Corporate Culture September 25, 2018 James J

September 23-26, 2018 CORPORATE CULTURE SEPTEMBER 25, 2018 JAMES J. KENNEDY, CPCU

your asset 24/7/365 ultimate or invisible strategic liability? asset weapon corporate culture

2018 NAMIC Annual Convention - Kennedy Page 1 of 71 our journey

1. intro to culture

9. summary 2. what is culture

8. management 3. financial impact culture

7. board accountability 4. winning culture

6. refining 5. dysfunctional culture

questions

Small Company CEO Control Bad Management Why does this even matter to How can a CEO control the How much is just bad a small company with only a culture when so much is management? few employees? driven by the employees?

2018 NAMIC Annual Convention - Kennedy Page 2 of 71 Intro to culture 1

your asset 24/7/365 ultimate or invisible strategic liability? asset weapon corporate culture

2018 NAMIC Annual Convention - Kennedy Page 3 of 71 “You“You nevernever getget aa secondsecond chancechance toto makemake aa goodgood firstfirst impression”impression” will rogers ~ will rogers

2018 NAMIC Annual Convention - Kennedy Page 4 of 71 2018 NAMIC Annual Convention - Kennedy Page 5 of 71 first impressions

first impressions

2018 NAMIC Annual Convention - Kennedy Page 6 of 71 corporate culture It exists – and pervades all aspects of organizational life. You cannot see the….

X-ray

Music

Smell

Taste

…yet, you don’t doubt they exist!

building blocks of organization success

why exist culture future view

purpose vision

culture success culture

mission values culture today’s view how to behave

2018 NAMIC Annual Convention - Kennedy Page 7 of 71 what is culture? ? 2 ?

culture multiple definitions

Comes from social anthropology and the term represents the qualities of any specific human group that are passed from one generation to the next. Standard The totality of socially transmitted behavior patterns, arts, beliefs, institutions, and all other products of human work and thought characteristic of a community or population. Dictionary Corporate culture is the amalgamation of values, vision, mission, and the day-to-day aspects of communication, interaction, and operational goals that create the organizational atmosphere that pervades the way people work. Corporate The set of shared, taken-for-granted implicit assumptions that a group holds that determines how it perceives, thinks about, and reacts to its various environments Academic

2018 NAMIC Annual Convention - Kennedy Page 8 of 71 Cultural norms It shapes attitudes define what is Culture is the tacit and behaviors in encouraged, social order of an wide-ranging and discouraged, organization. durable ways. accepted, or rejected within a group. corporate culture

“The Culture Factor” - Harvard Business Review – January /February 2018 Boris Groysberg, Jeremiah Lee, Jesse Price, J. Yo-Jud Cheng

Why Company Culture is So Important?

Organizational culture refers to the general internal atmosphere cultivated by a company…and it is often driven by their corporate mission and values.

2018 NAMIC Annual Convention - Kennedy Page 9 of 71 culture vs. brand

culture Culture is how you take care of your internal customers - your employees.

brand Your brand is your reputation. You cannot say what your brand is - your customers say what your brand is.

What is Corporate Culture?

Can be thought of as a “company’s personality”

Good cultural DNA = a well managed company

A key strategic asset

2018 NAMIC Annual Convention - Kennedy Page 10 of 71 survey says!!!

82% 10%

Believe that Believe they had the culture is a 7,000 Executives Participated right culture in competitive their advantage organizations

“Purposely develop a culture”

“A company’s culture is either created organically or through deliberate and consistent planning and action. Like a lawn, if you just “let it happen”, it will be mostly weeds and not very pretty. To have a lawn that is the envy of the neighborhood, however, takes a lot of time, effort and purposeful planning. Douglas Fincannon Great companies not only develop a culture that makes it a President and CEO great place to work, but they purposely develop a culture that Alamance Farmers Mutual Insurance Company provides a strategic advantage over its competition.” Graham, North Carolina

2018 NAMIC Annual Convention - Kennedy Page 11 of 71 human and chimpanzee DNA very similar, yet that 2% difference is huge

2018 NAMIC Annual Convention - Kennedy Page 12 of 71 “very few have been able to emulate”

“Looking back, developing our corporate culture was like working a puzzle and putting the pieces in one at a time which sounds simple enough. However, experience has taught me that it takes much more than just a written document to change the corporate culture. This has been evident by the 18 to 20 insurance Art Meadows companies who have visited our office over the years with the President/CEO thought of emulating what we achieved. I’m sure many good Panhandle Farmers Mutual Insurance takeaways have occurred for those companies but very few have Moundsville, WV been able to successfully emulate what we have built.”

pure joy!

no culture is organizational “glue” politics Helps people come together with a common purpose and values. alignment

Creates a sense of “team” throughout

more the company. results

2018 NAMIC Annual Convention - Kennedy Page 13 of 71 “Our work suggests that culture can be managed. The first and most important “the culture step leaders can take to maximize its value and minimize its risks is to factor” become fully aware of how it works.”

Harvard Business Review – January / February 2018 Boris Groysberg, Jeremiah Lee, Jesse Price, J. Yo-Jud Cheng

2018 NAMIC Annual Convention - Kennedy Page 14 of 71 “the culture factor” Harvard Business Review – January /February 2018 Boris Groysberg, Jeremiah Lee, Jesse Price, J. Yo-Jud Cheng

Culture is a group phenomenon – it cannot exist solely within a single shared Culture permeates multiple levels person. and applies very broadly in an It resides in shared behaviors, values, organization. and assumptions and is most commonly It is manifest in collective behaviors, experienced through the norms and physical environments, group expectations of a group rituals, visible symbols, stories, and legends - that is, the unwritten attributes implicit of culture pervasive

People are drawn to organizations An important and often overlooked with characteristics similar to their aspect of culture is that despite its own; organizations are more likely subliminal nature, people are to select individuals who seem to effectively hardwired to recognize enduring “fit in”; and over time those who and respond to it instinctively. don’t fit in tend to leave. It acts as a kind of silent language. So culture becomes a self- reinforcing social pattern

“Culture provides a platform”

”Culture also provides a platform to set up the idea that “this is a great place to work, but only for those who share our values”. At this point, the quality standards are so deeply imbedded at Mutual of Enumclaw that people who come to work here who don’t share these values quickly Eric Nelson, CPCU, ARP President and CEO self-select or are managed out.” Mutual of Enumclaw Enumclaw, Washington

2018 NAMIC Annual Convention - Kennedy Page 15 of 71 “Culture needs to be protected”

“Culture needs to be protected as one of the organizations most valuable assets. Steadfast commitment to the core values of the culture, address any undermining of the Larry Shaw, CPCU culture immediately, and assist those that work against the President/CEO culture in their “next job” search.” MMG Insurance Company Presque Isle, Maine

key impacts on culture Regardless of organization type, size, industry, or geography, culture is impacted by:

people’s response to reactions change

2018 NAMIC Annual Convention - Kennedy Page 16 of 71 key impacts on culture Regardless of organization type, size, industry, or geography, culture is impacted by:

An organization’s orientation toward people interactions and coordination will fall on a spectrum from highly independent to highly interdependent.

people’s Cultures that lean toward independence place greater value on autonomy, reactions individual action, and competition.

Those that lean toward interdependence emphasize integration, managing relationships, and coordinating group effort.

key impacts on culture Regardless of organization type, size, industry, or geography, culture is impacted by:

While some cultures emphasize stability, others emphasize flexibility, adaptability, and receptiveness to change. Those that favor stability tend to follow response to rules, use control structures such as seniority-based staffing, reinforce hierarchy, and strive for efficiency. change

Those that favor flexibility tend to prioritize innovation, openness, diversity, and a longer-term orientation

11 “The Culture Factor” - Harvard Business Review – January /February 2018 Boris Groysberg, Jeremiah Lee, Jesse Price, J. Yo-Jud Cheng

2018 NAMIC Annual Convention - Kennedy Page 17 of 71 “the culture factor”

“By applying this fundamental insight about the dimensions of people interactions and response to change, we have identified eight styles that apply to both organizational cultures and individual leaders.”

8 culture styles

No style Plus, while better than one style another – all may be depends on dominant, it organization likely will be type, size, a blend of

industry, purpose order caring safety results enjoyment learning authority styles geography, present. etc. caring purpose learning enjoyment results authority safety order

2018 NAMIC Annual Convention - Kennedy Page 18 of 71 elements of each culture style

STYLE EMPLOYEE IMPACT WORK ENVIRONMENT Caring United by loyalty Warm, collaborative, and welcoming places where Leaders emphasize sincerity, people help and support teamwork, and positive one another relationships Purpose United by a focus on Tolerant, compassionate sustainability and global places where people try to communities do good for the long-term future Leaders emphasize shared ideals

elements of each culture style

STYLE EMPLOYEE IMPACT WORK ENVIRONMENT Learning United by curiosity Inventive and open-minded places where people spark Leaders emphasize innovation, new ideas and explore knowledge, and adventure alternatives Enjoyment United by playfulness and Lighthearted places where stimulation people tend to do what makes them happy Leaders emphasize spontaneity and a sense of humor

2018 NAMIC Annual Convention - Kennedy Page 19 of 71 elements of each culture style

STYLE EMPLOYEE IMPACT WORK ENVIRONMENT Results United by a drive for capability and Outcome-oriented and success merit-based places where people aspire to achieve top Leaders emphasize goal performance accomplishment Authority United by strong control Competitive places where people strive to gain Leaders emphasize confidence and personal advantage dominance

elements of each culture style

STYLE EMPLOYEE IMPACT WORK ENVIRONMENT Safety United by a desire to feel protected Predictable places where and anticipate change people are risk-conscious and think things through Leaders emphasize being realistic carefully and planning ahead Order United by cooperation Methodical places where people tend to play by the Leaders emphasize shared rules and want to fit in procedures and time-honored customs

2018 NAMIC Annual Convention - Kennedy Page 20 of 71 measurement So, if culture cannot be seen, it must not be able to be measured --- right?

financial impact $ 3 $

2018 NAMIC Annual Convention - Kennedy Page 21 of 71 “Culture can explain up to half the difference in operating income compared to similar organizations” ~ james heskett

2018 NAMIC Annual Convention - Kennedy Page 22 of 71 culture & performance Kotter & Heskett: Study of 207 firms over an eleven year period as reported in their book Corporate Culture and Performance

11 year change in 166% revenue 682%

74% stock prices 901%

1% net income 756%

2018 NAMIC Annual Convention - Kennedy Page 23 of 71 2018 NAMIC Annual Convention - Kennedy Page 24 of 71 importance of culture

“Studies have shown that failure to properly introduce and assimilate newly hired employees into the new culture is one of the key reasons 55% of them don’t make the grade or voluntarily leave within the first two years.”

•tolerant of stress •competitive •high social •collaborative confidence •empathetic •innovative •socially •willing to take risks adaptable

“The Effect of Company Culture on Brand Image” Susan Gunelius Corporate Eye 9-13-14

2018 NAMIC Annual Convention - Kennedy Page 25 of 71 Apple Engineers Google Engineers 66% Google 56% Apple 59% Apple 52% Google

“The Effect of Company Culture on Brand Image” Susan Gunelius Corporate Eye 9-13-14

create a winning culture 4

2018 NAMIC Annual Convention - Kennedy Page 26 of 71 signs you have a winning culture

clear vision walk the walk embrace culture loyal & engaged Purpose/Vision/Mission/Value Day-to-day practices support Associates share and Associates and customers are s are clearly articulated by the the purpose, vision, mission, embrace the culture loyal and engaged leadership and clearly and values = “walk the walk” understood by the associates

the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values find great people who complement you communicate have fun! invite people to drink the kool-aid work as a team maintain and evolve culture

12345678

2018 NAMIC Annual Convention - Kennedy Page 27 of 71 the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past

• We all have experiences from which we can draw valuable lessons. • Examine the corporate cultures of organizations you worked for previously. • What worked for you in those cultures? What didn’t?

the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values

• This is your business. • You’re driving it, and you need to infuse who you are into what you do. Otherwise, it won’t work. • Think about your personality and, more importantly, your core values.

2018 NAMIC Annual Convention - Kennedy Page 28 of 71 the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values find great people who complement you

• Round out your corporate culture by hiring people who offer different experiences than yours. •Avoid hiring a "mini-me.“ •Identify your strengths and weaknesses, then fill in the gaps

123 8

the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values find great people who complement you communicate • Talk with each other. • People need to be able to share their ideas and speak openly without fear of repercussion. • People want their opinions heard, and they want to feel good.

1234 8

2018 NAMIC Annual Convention - Kennedy Page 29 of 71 the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values find great people who complement you communicate have fun!

• It’s simple: a little fun goes a long way.

12345

the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values find great people who complement you communicate have fun! invite people to drink the kool-aid

• Everyone needs to be a believer.

12345678

2018 NAMIC Annual Convention - Kennedy Page 30 of 71 the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values find great people who complement you communicate have fun! invite people to drink the kool-aid work as a team • Stop thinking of people in terms of “employees” or “departments.” • You’re all part of the same team, 12345678 so act like it.

the 8 essential steps to building a winning company culture Monica Zent, Entrepreneur 360

learn from the past culture aligns with values find great people who complement you communicate have fun! invite people to drink the kool-aid work as a team maintain and evolve culture • You need to nurture it. • You also need to give it the freedom to evolve. 12345678 • your culture will shrink and swell

2018 NAMIC Annual Convention - Kennedy Page 31 of 71 signs your culture is on the right track Shane Atkinson, Forbes Leadership Forum

employees can you trust employees are relate their job to productivity employees to engaged and employees work your company’s increases make decisions eager to help well as a team mission

how to manage toward a positive corporate culture From our stores to final customer

starts at the top: • senior leadership must own this purpose • have a formal statement vision

describing your culture mission

values

2018 NAMIC Annual Convention - Kennedy Page 32 of 71 example: Wynford Local Schools

example: Tiffin University

2018 NAMIC Annual Convention - Kennedy Page 33 of 71 how to manage toward a positive corporate culture this is how it’s done

• Senior leadership must own this • Have a formal statement describing your culture • Communicate, communicate, communicate • Hire the right people • Have the right reward /recognition mechanisms • Embed the culture into the organizational structure • Leadership practices must reinforce culture

72% •New employees65% are offered $2,000 to quit after the first week of55% training if they decide the job isn’t for them. •Core values are instilled in every Zappos has established what the team member company culture is, and fitting into that culture is the most important thing managers look fo MARKET USA EUROPE when hiring. This promotes the culture and happy employees, which ultimately leads to happy customers

2018 NAMIC Annual Convention - Kennedy Page 34 of 71 Southwest gives employees “permission” to go that extra mile to make customers happy, empowering them to do what they need to do to meet that vision. Employees who are convinced of a larger common goal are people who are excited to be part of a larger purpose.

•“The Chevon Way”: dedicated to safety, supporting employees and team members looking out for each other. • Chevron shows it cares about employees by providing health and fitness centers on site or through health-club memberships. • Offers other health-oriented programs such as massages and personal training. • Chevron insists employees take regular breaks.

Simply providing employee's with a sense of safety and well-being and creating a policy where everyone looks out for each other can easily suffice.

2018 NAMIC Annual Convention - Kennedy Page 35 of 71 •As Google has grown and the organization has expanded and Even the best culture needs to spread out, keeping a uniform revisit itself to meet a growing culture has proven difficult company’s team. The most •The larger a company becomes, successful company culture the more that culture has to leads to successful business, reinvent itself to accommodate and that requires an evolving more employees and the need for culture that can grow with it. management.

the “me” generation

millennials

2018 NAMIC Annual Convention - Kennedy Page 36 of 71 “7 Things Millennials Crave in Organizational Culture” Laura Trayani

flexible social team mentorship transparency room leadership scheduling responsibility collaboration opportunities for fun! potential

how to engage millennials in your corporate culture Erica Dhawan, Forbes Magazine

“The answer is not a better espresso machine, a weekly office happy hour, or a one- time corporate-sponsored concert. It’s not even about better flexibility programs.”

“The key is building sustainable structures to accelerate the connectedness within your company.”

2018 NAMIC Annual Convention - Kennedy Page 37 of 71 dysfunctional cultures 5

signs you have a toxic culture

1 2 3 4

clear vision lack of focus us vs. them fear of risk no clearly articulated lack of focus us vs them mentality fear of taking risks purpose, vision, mission, between departments or values 5 6 7

defensive late bad news average effort associates are hearing bad news late talented associates only defensive give average effort

2018 NAMIC Annual Convention - Kennedy Page 38 of 71 think culture is not important? “Doctors Divided” – Columbus Monthly – December 2017

• $3.4 billion annual operation • 7 hospitals, college of medicine, physician practice, outpatient clinics, world-renowned cancer center • Half of OSU budget • Fiscal year end June 2017: Federal funding up +20% Admissions up Surgeries up Outpatient visits up $302 million profit – best year ever

think culture is not important? “Doctors Divided” – Columbus Monthly – December 2017

Spring 2017 •4 separate letters sent to OSU President Michael Drake “excoriating” the leadership of the Medical Center – “power grabs, rude behavior, inefficient hiring practices, marginalization of medical center academic mission” •Letters signed by over 50 faculty – including 10 department chairs, 14 division chiefs, and 3 distinguished professors

2018 NAMIC Annual Convention - Kennedy Page 39 of 71 think culture is not important? “Doctors Divided” – Columbus Monthly – December 2017

two points to discuss: •If all is going so well, why are so many What will it take to achieve doctors at each other’s throats? •Dispute is the usual mix of money, ego, even greater success in and power – but it is about something the future? more fundamental and important:

1 2

“If “Ifyou you want want the bestthe peoplebest people here, you here, haveyou to haveinvest to in investthem. Theyin them. have They to have a shared sense of mission and havevision, to andhave it can’ta shared be just sense a of business.missionIf and someone vision, came and here it can’tto practicebe just medicine, a business. why wouldIf someone you choose to do it at OSU? You would go upcame the road here and to gopractice into private medicine, practice,why would and do you the samechoose amount to do of it at workOSU? and get You paid would 50% to go 100% up themore.” road and go into private practice,~ DR. STEVE CLINTON and do the same amountOSU PROSTATE SPECIALIST of work and get paid 50% to 100% more.”

~ dr. steve clinton OSU prostate specialist

2018 NAMIC Annual Convention - Kennedy Page 40 of 71 think culture is not important? “Follow The Leader” Columbus Dispatch – April 8, 2018

“I was really taken with the “West Virginia looks to public-health driven mission recruit from medical centers that was articulated”, said Dr. with “bad cultures”. John Campo, assistant dean of “WVU was focused on behavior and wellness, chief creating a “purpose-driven” behavioral wellness officer, culture that people wanted to and professor at WV School of be a part of”, Gee said. Gordon Gee Medicine -- and an Ohio State Dr. Ali Rezai transplant Former OSU President from Dr. Ali Rezai, a renowned 1990-1998 (when all this neurosurgeon, said when he medical expansion began) and moved to West Virginia that he is again from 2007-2013 -- and is now “more aligned with the now President at West Virginia vision and purpose” has hired 6 top doctors away at West Virginia from OSU

low performing cultures XEROX

2018 NAMIC Annual Convention - Kennedy Page 41 of 71 low performing cultures XEROX

the stats: •Xerox 914 introduced in 1960 •Weighed 650 pounds and made 6 copies a minute •Leased to customers for $95/month •CEO predicted this product alone would double the firm’s sales by 1960 to $60 million •Actual was $393 million by 1965 •One of the most profitable products in US business history

low performing cultures XEROX

the stats: •1963: introduced the 813 “desktop” copier •1965: brought out the Xerox 2400 – model 6 times faster than the 914 •1968: revenues $1.1 billion – was $7 million in 1945 •Clearly a success story

2018 NAMIC Annual Convention - Kennedy Page 42 of 71 “Faith in people, concern for customers, and economic power through innovation, marketing, patents, and worldwide presence”

~ joe wilson, CEO

low performing cultures XEROX

Soon… •Managers became arrogant •Spent lavishly and lost control of costs – a key element of what made them successful •Became intolerant of leadership and initiative from the ranks •Decision making was centralized •Experimentation discouraged •Errors not tolerated

2018 NAMIC Annual Convention - Kennedy Page 43 of 71 low performing cultures XEROX

worldwide share of copier revenue

the results: • Consequences devastating • It’s Palo Alto Research Center invented the personal computer – complete with GUI interface, icons, scalable type, mouse, and a laser printer -- yet Xerox never embraced it 82% 41%

1976 1982

low performing cultures XEROX To survive over a significant period and become a major player in an industry requires a considerable amount of success – and this very success often poisons the culture.

2018 NAMIC Annual Convention - Kennedy Page 44 of 71 low performing cultures UBER

low performing cultures UBER

the stats: •Started in San Francisco in 2008 •Now in 633 cities around the world •Over 1 billion riders •Company valued at $50 to $70 billion – depending on who is doing the valuation •CEO/Founder is Travis Kalanick •No doubt, a very successful company

“The Fall of Travis Kalanick” Eric Newcomer and Brad Stone Bloomberg Businessweek 1-22-18

2018 NAMIC Annual Convention - Kennedy Page 45 of 71 low performing cultures UBER

the stats: •“Shotgun” management style •Unwillingness to listen •Sexual harassment tolerated •Missed or cancelled meetings •Legal non-compliance •“bro-ish” cultural values: “always be hustlin’”

“The Fall of Travis Kalanick” Eric Newcomer and Brad Stone Bloomberg Businessweek 1-22-18

“We don’t have a PR problem;“We don’t we have have an a PR “us”problem; problem we– we have have an behaved“us” problempoorly” – we ~ darahave khosrowshahi behaved poorly” Dara Khosrowshahi

2018 NAMIC Annual Convention - Kennedy Page 46 of 71 low performing cultures General Electric what people are saying: •“GE’s precipitous fall……..was exacerbated, some insiders say, by what they call “success theater”. Mr. Immelt and his top deputies projected an optimism about GE’s business and its future that didn’t always match the reality of its operations or markets…” •“This culture of confidence trickled down the ranks and even affected how those gunning to succeed Mr. Immelt ran their businesses…with consequences that included unreachable financial targets, mistimed bets on markets, and sometimes poor decisions on now to deploy cash.” •“Said Sandra Davis, who knows several GE executives as the foudner of MDA Leadership Consulting: “GE itself has never been a culture where people can say ‘I can’t’”.

“How Jeffrey Immelt’s ‘Success Theater’ Masked the Rot at GE” Thomes Gryta, Joann Lublin, David Benoit – Wall Street Journal – 2/24/18

2018 NAMIC Annual Convention - Kennedy Page 47 of 71 three unhealthy characteristics of low performing cultures

don’t value arrogant customers, managers Ees - S/H - P/H

value stability and order over leadership

reforming a dysfunctional culture 6

2018 NAMIC Annual Convention - Kennedy Page 48 of 71 kotter’s 8 step change model Harvard Business Review – January /February 2018 Boris Groysberg, Jeremiah Lee, Jesse Price, J. Yo-Jud Cheng

form a powerful create a vision for create climate for change create urgency coalition change

engaging & enabling the communicate the empower the action create quick wins organization vision

implementing & sustaining for make it part of the build on change change culture

reforming corporate culture in financial services firms Pomello Blog

the learnings: •If culture is the key to effective private regulation of the financial services industry, then each company must be able to effectively assess the existing culture regularly. •Regular assessments can detect drift and allow corporate management the opportunity to correct underlying issues before they lead to misconduct.

2018 NAMIC Annual Convention - Kennedy Page 49 of 71 reforming corporate culture in financial services firms Pomello Blog

the learnings: •No matter what public regulations are passed to regulate the financial services industry, the financial services industry needs cultural safeguards in place to protect its reputation. •Without a staunch culture that rewards professional ethics, your company could easily become implicated in the latest headline-grabbing misconduct charge.

reforming corporate culture in financial services firms Pomello Blog

the learnings: •Strong cultures can also become diluted due to poor hiring •Employees may have the skills to thrive in the financial sector, but they may not display the ethics and values necessary to uphold the necessary corporate culture. •Rapidly growing companies are particularly vulnerable to cultural dilution and drift if they do not hire specifically for cultural fit.

2018 NAMIC Annual Convention - Kennedy Page 50 of 71 Somebody“Somebody once once said said that that in lookingin looking for forpeople people to hire,to hire, youyou look look for forthree three qualities: qualities: integrity,integrity, intelligence, intelligence, and and energy. energy. And if theyAnd don’tif they have don’t the first,have the the other first, thetwo otherwill kill two you. will kill you.” ~ Warren buffett ~ warren buffett

role of board in culture

2018 NAMIC Annual Convention - Kennedy Page 51 of 71 first impressions

2016: 2016: 2015: 2015: 2015: Installed devices to Opened over 2 Raised price of Traded in blood Deep rooted bypass emissions million phony drug 5000% diamonds and corruption testing accounts laundered $ for dictators

where was the board???

2018 NAMIC Annual Convention - Kennedy Page 52 of 71 role of the board in culture George Anderson, Michael Anderson, Jerimiah Lee

One aspect of performance rarely appears on board agendas: culture Few boards oversee culture with anything like the rigor they do the operational elements of the business.

role of the board in culture

lack of ownership 1 2

lack of a why are lack of shared boards not visibility into vocabulary more culture engaged?

lack of a defined board role

2018 NAMIC Annual Convention - Kennedy Page 53 of 71 why are boards not more actively engaged in its oversight? George Anderson, Michael Anderson, Jerimiah Lee

the learnings: •No one exerts more influence over corporate culture than the company’s leaders. lack of •The CEO and management team own culture, not board the board. •As a result, boards tend to give the issue of culture ownership a wide berth, expecting the CEO to raise cultural issues when needed.

why are boards not more actively engaged in its oversight? George Anderson, Michael Anderson, Jerimiah Lee

the learnings: lack of board •Directors rely on the management team to bring visibility into information about corporate culture to the board. •The board’s role in cultural oversight is not as clearly the culture defined as areas such as executive compensation or risk oversight. lack of a defined board role

2018 NAMIC Annual Convention - Kennedy Page 54 of 71 why are boards not more actively engaged in its oversight? George Anderson, Michael Anderson, Jerimiah Lee

the learnings: •Without a shared language or framework to discuss culture, directors and executives don’t lack of know where to start or how to have a productive shared conversation about it. vocabulary

role of the board in culture how does the board share this responsibility with management?

observe: seek input: be diligent surveys, etc.

“The Culture Factor” - Harvard Business Review – January /February 2018 Boris Groysberg, Jeremiah Lee, Jesse Price, J. Yo-Jud Cheng

2018 NAMIC Annual Convention - Kennedy Page 55 of 71 role of the board in culture

the learnings: •The cultural health of an organization is the so the board responsibility of the organization’s leadership – and must have a the board of directors is part of that leadership role in the •Remembering the fiduciary duties of a director means culture – but they cannot leave the issue of organizational culture how much? entirely to management

role of the board in culture

the learnings: •The board delegates to the CEO the management of as directors, when culture and the implementation of cultural change. you are in the •In making the delegation the board does cannot “set and office, do you forget” model the culture you expect from •Is the CEO embedding in the organization the cultural your associates? traits the board has endorsed? •Is the CEO modeling the desired culture? •Is the Board modeling the desired culture?

2018 NAMIC Annual Convention - Kennedy Page 56 of 71 how can the board oversee culture and culture risk? “Corporate Culture Risk and the Board”, Deloitte Center for Board Effectiveness – April 2018

Treat culture as you would strategy, be inclusive performance, and risk/ERM as regular board agenda items.

Ask culture related questions of be proactive management

Especially if something does not appear be persistent right

role of the board in culture

questions for the board to consider: • What is management’s view as to the nature and strength of culture? • Do we understand that our culture is an asset that can help us perform? • Has management conducted any employee engagement efforts to be sure they have a handle on the culture? • How do our compensation plans reinforce the culture? • Are we promoting people who align with the culture and how do we ? handle those who are not? • Do we discuss culture as part of our risk oversight process? • What do our agents, customers, and other business partners say about our culture? How would they describe it? • Do our internal/external communications reflect our culture? • How do we get comfortable with the culture assessment beyond just comments from management?

2018 NAMIC Annual Convention - Kennedy Page 57 of 71 role of management in culture 8

how to create a positive culture

competent leadership

2018 NAMIC Annual Convention - Kennedy Page 58 of 71 “my primary responsibility”

“I truly believe that setting and overseeing the culture of Harford Mutual is my primary responsibility as its President & CEO. Placing culture first on the proverbial “to-do list” twelve years ago was the single most important decision I have ever made as a leader and has resulted in our tremendous success Steve Linkous as a company. It has bound us together during our challenges President / CEO and promoted unity and mutual respect when achieving Harford Mutual Insurance success. If you don’t have culture, you don’t have anything.” Company Bel Air, MD

culture management Alan Colberg, President and CEO – Assurant, Inc. “How to Build a Positive and Productive Company Culture” Carrier Management – Jan/Feb 2018

one way: •“An on-going effort to encourage employees to spend time and interact with each other is also crucial. I call it the “never eat lunch alone” rule, and encourage all our employees to follow it. •My experience has shown that if you can try to spend time with a colleague every day, you will learn something new – and collectively, these conversations can contribute to building relationships and a culture that will support business goals.”

2018 NAMIC Annual Convention - Kennedy Page 59 of 71 how to create a positive culture

leaders: •Know how to produce change •Create a team •Establish a grand vision •Set a new set of strategies leaders •Persuade important groups/individuals to commit themselves to the new direction •Energize people to execute properly •Create that common culture language that unites everyone

how to create a positive culture

leaders: •Flamholtz and Randle suggest that a key element in managing culture is found in a term call the “Leadership Molecule”: •A set of leaders who despite having roles and capabilities are able to function as a real team instead of separate individuals •There is alignment on vision, culture, systems, and operations

2018 NAMIC Annual Convention - Kennedy Page 60 of 71 how to create a positive culture

the leaders are the living embodiment of the culture they desire: you are the •On display in every behavior “walking logo” •In questions they ask •How they spend their time of your •Decisions that they make organization •Know the power of their words and deeds

“LeadersLeaders establish establish the the visionvision for for the the future future and and set the strategy for set the strategy for getting there; they cause change.getting They there; motivate they and inspirecause others change to go in the right direction and they, along with everyone else, sacrifice to get there.”

~ john kotter, professor,~ John kotter, professor harvard business school harvard business school

2018 NAMIC Annual Convention - Kennedy Page 61 of 71 “considered when decisions are made”

“Culture impact has to be considered when decisions are made. If the decisions are in conflict with the culture, this will negatively impact the credibility of the culture Larry Shaw, CPCU and management.” President/CEO MMG Insurance Company Presque Isle, Maine

how is culture manifested?

words and posted how artifacts language culture management on display used statements behaves

2018 NAMIC Annual Convention - Kennedy Page 62 of 71 culture management

much of culture management is done thru day-to-day communication: communicate •Videos •Company meetings communicate •Written materials •Company intranets communicate •Electronic bulletin boards •Symbols

“they want to be a part of it”

“When I asked our newest Board members what attracted them to Mutual of Enumclaw, all three said that by simply sitting in our lobby while awaiting their interviews they were able to observe how our employees interacted with each other as they came and went through the lobby. They Eric Nelson, CPCU, ARP said they could immediately tell we had a great culture President and CEO simply by watching our employees and they wanted to be Mutual of Enumclaw a part of it.” Enumclaw, Washington

2018 NAMIC Annual Convention - Kennedy Page 63 of 71 culture management

how create a positive culture? •Lead with a non-micro-management style •Requires a lot of cheerleading and recognition for initiative •Winning over some of the more respected long-term managers is key buy-in •Important to get results early with new direction, as that gets people to buy-in

culture management

how create a positive culture?

•Leader at the top must have an outsider’s openness to new ideas with an insider’s power base •Must create a perceived need for change even if people think things are going well influence •Must communicate a new vision and then behave accordingly •Must seek out opportunities to influence behaviors

2018 NAMIC Annual Convention - Kennedy Page 64 of 71 in summary ? 9 ?

“Culture eats “Culture eats strategy for strategybreakfast” for breakfast”~ peter drucker ~ Peter drucker

2018 NAMIC Annual Convention - Kennedy Page 65 of 71 thinking about culture? five questions to ask yourself

are we do we really how would what should thinking of why is culture understand our associates our culture be culture as a important? our current define our like? strategic culture? culture? weapon?

2018 NAMIC Annual Convention - Kennedy Page 66 of 71 pure joy!

no culture is organizational “glue” politics Helps people come together with a common purpose and values.

alignment

Creates a sense of “team” throughout

more the company. results

“preserve and promote culture”

“Over the years I have come to the conclusion that preserving and promoting our culture is more important than the strategy & execution of the company’s primary objectives. In fact, if you focus more on the former Kurt Foley and get it right, the latter will seem easy!” President/CEO Pioneer State Mutual Insurance Company Flint, MI

2018 NAMIC Annual Convention - Kennedy Page 67 of 71 consequences of culture “Consequences of Culture” – ChromiumBranding.com – September 21, 2016

how create a positive culture?

•“Core values, when they are realistic and true, and where there is distinct clarity and alignment of the culture behind those core values, act as a binary for employee decision core making. • If an employee can ask “Is what I am doing in line with our values core values?” and “Would others in the company support my decision?”, then that employee can make autonomous decisions that benefit the customer and ultimately the brand.”

final story ! ! !

2018 NAMIC Annual Convention - Kennedy Page 68 of 71 example: Ohio Mutual Insurance Group

YOUR LOGO purpose insert here WHAT WE ARE ABOUT

mission insert here WHAT WE DO

vision insert here WHAT WE WANT TO BE

strategic commitments values WHERE WE WILL FOCUS HOW WE BEHAVE

HEADER - description here VALUE - description here

2018 NAMIC Annual Convention - Kennedy Page 69 of 71 building blocks of organization success

why exist culture future view

purpose vision

culture success culture

mission values culture today’s view how to behave