who is the redheaded stepchild of allstate's Distribution system?

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feature One Heckuva Job, Mr. Wilson By Jim and Nancy Fish company has aggressively terminated, or threatened to terminate, thousands of Allstate agents for their failure to meet company imposed quotas. The number of Allstate agencies across the county has steadily declined. Agent morale is at an all-time low. • On his watch, the company has suffered an unprecedented decline in standard auto and homeowner policies in force nearly every quarter. This translates into a loss of nearly 1 million standard auto policies and over 1.3 million homeowner policies. • Mr. Wilson has systematically removed and replaced 10 of the 13 senior managers who were in place in 2006. Only one of these replacements was promoted from within and five have no insurance experience. Moreover, he has increased the number of senior level managers, and twice made significant organizational changes at this level. There is a definite lack of continuity. The question is, were these managers inept or is Mr. Wilson just fickle • Mr. Wilson has imposed unpopular changes on employees who handle customer claims, causing unrest and morale issues in that department. • Allstate shares dropped dramatically, and are now trading between 50% and 60% below their pre-2007 levels, a sign of poor leadership and a lack of direction. The New Definition of Corporate Insanity: Doing the same thing over and over again and expecting different results. Tom Wilson charted a course for Allstate in 2007 that has led to disastrous results for the company. Since his appointment to the positions of chairman, president and CEO in 2007, following are the indisputable facts: • Under Mr. Wilson’s direction, the The business of insurance: Product, Platform and Promise Like a broken record, Mr. Wilson sings the same refrain over and over in interviews and presentations. Doubtless, we have all heard him say, “We are doing this for the customer,” or “This change is driven by what customers want.” In reality, these statements are merely convenient smoke screens meant to conceal the real motives behind the proposed changes, 26 — Exclusivefocus Winter 2011/2012
most of which are not customer-centric at all, but rather profit driven. Take agent commissions as an example. For the past few years, the company has stated time and again that their surveys indicate that consumers believe the value of having an agent is worth 8%. This not-so-subtle message, reiterated over and over, was intended to lessen the blow of the commission cut the company knew it would eventually propose. Naturally, consumers want to pay as little as possible and will state as much in a survey, but will our customers really leave us in droves because we earn 10% instead of 8% or 9% Fatal error: When the entire economy took a drastic downturn in 2008, Allstate failed to alter its pre-recession strategy. Consumers cut back, started shopping more and began demanding reductions in prices and/or more for their money. Allstate arrogantly maintained that consumers would gladly pay more for the “brand” and refused to modify their products or its pricing. This stubborn resistance to change in a chaotic market, combined with the ongoing reduction in the sales force, has yielded devastating results. “Putting the customer at the center of all our work” What the customer wants is a good product at a competitive price, backed up by good service and fair treatment at the time of a claim. Like the wheel, this is not a concept that needs to be reinvented. If you focus on the product, the platform and the promise, the rest will take care of itself. A good product at a competitive price: A good product is not about fooling people with gimmicks, it is about providing a policy that does what it should at the time of a claim. And, the price must be competitive. The platform must be fixed: Technology woes at Allstate are probably some of the worst in the industry. Agents, staff and technology vendors who are familiar with the company’s agency technology are in disbelief that a company with the size and reputation of Allstate is in such a state of technological disarray. There is a constant barrage of issues that agents and customers must contend with on a daily basis. From the system frequently going down to policies renewing with missing discounts or incorrect surcharges, agents and staff are forced to spend countless hours in limbo or fixing errors. If everything is about what the customer wants, the technology platform must perform. “ Wilson and his senior advisors have ignored many of the macro issues and focused instead on micro issues. “ The promise: The Allstate claim experience should be fast and painless. The best advertising is when customers boast how fast and fair their Allstate claim experience was. Our claim partners are a key asset for the company and should be treated accordingly. They deliver the promise every day to our customers, yet they are being overloaded with work they can’t complete unless they cut corners. Unhappy employees will never equate to happy customers, a fact that seems lost on Mr. Wilson. The fact is, since 2008, Allstate has ranked well below average in the JD Power Auto Claims Satisfaction Study. This workload and morale problem in the claims department must be fixed immediately. Who’s steering the ship There are currently 15 senior level mangers listed at allstate.com. Only two have been with the company more than 10 years. The average tenure of the rest of this team is 3.4 years. Ten senior level managers have been appointed by Mr. Wilson since 2007. Tom Wilson seems proud of the fact that 60% of his leadership team is new to Allstate. This group has an average of 1.5 years of Allstate experience – is this something to boast about When an 80-yearold company flourishes for 75 years and then stumbles because it has strayed too far off-course, it is time to get back to basics. It is not a time to experiment with the composition of your management team, especially if they lack both Allstate experience and industry experience. Yet that is exactly what Mr. Wilson has done, causing the loss of more than two million policies and no prospect for improving results any time soon. Out with the old, in with the new: Mr. Wilson seems to have a penchant for eliminating the most experienced people at Allstate. Like Sherman’s March to the Sea, Wilson has laid waste to anyone he believes is standing in his way. The casualties include top tier leaders like George Ruebenson, Joe Richardson and, of course, Joe Lacher, as well as thousands of dedicated, experienced Allstate agents. As he picks off his loyal and most experienced generals, he follows the same process with his most experienced troops, as if they are all somehow responsible for the downward spiral of the company. What rational commanding officer would take out his best regiment in the middle of a battle and attempt to create a new army with untested leaders and untrained troops For four years running, Mr. Wilson has been terminating experienced Allstate agents while simultaneously attempting to replace them with greenhorns, many of whom have no previous insurance experience. This is not meant to be disrespectful to new agents; it is only intended to question the wisdom of Mr. Wilson’s flawed strategy. Additionally, the company seems to have a fetish for micromanaging agency operations, and it has increased exponentially. Rewards for retention and profitability have been eliminated and have been replaced with EB, ALI, and woople. Conflicting programs and objectives have resulted in agents receiving congratulations for attaining Premiere Service Agency (PSA) status one day, and a contract termination letter the next. You’re not the only one who’s confused: The company has done a good job of hiding these conflicting hiring/ firing practices. As recently as the third quarter earnings call, Ian Gutterman of Winter 2011/2012 Exclusivefocus — 27
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