As India's largest private life insurer ICICI Prudential Life halved its headcount and groomed a ‘profitable growth' culture, the HR team had its hands full.
Presenting to the board of ICICI Prudential Life Insurance recently, Judhajit Das, Chief of Human Resources, explained what had transpired in insurance since it was opened up to private players over a decade ago.
He recalled that the period between 2002 and 2008 was one of rapid expansion, focused on top line growth. Multiple players had entered the field. High increments had led to wage inflation and high attrition, and rapid promotions had caused job inflation. The key proposition for people to join was that insurance was a fast-growing sector, and one would get accelerated career growth. There was an unprecedented war for talent. Circa 2006, ICICI Prudential Life was hiring about 25,000 people a year.
The period between 2008 and 2010 bore the keywords ‘financial crisis' and ‘market volatility'. This watershed saw ‘a bit of uncertainty' on where the sector was headed, as more than one industry executive now admits. Morale was low. Promotions were absent. Increments were minimal. There was a ‘no bonus' year for many.
But by then, most insurance companies had already added capacity for much higher growth. People had to start ‘right sizing'.
From a staff count of 30,000 in 2007, ICICI Prudential Life is down to 14,000 people today. And the numbers are not going up in a hurry. For Das, who has been with the company since 2000, it's been a roller coaster ride. “We did right sizing in a calibrated manner. Every six months we would look at performance and take a call on the bottom 10 per cent. It was not that we simply brought down numbers,” explains Das, in conversation with The New Manager.
The ‘Right Sizing' Challenge
The front line sales force constitutes around 80 per cent of the staff. Back in 2006-07, attrition in this segment was between 90 and 100 per cent. It has dropped to around 50 per cent now. Even at the current rate of attrition, one doesn't have to engage in forced exits to bring down the headcount, underlines the HR head. In the sales function, the challenge was to identify those who had to be retained. The bigger challenge was with the managerial cadre.
Das notes, “The group umbrella helped us. More than a third of the 3,000 managers were moved to ICICI Bank last year, and over 300 to ICICI Securities and ICICI Lombard General Insurance. Then there was the natural attrition, and some were asked to leave — but only based on performance.”
Of the 14,000 employees now, around 10,000 are in front line sales. Another 1,500 are in customer service functions and the remaining form the managerial cadre. Attrition at the managerial level is now at 20 per cent — down from 35 per cent in 2006-07.
Regulations, Profitability, Channels
Some significant regulatory changes have been introduced in the last two years. One capping commissions and marketing spends on the popular ULIPs (Unit Linked Policies) implied that business models underwent change. ULIPs, being dependent on the stock market, also saw weaker performance. Customers also moved to investment options such as banks' fixed deposits and infrastructure bonds, say industry specialists.
“We had to reorient the whole business strategy, moving away from 90 or 95 per cent sales from ULIPs to around 60 per cent — the rest being from traditional (term insurance, savings-cum-insurance) products,” he notes.
While retaining multiple sales channels (agents, corporate agents (including bancassurance) and brokers), ICICI Prudential Life has moved to an ‘integrated' geographic structure. Every branch today has a head responsible for everything, including profitability. This is a departure from having a branch manager for every channel. This, say industry watchers, has also reduced head count. “When you run a channel-based strategy, people become specialists. So an agency guy sees a career only in that channel. We're now saying you can move to bancassurance. The branch head can allocate more people to a channel if he or she believes there is more potential. It gives flexibility,” explains Das.
Flexibility is also expected of the work force — across channels, roles and geographies.
Another focus area has been the avoidance of mis-selling, thanks again in part to regulations. This puts more pressure on the sales force — to ensure not just profitable growth, but also ‘quality' profitable growth. With persistence being key in insurance, the stress on quality works for the players: a lapsed policy does not add to profits. And policies are unlikely to be renewed if they are mis-sold.
Das explains, “Our performance measures are much more balanced today — not just in terms of top line, but profitability and business quality. At senior levels, we have something called a ‘Good Order Index' which looks at the quality of business.”
Long Term Talent Strategy
At ICICI Prudential Life, one may get a top performance rating (5) according to the KPIs (key performance indicators). The ‘how' of the performance is also rated, and it plays a role in talent management — a Talent Council comprising a cross-functional group gets together to assess the potential of people. While the top 20 per cent typically score 4 or 5 on performance, they are further evaluated on factors such as people and peer management and collaboration, as A, B or C.
While everyone ranked 5A (or 5B and so on) will earn the same rewards, what is critical to the HR strategy is the long term pay component. “We have a matrix based on performance and potential. The performance rating is directly correlated to the performance bonus. However, the long term pay (incentive for staying with the organisation) is only given to ‘high potential' people (based on the ‘how' of talent management),” Das explains.
As a strategy at ICICI group, says Das, the higher the seniority, the bigger the proportion of long-term pay (paid over four years or so). In the junior management where variable pay is at over 30 per cent, there is no long-term pay component. (At levels above these, variable pay hovers around 15 per cent.)
“In senior management, we are trying to ensure that people have a longer term focus towards taking the right decisions for the company. A significant part of pay — 30 to 40 per cent — is linked to staying with the organisation over a period of time. So if one takes short cuts, he or she will get caught over a four-year period. We encourage prudent long-term behaviour through long-term pay,” explains Das.
He admits that ultimately, performance management and talent coding are judgement-based processes. “But we have a multi-tier process to minimise bias,” he adds.
Higher Retention, Slower Promotions
Fifty-two per cent of the senior management (top 100 people) have been around for over seven years. Almost 75 per cent of them have been in the company for more than five years, claims Das. “With a strategy to ensure people stay for the long term, we have much more stability at the senior most level. Most of the top leadership, including the MD and CEO Sandeep Bakshi, have been ICICI lifers,” he adds.
Average employee age is 29 years. So, the company's intranet, which is two years old, is being upgraded. There are people building a Facebook equivalent for corporates — ICICI Prudential Life is thinking about such options. For 1,500 people in the sales force (to start with), automation has also come in the form of handhelds that can be used to capture and transmit documents that need to be logged in for each policy sold.
There is also an attempt is to ensure that the company's managers are more prepared. In the high growth period, ‘those who were not ready to become managers were made managers' — a short cut to retention.
Das notes, “If we promoted someone in one year, it is now two years — and that is only if you are a top performer, and in junior management. At the middle management level, it has to be at least three years. We've increased the residency criteria for promotions. You ensure that people stay longer in the job so that they get pickled better.”
Admittedly, it would have been a tough bullet to bite but for the tough market environment.
“Earlier, if you did not promote people in one year, they would have quit and gone. Today, jobs are not so easily available. In a way that is helping to bring about these changes,” adds the HR head.
A lot has changed since 2002, including the proposition of accelerated growth to attract talent. “Fairness and meritocracy remain propositions. But we are talking about learning and growth in a different context. Earlier, it was in the context of handling larger territories. Now it is about depth, thanks to the P&L focus,” notes Das.
On campus, ICICI Prudential Life has been absent for the last few years. This year it plans to hire around 10 people from the ‘top rung' schools and another 40 from the next. These inductees will get into corporate functions — not sales and distribution which demand experience.
Managing the transition from high top line growth to a profitable growth culture with considerable regulatory changes has posed obvious challenges for the HR team. With labour costs in the sector at an estimated 40 to 60 per cent, the wrong productivity-people equation can make the business model untenable, the HR head observes.
He says, “The issue is not about reducing people; it is about managing cost. People are the input. If you have the same people delivering twice the output, you're home.”