Having all parties within the company working toward one goal may seem like a simple task to accomplish for insurance carriers, but of course if it were that easy, everyone already would have done it. The reality is each department has its own ideas on how best to run its business, but as companies have learned, siloed strategies rarely succeed. Never is that more pronounced, though, than when technology enters the discussion. Technology has become the integral enabler for virtually every task performed, and with such power, complaints are certain to follow as new methods of operation meet up with the traditional workflow of insurance.
“Alignment is the Holy Grail for businesses,” says Bernard Tubiana, principal with Deloitte Consulting. Even within the individual lines of business, he explains, alignment is nearly impossible to achieve. “It’s not just inter-business/IT alignment but also intra-business alignment,” he says. “The plank IT walks has multiple constituents. Even with a seat at the table, even if IT were able to understand the business better, and even if business understood IT language better, you still would have degrees of misalignment.”
IT is making progress in achieving alignment with the business side, according to David Holtzman, managing director, PricewaterhouseCoopers, who leads the consultant’s insurance technology and operations practice. But he points out the issue remains one of the top targets for insurers seeking to realize the benefits of technology. “There are a ton of projects being driven by IT, and at the end of the day, they don’t meet expectations because business isn’t driving the actual design and implementation,” he says.
Jeffrey Kamrowski, senior vice president of the business services unit for Selective Insurance, believes his company’s efforts toward alignment have been extremely successful. “It’s what I would qualify as a true partnership, with both parties having an equal stake in the results and outcomes and truly working together,” he says.
Amerisure Insurance has gone out of its way to include business in all technology discussions and drop the mystique around IT, maintains Ed Cullari, director of Amerisure’s project management office. “We wanted to bring business into the fold because the projects we do are business projects, not IT projects,” says Cullari. “If it’s just IT and you have no business requirements, what are you going to do? There are only so many times you can grease the engines if you aren’t doing any new projects or applications.” At the same time, if the business side wants something done, it has to adapt to the world of technology. “You can’t go back to the old way,” Cullari says. “We all remember the good old days, but remembering them is all you can do because they’re not coming back.”
Governance Strategy
Too many carriers still are allowing IT departments to gather the specs for a project and build a solution with the hope the solution will somehow work. But many organizations are moving away from that strategy. The changes have come about because of new governance structures that have been put in place within many companies, Holtzman contends. It is important these governance groups be represented by both business and IT leaders, he adds, to review projects and major initiatives and ensure projects line up with the company’s strategy.
Amerisure has a technology investment decision board that is included in all technology decisions. Steering committees also are set up within the business community to prioritize the work—both project and nonproject decisions. From the technology side, Amerisure has instituted a portfolio management system called eProject. The business and IT staffs are included, so when a project team is put together, the members are from both the IT and the business sides. “That inclusiveness goes right up the line,” says Cullari. “Our CIO or project sponsor could look at any point in time at all the documents of the project. It’s complete transparency.”
Holtzman knows of one large multiline company that has put a governance structure in place not only at the project level but at the architecture level, too. This allows the carrier to make sure projects line up with business strategies put forth. The review board also makes sure technology plays well in the infrastructure so there aren’t a lot of two-plus applications out there.
Businesses are looking at alignment of synergies across the organization, Holtzman explains. They have turned to a governance structure because when analyzing their project portfolio, they found there were projects that never met expectations. When the companies dissected these projects, the successful projects had a better split of IT staff and business people working on them. The initiatives that failed usually were driven solely by IT.
There are multiple dimensions to the governance project at employee benefits provider CIGNA as the company tries to monitor all the business areas. Steering committees were formed to manage books of project segments such as individual projects, service-related areas, and network contracting, for example. CIGNA in addition has an architecture committee that is focused on ensuring the different initiatives are linked tightly to what the company expects to do with strategy going forward. “You make sure you are working on today’s requirements, but you also are building for the future,” says Jeffrey Scobee, vice president of IT.
Steering the Course
Selective has both formal and informal processes in its project management discipline, according to Kamrowski. The formal part is centered around an enterprise project management office, which takes a formal role in defining projects, approving projects, and monitoring items of large scale. “It creates a consistent set of rules, guidelines, procedures, and format so everyone involved in the project knows the expectations—from the CEO all the way down to the project manager,” he says. “People have a true awareness of what needs to be done.”
Every initiative Selective undertakes has a business manager and an IT manager assigned to it at the same time, so no business project is run solely out of the IT area or the business area. “There is joint accountability, which creates a very good partnership and a good commitment of resources working on initiatives,” says Kamrowski.
Outside of that formal component, the managers are on the phone with each other virtually every week. “Very informally, we encourage those managers to spend some time with each other on a scheduled fun event—a Friday afternoon golf outing or a combined effort to benefit a local charity—anything that creates a bond between those two managers,” notes Kamrowski. “It gives them an opportunity to get to know each other.”
Holtzman describes a governance committee as an executive steering group that meets at least on a quarterly basis and institutes a process regarding what should be submitted relative to an initiative. The committee sets a dollar limit for what projects it wants to look at. As the governance group gets more efficient, Holtzman believes the business and technology leaders better understand the process and what has to be in place for a project to be successful.
“The best governance structures meet on a regular basis, they are keenly aware of the business strategy, and they have set up a matrix to measure and score the initiatives that have come into their governance group so they can make the best decisions,” says Holtzman. Governance committees have a longer-term focus, so they are not just looking out to the next year, Holtzman adds. “Governance is a key element if you have a good mix of business and IT at the table,” he says. “[The committee] has a great set of measurement and benefits realization criteria, and it starts to look back at projects and lessons learned.”
Governance is more commonly found with the larger companies, continues Holtzman. “If you have five or six lines of business, a billion-dollar-plus IT shop, and thousands of IT professionals, you need things such as governance put in place,” he says.
Tubiana agrees governance is effective for alignment. “Doing the right thing often leads to behaving the right way,” he remarks. “There is a lot of merit to governance and oversight. The way it is set up obviously is different for different companies. It’s a place where you do have some say and directly align organizations, teams, and projects. It needs to be executed correctly—as much as required but no more than necessary. Good planning matters a lot, and governance falls under planning.”
The more CIGNA leverages this type of thought process and the tight linkage with the business, Scobee asserts, the more momentum the company will begin to pick up. CIGNA has a group called Projects, Process, and Requirements (PPR) that works closely with business in defining the details of the requirements underneath the capabilities. “[PPR members] do that in a holistic way, so they are looking at all the different streams of the business process even before technology is fully engaged,” he says.
PPR views issues from a business modeling/business process perspective. “Not only is it helping the business teams to articulate how a certain requirement will impact the entire process flow, but it also assures we don’t have redundancy in terms of projects—one project group working on a piece of code one way and another project group working on it in another way,” Scobee points out. “We’re finding tremendous synergy out of that. All of these things are continuing to gain momentum and showing positive results.”
Avoiding Disconnect
There always will be some measure of dissatisfaction among business leaders because they want things faster, better, and cheaper, Tubiana indicates. “Right off the bat you are behind the eight ball,” he says.
As third-party administrator National Benefits America has grown, alignment became one of the company’s major challenges, according to operations manager Amy M. Duke. “It was like the tail wagging the dog,” she says. “Our IT area thought it knew what was best for the company, and there was no decision-making going on from the management perspective and the operations area on a day-to-day basis. The IT area almost was like an island.”
Duke brought with her an understanding of underwriting, premium audit, loss control, and claims when she joined the company as operations manager about four years ago. “Having an understanding in each of these areas was a bridge to bring us together to put communication in place,” she says. While the IT area once was accustomed to deciding what the technology plan would be, today it sees things with a fresh outlook. “Since we’ve made that transition, we’ve put some long-term goals in place, been able to identify where our need is for the business, and focus on what is going to help us as opposed to having someone from outside the business area telling us,” says Duke.
As the operations manager, Duke had an understanding of what was needed from a business perspective. She feels she and the IT people were educating each other on basic things—such as statistical vs. financial reporting numbers. “It definitely was challenging, but you learn and you grow,” she says. “It’s actually made us better.”
Kamrowski believes companies have to be cautious not to build rules that supersede relationships. “The biggest challenge is making sure you don’t create a rule-based process that interferes with the ability of two people to work together,” he says.
CIGNA’s IT strategy is focused on enabling business capabilities. The company has developed a road map based upon the capabilities identified in the core business strategies, explains Scobee. CIGNA structured itself internally to maximize IT’s capabilities to deliver against those strategies. “That means establishing organizational units that are aligned closely to the key business function or process,” he says. “The suite of applications, the function, and the technology are aligned closely with that direct business partner.”
By and large, the alignment was welcomed, Scobee says. There always have been line-level business-IT relationships, but CIGNA wanted to bring a holistic viewpoint to the relationship. “You can come up with 100 priorities in each individual [business] unit, but they have to be balanced across the enterprise holistically to deliver against some of the capabilities,” he advises.
CIGNA is aligned tightly in terms of strategy, with a focus on consumerism, health advocacy, and informatics, Scobee comments. “Looking at a member-centric view is not something this industry has done in the past,” says Scobee. “To do that, we have to have arms linked as we define what’s necessary, meaningful, and valuable; organize that from a technology perspective; and deliver against that as quickly as we can.”
Seat at the Table
Alignment requires executive buy-in, Cullari states. “Without that, you are kidding yourself,” he says. “You can talk about IT and business alignment, but if you don’t have it from the top, it doesn’t work.” Cullari has seen projects move more smoothly thanks to having a more cohesive team. “It’s not ‘us against them,’” he says. The alignment is not yet complete at Amerisure, but he believes both sides are starting to open up.
IT is included in early discussions so it can assist in the groundwork. In the past, the business side waited until it knew what it wanted and then told IT. Now, IT is brought in sooner to assist in those conversations. “It doesn’t happen overnight,” admits Cullari.
There is value to having IT at the table, Tubiana concurs, especially with insurance and financial services organizations, where there are more IT organizations in support of the business. “If you think just of operating costs, IT is a huge component, so [IT] must have a seat at the table, but it can’t dictate,” he says.
What it often boils down to is whether the CIO has the CEO’s trust, notes Tubiana. “Is the CIO able to implement things on time and on budget and help enable the business to be more productive and more competitive in the marketplace?” he asks. “Depending on your starting point, the relationship will vary, as well. If you are an organization that is notorious for not being able to do projects on time, and coupled with that you have business analysts who don’t give good business requirements, you’ve got a very different starting point than when you have a well-oiled, well-run machine.”
Companies also find success with business analysts who have a liaison role back to IT, according to Holtzman. These analysts can translate business into technology and serve as a conduit between the two groups. “When [analysts] live in the business units, they understand the day-to-day operations and what [business] is trying to handle,” he says. “As a company goes through an implementation, the analysts are able to help the IT professionals find a workflow or a business rule and understand the implications of what [IT] does from the technology perspective. The business analysts within the business, we’ve found, have helped a lot of projects to be successful.”
Centralized vs. Decentralized
Tubiana relates Deloitte was involved in a merger where there were two different styles of IT organizations. With one company, the IT department was aligned with the business peers; the second company had a more traditional IT organization—more centralized. “The former had business analysts in the IT organization, and the latter had business analysts in the business organization,” he says. “When we compared and contrasted in anticipation of the merger, we found the first one had much better alignment.”
Tubiana compares the centralized vs. decentralized IT structures to New York City schools. “When you have everything centralized, the outcry is you have to empower the local schools because they are closest to the students and have to make the decisions,” he says. “Then everything goes decentralized, and people complain there are no standards across the system; that’s not right for the kids or the teachers. It ebbs and flows in cycles. At the heart of that is it is very difficult to find the right mix between centralized and decentralized.”
Pacific Life Insurance uses a decentralized IT structure for its business units. “HR has a dedicated IT department, and we’re its priority,” says Melanie Wagner, the carrier’s director of payroll. “We don’t have to compete with other priorities within the company, which gives us a very quick turnaround.”
Since her department and this particular unit of IT both report to HR, they share the same reporting relationship. “That’s part of what makes it successful,” says Wagner. “[IT] really knows what our business needs are because we partner with it.”
When business decisions need to be made, IT is brought into the loop in the planning stages, reports Chuck Kentfield, senior software engineer for the HR systems at Pacific Life. This allows IT to help influence the decision-making process so a solution will be developed using the carrier’s existing tools to meet the objective of the business decision.
In the planning stages of any HR project—before a vendor is selected—business is meeting with and getting recommendations from IT. “We’re always partnering with IT,” says Wagner. “The developers give us recommendations on how the system can handle our business needs, working with vendors such as Lawson to make that happen.”
Some small or mid-tier companies have governance, but Holtzman points out those companies usually are more intertwined. “The IT groups are smaller, there are not as many big projects, and usually business and IT work a little better together because it’s more of a community focus,” he says. “When IT gets big, it builds its own fiefdoms.”
Large IT departments often are decentralized by line of business, which Holtzman indicates creates disconnect. For those companies, governance creates standards so there is a consistent underlying project management methodology and an enterprise architecture, which set the core for all IT people.
Stay Tuned In
Selective believes integration is a culture of continual improvement, according to Kamrowski. “If we become comfortable we know it will become dormant, so we always are looking at ways to improve the process and challenge each other,” he says.
The pressure is huge to make IT more aligned, observes Tubiana. “Clearly, from a CIO perspective, setting standards for technology is critical,” he says. “Even if you have a decent TCO model, somebody has to set the standards so you don’t have disparate architectures and technology, which really would raise your TCO.”
Some business people view governance as something that drives up cost and complexity because everything has to go through a funnel, Holtzman notes. However, he believes it actually creates efficiency because everyone in the organization knows what the requirements are and what must be brought in front of the governance committee. “The governance committees are making fewer mistakes, so there aren’t any $50 million runaway projects out there,” he says. “In essence, it is creating efficiency.”