UNUM Corporation’s Balanced Scorecard Approach

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					     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

• Employs approximately 7200 employees worldwide(1999)
         UNUM’s Pre-BSC Strategy
• A corporate-wide goal known as 61592 was established in

  ▫ 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
     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
• 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
• Arnold, Neil P. (2008). Unum Disability, Life, and Long Term Care Insurance.
  In Investor Relations News Release. Retrieved February 13, 2009, from

• Evans, Matt H. (January 16, 2009). Excellence in Financial Management. In
  Financial Management Training Center. Retrieved February 13, 2009, from

• 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