All inclusive

Fred Lowe’s motivation back in 1997 was simple: Venture capitalists had just pumped $22 million into his company, the former CEO had just retired and it was now Lowe’s job to find a way to make those new stakeholders happy.

Lowe wanted to grow AmCOMP Inc., but before he could take the workers’ compensation insurer outside its Florida-based comfort zone, he had to make sure the employees were comfortable with one another. The company was profitable, but Lowe, now chairman, president and CEO, knew that for it to grow successfully, the departments comprising the company had to learn to communicate more effectively.

If people in the same building weren’t talking to one another successfully, how could he ever expect offices across the country to do so?

“We felt that the company had built silos between the various departments,” Lowe says. “There weren’t the interactions between the departments we felt were necessary to achieve what we hoped to achieve, particularly when we were embarking on an expansion plan that was going to take us into other states.”

Much of the problem was simply the way the office was structured. During its 15 years, the company had grown from roughly 4,000 square feet to more than 30,000 square feet.

“We don’t have the best physical setup in our home office, which is where the silos began,” Lowe says. “We’re on four different floors. The building wasn’t built with us in mind. We felt we had to do something extraordinary to break down and get people communicating more closely.”

To accomplish that, Lowe, along with executive vice president and COO Debra Cerre-Ruedisili, decided to get every employee involved in writing the business plan that would take the company to the next stage in its evolution.

“Our objective was to get the departments communicating more closely with each other,” Lowe says. “We … explained we were going to start from the bottom up and put a business plan together that incorporated everyone’s objectives and goals.”

The company had about 60 employees at the time. Most department managers had just three or four employees, and Lowe wanted to get them all involved in the process. Before they got started, management explained the reasoning behind the change in process.

“We communicated that what we were trying to achieve is getting the different departments of our company working together to produce an improved result for the company, which then produces improved income for employees, managers and executives of the company,” Lowe says. “We explained why we thought it was important to do. We wanted the company’s culture to be a representation of the employees of the company, and therefore, their input was critical to us achieving the kind of business plan we wanted to achieve. That then gives us something to measure ourselves by as we go forward.”

Managers made writing the business plan an integral part of their regular department meetings. Despite the time management took to explain why the change was made, not everyone was on board initially.

“The first time around, I heard some grumbling — ‘I don’t have time to do this,’” he says. “We haven’t heard that kind of grumbling in the last several years. Frankly, it doesn’t take as much of their time today as it did the first time around.

“Some persons attacked it enthusiastically. Some thought, ‘What are we doing this for?’ As they got into it, they developed a vision statement and mission statement. Different departments had different suggestions about what the vision statement of the company should be and what the mission statement could be. It ultimately evolved into what it is today.”

The initial plan took about four months to complete, four times longer than it does today even though the company now has about 450 employees.

“We’d follow up with subsequent management meetings as to what kind of progress they were making and keep setting targets as to time to get it completed,” Lowe says. “It took us a lot longer than we originally had envisioned. We felt, ultimately, the effort was worthwhile.

“(In) subsequent years you build on (the existing plan). Each year, we send out the previous year’s business plan. They have a chance to review what their previous objectives were last year and modify them.”

Department managers, along with their team, discuss and set new goals and targets.

For example, the Midwest region set a goal to write and retain profitable workers’ compensation insurance business totaling more than $115 million in 2006.

“In each business plan, it’s been our goal to retain as much profitable business as we can,” Lowe says. “In doing that, it also feeds into part of the budget process, because they have had to look at their book of business, see what they wanted to renew and then make estimates on what we wanted to renew, how much we are able to renew and so forth.”

In the old approach to business plan writing, a top-level manager pulled bits and pieces of information from the departments and put the document together. There was no need for any department to check with any other. By involving the employees, each department must now talk to the others to get the necessary information.

“A lot of interplay goes on in expressing those goals,” Lowe says. “They have a targeted loss ratio. Our internal actuary gets involved with (that department) in that discussion as to what kind of pricing they have to have to get to the goals that they have. They have to evaluate the competition to see if they can achieve that pricing in the market. The very nature of it achieves a lot of the communication goals.”

Each department submits its goals to the home office, where they are compiled into a comprehensive document.

“Then we send the business plan by e-mail to all the members of the management team,” Lowe says. “They sit down with their department heads. The department heads sit down with their employees and talk about their portions of the business plan.

“We like for employees to be familiar with what other regions’ goals and objectives are and what they are doing to achieve those goals and objectives. They might find some thoughts and ideas in there that they can use I their own regions.”

The process is complete once the company’s audited financials are compiled.

“Now we do the business plan every year; it starts from the bottom up every year,” Lowe says. “Everybody identifies what the critical success factors are for their region, their state and for their department. All those things are included in the business plan as goals of the company.”

Every employee gets a copy of the plan every year.

Going through this process, employees are more engaged in the company, and they now have more interest in what is happening outside their own areas.

“Everybody is aware of what each region’s and each state’s goals are, and there is a certain amount of peer pressure — ‘Are you achieving your goals?’” Lowe says. “‘We’re doing pretty good on ours.’ It has forced everyone in the company to clearly understand what they are trying to achieve. Sometimes, that in itself is difficult to communicate effectively.”

Getting everyone involved in the planning process has broken down the silos that were an obstacle to the company’s growth.

“I’m not going to tell you communication is always perfect through every department of our company, but compared to where it was 10 years ago, it’s not even close,” Lowe says. “The efforts that we’ve made to develop this culture, which is a difficult word to define, has made all of our departments in all of our states and all of our regions more sensitive to the things that are necessary to develop an underwriting profit in this company.”

Having the employees develop the business plan was all about better communication, and that is something that Lowe tries to carry into other parts of the organization, as well.

“The lesson that we learned along the way was how important it was to communicate with all the parties that are involved in our company,” Lowe says. “I would start with employee communication. Communication can be so impersonal today. You’ve got e-mails, voicemails, letters, telephone conversations.

“We found out communication by edict was not nearly as effective as turning the communication upside down. We had so many things to accomplish. Communication was critical to getting all of our employees on the same page, having the same goals. We think over-the-top, extra-effort communicating is a critical factor in developing the culture that has delivered the results that we have delivered over the past five or 10 years.”

The culture of employee involvement has created a culture that Lowe says is key to AmCOMP’s success.

“A relatively small percentage of property casualty insurance companies consistently have underwriting profits,” he says. “Most of them depend on their investment income to generate their net income at the end of the day. We have tried to develop this culture where we make an underwriting profit every year. We’ve been successful in developing a culture that has targets and goals as an underwriting profit company.

“That’s the culture that we’re trying very, very hard to maintain, and at the same time, grow the company. The most difficult time to develop underwriting profits is when you’re also pushing to grow your top line. We want to make it clear the growth of our top line is secondary to the goal of achieving an underwriting profit in our company.”

Lowe’s strategies are working. In 2005, the company posted revenue of $267 million, and Lowe expects that to grow 5 percent to 6 percent this year.

“Despite being capital constrained through 2004, we outperformed the workers’ compensation industry over the past 10 years by 19 percent a year,” Lowe says. “We’ve grown four times faster than the industry in the last five years. We’ve had a return on equity that’s twice as high as the industry over the past five years.

“Ultimately, what it’s resulted in, because of that record, we were able to raise $32 million of venture surplus in 2004 and an additional $48 million of stockholders’ equity in our IPO last February.”

Lowe knows not to mess with a good thing.

“It’s produced results for us,” Lowe says. “We certainly don’t do everything perfectly. We’ve had missteps. We’ve eaten the mistakes and hopefully learned something from them and hope we don’t replicate them in the future.”

HOW TO REACH: AmCOMP Inc., (561) 840-7171 or

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