The answer man Featured

7:00pm EDT January 31, 2007

John Hayden’s secret to success might be his ability to pare down any problem to its core.

When the Midland Co. needed to expand its portfolio of offerings beyond insurance on manufactured homes to a broader range of coverages, it launched a batch of new products, only to find itself struggling to break into new markets and overstretching its resources in the effort. “How many different products could we master at one time?” says Hayden, president and CEO of Midland. “Yet, we knew we needed all the different products in order to capture a meaningful enough place in an agent’s office.”

Recognizing that his team was struggling with mastering so many new products at one time, yet knowing that it must do so, Hayden simply lumped the 15 products into four groupings, concentrating on their similarities and approaching their marketing and development as related products. “Whether it was art or science, I don’t really know,” says Hayden. “I grouped the products together into four buckets: residential property, recreational casualty, financial institutions and all other. Somehow, magically, by putting 15 products into four buckets, we had sufficient resources to execute them.”

Art, science or magic, Hayden has been successful in growing Midland from a single-product company to a much more diverse, multiproduct company since 2000, when it posted revenue of $539 million. In 2005, Midland’s revenue was $733 million, and it grew at a double-digit rate on top of that in 2006. Net income has improved substantially over that period, from $35 million in 2000 to $65 million in 2005.

The one-pager
Taking a problem and trimming it down to more easily digestible portions has been one way Hayden and his team have tackled the business challenges they find on its plate.

Around the time that Midland was rolling out its new products, Hayden decided he wanted to communicate the company’s values and strategic and operational goals more completely and clearly to its growing employee base, which was approaching 1,000 associates at the time. “I wanted everybody in the organization to be aligned around what it was we were trying to do,” Hayden says. “I didn’t want them to see the decisions we were making as mysterious or made from on high. I wanted everyone in the organization to feel as if they were in the room, either literally or figuratively. I began to put the gospel down in writing.”

His first try turned out a long-winded document that expounded on the company’s strategy, values, vision and goals.

“The problem was we had about eight or nine pages of propaganda, and people would dutifully post all of these eight or nine pages of propaganda on their workstation walls, but it was simply too much to remember,” Hayden says.

“I had a wonderful adviser at the time who asked me, ‘Is there any way you could boil this down to one page?’”

Hayden sliced and diced the multipage work until he got it down to a considerably more condensed version.

“We now have a document that we refer to throughout the organization as the one-pager, and it is our corporate DNA,” he says. “By getting the critical elements of our operating framework and our strategic framework down on a single sheet of paper, it’s made it possible for the organization to get their minds around it.”

On one side of the page, Midland’s strategic framework is stated concisely. “Compete on value, not on price,” for instance, is the profit strategy. Midland’s people strategy is, “Attract, retain, align and invest.” “It’s all in sound bites,” says Hayden. “I believe in sound bites versus paragraphs. People can remember three-, four-, five-word phrases, but they can’t remember paragraphs. So if we can get all of our key deliverables into short phrases that become memorable, memorable becomes actionable and actionable becomes results. It really is that simple at the end of the day.”

Simplicity leads to success
Hayden says he believes that the simplicity of the message has helped to produce positive financial performance at Midland since it extended its product lines, particularly in one key industry measure. Midland’s combined ratio — the combination of losses, commission expenses and operating expenses against every dollar in premium collected — has improved substantially since 2001, when it stood at 99 percent. By 2005, it had improved to 93.8 percent.

It’s also been a plus from a human resources perspective.

“What’s happened in the years since we’ve started to get focused on it is a sense of community, a real sense of alignment,” says Hayden. “Our turnover is very low. Over the last three years, it averages 7.5 percent, and we drive more than half of that turnover. We monitor our desirable and undesirable turnover, and for every one person who leaves that we wish hadn’t, we try to have one-and-a-half leave us that has a performance issue of one sort or another.

“It’s all kind of coming home to roost in the numbers. All I can tell you is, if you set clear standards, you begin to perform to them. I’d say that as a leader, a couple of things we’ve done to drive the results are first, to have conceived of the one-pager and next to have articulated it clearly.”

Hayden says that while it addresses fundamental principles and objectives for Midland, the one-pager isn’t static. Rather, the company makes improvements in the language and changes it to include, for instance, new elements of strategy, the introduction of something fundamentally new to the business, a new distribution strategy or a new technology platform. “This document is a living, breathing document,” says Hayden. “It’s revised at least once annually, but 80 percent or more of its content remains constant. Sometimes, the wording of a particular element in a prior draft may have been confusing to people. So where there may be a lot of confusion about what a set of words might mean, we’ll try to refine those words. As long as it’s resonating, we’ll leave it alone, but when we need to modify it to capture what we’re trying to do with the business over the next several years, we’ll modify it.”

At town hall meetings at least twice a year, everyone is brought together for an explanation of the annual business plan. Usually in February, when the company conducts its profit incentive distribution, all employees get a revised copy of the one-pager, and Hayden discusses it with them. “So there’s real alignment around mission, vision, values, strategic objectives and strategic imperatives,” says Hayden. “It’s the repetition that makes everybody understand that this is the way we’re going to conduct our business.”

The right initiatives
When Midland was trying to figure out how to maximize the new products it had introduced in the 2000 timeframe, Hayden enlisted the help of a consultant to survey the projects Midland had under way and suggest ways to apply its resources to accomplish them. “He put all of our initiatives on yellow Post-It notes and put them all up on a flip chart,” says Hayden. “As it turned out, there were 199 items on that flip chart. We had a leadership meeting, and he asked which of the 199 items were critical. I said, ‘They all are.’ Then he asked which of them had to get done. I said, ‘They all do.’”

The consultant told him they weren’t all going to get done, but Hayden insisted they had to find a way to do it.

“That was the day of epiphany, I guess,” says Hayden. “What I told him was that all these initiatives had surfaced from within the organization. I didn’t make them up. These are things that our people think they have to get done in order to execute their jobs and achieve our objectives.”

Out of that experience emerged a process that allows the team to analyze each proposed initiative and decide, based on need and available resources, which will be pursued in a given year. To manage the process, Hayden moved Midland’s project office out of its IT group, made it an organizationwide function and brought the consultant on full-time to oversee it. “Now, our project office is the central part of our annual planning process,” Hayden says. “Everyone submits their initiatives. It’s like the holiday season; everyone submits their list of things they want on Christmas morning. Then we have a cross-functional process that sorts through each of the initiatives. Typically, there will be in excess of 140 initiatives each year, some carried over from the previous year. What we’ll end up doing is agreeing to fund between 25 and 30 of those initiatives, no more. So the vast majority of them end up on the editing room floor. Amazingly, our people are happier because they know that we’re allocating sufficient resources to get those 25 to 30 projects done.”

And what about the proposals that don’t make the cut? Again, like Christmas, their proponents know that they’re not going to get everything they ask for.

“People are pretty creative,” says Hayden. “If their project didn’t make the cut, somehow they’ll find a way to work it in in a cheaper version to one that did get funded. As a result, instead of doing 199 things halfway well, we’re doing 25 or 30 things all the way well, and we’re sliding a few other things in along the way.

“So we’re allocating resources more judiciously, far more deliberately and with the end in mind. I would tell you that our ability to produce results today is in large measure attributable to what we’re doing in this project office as we’ve imposed process discipline across the organization.”

While Hayden is sold on the value and utility of tools like the one-pager, he also knows that leading a company like Midland takes more than the efforts and skill of one person.

“Leadership is not a one-man job, and so making sure that each of the significant areas of the company has effective leadership in place is important,” says Hayden. “When I talk about our leadership board, it’s 15 senior managers throughout the organization who are all experienced professionals. They’re not just technically proficient, they understand what leadership is and what their job is and are executing leadership effectively. So that group has to be well-aligned; we must have a very clear sense of what the shared vision is.

“They each have their jobs to do, and we have to communicate frequently and openly in order to stay aligned. Separate and apart from that, they have to cascade the key messages through their organizations effectively and reinforce them regularly.”

HOW TO REACH: The Midland Co., www.midlandcompany.com