What kind of leader does it take to help direct your company through the
claims process? This article takes leadership lessons from a chapter of history.
Here is the story of Sir Ernest Shackleton and how his great leadership skills
of his famous Antarctic adventure can be used during the claims process. Also
discussed are the complexities of dealing with a large insurance claim, stressing
the important role that good leadership plays to effect a smooth settlement.
To conclude, a real life example of how an executive who applied the Shackleton
approach to a business interruption and property damage claim.
Complex Claims Require Complex Planning
Many businesses in New York are now dealing with the arduous process of complex
claim resolution. Currently, many of the larger claims still remain open, and
issues ranging from the scope of property damage to how to apply certain business
interruption endorsements remain unresolved. In "World
Trade Center Terrorist Business Interruption: Claims Will Challenge Policyholders,"
IRMI.com February 2002, noted the challenging issues that face corporations
in handling ground zero claims such as: multiple occurrence issues, valuation
of valuable papers/computer files, civil authority, ingress/egress, idle periods,
contingent business interruption, extended indemnity periods, permanent relocation,
and asbestos cleanup.
Financial service companies that routinely close multi-million dollar deals
overnight now must deal with open claim items and issues 11 months after the
event. The depth of this cold and lonely process is enough to frustrate any
claims team. It will take great enthusiasm, character, and leadership to help
companies maintain focus and work through claim resolution without entering
a litigation forum.
About Leadership
Thriving under pressure is what separates leaders from followers. Picture
yourself as a leader of an expedition across Antarctica at the turn of the 20th
Century. It's you, a state-of-the-art Nordic ice breaking vessel, 25 men, 25
dogs, and rations for 180 days. You must find a way to lead these men through
the next 15 months at 30 degrees below zero, locked in the ice, isolated, and
with overwhelming odds against your survival. Any rational person would say
it couldn't be done. But that is just what Sir Ernest Shackleton faced and overcame
so long ago. All his men survived and never doubted his leadership or their
ability to survive.
This great feat has been recognized the world over as one of the most amazing
examples in leadership. There are a lot of lessons to be learned from Ernest
Shackleton that will help you if, and when, you are faced with your own daunting
challenge.
Shackleton: A Great Leader
The tale of Sir Shackleton's voyage aboard his ship the Endurance, is a most
inspiring and exciting tale during a time when man dared to explore one of the
last and most remote places on Earth. According to a recent book, Shackleton's Way, by Margot Morrel and
Stephanie Capparell:
He has been called "The greatest leader that ever came on God's earth,
bar none," yet he never led a group larger than 27, he failed to reach nearly
every goal he ever set, and, until recently, he had been little remembered
after his death. But once you learn the story of Sir Ernest Shackleton and
his remarkable Antarctic expedition of 1914-1916 you'll come to agree with
the effusive praise of those under his command. He is a model of great leadership
and, in particular, a master of guidance in crisis.
During those tough and cold months, he held his crew together, inspired them
and motivated them. He made sure they understood their objective and what role
each must play to attain their goal. Here is another accounting.
Ernest Shackleton's 1914 voyage to the Antarctic. Just one day's sail from the continent, the ship Endurance became trapped
in sea ice. Frozen fast for 10 months, the ship was crushed and destroyed
by ice pressure, and the crew was forced to abandon ship. After camping
on the ice for 5 months, Shackleton made two open boat journeys, one of
which -- a treacherous 800-mile ocean crossing to South Georgia Island --
is now considered one of the greatest boat journeys in history. Trekking
across the mountains of South Georgia, Shackleton reached the island's remote
whaling station, organized a rescue team, and saved all of the men he had
left behind. [From the American Museum of Natural History Web-site.]
The Power of Great Teams and Leaders
Sir Shackleton was undeniably a great leader. However, a leader is only as
good as his or her team. Here are some of his tips on forming groups for tough
tasks. Consider these concepts when developing your own claims team.
Shackleton's Way of Forming Groups
for the Toughest Tasks |
- Consider smaller group meetings where more focused and productive
conversations can take place in an effort to resolve claim issues
as they develop. The best way to handle the biggest tasks is often
to divide the staff into teams. Create units that are self-sufficient,
but understand they won't all be equal. It is more important that
the teams are balanced when considering the big picture.
- Hire top-notch consultants, check references and implement regular
update or status meetings. Make sure you have some "Cracker Jack"
groups that can handle the toughest challenges. They can also help
others to ensure no team falls far behind.
- Figure out who does what tasks well. Give the tedious assignments
to the workhorses who don't complain. Let them know you are aware
that you are giving them an outsized task and that you count on
their good will and exceptional fortitude to get the job done.
- Leave the details to the groups that know the subject matter,
make them figure out certain problems on their own, make them report
their findings to you. Empower the team leaders so they have the
authority to handle their own group, but keep an eye on the details.
Never let yourself be surprised by problems down the road.
- Use logic to avoid emotional surprises and inform your insurer
and management before you make changes to the claim. Don't be afraid
to change your mind when you see your plan isn't working. You won't
look indecisive if you show the logic of your changes.
- Use the claim project to mentor staff. Give a show of confidence
in those acting in your stead. It's important that your support
staff maintain the same level of competency you set in your absence.
- Praise in public, criticize in private. Never point out the
weaknesses of individuals in front of others. Often, it's better
to let everyone share in a remedy aimed at a few. Chances are, even
the strongest will benefit from it.
Source: Concepts from Shackleton's
Way, by Margot Morrel and Stephanie Capparell, page 177. Emphasis
by this author. |
Who's in Charge of Your Business Interruption Claim?
A claim provides a company with a unique opportunity to reinforce the importance
of good risk assessment, risk evaluation, and management within a company. Just
as Sir Shackleton had to provide goals for his men to accomplish, a claim leader
needs to motivate the organization for the long, often drawn out claim process.
This may mean going beyond the concept of "We need to collect the entire claim
amount" to your corporate vision statement. Ask yourself how you can tie in
your company's goals or vision, statement into a goal-setting exercise for the
claim. Develop a claim philosophy.
The claim process can elevate a company's risk manager, controller, or outside
expert to a variety of roles. Often the risk manager can lead the company through
the claims process because he or she is the most knowledgeable person within
the company's organization in dealing with the insurance program, handling the
claim, and understanding the operational risk. With this knowledge comes the
responsibility to muster the right troops around a complex claim to bring the
company's best resources to bear on protecting any capital at risk and recovering
any capital or revenue stream lost by the claim event. An effective leader recognizes
the value of bringing in the right resources and is not threatened by outside
experts.
Analyzing and resolving a complex business interruption claim requires extraordinary
effort. For larger claims and especially claims relating to September 11, many
companies have formed teams of the best outside experts, along with internal
resources, to ensure and protect claim recovery. To achieve success, it is critical
that all the parties involved understand property and business interruption
insurance as well as the technical accounting issues that will arise. The only
way this can be done properly is to ensure that the right resources are dedicated
to the project—not only proper staffing but knowledgeable and seasoned professionals
who understand what is involved in preparing a well-documented and logical claim.
However, these steps will only get you so far. The most fundamental step is
often overlooked. Companies must identify a leader who will guide them through
the claim process to an effective and fair settlement.
To pick an effective leader, you may imagine yourself or your claim leader
in the following roles.
The Politician is responsible for
handling issues and communicating results to constituents in the other corporate
departments such as accounting, operations, legal, and so on.
The Client is the key contact for
the broker and the insurer, both of whom want to keep their client, happy,
while executing the responsibilities of their companies.
The Employee has the duty is to inform
the treasurer, controller, or chief financial officer of risk management
issues.
The Boss motivates staff and any
outside experts, such as accountants and engineers, hired to stay on top
of the claim.
The Negotiator argues the claim on
behalf of the party they represent.
The Technical Adviser is the most
knowledgeable on risk, insurance, and claim issues.
The Task Master executes tasks directed
by others.
The Commander leads the overall effort.
What role do you play during the claims process? Will you be the individual
that will execute certain tasks and check them off a list, waiting and anticipating
the next order from your boss? Or, will you be the person who leads the claims
process as a commander who provides direction to the troops? Few of us are either
one or the other; most people fall somewhere in-between.
Commander or Task Master?
The commander—i.e., the claim leader, whatever the title is within the organization—can
lead through delegation, while maintaining control and supervision and focusing
on core activities; the claim leader develops a vision of the ultimate outcome
or claim resolution and focuses on the details needed to document and support
the claim. This may sound like a paradox; yet if done right, it can be very
rewarding both in terms of job satisfaction and importance to the organization.
Leaders succeed because they dedicate teams of people to one project, treat
all team members like clients, ensure results and think critically. But one
trait that we have not mentioned is that good leaders have a heart. Sir Shackleton
was known to have a huge heart; many say it was because he grew up with eight
sisters. He was a fierce warrior yet very much in touch with his emotions.
Leadership requires courage. In fact, the word courage comes from the
French word Coeur, meaning heart. A leader must have the heart to communicate
his vision no matter how absurd it may sound to others, to risk defeat in
the face of bitter odds, to put himself and his reputation on the line,
and to reach out to others in order to take them on the journey. After all,
a leader's courage is ultimately not for himself, but for all the people
depending on him to lead. [The Right to Lead;
A Study in Character and Courage, John C. Maxwell, published by J.
Countryman, page 34.]
The Shackleton story illustrates the power of leadership and the importance
of designating effective task masters. An integral part of any organization,
task masters have the ability to focus on a task and execute goals with pristine
precision. This is a talent held by only a few. An individual may be a task
master due to his or her technical ability, years of work experience, or job
description within an organization. An effective claims team often includes
several task masters to help resolve or complete certain tasks.
Task masters differ from leaders, as they are usually focused on only one
aspect of a project—not on the overall organization. Problems arise when the
appointed task master is ill equipped for the assigned project. A task master
who is unsure of the next move and becomes paranoid is one to be wary of. We
call this person a "worried task master." Use the chart below to gauge yourself
as a commander or task master.
The Traits of Commanders and Task Masters |
---|
Challenge | Fearless Commander | Worried Task Master |
1. Managing Expectations | We need to meet with the chief financial
officer to inform him about this claim and how we intend to handle it. | I hope they don't ask me to work on this claim. |
2. Claim Accounting | Accounting says they need outside help with this claim. Let's find out what firms specialize in this area and have them meet the controller(s). | If accounting can't figure out the claim, we will simply send the hard documents to the insurer and have the adjusters figure it out. |
3. Legal | Let's get our in-house counsel to review this coverage item. | Let's not get legal involved; they will try to take this thing over. |
4. Scope of Damage | We need to recommend to the plant manager to engage an outside engineering firm to help with the scope of damage. | There's no need to visit the plant site—I have all the information here, besides, it's not something I'm really looking forward to. |
5. Broker | We need to get our broker working on the advance payment. | Let's not rock the boat. |
6. All of us are smarter than one of us | We need to meet with the top executives from other departments and find out how they can help with the claim. | More political meetings that could get this out of my control. |
7. Control | We can orchestrate a presentation of our department heads with the adjuster and their experts to inform them about our claim. | The adjuster sets-up meetings without you. |
8. Productive Meetings | We need to request any analysis by the adjuster or their experts prior to any meeting in order for a more productive conversation. | Let's take notes as the adjuster's experts tell us why our claim analysis is wrong and theirs is correct. |
9. Coverage | Let's ask the adjuster to summarize their opinions on coverage in a letter to us. | We just left a meeting not knowing what is covered and what is not. |
Now imagine pursuing a complex business interruption claim where the adjuster
has already questioned both coverage and quantum of a claim that your management
may believe is worth several million dollars. You face limited resources within
your own company to actually investigate and prepare the claim. Where do you
start?
The successful analysis of a business interruption claim will require an
understanding of accounting, operational, and policy issues. Here are some key
questions that will need to be addressed.
- What is the most realistic method to project what sales would have been
during the indemnity period?
- How long is the estimated period of restoration?
- To what extent can any portion of the claim be mitigated?
- What documents will be used to validate the claim?
- What margins would be experienced had no loss occurred?
Essentially, be prepared for an extremely document-intensive process that
will require interactions with a variety of groups within a company. Orchestrating
the right talent to tap the best information for an effective claim presentation
will take the ability to motivate many people to a common goal. Here is where
leadership plays a key role in the claim process.
The above areas can be reduced to three focal points during the claim.
- Claim accounting—Developing a well-documented
and comprehensive claim that is consistent and can be explained to a third
party.
- Claim management/process—Managing
the overall communication process with the adjusters, your operations people,
etc.
- Policy interpretation—Reviewing
and understanding the policy.
These three claim areas may require decisive leadership and technical expertise
to complete and resolve the claim on a timely basis.
The events of September 11 are affecting risk managers everywhere. Don't
be afraid to use these skills outside the claims process, such as developing
a contingency management plan or renewing your insurance policy. Leadership
can be used in many aspects of your work or personal life. To learn more about
leadership, learn more about a person who you respect as a great leader. Below
is a fairly recent example of how a good leader handled a serious business interruption
claim.
An Example of Shackleton Leadership Skills in Practice
An example of Shackleton's Leadership skills are presented in Dennis N.T.
Perkins's book, Leading at the Edge. Mr.
Perkins tells the story of a commander and how he followed the Shackleton Leadership
Skills during his trying time as the president of a company on the verge of
collapse. The "commander" was Aaron Feuerstein, president of Malden Mills Industries,
a textile company that manufactures Polarfleece and Polartec. In 1995 the sales
for Polartec were more than $200 million and the demand for Malden Mills' product
was continually increasing.
On a cold night in December 1995, three of Malden Mills' four plants erupted
into fire, and the 40-mile-per-hour winds that night were threatening to engulf
the fourth plant. That night Mr. Feuerstein was quoted as saying, "Whatever
technical progress we had made was in those buildings, and whatever specialty
processes we had developed were in those buildings." Presented with the question
of how Malden Mills would be able to stay in business with the fire burning
in three of the buildings and the fourth on the verge, Mr. Feuerstein responded
with an unrelenting desire to save his business and the jobs of his 3,100 employees.
He realized that the only chance he had in saving his business relied on
the ability to save the fourth building. If the fourth building were saved,
it would provide a basis on which to rebuild the company. Mr. Feuerstein instructed
his employees, "Do anything you need to do, just save that building." He later
recalled, "They were in that building all night, and they saved it, and therefore
the company, from certain destruction."
To stop the fire and overcome the many obstacles that remained during the
long journey of rebuilding the company, Mr. Feuerstein had to implement many
of the Shackleton Leadership Skills. He never lost sight of the ultimate goal:
to save the company. He also focused his energy on the short-term objectives:
saving the fourth building. By focusing on the short-term objectives, Mr. Feuerstein
saved the building and was able to salvage a base on which to rebuild the business.
One of the next challenges encountered was to prevent his employees from
becoming discouraged about the company's ability to recover. To meet this challenge,
Mr. Feuerstein reinforced the team message constantly: "We are one—we live or
die together." He demonstrated this by continuing to pay his employees despite
their inability to return to work.
A third challenge was to overcome the risk of losing customers if Malden
Mills was not fully operational in time to meet the winter demand. To satisfy
the customers, Mr. Feuerstein had to instill optimism and self-confidence, but
stay grounded in reality. He called his customers and assured them that he could
be in production in 30 days. Through sheer willpower, and strengthened by the
renewed confidence of Mr. Feuerstein, the production crew made the first test
run of Polartec within 10 days of the fire. Although there were still tremendous
challenges ahead, this symbolic event caused the workers to believe that they
might achieve their goals.
By the end of December, Malden Mills was producing at 20 percent of normal
output, even though the fire had destroyed 75 percent of Malden Mill's operations.
By the end of February, Malden Mills was producing at 90 percent of pre-fire
levels.
In the following months, Mr. Feuerstein encountered many more challenges.
These ranged from the insurance companies' unwillingness to pay the claims that
deprived Malden Mills of its need for cash, to the emergence of a number of
new fleece manufacturers. Despite these setbacks, he refused to give up. Just
over one year after the fire, an investigation cleared Malden Mills of any negligence,
and the insurance companies slowly paid the remaining millions due to the company.
By early 1997 Malden Mills began to reach pre-fire revenues.
Reflecting on the disastrous experience, Mr. Feuerstein stated, "You're out
there all alone in the world, and in the last analysis you've got to do something.
In those situations, I stand forward, and I do what needs to be done."
Conclusion
Understanding Shackleton's lesson is your first step to improving your leadership
skills. Implementing "Shackleton's Way" will take time, but will reap rewards.
There are likely to be bumps along the road that you will need to maneuver past
and overcome. However, the rewards of employing leadership throughout the claims
process are plentiful. You will create teams across your company that will work
together, and you will enhance the claim information available by having greater
accountability. Finally, you will have a sense of accomplishment and closure
as you command the oversight of the many stages of recovery.
Be firm in your vision and understanding with your team. Remember the traits
of Sir Ernest Shackleton. Challenge yourself and you will raise the bar for
others and even surprise yourself. The key is to take an active role in the
claims process and in leading your team. As another leader, George W. Bush,
stated in a time of crisis: "We will define our times, we will not be defined
by them."