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May 21, 2009
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The Robert E. Nolan Company is an operations and technology consulting firm specializing in the insurance industry. For 35 years, we have helped insurance companies redesign processes and apply technology to improve service, quality,
productivity, and costs.

Our staff members are all senior industry experts with 15+ years in the industry. Visit www.renolan.com to download our insurance industry studies, white papers, and client success stories.


A Strategy for Surviving Past Today
By Ben DiSylvester
Chairman

With bad economic news—bankruptcies, bailouts, and shrinking economic output—coming at us every day, it is hard for management to see beyond the next overnight investment placement. Even if an organization has more than enough cash in reserve and no exposure to the toxic investment vehicles that are bringing down hallowed financial institutions, most companies will feel the effects of a potentially deep and long recession. It is infinitely easier to lead and manage in good times than in challenging times like these. However, declining sales and eroded investment income will expose and magnify previously hidden issues. These include: low productivity, average quality, questionable organizational structures, non- value-adding products and services, incorrect pricing, and unnecessarily high costs. In a recessionary environment, previously ignored problems could have an exponentially worse impact on your bottom line.

Most management teams have experience with difficult times. Some tried-and-true approaches, including across-the-board budget cuts and the dreaded staff layoffs, are usually what companies turn to when the going gets tough. These approaches cut expenses, but staff morale, service, and expertise all take a serious hit, as well. And once the pressures ease and the economy improves, the company emerges perhaps a little worse off and less prepared to handle the increased activity.

There is an alternative to this type of decision making. It enables an organization to not only survive the daunting challenges of today but also position itself to thrive when the economic cycle turns and revenue and growth trend upward again. It involves four important action steps, but with just a bit more strategic thinking added:

  1. Reduce expenses wisely. We recently saw this quote: "Invest in success, eliminate failure." This is a useful framework when reducing expenses. Arbitrarily chopping expenses in functions that work in equal percentage as functions that aren't working well does not make sense today. Rather than reducing expenses across the board, work with your people to quickly identify non-value-adding activities in your operations. Think effectiveness in delivering what your customers need and want. What better way to cut expenses than to eliminate what your customers don't want or need from you anyway?

  2. Improve service now. In deep downturns and economic uncertainty, fear grips even the most rational of people. There is a good chance that many of your customers are worried about your company, whether they should be or not. The worst thing that your company could do is to give poor customer service to someone with this mindset. A bad customer service interaction could be the very thing that motivates them to seek another carrier. Nothing will help retain customers (think "revenue") better than consistently knowledgeable and efficient service experiences with your company.

  3. Rationalize the organizational structure. Rare is the executive who hasn't questioned why there are several service centers, or wondered why there are so many people doing what seems to be a simple task in some part of the organization. Now is the time to address and resolve those lingering questions. Rationalizing organization structures streamlines decision making, improves service, and reduces significant unnecessary expenses. Better yet, it positions your organization to respond even faster when the cycle turns upward again.

  4. Communicate frequently. In periods of uncertainty, people look to their leaders for reassurance. Explaining how the company is being affected by these events and what is being done to address them is critically important. The message of "cutting expenses" is one that employees certainly expect to hear, but that message alone is hardly reassuring for the long term. Rather, share with them the vision that by taking the right actions now, the company will be positioned to be even stronger in the future. And don't forget that nothing contributes to good communication (and success) better than actually enlisting your people to participate in all the elements above, with clearly stated goals and guidelines.

You know what needs to be done. It is how you do it that will determine if it just gets you through this difficult time or contributes to the long-term strength of your organization.


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