UNUM Corporation’s Balanced Scorecard Approach “We will achieve leadership in our business” Michael Liang Unum Corporation • An insurance holding company with several subsidiaries • Leading provider of group long term disability insurance, special risk insurance, and employee benefits to individuals and businesses • Headquartered in Maine, but has international operations throughout the U.K., the Pacific Rim, Europe and Latin America • Employs approximately 7200 employees worldwide(1999) UNUM’s Pre-BSC Strategy • A corporate-wide goal known as 61592 was established in 1986 ▫ Objective: To earn $6 a share with 15% return on equity by 1992 ▫ The goal was accomplished one year ahead of schedule in 1991 ▫ Lesson learned: a corporate-wide goal could serve as an effective “rallying point” for a committed workforce Decision to pursue the BSC process • By 1991, ▫ UNUM was far more complex compared to the 1986 organization due to extensive growth and acquisitions ▫ Leadership realized that a goal comprised of a single financial result (share value) was insufficient Too difficult to communicate effectively to a much more complex organization Would not reflect the new challenges that UNUM would face ▫ Needed a new set of goals that appealed to every employee and all stakeholder groups Wanted to focus on financial, customer, employee and productivity outcomes through to 1998 (150th anniversary) Porter Analysis of UNUM Corp. • Threat of Substitute Products ▫ Over 2000 companies around the globe offer products and services similar to UNUM • Threat of New Entrants ▫ Insurance companies must abide by strict regulations of their respective countries of operation Includes licensing, meeting standards and tests according to insurance laws • Bargaining Power of Suppliers ▫ Not a factor since UNUM does not sell a tangible product ▫ Some Argentinean employees are unionized (<1% of workforce) Should have minimal bargaining power • Bargaining Power of Customers ▫ Competitive pricing is necessary due to the number of potential alternatives for customers • Competitive Rivalry within Industry ▫ Substantial because of the number and diversity of rivals ▫ “Minimized” due to acquisitions of potential competitors SWOT Analysis of UNUM Corp. • Strengths ▫ Variety of products (i.e. varying policies and plans) ▫ International presence and reputation (branding) ▫ Past success in implementing a corporate-wide goal • Weaknesses ▫ Complex structure and scattered workforce due to acquisitions ▫ Lack of employee trust in management ▫ Misalignment between corporate values and management’s behavior ▫ Poor employee communication • Opportunities ▫ New technology ▫ Access to global market ▫ Areas where health insurance is required ▫ Increasing cost of healthcare • Threats ▫ Substantial number of competitors offering similar services ▫ Government regulations and laws ▫ Improved healthcare systems ▫ Nationalized healthcare systems ▫ Increasing cost of healthcare • So what? ▫ UNUM must create a new corporate goal that capitalizes on its strengths and opportunities while also addressing its weaknesses and threats UNUM’s BSC in Action (1993-1998) • The role of human resources ▫ HR owned the “people” perspective of the BSC which was to create employees who have the “mind of a customer and the pride of an owner” ▫ Responsible for seeking out employee input Accomplished via a benchmark survey that integrated all of UNUM’s employee surveys as a metric for progress Headed “trust workshops” • Most significant strategic changes ▫ Implemented a 360 degree appraisal system ▫ 1998 Goals Stock Option Plan Gave employees stock options to create ownership mentality ▫ Money Machine Presentation Shows how UNUM makes money and shows how each employee contributes to the process UNUM’s Executive Premium (1998) • UNUM People ▫ 100 best companies to work for in America by Fortune ▫ 100 best companies for working mothers by Working Mother ▫ Top 30 family-friendly companies by Business Week ▫ Top 50 employers by Equal Opportunity • Operating Effectiveness ▫ Improved operating cost structure by 22% over 1992 base year • Customer Satisfaction ▫ Strong sales and improved customer retention ▫ Significant progress in reaching target • Shareholder Value ▫ Diluted earnings per share were $2.75, a 15% increase from 1997 ▫ Operated earnings of $388.2 million, a 14% increase from 1997 • Lessons Learned ▫ Leadership’s commitment is vital ▫ Senior managers owned the process of building the BSC ▫ The role of vision and a core set of values as guidance ▫ Internal communication is essential Employees had full understanding of BSC goals and measures References • Arnold, Neil P. (2008). Unum Disability, Life, and Long Term Care Insurance. In Investor Relations News Release. Retrieved February 13, 2009, from www.investors.unum.com. • Evans, Matt H. (January 16, 2009). Excellence in Financial Management. In Financial Management Training Center. Retrieved February 13, 2009, from www.exinfm.com/training/. • Kaplan, Robert.S., & Norton, David.P. (2008). The Execution Premium. Boston: Harvard Business School Publishing Corporation. • UNUM’s Annual 1998 Report. (December 16, 1998). Company Information: UNUM Corp. Retrieved February 13, 2009, from www.sec.gov.
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