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A CEO’s Amazing Transformation Story

by Bill Benjamin

I am professional speaker and after my speeches, people often share stories about their leaders: both the good and the bad. At a recent keynote, I was surprised at the number of positive stories people were telling me about thier CEO. They built a picture of a leader who had led an amazing turnaround in culture and performance.

That CEO is Vern Steiner of the State Compensation Insurance Fund of California (State Fund). Upon meeting Mr. Steiner, I quickly realized why we was admired by his employees.  I wanted to learn more, and Mr. Steiner was gracious enough to agree be interviewed for this story.  It was an inspiring interview, and I am excited to share the five best practises I learned from Mr. Steiner to make the transformation a success. The best part is that anyone can apply these principles, no matter what their role in life is.

Bigger than a breadbasket
“OMG, what have I gotten myself into?”  Those were the words that Mr. Steiner, the CEO, said to himself in 2014, about six weeks after he’d been brought in to the turn the organization around.

We’ve all said those words to ourselves at some time in our lives when we find ourselves in a situation, and we start to question if we have what it takes to overcome the challenge.  It could be a presentation we are giving on a topic we don’t feel we have the expertise in, or a difficult conversation we need to have. It could also be something big like starting a new business or a multi-year turnaround like Mr. Steiner faced.

How you respond to these kind of situations – big and small – is critical to your career and personal success.

The Challenge
Established in 1914 by the state legislature, State Fund is a provider of workers’ compensation insurance to California businesses:  They have 110,000 policy holders, 4400 employees and 12% market share in California. In the 7 years prior to his joining, State Fund had been through an incredible amount of change and disruption:

• They had seven different CEO’s in seven years.
• Their market share had grown from 20% to 53% in three years in the wake a collapse in the  California workers’ compensation market .
• It was during a recession, and financial crisis in State Government that subjected State Fund to a statewide hiring freeze (although they are not funded by tax dollars).
• During that 5-year period, they averaged 200,000 claims/year. Today they have 20,000 claims/year.
• Not only were they not able to hire new staff to support this growth, laws forbid them outsourcing work that a civil servant could do.  Labor unions sued when they tried to hire temporary workers, and they won.
• The result was burnout, poor customer service, upset customers. Most importantly, the employees felt betrayed and they were understandably frustrated and angry.
• After sweeping legislative reform, the health of California market was restored, and State Fund’s market share began to plummet – right when they’d finally been able to staff up to meet the 53% share!

“Following this roller coaster ride, State Fund had to dramatically reduce expenses, close offices, displace people, all while handling a huge increase in volume of claims. Then as their market share dropped, they were overstaffed and had to downsize” Mr. Steiner explains.  “To make matters worse, there were scandals with the previous CEO’s and board.  People felt betrayed and trust was broken.”

“I had come from a great positive culture where I was appreciated and trusted. At State Fund, people were angry and resentful, and  I was viewed as likely just another “evil” CEO that would ruin State Fund even further. Not only that, but our reputation with brokers and clients had been also severely damaged.”

That was Mr. Steiner’s “OMG, what have I done” moment, and had I not known the outcome 4 years later, I would have thought that transforming the culture and the organization was not possible.  The following are the five best practises Mr. Steiner shared with me that enabled him to have a huge positive impact on the people, culture and the success of the organization.

Five Best Practises for a Successful Transformation

#1: Have confidence in your team
“I had never dealt with civil service and a unionized workforce. There was a moment where I thought ‘this is how the civil service and unionized system works and you can’t change it’.”   Mr. Steiner shared. “Instead, I chose to believe that there were good people who wanted to make a difference, but they had been through a terrible experience.  I have found that even good people can behave poorly when they are led poorly. When you give them an opportunity, they can be their best selves.”

Through all the challenges of the previous seven years, many rules and regulations had been put in place. “The previous management had designed rules for every situation so people couldn’t make decisions” described Mr. Steiner. “Then if people did decide, they’d get in trouble. People were discouraged from taking any risk or doing anything that stood out. The motto was ‘keep your head low and follow all the rules’.

Mr. Steiner recognized that he needed to demonstrate trust and give people more authority to make a decision. If someone did make a mistake or something didn’t work out, it was critical not to call them out, but rather treat it as a learning opportunity. If something is done well, celebrate that and commend the person for taking a risk.

“I’ve learned that people in the civil service and unionized environment are just as committed, passionate and innovative as people are in the corporate world.  Like anyone else, you just need to show confidence, give them the opportunities to excel and recognize them when they do.”

An important element in providing this autonomy and freedom to make decisions is that it’s guided by a purpose that everyone can rally around.

#2: Provide a Purpose
“People felt they were underpaid and not treated well. They’d had an incredibly negative experience over the last few years with the focus on expense reduction after they grew to meet the demand for 53% market share and then had to go back to 9% market share, and a reduction from $8 billion to $900 million in premiums. Everything was focused on how to do something fast for less and there was no focus on doing things well. Nobody felt good about what they were doing; it’s actually less efficient when you do poor quality work” explained Mr. Steiner.

As public service organization, he didn’t have tools at his disposal like increasing compensation and benefits that a private sector company would have.  “It became clear to me that people needed to be part of something that matters.  They needed to have a purpose. We are a non-profit, and our primary goal is not about making money. We created a focus on quality and client service, and why that matters.  We talked about the difference we were making in people’s lives.“

“I wanted to build a purpose driven organization with empowered employees focused on ‘how can we help’” Mr. Steiner shared.  He started going to every monthly new hire program to talk about the journey and the purpose of the organization – to establish their “North star”.
“We created a vision for State Fund to become California’s workers’ compensation insurer of choice rather than the market of last resort, what we had become known for.

We created a North Star to help in problem solving, ‘Driven to help others and do the right thing.’  We designed and delivered EDGE (Everyone Drives Great Experiences) training to all employees and most recently we delivered innovation training, Experiences by Design.”

#3: Empathy and Leading with Emotional Intelligence

In his first week, Mr. Steiner spent time in the corporate office. Then he spent as much time as possible over the next six months out in the regional offices talking to small groups of 6-10 people at a time.  In the first month alone, he talked to 300-400 people at all levels of the organization about their experiences.  Ultimately he met in small groups with 1200 out of the 4300 employees in the organization at that point in time.

“I felt terrible for what the people in the organization had gone through” Mr. Steiner shared. “I thought the most important thing at that point was to listen and acknowledge their experiences”.  What Mr. Steiner is describing is empathy, a key Emotional Intelligence (EQ) competency.   People often confuse empathy with being weak or giving in.  But empathy doesn’t mean agreeing with people or telling them they are right, it’s simply means genuinely listening and acknowledging what they are saying, especially their emotional experience.

According to Mr. Steiner “it was important for to me to acknowledge the frustration and sense of betrayal people felt.  It was about treating people like they mattered. I also want to be able to take action on the feedback I was getting,  I went back to the corporate office and implemented some small things that would show I was listening and understood their concerns.”

#4: Think Big. Start Small
When Mr. Steiner arrived in 2014, the organization had recently done an engagement survey, “and the results were disturbing” he admitted. “I felt like it was going to take a long time to re-engage the employees, and rebuild our brand reputation with brokers and customers, who’d come to feel we were one of the most difficult organizations they had ever worked with”.

Mr. Steiner also observed behaviors he had not seen before. “Some people were unprofessional, not dressed properly or acting insubordinate. I had to ask myself “Do I immediately address those things or try to first to win trust?” Previously, in turnaround situations, I’d tackle the hard things first. I felt if I started tackling those things right away, it would sow further distrust.

Rather than try to immediately make sweeping organizational, cultural and people changes, which would create even more fear and uncertainty, Mr. Steiner started to make small changes designed to rebuild trust.

“I made a couple of key leadership changes where it was clear to me that there was no trust and it was unlikely trust could be restored.  I started hiring new people to reduce workloads and inject energy into the organization.  We created the Emerging Leader Program and started teaching leaders that their job was to help their people be successful.  We revamped much of the way our HR operation interacted with employees, treating them as customers and modeling the kind of customer experience we wanted employees to give our customers” concludes Mr. Steiner

#5: Develop Culture and Exceptional Leadership
“Changing a culture starts at the top with the leadership team.” stated Mr. Steiner.  “Not surprisingly, there was dysfunction in the group, and they had broken into camps.  They often didn’t tolerate each other in meetings and didn’t trust each other.  I did make one change on the senior leadership team, but with the rest, I worked on coaching and developing them”.

In addition to getting them bought into the purpose, Mr. Steiner also worked on establishing Emotionally Intelligent behaviors and responses to conflict. An example of a behavior he wanted to change, Mr. Steiner said “We had people complain about each other, but not talking directly to each other”.  In psychological terms, this is called triangulating and it leads to a lot of dysfunction.

When someone would complain to him about another person, Mr. Steiner would empathize and acknowledge their concerns, and then coach them by asking questions. For example:
• Have you talked to the other person about your concerns?
• Are you assuming a negative intention about that person?
• How could you resolve the conflict and rebuild trust with that person?

“I got people talking to each other” Mr. Steiner continued “I started addressing the behaviors that were causing conflict and I did it in stages depending on the degree of the conflict.  My leaders started to interact differently and model the new behaviors I wanted to establish in the culture.  After just a few months, the team started to gel, and I  could feel the culture slowly starting to shift.

State Fund also began investing in the development of their managers and leaders that reported into the senior team.  They created an emerging leader program that focused on their purpose and developed the leadership capabilities that would drive the culture and performance the organization needed.

The results
In 2014, their engagement scores came in at 49%, one of the worst in the industry.  By 2015, those scored had increased to 63%, so the transformation of culture had really started to take effect. In 2018, their engagement score was 74%, which is 20% above the average for a government entity, and slightly above the commercial insurance industry average!

Mr. Steiner is proud to share “Our employer (policy holder) satisfaction and injured worker satisfaction surveys have improved from the mid 3 range to above 4 on a 1-5 rating scale.  It is impossible to create a great customer experience without a great employee experience.”

While he might have started out saying to himself “OMG, what have I done”, Mr. Steiner started to see changes right away “I thought it would take a long time to transform the culture”. Mr. Steiner explained.  “It confirms my faith in the basic goodness of people – if  you treat people with respect, truly listen to what they have to say, show them they matter, make their purpose clear, and take small actions to create a better employee and customer experience,  people are capable of almost anything.”

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