redouble its efforts to improve operational efficiencies and unlock savings that can be redirected to transformational initiatives. Along with the innovation and transformational agenda, there needs to be a productivity agenda; a mindset needs to be instilled that being more efficient in running the business is an every-day goal and is everyone's business. The company has successfully executed several cost savings initiatives in the last few years, but we believe these efforts should be done more regularly and consistently across the enterprise.
Future-proofing by regular pressure-tests
We encourage the company's leaders to adopt a more robust and regular process for pressure-testing the assumptions underlying its strategy. This could include formal scenario planning or blue-sky exercises that evaluate a range of rich and imaginative possibilities (both on the upside and the downside). Recognizing that the world around us is changing rapidly (including trends such as the evolving ethnic composition of the American population, a shrinking middle class and newly emerging consumer preferences), we must ensure that Northwestern Mutual will be prepared to serve, and be relevant in, the country of the future decades from now. This pressure-testing should be a regular process that is ingrained into the leadership culture of Northwestern Mutual.
In closing …
We must admit that none of us really understood the magnitude of what is happening at Northwestern Mutual until we saw the transformation close at hand. There has not been a more critical juncture in the company's history than right now, because of the scope and foundational nature of the changes being driven: how customers experience the company; how the field force is hired, trained, incentivized and organized; and wholesale replacement of legacy, non-digital technology and data infrastructure. These are all massive change efforts. Most companies attempt to transform one or two of these areas at the same time, let alone also rethinking people and culture, growth and innovation. We applaud the company for being bold, operating from a position of strength, and undertaking an essential transformation for the long-term success of its policyowners and clients.
Committee Member Bios
Chair of the 2019 Policyowners' Examining Committee and general counsel and chief franchise officer of Mastercard
Executive Vice President of Leadership Development at Succession Institute LLC
Kimberly N. Ellison-Taylor
Executive Director—Finance Thought Leadership—Oracle Cloud Business Group at Oracle Corporation
Former Principal and Global Insurance Leader for Ernst & Young LLP
Vice President of Product Development for Benefits Solutions at Applied Systems
Senior Vice President and Chief Information and Digital Officer of Eli Lilly and Company