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1 | 2013

®
The Magazine of WorldatWork©

A Business
Transformation
in India Led by
Human Resources
For companies in the service sector, the regulatory environment led to
Human resources the core value to the business is significant losses. Shareholder pres-
helped one provided by employees. Likewise, sure mounted and the board tasked
company employee cost is the greatest expense, management to develop a strategy
successfully commonly ranging from 60 percent that would transform the business.
to 70 percent of all costs in service The private-sector Indian life insur-
transform itself sector companies. These compa- ance industry shrank by 26 percent,
during tumultuous nies provide a perfect opportunity as measured by first-year premiums,
times for the Indian for human resources to help the during 2010-2011 with more than
life insurance company reach its business objec- 44,000 employees losing their jobs.
tives. This article provides a case
industry. study of programs that produced the Background
successful business transformation of Before 2000, India had only one
Rajiv Burman,
Change2Succeed a service company. insurer, which was publicly owned.
Max New York Life, a joint venture After deregulation, the market
of New York Life and the Max exploded and by 2010, 23 private
Group, is a leading Indian busi- insurers operated in India. The
ness group that needed to develop number of life policies in force
a new business strategy in 2011 to increased nearly 12-fold between
save the company. After 10 years of 2000 and 2010 and health insurance
rapid growth, large-scale changes in policies nearly 25-fold. Factors like

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The industry shrank by 26 percent
in response to the new regulations
because the massive size and cost base became unprofitable.
Agents left in hundreds as commissions were capped,
leading to falling sales and more cost cutting.

better terms, availability of a wide But this was a turning point, not selling traditional long-term insurance
variety of products and government an end. A 2011 McKinsey study said: products to a more affluent customer
incentives boosted the growth of the “The Indian life insurance industry segment (family income of at least
industry. India has the largest in- is at a unique point in its evolution. $10,000 a year) and reducing the cost
force policies in the world. From Since the introduction of significant base to improve margins. This led the
2000 to 2010, the number of regulatory changes in September 2010, company to shrink from more than
employees in the sector grew by there has been a marked slowdown 11,000 to more than 7,200 employees
131 percent (123,000 to 285,000) and in the industry. However, over the and shut down more than 400 sales
number of agents by 306 percent medium to long term, the growth offices in locations with small popula-
(714,000 to 2.9 million). prospects of the industry remain tions of affluent customers. But more
In 2010, the government introduced attractive, with India likely to remain important, it required the company
regulations that changed the product one of the fastest growing major life to become more customer-focused,
and profitability landscape. These insurance markets globally. India is use a need-based selling approach
regulations, enacted to save the long- expected to grow at double digits and reduce the sales employee
term interests of the industry and and account for 10 percent of the turnover and costs.
consumers, curtailed the practices incremental growth in global life This organizationwide transformation
of selling insurance as an investment insurance premiums. Between 2010 has shown success, and MNYL
and tax-saving vehicle. Low persis- and 2015, the Indian life insurance exceeded its 2011 business plan by
tency of first-time customers was industry’s gross written premiums beating its own and industry estimates.
widespread because of high-pressure (GWPs) are forecast to grow at a rate It exceeded its profit target in 2011.
sales and unrealistic investment between 13 percent and 14 percent to As part of the business strategic
growth expectations. The industry reach a total of about $110 billion by redesign, human resources led the
shrank by 26 percent in response 2015. Given this outlook, India will review of the changes needed in
to the new regulations because the continue to be an important market the people strategy. This article
massive size and cost base became for global players in their pursuit for focuses on the people strategy for the
unprofitable. Agents left in hundreds growth. Besides growth, the industry agency development manager (ADM)
as commissions were capped, leading will need to focus on two important or sales manager.
to falling sales and more cost cutting. objectives: providing long-term The ADM function in life insurance
A vicious cycle was in play until savings and protection, and driving is the most critical revenue-generating
equilibrium was reached. Sales profitability through sustainable front-line role. Each ADM hires, trains,
offices were slimmed down and business models.” coaches and manages agents who sell
layoffs were widespread. More than insurance to consumers. The ideal
44,000 employee jobs and 551,000 Max New York Life’s standard is that each sales manager
agent roles were eliminated. The People Strategy hires one or two agents per month.
employee impact proved even Starting in early 2011, Max New York Over the average tenure of five years, a
larger as companies focused on Life (MNYL) began a massive change successful ADM develops and manages
hiring higher-skilled, more expe- to ensure implementation of a more an effective team of 40 to 45 active
rienced sales staff and agents to sustainable business strategy. That agents. The ADM role became more
replace existing staff. new business strategy focused on important as MNYL lost more than

58  | workspan  january 2013


30,000 agents between 2010 and 2011. But the challenge was immense. The products. The need to broaden the
Adding agents and ensuring that they average acceptance rate at MNYL was market was driven by a review of exit
are active is a crucial metric, with the one for every nine candidates who interviews. Departing ADMs said they
board periodically reviewing agent entered the first part of the process — were able to find much easier jobs
man-months. To reinforce the metric’s a numerical aptitude test. Since MNYL in other industries.
importance, agent man-months is was testing candidates prescreened The sales commission program
one of the factors in determining the by recruitment consultants, the real was altered to provide for a much
management bonus pool. acceptance rate of candidates sourced higher payout for selling tradi-
Four key elements were identified by consultants was even lower. To hire tional life insurance products
based on an assessment of the barriers 2,000 managers, about 20,000 candi- rather than the investment-linked
and enablers to success for the new dates had to be processed by MNYL. products, having a higher level of
ADM. For the new sales strategy of And, the consultants had to reach out persistency and a larger ticket size.
targeting affluent customers and to more than 200,000 aspirants. It On target, a sales manager could
focusing on customer needs, MNYL became a significant challenge to find earn 100 percent of base salary as
needed to change the candidate candidates who met the ideal profile commission. Finally, the commission
profile of an ADM as well as the in an industry that has become unat- program was uncapped to allow for
training, compensation and employee tractive because of major reduction in significant earning potential.
value proposition for that position. force and lower earnings.
Besides identifying multiple recruit- Employee Turnover
Profile ment consultants in each city and The high ADM employee turnover
An ideal candidate profile was training and working with them, of 85 percent was a significant
determined for the new environment. other initiatives were launched. A barrier to building a trained and
A 40-point scale was developed number of programs and contests skilled workforce. It led to a huge
and screening required a minimum were run for employee referrals, and hiring focus and high recruitment
score. The ideal profile was someone direct hiring was initiated on a large costs for the field HR team with
who was a college graduate, spoke scale. By end of 2011, 45 percent of an accompanying neglect of other
English, was married, owned a all hires were through consultants, objectives, such as employee
motorcycle, had a family income 35 percent through employee referrals engagement and talent management.
of at least $10,000 a year and had and 20 percent through direct hiring. A comprehensive strategy was
worked in sales for five to seven developed to reduce employee turn-
years but not for more than two life Training over. This included designing a new
insurance companies. Each element Selected candidates were taken employee value proposition, hiring
was based on research of what had through an intense eight-week the right candidate and following
worked in the past. For example: training program, which was much tactical turnover management.
❙❙ In a socially stratified society such longer and detailed than previous ❙❙ Employee value proposition. A
as in India, it is easier to target programs. The new program complete assessment of the role was
customers if the sales manager emphasized training employees on carried out and all aspects were
belongs to the same social group. assessing needs of the customers and reviewed. These included compensa-
❙❙ Marriage provided stability and providing them a product solution tion, role, environment, growth and
turnover for married employees was that met those needs. manager. Based on the review of
lower than for unmarried employees. Customer feedback on the quality of past exit data and focus groups with
The new hiring process and selec- sales managers and their knowledge current employees and potential
tion criteria were finalized and improved. By the end of 2011, MNYL employees, the new strategy was to
rolled out across all offices. Effective had one of the best ratings on the emphasize MNYL as a sales career
communication was critical with more quality of sales managers among company known for its training.
than 200 MNYL offices across the all private carriers. In addition, an assessment center
country. Bringing all field HR and review of the managerial skill
office manager teams together and Compensation set of office managers (supervi-
rolling out the standardized process The sales manager compensation was sors to the ADMs) was done
enabled a fast and consistent rollout. redesigned with a fixed base salary to weed out poor managers
From March through August 2011, competitive with other industries. and identify training needs.
more than 2,000 ADMs were hired. It Instead of focusing on just the life ❙❙ Hiring the right candidate. An
may seem that in a country as popu- insurance market, base salaries were ADM or sales manager role in life
lous as India it would be easy to find targeted against other industries, such insurance is tough. Experience has
candidates who matched the profile. as pharmaceuticals and consumer shown that even highly successful

january 2013  workspan | 59


The changes made at MNYL to the candidate profile
of sales managers, their training, compensation and
the employee value proposition
led to a seismic shift.

sales candidates from other relationship with Axis bank enabled ratio. The customer complaints
industries find the sector difficult. business success. By the end of 2011, incidence ratio was just 0.28 per
Because employee turnover was the company had achieved or exceeded thousand as of Dec. 31, 2011.
the highest during the first three its targets on metrics, including: ❙❙ Costs totaling $20 million were
months of joining, it pointed to ❙❙ A positive shift to long-term savings eliminated from the business. Cost
lack of fit with the job. To provide protection products being sold ratio improved from 42 percent
a better understanding of what by agents. In 2011, the propor- to 38 percent because of the
the job entailed than just what job tion of traditional products to impact of cost management initia-
descriptions and interviews could overall sales was 65 percent versus tives taken during the year.
offer, the candidates were asked to the previous year of 25 percent. ❙❙ The company’s conservation ratio,
demonstrate what a typical sales This increase in sum assured by which is among the highest at
employee would do. Part of the 2 percent is an outcome of the 81 percent, is testimony to its
hiring process was to have the short- company’s enhanced focus on commitment toward customers. The
listed candidate develop a list of long-term savings and protection. 13th month persistency at 74 percent
20 potential customers by sourcing ❙❙ The company became more profit- is among the best in the industry.
them through his/her network. able and significantly exceeded The new HR strategy was critical
❙❙ Short-term tactics. A number of its target. The company recorded in ensuring the business success
short-term solutions was devel- 8 percent growth in gross revenue and helped define the value that
oped to counter the multiple job to 44.70 billion rupees while human resources can provide to
opportunities available in the the profit increased 18 times to the business. By being part of the
market to trained sales managers. 5.72 billion rupees compared with business strategy design and
Retention programs with deferred the previous period. The company implementation, human resources
bonuses, quarterly contests, tenure- also performed well on other param- can redefine its role from a support
and performance-linked awards, eters like asset under management function to a front-line function. 
including higher education, such recording a growth of 18 percent to
as nomination to a company-paid 153.57 billion rupees over the same Rajiv Burman is the owner of Change2Succeed
MBA program, were offered. period in FY 2010 while solvency in Toronto, Canada. He can be reached at
Turnover fell to 63 percent by the margin increased to 539 percent. burman7@yahoo.ca.
end of 2011. ❙❙ ADM turnover fell from 85 percent
to 63 percent. Although still high,
Conclusion the reduction has been critical in
The changes made at MNYL to the ensuring that ADMs can succeed
resources plus
candidate profile of sales managers, in their roles and have attrac-
For more information, books and
their training, compensation and the tive careers in life insurance. education related to this topic, log on to
employee value proposition led to a ❙❙ Customer satisfaction improved and www.worldatwork.org and use any or all of
these keywords:
seismic shift. This and other initiatives MNYL achieved the lowest level
for improving productivity, reducing of customer complaints. Max New ❙❙ Employee turnover

costs and building on the multidis- York Life has now one of the lowest ❙❙ Employee engagement
❙❙ Employee retention.
tribution channels including the new customer complaints incidence

60  | workspan  january 2013