Talent strategy has always been important for insurers, but as COVID-19 accelerated the move to remote working and years of digital transformation happened in a matter of weeks and months, talent became essential to lead organisations through these changes.
The right talent strategy is needed to address the changing context and employee needs, say Kweilin Ellingrud, senior partner at McKinsey in Minneapolis, and Elixabete Larrea Tamayo, a partner at the firm in Boston.
“Let’s take remote working as an example,” says Ellingrud. “Before, remote work was used mainly for underwriters, claims and some categories of important talent that were hard to recruit. Now, remote work opens an opportunity to extend that to other types of digital and diverse talent.”
Larrea Tamayo agrees that while the pandemic presented many challenges for talent, it also brought about many opportunities.
She says: “The ‘next normal’ presents a chance to rethink cultural norms and reimagine the end-to-end employee journey from recruiting to onboarding, development and new ways of working.
“The old rules no longer apply so those insurers who want to take advantage of the opportunity will need to put their talent strategy front and centre.”
Why should insurers tie their talent strategies in with diversity and inclusion (D&I)? Talent strategy ties in with the D&I agenda in a few ways, says Ellingrud.
“For one, if you have an effective talent strategy, you’re aiming to get at least your fair share of diverse talent in the marketplace. For example, 56 percent of college degrees in the US today go to women. Women have higher grade point averages and are the majority of valedictorians.”
If an employer’s talent strategy is not getting at least 50 percent women, it is missing out on a vital talent pool. And it isn’t just about recruiting them, Ellingrud adds, it is about engaging, developing, and retaining them over time as well.
She emphasises that the evidence shows diverse teams perform better. “They are better at innovation and problem-solving because they approach the problem with different expectations and different ways of thinking and assumptions.
“Diverse team members challenge each other and get to a better answer. It’s also interesting that diverse teams are more likely to be open to the idea that they didn’t get the best solution the first time around.
“In other words, they are more open to continuous improvement, which is so essential for great performance.”
Gaining this edge in performance is especially important now, as all the progress made in the last five years with respect to D&I could be erased in only one, adds Larrea Tamayo.
She points out that in September 2020, the US Department of Labor announced that more than 860,000 women had dropped out of the workforce, mainly as a result of COVID-19.
“Very similar trends are observed for sub-groups of women such as mothers of young children, senior women and women of colour, who are by far the ones most impacted by the current context,” says Larrea Tamayo.
“If we know diverse teams are better, we need to do more to make them a reality in a context where we are seeing diverse talent disappear. More than ever, D&I should be at the centre of the talent strategy.”
“A key action will be breaking through that ‘broken rung’ of promotions at the senior manager and vice president level.”
Kweilin Ellingrud, McKinsey
Building a fruitful talent and D&I strategy
An effective combined D&I and talent strategy has a few components, Larrea Tamayo explains. She says that often, the first step is setting a clear sense of the starting point.
“Ask these questions about the business: ‘what are you doing well?’ and ‘where are there points of improvement?’. This data empowers an organisation to make a change.
“Next, set a simple yet aspirational objective. This could be to reach the same representation as the broader talent market in the next few years, or reach 50 percent of women at the entry level.
“In a further step, this aspiration is then translated into a set of initiatives. What are you going to do to reach these goals? This could be a sponsorship programme or unconscious bias efforts—but not more than a couple of things that are executed really well.”
Another important component of an effective D&I/talent strategy is setting up a consistent and transparent way to measure progress on a regular basis—at least quarterly—which allows you to evaluate what needs to be accelerated or changed, says Ellingrud.
Making the data visible allows an organisation to steer the strategy, and a proactive strategy on how leaders can role model the change they want to see and be consciously inclusive to people of all types will help to achieve the scheme’s goals.
Incentives—quantitative or qualitative—can be tied to D&I progress and results. However, Ellingrud warns, this can be challenging, and ranges from very explicit incentives to more directional goals that are awarded as a group in annual reviews. But she says: “Either way, D&I progress has to matter, or you won’t see change.”
“This aspiration is then translated into a set of initiatives. What are you going to do to reach these goals?”
Elixabete Larrea Tamayo, McKinsey
One example of an approach Ellingrud has seen working successfully in the insurance industry is sponsorship programmes at the executive level. This where a chief executive officer (CEO) sponsors a number of women at the C-suite level, and asks each of them to sponsor a set of women at the next level, with this model cascading through the organisation. This is complemented with a mix of formal and informal events to help female leaders across the organisation meet each other, become aware of other career paths, and find sponsorship opportunities, which helps to close the sponsorship gap often seen in the industry.
She points to two other companies, outside the insurance sector, that have seen significant improvement: Sodexo and Xerox.
“At Sodexo, a French food services and facilities management company, the previous CEO saw that business units with 42 percent or more diverse leaders (of all types of diversity) had higher profits, higher growth, and better resilience in a downturn.
“He tied 15 percent of bonuses to getting to 42 percent or more diverse leadership. And he asked his team to let them know what support they needed from him to get there.
“At Xerox, they wanted to accelerate progress in hiring diverse leaders after finding that much of their external hiring diluted their overall diversity. This is quite common: on average, two-thirds of external hires at more senior levels are men.
Xerox held vice president-level and above job openings vacant until there was at least one woman and one woman of colour on the slate. When we see this happen—at Xerox or elsewhere—the hiring rate for a diverse candidate for the role often triples or quadruples, because it is a real discussion and debate between two or more talented diverse candidates,” she explains.
“We need to raise our aspiration as an industry and lead the way.”
Elixabete Larrea Tamayo
Flagging up another example, Larrea Tamayo highlights the 10 actions towards racial equity that McKinsey committed to following a number of racial injustices in the US in 2020, including the infamous death of George Floyd after he was arrested by police in Minneapolis.
She says McKinsey came together as a firm and committed to 10 actions to support racial equity, including doubling the company’s black leadership and hiring of black colleagues, conducting an expert review of people processes and setting up a black leadership academy.
“We know we can continue to improve, and we are making a commitment to get there,” she says.
Despite the evidence of the business advantages D&I can bring, and the ever-increasing societal awareness of the issue, there are still people who believe D&I is optional rather than a business imperative.
Larrea Tamayo says that over time companies that are not prioritising D&I will have a hard time recruiting and retaining the top talent. “The most effective companies are making this a business priority—this is how we compete and serve our customers, because our customers are diverse as well.”
Ellingrud agrees and adds: “Optional things rarely get done, especially when they are challenging. And D&I is challenging—it requires concerted focus and sustained effort over a number of years across all levels of the organisation.”
Both experts are clear that a lot more can be done to encourage greater D&I across the insurance industry.
A key action for Ellingrud will be breaking through that “broken rung” of promotions at the senior manager and vice president level, and pulling that all the way through to senior vice president and C-suite equivalent roles. This can be achieved by ensuring that succession planning and external recruiting are well balanced by gender and race and other dimensions of diversity, she says.
For Larrea Tamayo, collective action across the insurance industry will be an important step.
“I encourage the industry to lead the way for other industries and come together to push some collective action.
“If we want to win the war for talent, we need to raise our aspiration as an industry and lead the way,” she concludes.
Image courtesy of Shutterstock / Nicoleta Raftu