A Sure Thing

Dissecting the seven habits of highly effective environmental firms

• By David L. Coduto
• Jun 01, 2006

Some successful insurers prosper not because of anything they do internally, but because the people, businesses, or other organizations they insure behave in a way that leaves claims personnel twiddling their thumbs more often than not.

What is it about some owner/insureds that make insurance companies salivate at the thought of how little maintenance they'll require?

What makes these owner/insureds a sure thing (well, as close to a sure thing as you can find in the insurance business, anyway)? Do a little poking around in the inner workings of these owner/insureds, and you'll see that a pattern emerges in a great number of them. There are seven organizational "habits" that seem to make all the difference.

Identify and document corporate culture: A firm's corporate culture is its corporate philosophy; what it genuinely believes in. Most firms have a corporate culture. The best firms identify what it is and then commit it to writing. But that doesn't mean the culture shouldn't change. In fact, at the best firms, corporate culture changes continually, evolving as the firm responds to changes in the environment in which it functions. If you haven't developed a culture statement before, do so when you update your strategic plan. The culture statement should respond to questions like, "What are we?" "What is our business philosophy?" "What are we trying to achieve?" Once you have your culture statement, do what the best firms do: Distribute it to all employees; discuss it; and apply it, using it as the standard by which all the firm's activities are evaluated.

Assemble and maintain a competent staff: Having competent people starts with establishing a comprehensive job description for each position, so you know what you are looking for. While it's essential to verify every claim that a person includes in a resume, don't overvalue what's written. The best firms teach personnel how to interview prospective hires, and they spend a lot of time talking with job seekers, trying to learn if an individual has the technical competence required and the ability to communicate effectively with the people -- coworkers, client representatives, et al. -- who are essential to getting "the job" done well. Those firms also recognize that the people they hire will not stay competent unless the firm invests in the education and training personnel need to continually improve.

Establish a non-autocratic work environment: Firms establish a non-autocratic work environment to encourage a free flow of ideas and communication among all personnel -- clerical staff, field personnel, project professionals, and project managers -- even when the opinions expressed are contrary to senior management's. They encourage staff to discuss problems, issues or concerns as they occur by fostering regular interaction and communication between the "people in the trenches" and the people in the office, holding frequent "brown bag" sessions and staff meetings for this purpose, all with an eye toward enhancing the quality of the firm's services and deliverables.

Operate with financial fortitude: A firm achieves financial fortitude when it couples financial wherewithal with a financially mature attitude. Firms with financial fortitude abide by their convictions, even when doing so can have a negative near-term impact on the bottom line. They understand that success is measured in terms of years, not weeks, so they focus on the long-term impact of their decisions. For example, knowing that liability can linger for decades, they research clients and projects thoroughly before accepting either. They do not work for clients that do not appreciate the need for quality or cannot afford it. They do not agree to contracts whose scope is insufficient in light of the project's risk, or whose terms and conditions do not deal fairly or thoroughly with project risks, or which establish rates that do not generate an adequate return. They also appreciate the need for investing in their staff, which is why they take more time in the hiring process, pay higher salaries, and spend more on staff education and training, and also why they experience less turnover and project disruption, resulting in more bottom-line benefit than expense. The best firms also use their financial fortitude to weather the downturns of our cyclical economy, and even to respond rapidly to project-based problems, as discussed in more detail below.

Foster a culture that places importance on client and project selection and assigns accountability for those selections: Financial fortitude is a key "enabler" of this habit, because it allows firms to turn away business it believes could cause more harm than good. Dozens of case histories underscore the wisdom of that approach, just as they demonstrate the need for accountability. In fact, what good are rainmakers if they are not held accountable for the problems that arise on the projects they bring in, or for the nonbillable time spent dealing with those problems? And what good are their projects when the margin they generate is eroded or eliminated by costly claims? Successful firms reward quality in addition to quantity. They hold people accountable and link compensation, bonuses, and advancement to the firms' long-term profits, not just an individual's achieving or surpassing an annual production target.

Respond rapidly to problems: Burying your head in the sand after learning about a problem almost inevitably causes a molehill to grow into a mountain. Smart firms do not let this happen, with the best of them actually sponsoring in-house seminars or other training on how to spot the early symptoms of a problem (e.g., cessation of communication, slow pay, or a fee dispute). And once they realize a problem exists, they take swift action. Some have even established a protocol on how to assemble a rapid-response, problem-solving team led by one or more senior managers. Typically, these senior managers would have had no role in the project (so they can move without emotional baggage) and are empowered to make binding decisions on the firm's behalf.

Participate in business-focused, outside organizations: Some of our most successful owner/insureds have involved key personnel in outside organizations that address business management, including loss prevention and risk management. While the programs these groups offer at their meetings can be extremely valuable, one of the most beneficial aspects of the meetings is the social interaction outside the sessions. Mingling with other professionals facing the same challenges, swapping stories, and asking questions are all elements of the important socialization function provided by these organizations. I often receive calls from owner/insureds saying that, while one meeting session or another was truly great, "I got a chance to talk with Joe about the leadership transition in their firm. We're dealing with similar issues in our firm." You can only get so much in the dealings within your own firm, so interaction with other, similar professionals on a fairly regular basis can really help firms develop new solutions to the risk management puzzle.

Firms will succeed in many ways when they make the seven habits of highly effective environmental firms vital elements of their corporate culture and their operating structure. The habits must be known, understood, and appreciated by all employees -- professional, technical, and support. Firms will reap the benefit of fewer, less serious claims; a lower rate of employee turnover; a higher rate of profitability; and other positive outcomes that typify a well-run firm. In short, the seven habits are good habits to get into.

This article originally appeared in the 06/01/2006 issue of Environmental Protection.