The University of Farmers's award-winning training programs are among the company's best insurance policies.
President and CEO
Farmers Insurance Group
Despite the recession and challenges in the financial sector, Farmers Insurance Group produced strong business results in 2010, and it is one of the largest and healthiest insurers in the United States. Its University of Farmers is the centerpiece of a recent TV ad campaign inspired by the fact that Farmers agents and employees are the best trained in the business.
We spoke with President and CEO Jeff Dailey at the University of Farmers in Agoura Hills, California.
Q| In announcing your appointment as CEO-designee, Farmers Group Board Chairman Paul N. Hopkins mentioned the companys emphasis on talent management and succession planning. He said, Attracting, developing, and promoting the best talent in our industry is part of our organizations proud 83-year history and tradition. What are your views on the role of talent in sustaining the health of the financial sector and driving growth at Farmers?
A| Talent management is vital to our industry and to this company. This is a people business, so our talent management begins with hiring the right people. We look for two traits in particular: empathy for people and a willingness to serve.
If we get the right people, we can develop them in the basics of the business. Our agents represent our products, and they have to be absolutely skilled at delivering service and must have product knowledge. We seek to develop those technical competencies.
If careful talent acquisition is the first leg of the stool, and training and development make up the second, the third leg is leadership capability. We want people who can get things done through others.
Q| The University of Farmers has received many awards, including four Excellence in Practice Awards from ASTD in the categories of technical training, managing change, and performance improvement. These awards are given for practices that produce measurable results. How do you determine the contribution of the learning organization to business results?
A| No matter what the learning metrics are, they dont matter if the business doesnt get better and we dont move forward. The metrics for [Senior Vice President and Chief Learning Officer] Annette Thompson and the entire learning and development team are based on our business results. Are the salespeople more effective? Is our claims organization better at claims? The reason we have a university and the reason we have training and development is to make our people better and to make the business better.
Q| When you look at the business for the next year or two, what metrics are you trying to drive and how is learning tied into that?
A| Our business model demands that we grow the business to invest in it and in our people, so our most important metric is growth. We have three distribution channels: exclusive Farmers agents, independent agents, and the direct distribution channel in which our insurance is sold via the telephone or online. Were focused on being able to grow all of those channels profitably.
To determine if learning and development are contributing to growth, we look at several factors. Can agents effectively interact with customers, create a solution that meets their customers needs, and grow their business in the process?
Our agents are independent contractors, and we cant require them to go through training. That's why we focus so much on results in the sales arena because our ability to move the dial on their business is what makes them fans of the learning environment. The training absolutely has to provide value to their business or they're not going to invest the time and money to go to the University of Farmers. But we frequently hear from the agents how valuable the training is for their businesses.
One of our core values is serving people, so we look at a number of different metrics related to how were performing in terms of service. We use those to determine how the organization is doing, how our agents are serving, and how satisfied our customers are. These metrics can also tell us where were having issues or not having issues with functional transactions.
One other important measure that is tied to learning and development is customer retention. The competitive environment in the insurance industry is brutal right now. When people shop for insurance, they have a choice of hundreds of companies, but only three or four get into whats called their consideration setthe ones they will actually look into. Thats why you're seeing so much advertising by insurance companies.
Q| Farmers's very amusing television commercials and print ads feature the University of Farmers and show agents learning from Professor Nathaniel Burke played by actor J.K. Simmons. Why the decision to highlight the university in your ads?
A| Some people want to shop for insurance online, but the majority would still rather do business with an agent. We believe that Farmers has the best agents because of our award-winning university. So if you want to do business with an agent, ours are the best trained. That's the message of the ad campaign.
We've found that unaided consideration--people putting Farmers on their insurance shopping list without being prompted--has improved since we started running those commercials. We've moved up from one in four to a little bit better than one in three.
Q| You were named CEO-designee in December 2010, but didn't become CEO until January 2012. Throughout 2011 you worked closely with CEO Robert Woudstra learning the CEO job. What does that long period of learning by experience tell us about executive development at Farmers? What changes do you see in the development of successful leaders as a result of your own executive development process?
A| The biggest reason for my early appointment was that Woudstra was beginning to plan his retirement. Because it was known that he was going to retire at the end of 2011, it was important that a successor be designated to get the team lined up before the change. When you have a change you know is going to happen, the faster you can put certainty around it, the easier it is to align people behind it.
An important part of getting people ready for their next jobs is to have a very good succession planning process, which I think we do. It identifies people we think can fill leadership roles and then helps us make sure that their skill gaps can be addressed so they can progress. I am not sure my long transition period will be something we will continue to do in our future succession planning process.
Q| When you're choosing leaders for the company, what do you look for?
A| The most important thing from my perspective is a successful track record. You have to see that people have really been able to get things done. And in this organization, it is less about individual contributions and more about the ability to get things done through groups of people.
I also look for a persons capacity to understand problems. I like to see that people have failed at a couple of things because you want to see how they react in challenging times. It shows how they have been tested under fire and how well they reacted.
Q| How do you develop your team to be innovative and deliver results while not taking some of the dangerous risks that have occurred in the financial services industry? How do you balance the need to drive results in a highly competitive environment with the need to be ethical?
A| Acting unethically is unacceptable for this organization. In our evaluation process we look at two things: what kind of results you get and how you get them. We have 14 competencies that address how we expect people to act on their own and with each other. As you go higher in the organization, thats more important than the results you drive. Thats absolutely a core value of this organization and has been for a long time.
We'll never take any risks on the balance sheet to earn a couple of extra dollars or do anything that would threaten the company. But in terms of running the business on a day-to-day basis, we encourage people to take risks if we understand the nature of the risk and what the downside would be if anything went wrong.
I think this organization took a risk in buying 21st Century Insurance in 2009. At the time, Farmers was an 81-year-old company built on exclusive agents. Buying 21st Century meant we were going to add the capability to sell auto insurance over the telephone and Internet with the appearance we might be competing against some of our own agents. But we did it because the world was changing and we needed to serve people who wanted to shop on the Internet as well as those who preferred to buy through an agent.
We prepared the agents for the change, and we feel we've created synergy between the two organizations. About $200 million a year in business comes to Farmers agents from 21st Century leads.
Q| How do you know leadership development is working?
A| That's complicated. We have a lot of leadership development classes, including a unique one called the Presidential Leadership Program that were sponsoring with the Ronald Reagan Presidential Library, for which we get phenomenal feedback. People who have gone through the course tell us its made them think about themselves differently as leaders and as individuals in their personal lives.
But unless a development class is ineffective, you usually get positive remarks from people coming out of it. So to know if leadership development is working you have to look for long-term results, longer than three months, six months, or nine months. Are we putting the right people into leadership development classes? Are the people weve trained getting into leadership positions? Are they being successful?
I really believe were getting better and better at leadership development, but it will be proven in the years to come by how successful we are as an organization.
Q| What is your role in leadership development?
A| The leadership team and I have a role in setting the culture that we expect out of the organization from a leadership perspective. Probably the most important thing I do is to create an environment where we can develop people into leaders. Ultimately, the people who are going to succeed me will come from that.
Q| How do you know the learning functions work is aligned with the overall goals and strategies of the organization?
A| We have a very laborious planning process for making sure were all aligned. Annettes group supports the things were working on as an organization. She's not evaluated [on the basis of] the University of Farmerss many awards; while that's an added benefit, she's evaluated on how well the business does. If the business is successful, she's going to get well-deserved credit for that.
Q| In the recent past, Farmers received some low scores from service rating agencies for customer service and claims processing. What was learning's role in helping address these issues and how are you determining if they are successful?
A| The first thing we had to do was try to understand why we had those low ratings. We did a lot of work to get customer feedback to understand what works and what doesn't work. Once we understood the problem, Annette's group in learning and development created policies and [training] programs to deal with it.
The main issue was about process. We had some functional silos that were intent on optimizing how well their silos worked. But customers don't experience us as a product department or a billing department; they experience a transaction.
We needed to flip the silos horizontally and figure out the process that delivers the value the customer is expecting. Thinking about process orientation is a big change for the organization, and learning has a big hand in helping make this happen.
If we diagnosed the problem correctly and the scores continued to be low, I'm not rewarded, nor is Annette. There are lots of reasons why scores may not get better and they may or may not be related to training, but we still have to determine whether the training is effective.
But at the end of the day, we have training and development and we have the university to make the business better. And that's how Annette and her team are rewarded and evaluated.
Q| How did the recession affect the company's investment in the University of Farmers?
A| Really, not at allbut it did make the business harder. The recession made people a lot more price conscious and that made market growth slower. The only way we win right now is by taking market share away from our competitors and vice versa. When things like the recession happen, we've just got to get better. So we didn't change our investment in the university one bit. We used it to continue to get better.
Jeff Dailey was interviewed by Tony Bingham and Pat Galagan.
Photograph by Mark Robert Halper