Zero-based performance metrics help insurers to correctly size and allocate the resources it needs to achieve its goals.
Rapid change in the insurance market, driven by digital disruption, is forcing many carriers to find new ways to become more competitive. Traditional approaches to business planning are often inadequate.
Zero-based business planning, as I mentioned in an earlier blog post, enables insurance providers to improve their performance by focusing on their future goals rather than reflecting on the past. It begins with a clean sheet and then identifies and reallocates the resources required to achieve specific objectives.
Performance metrics are essential. They ensure that the organization’s resources remain aligned to its strategy and thereby fuel profit growth and promote competitiveness. Conventional metrics, however, often fail to meet the mark. First-quartile benchmarks, for example, compare the organization’s performance to the achievements of similar businesses in the past. Such comparisons don’t help the organization attain its new goals. Likewise, rear-view-mirror peer analysis tracks past performances and relies on “top-down” assessments. It doesn’t gauge the critical “workload drivers” that will enable the organization to create new business value and increase its competitiveness.
Insurers that adopt a zero-based approach to business planning, and become zero-based organizations, need a fresh set of performance metrics. It should focus on resources that are being used to transform the organization instead of measuring incremental performance enhancements and reductions in costs. Such performance metrics must measure three key features of the business:
Workload drivers: Identify and analyze the key contributors to workload volumes and demand.
Complexity factors: Pinpoint the workload drivers that increase the complexity of work performed at each business unit.
Automation and productivity levers: Determine the routine tasks that can be automated to reduce or eliminate work.
Zero-based performance metric allow an organization to correctly size and allocate the resources it needs to achieve its goals. They focus the organization’s leaders on what its costs should be, working from a zero base, rather how they relate to past expenses. Most importantly, they assign clear responsibility to the decision-makers within the organization for the future performance of the business.
In my next blog post, I’ll discuss how insurers can use zero-based planning to overcome workforce inefficiencies. In the meantime, have a look at these links.Technology Vision for Insurance 2017: Technology for People.