Mutual of Omaha’s Healthy Preoccupation With Talent

Jack Weekly decided to shake things up at a company-wide management meeting three years ago.

"We've been kind of comfortable," the chairman and CEO of Mutual of Omaha told his assembled attendees. "We've got to change, and be better, and more competitive. To stand still is to die."

Having gotten his audience's attention, Weekly continued, "We will not settle for second best, and we will not tolerate mediocrity in our brand. Everybody's going to be pushing further and harder, so you can't just say, ‘We've always done it that way before.' We need to be the best."

With these words, Mutual of Omaha's chief signaled a new era at one of America's best-known companies. A financially solid insurance and financial services icon, Mutual of Omaha could have coasted on its reputation for years -- perhaps decades. Instead, the company that brought us Marlin Perkins and Wild Kingdom has chosen to tame perhaps the most obstinate beast of them all: effective organizational and cultural change.

A ubiquitous brand name

Mutual of Omaha began as Mutual Benefit Health and Accident Association in 1909. In 1962, it changed its name to Mutual of Omaha. In what turned out to be a marketing coup, it launched Mutual of Omaha's Wild Kingdom, one of the most popular televised nature programs of all time, in 1963. This made the Mutual of Omaha brand name ubiquitous and etched the company name and all that it stood for into the American consciousness.

By the end of the 1990s, however, the company was at a crossroads. Though it had gained widespread name recognition and trust and had billions of dollars in assets, some of the heady momentum generated by years of growth had subsided. There were many reasons for this: competition multiplied as financial institutions entered the market, while legislative threats to insurers loomed; the insurance industry as a whole was taking a public relations beating; and there was a need to strongly communicate the company's direction, both internally and externally.

Mutual's senior management candidly assessed the company's workforce. They found employees to be loyal, ethical, and dedicated. But top executives wondered if the workforce, from the senior management team on down, was ready to take on the challenges of the new marketplace. New direction was needed, and Weekly's words echoed the collective thoughts of the entire management team: "We've got to change, and be better."

They set out to do just that. But where would they start?

Mapping the future

Mutual's management team first defined five key objectives to pursue: growth, customer loyalty, profitability, financial discipline, and an accountable workforce. Then, with these aims in mind, they designed a scorecard that articulated the objectives and defined measures for each. This scorecard was designed so that operating units at all levels with targets and measures could then develop their own scorecards that were in sync with larger corporate goals and objectives. This "cascade" allowed every employee in every division, department, and workgroup to have a "line of sight" back to the overall corporate goals, enabling employees to fully understand how their daily work contributed to the overall mission of the company on all five issues.

Adequate measures were available for growth, customer loyalty, profitability, and financial discipline. But the fifth objective, an accountable workforce, posed a problem.

"The prerequisite for all our corporate objectives is an accountable workforce," says Jane Huerter, Mutual's executive vice president of corporate services and corporate secretary. "As a team, we asked ourselves: ‘How do we measure accountability, and what are the right metrics that will help us focus as an organization?'"

The typical employee survey wouldn't yield the information necessary to prescribe real and actionable change. In fact, Mutual had tried several instruments with little success, and veterans of those failed exercises would probably greet a new round of lengthy questionnaires with little, if any, enthusiasm. And in the end, the findings wouldn't have helped the leaders in the organization get to the root of their most pressing issues.

Three distinct employee groups

As one of Mutual's top executives wrestled with this problem, she had a chance to hear Gallup Organization Chairman and CEO Jim Clifton speak at a Chamber of Commerce meeting in downtown Omaha, Nebraska. The subject of Clifton's address? Gallup's Employee Engagement Index and what Gallup has discovered about engagement by using this tool in many of the world's great organizations.

In his presentation, Clifton shared Gallup's finding that when it comes to engagement, employees generally fall into three groups: "engaged" -- employees who are loyal, productive, and find their work satisfying; "not engaged" -- those who are not psychologically committed to their roles; and "actively disengaged" -- those who are disenchanted with their workplaces.

Clifton noted that most companies have more employees who are either not engaged or actively disengaged than they realize -- and that engagement is measurable and manageable. He also highlighted the strong linkages Gallup researchers have found between the level of employee engagement and important business outcomes such as productivity, profitability, turnover, safety, and customer engagement.

Clifton's message resonated with his audience that day, and specifically with his Mutual of Omaha listener. "The idea that three very distinct groups of employees in any organization could be identified as engaged, not engaged, and actively disengaged was intuitive, and mirrored my own experience," Huerter says. "I have read a lot of management philosophies that are so counterintuitive, and I never felt I could fully embrace any of them. But the notion of engagement really made sense, and we felt it would resonate with our associates."

After hearing about Clifton's address, Weekly observed that, like most companies, Mutual would benefit from knowing the percentage of disengaged employees among their workforce -- and the impact they were making on all aspects of the organization.

Measuring engagement in 2002

Mutual of Omaha conducted its first Gallup Q¹² administration in 2002. The process really began months before, with the selection of 100 change leaders throughout the organization. Those leaders spread the word and taught teams about the importance of the survey's 12 items, the action-planning process that would follow the survey administration, and how best to manage and interpret the results. (See "Feedback for Real" in See Also.)

After the Q¹² was first administered, each manager received a report of the results. Managers then met with their teams to develop action plans based on the results. This process increased the buy-in from employees and helped them "own" the actions to be undertaken by the team.

For Mutual's senior management, the first Q¹² administration brought good and bad news. On the positive side, the response rate in this first administration was a quite respectable 89%, despite some initial skepticism among employees (mainly attributable to previous employee satisfaction studies that yielded little, if any, real change). The bad news was that Weekly's hypothesis was correct -- engagement levels at the company were 14% below the national average.

Mutual soon learned that these engagement results had a significant link to outcomes that mattered. For example, teams in the top quartile of performance on Gallup's Q¹² were found to have operated at 6% below their projected annual operating costs. Teams in the lowest quartile were almost 1% above theirs. In a company the size of Mutual of Omaha, this difference amounts to millions of dollars.

Also, the results identified a correlation between disengagement and time off work. Simply stated, engaged employees were more likely to report to work. On an annualized basis for the entire Mutual workforce, this difference results in about 6,000 more days of total time off for the not-engaged and actively disengaged workers.

Following up

After the 2002 Q¹² administration, Mutual's management began weaving the Q¹² process and the language of engagement into the everyday work life of its employees; Q¹² became a part of the fabric of the organization. Every team was expected to have an action plan and implement it, and the company tracked and monitored their progress.

The Q¹² process engendered "more communication between the managers and employees," Huerter says. "Just that communication in and of itself makes employees feel engaged, and the impact planning and accountability gave the employees a sense of empowerment."

The communications team developed and distributed a publication to all employees that shared the corporate results for the survey, and then focused on the progress made by various teams in employee publications. Mutual's management began recognizing best-practice workgroups and managers. Mutual also launched "learn at lunch" programs that allowed managers to get together to share ideas and discuss how they were progressing on their Q¹² action plans or how to affect an item that was low. And Q¹² results became part of the overall performance reviews throughout the company.

By 2003, every employee and manager was familiar with the process and was well aware of the concrete and positive outcomes linked to engagement. Team members, managers, and corporate leaders could see the positive impact -- and wanted more.

Measuring engagement in 2003

Next, Mutual's senior management set about to change their corporate culture while raising the percentage of engaged employees throughout the organization.

It wouldn't be easy, because the 2002 Q¹² administration preceded one of the most difficult times in the company's recent history. Mutual had just gotten out of the major-medical insurance business; this move forced the company to take $50 million out of its expense structure while laying off or transferring about 500 jobs to other areas of the company. There was much concern about what would happen to the company's engagement scores.

But instead of lowering their expectations, Mutual's management chose to stay the course, and they were rewarded for their efforts. In 2003:

• The employee response rate increased from 89% to 94%.
• The percentage of engaged employees rose 63%. Mutual's engagement percentage is now 39% above the national average.
• All the company's managers were trained to facilitate discussions about the Q¹² results and carry out their work-unit action plans.

The results were shared with all employees, and an ongoing communication strategy included a best-practices video, frequent articles in employee publications, and endorsement from senior management. These outstanding results signaled that the changes Weekly had been advocating were actually happening. Mutual of Omaha was successfully transforming itself, and the company had the numbers to prove it.

Self-discovery

The Q¹² process also helped Mutual's managers learn a great deal about themselves during those two years. "I care very deeply for my team, but on the first administration, my scores were low on the item ‘My supervisor, or someone at work, seems to care about me as a person,' and I took that personally," says Cathy Thill, information services manager. "I set about to show my team that I actually do care, and now I take a few minutes every day to stop by and talk with them about non-work stuff -- about their lives, their kids, that kind of thing."

Thill adds, "At first I had to get into the habit, but now it's an important part of my day, and I enjoy it very much. Until we took the Q¹², I never would have thought that my actions were giving the wrong signals, and that employees thought that I didn't care about them."

Dan Neary, Mutual's president, says that "the Q¹² has opened our eyes to different areas that weren't a high enough priority in the past." There is now what he calls a "healthy preoccupation" with finding talented people for positions at all levels of the organization.

"The Q¹² process has made a difference," Neary says. "How far we take it and where we go next depends upon developing an even better understanding of what it all means."

The future

Over the past two years, Mutual of Omaha has been focusing on key issues and successfully preparing for the challenges of its second century. It's building an engaged workforce and helping individuals discover their innate talents and strengths.

Currently, Mutual's management is considering the option of studying its customer relationships more deeply -- that is, delving more deeply than typical loyalty and satisfaction studies. "We exist for the benefit, the care, and the needs of the policyholders we serve," Neary says.

Since that dramatic company meeting three years ago, Mutual of Omaha has taken Jack Weekly's words to heart -- and has refused to tolerate mediocrity by settling for second best.

"What we are doing," Neary says, "feels right."