1 | 2013

®
The Magazine of WorldatWork©

A Business
Transformation
in India Led by
Human Resources
For companies in the service sector, the regulatory environment led to
Human resources the core value to the business is significant losses. Shareholder pres-
helped one provided by employees. Likewise, sure mounted and the board tasked
company employee cost is the greatest expense, management to develop a strategy
successfully commonly ranging from 60 percent that would transform the business.
to 70 percent of all costs in service The private-sector Indian life insur-
transform itself sector companies. These compa- ance industry shrank by 26 percent,
during tumultuous nies provide a perfect opportunity as measured by first-year premiums,
times for the Indian for human resources to help the during 2010-2011 with more than
life insurance company reach its business objec- 44,000 employees losing their jobs.
tives. This article provides a case
industry. study of programs that produced the Background
successful business transformation of Before 2000, India had only one
Rajiv Burman,
Change2Succeed a service company. insurer, which was publicly owned.
Max New York Life, a joint venture After deregulation, the market
of New York Life and the Max exploded and by 2010, 23 private
Group, is a leading Indian busi- insurers operated in India. The
ness group that needed to develop number of life policies in force
a new business strategy in 2011 to increased nearly 12-fold between
save the company. After 10 years of 2000 and 2010 and health insurance
rapid growth, large-scale changes in policies nearly 25-fold. Factors like

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 The industry shrank by 26 percent
in response to the new regulations
because the massive size and cost base became unprofitable.
Agents left in hundreds as commissions were capped,
leading to falling sales and more cost cutting.
better terms, availability of a wide
variety of products and government
incentives boosted the growth of the
industry. India has the largest in-
force policies in the world. From
2000 to 2010, the number of
employees in the sector grew by
131 percent (123,000 to 285,000) and
number of agents by 306 percent
(714,000 to 2.9 million).
In 2010, the government introduced
regulations that changed the product
and profitability landscape. These
regulations, enacted to save the long-
term interests of the industry and
consumers, curtailed the practices
of selling insurance as an investment
and tax-saving vehicle. Low persis-
tency of first-time customers was
widespread because of high-pressure
sales and unrealistic investment
growth expectations. The industry
shrank by 26 percent in response
to the new regulations because the
massive size and cost base became
unprofitable. Agents left in hundreds
as commissions were capped, leading
to falling sales and more cost cutting.
A vicious cycle was in play until
equilibrium was reached. Sales
offices were slimmed down and
layoffs were widespread. More than
44,000 employee jobs and 551,000
agent roles were eliminated. The
employee impact proved even
larger as companies focused on
hiring higher-skilled, more expe-
rienced sales staff and agents to
replace existing staff.
58  | workspan  january 2013
But this was a turning point, not
an end. A 2011 McKinsey study said:
“The Indian life insurance industry
is at a unique point in its evolution.
Since the introduction of significant
regulatory changes in September 2010,
there has been a marked slowdown
in the industry. However, over the
medium to long term, the growth
prospects of the industry remain
attractive, with India likely to remain
one of the fastest growing major life
insurance markets globally. India is
expected to grow at double digits
and account for 10 percent of the
incremental growth in global life
insurance premiums. Between 2010
and 2015, the Indian life insurance
industry’s gross written premiums
(GWPs) are forecast to grow at a rate
between 13 percent and 14 percent to
reach a total of about $110 billion by
2015. Given this outlook, India will
continue to be an important market
for global players in their pursuit for
growth. Besides growth, the industry
will need to focus on two important
objectives: providing long-term
savings and protection, and driving
profitability through sustainable
business models.”
Max New York Life’s
People Strategy
Starting in early 2011, Max New York
Life (MNYL) began a massive change
to ensure implementation of a more
sustainable business strategy. That
new business strategy focused on
selling traditional long-term insurance
products to a more affluent customer
segment (family income of at least
$10,000 a year) and reducing the cost
base to improve margins. This led the
company to shrink from more than
11,000 to more than 7,200 employees
and shut down more than 400 sales
offices in locations with small popula-
tions of affluent customers. But more
important, it required the company
to become more customer-focused,
use a need-based selling approach
and reduce the sales employee
turnover and costs.
This organizationwide transformation
has shown success, and MNYL
exceeded its 2011 business plan by
beating its own and industry estimates.
It exceeded its profit target in 2011.
As part of the business strategic
redesign, human resources led the
review of the changes needed in
the people strategy. This article
focuses on the people strategy for the
agency development manager (ADM)
or sales manager.
The ADM function in life insurance
is the most critical revenue-generating
front-line role. Each ADM hires, trains,
coaches and manages agents who sell
insurance to consumers. The ideal
standard is that each sales manager
hires one or two agents per month.
Over the average tenure of five years, a
successful ADM develops and manages
an effective team of 40 to 45 active
agents. The ADM role became more
important as MNYL lost more than
30,000 agents between 2010 and 2011.
Adding agents and ensuring that they
are active is a crucial metric, with the
board periodically reviewing agent
man-months. To reinforce the metric’s
importance, agent man-months is
one of the factors in determining the
management bonus pool.
Four key elements were identified
based on an assessment of the barriers
and enablers to success for the new
ADM. For the new sales strategy of
targeting affluent customers and
focusing on customer needs, MNYL
needed to change the candidate
profile of an ADM as well as the
training, compensation and employee
value proposition for that position.
Profile
An ideal candidate profile was
determined for the new environment.
A 40-point scale was developed
and screening required a minimum
score. The ideal profile was someone
who was a college graduate, spoke
English, was married, owned a
motorcycle, had a family income
of at least $10,000 a year and had
worked in sales for five to seven
years but not for more than two life
insurance companies. Each element
was based on research of what had
worked in the past. For example:
❙❙ In a socially stratified society such
as in India, it is easier to target
customers if the sales manager
belongs to the same social group.
❙❙ Marriage provided stability and
turnover for married employees was
lower than for unmarried employees.
The new hiring process and selec-
tion criteria were finalized and
rolled out across all offices. Effective
communication was critical with more
than 200 MNYL offices across the
country. Bringing all field HR and
office manager teams together and
rolling out the standardized process
enabled a fast and consistent rollout.
From March through August 2011,
more than 2,000 ADMs were hired. It
may seem that in a country as popu-
lous as India it would be easy to find
candidates who matched the profile.
But the challenge was immense. The
average acceptance rate at MNYL was
one for every nine candidates who
entered the first part of the process —
a numerical aptitude test. Since MNYL
was testing candidates prescreened
by recruitment consultants, the real
acceptance rate of candidates sourced
by consultants was even lower. To hire
2,000 managers, about 20,000 candi-
dates had to be processed by MNYL.
And, the consultants had to reach out
to more than 200,000 aspirants. It
became a significant challenge to find
candidates who met the ideal profile
in an industry that has become unat-
tractive because of major reduction in
force and lower earnings.
Besides identifying multiple recruit-
ment consultants in each city and
training and working with them,
other initiatives were launched. A
number of programs and contests
were run for employee referrals, and
direct hiring was initiated on a large
scale. By end of 2011, 45 percent of
all hires were through consultants,
35 percent through employee referrals
and 20 percent through direct hiring.
Training
Selected candidates were taken
through an intense eight-week
training program, which was much
longer and detailed than previous
programs. The new program
emphasized training employees on
assessing needs of the customers and
providing them a product solution
that met those needs.
Customer feedback on the quality of
sales managers and their knowledge
improved. By the end of 2011, MNYL
had one of the best ratings on the
quality of sales managers among
all private carriers.
Compensation
The sales manager compensation was
redesigned with a fixed base salary
competitive with other industries.
Instead of focusing on just the life
insurance market, base salaries were
targeted against other industries, such
as pharmaceuticals and consumer
products. The need to broaden the
market was driven by a review of exit
interviews. Departing ADMs said they
were able to find much easier jobs
in other industries.
The sales commission program
was altered to provide for a much
higher payout for selling tradi-
tional life insurance products
rather than the investment-linked
products, having a higher level of
persistency and a larger ticket size.
On target, a sales manager could
earn 100 percent of base salary as
commission. Finally, the commission
program was uncapped to allow for
significant earning potential.
Employee Turnover
The high ADM employee turnover
of 85 percent was a significant
barrier to building a trained and
skilled workforce. It led to a huge
hiring focus and high recruitment
costs for the field HR team with
an accompanying neglect of other
objectives, such as employee
engagement and talent management.
A comprehensive strategy was
developed to reduce employee turn-
over. This included designing a new
employee value proposition, hiring
the right candidate and following
tactical turnover management.
❙❙ Employee value proposition. A
complete assessment of the role was
carried out and all aspects were
reviewed. These included compensa-
tion, role, environment, growth and
manager. Based on the review of
past exit data and focus groups with
current employees and potential
employees, the new strategy was to
emphasize MNYL as a sales career
company known for its training.
In addition, an assessment center
review of the managerial skill
set of office managers (supervi-
sors to the ADMs) was done
to weed out poor managers
and identify training needs.
❙❙ Hiring the right candidate. An
ADM or sales manager role in life
insurance is tough. Experience has
shown that even highly successful
january 2013  workspan | 59
 The changes made at MNYL to the candidate profile
of sales managers, their training, compensation and
the employee value proposition
led to a seismic shift.
sales candidates from other
industries find the sector difficult.
Because employee turnover was
the highest during the first three
months of joining, it pointed to
lack of fit with the job. To provide
a better understanding of what
the job entailed than just what job
descriptions and interviews could
offer, the candidates were asked to
demonstrate what a typical sales
employee would do. Part of the
hiring process was to have the short-
listed candidate develop a list of
20 potential customers by sourcing
them through his/her network.
❙❙ Short-term tactics. A number of
short-term solutions was devel-
oped to counter the multiple job
opportunities available in the
market to trained sales managers.
Retention programs with deferred
bonuses, quarterly contests, tenure-
and performance-linked awards,
including higher education, such
as nomination to a company-paid
MBA program, were offered.
Turnover fell to 63 percent by the
end of 2011.
Conclusion
The changes made at MNYL to the
candidate profile of sales managers,
their training, compensation and the
employee value proposition led to a
seismic shift. This and other initiatives
for improving productivity, reducing
costs and building on the multidis-
tribution channels including the new
60  | workspan  january 2013
relationship with Axis bank enabled
business success. By the end of 2011,
the company had achieved or exceeded
its targets on metrics, including:
❙❙ A positive shift to long-term savings
protection products being sold
by agents. In 2011, the propor-
tion of traditional products to
overall sales was 65 percent versus
the previous year of 25 percent.
This increase in sum assured by
2 percent is an outcome of the
company’s enhanced focus on
long-term savings and protection.
❙❙ The company became more profit-
able and significantly exceeded
its target. The company recorded
8 percent growth in gross revenue
to 44.70 billion rupees while
the profit increased 18 times to
5.72 billion rupees compared with
the previous period. The company
also performed well on other param-
eters like asset under management
recording a growth of 18 percent to
153.57 billion rupees over the same
period in FY 2010 while solvency
margin increased to 539 percent.
❙❙ ADM turnover fell from 85 percent
to 63 percent. Although still high,
the reduction has been critical in
ensuring that ADMs can succeed
in their roles and have attrac-
tive careers in life insurance.
❙❙ Customer satisfaction improved and
MNYL achieved the lowest level
of customer complaints. Max New
York Life has now one of the lowest
customer complaints incidence
ratio. The customer complaints
incidence ratio was just 0.28 per
thousand as of Dec. 31, 2011.
❙❙ Costs totaling $20 million were
eliminated from the business. Cost
ratio improved from 42 percent
to 38 percent because of the
impact of cost management initia-
tives taken during the year.
❙❙ The company’s conservation ratio,
which is among the highest at
81 percent, is testimony to its
commitment toward customers. The
13th month persistency at 74 percent
is among the best in the industry.
The new HR strategy was critical
in ensuring the business success
and helped define the value that
human resources can provide to
the business. By being part of the
business strategy design and
implementation, human resources
can redefine its role from a support
function to a front-line function. 
Rajiv Burman is the owner of Change2Succeed
in Toronto, Canada. He can be reached at
burman7@yahoo.ca.
resources plus
For more information, books and
education related to this topic, log on to
www.worldatwork.org and use any or all of
these keywords:
❙❙ Employee turnover
❙❙ Employee engagement
❙❙ Employee retention.