In Sync

Thanks to a broad education through the examination process, actuaries are often leaders, formally or informally, in the organizations they serve. As available theory and tools improve, and as laws, regulations and other factors affecting our work change, we must be lifelong learners and continuously update our knowledge and refine our skills. This article discusses a strong trend in organizations that has been enabled by improved software tools: collaboration within organizations and among organizations. Experience has shown that not all collaboration efforts are effective, so this article discusses elements contributing to healthy collaboration.

During a management training exercise in which I participated, attendees were divided into groups of six to eight people sitting at round tables. At one point, the facilitator asked the group to brainstorm ideas for the uses of a brick—a task not requiring any specialized knowledge. First, each person at every table produced his or her own list of ideas, and then the people at each table produced a joint list that removed any duplicates. The most responses any individual participant conceived was about 100 ideas. However, the joint lists developed by the groups at each table all had more ideas than the longest list from the individual participants.

This simple exercise was a powerful object lesson regarding this idea: “None of us is as smart as all of us.”¹ While this principle might be considered self-evident, the complexities of organizational culture and reward systems, combined with egos and different communication styles, provide obstacles in creating a collaborative environment within and among organizations. However, there are effective ways to address these obstacles, most of which begin with examining one’s own attitudes and behaviors.

Lay Aside Ego

When I first joined the Kansas Insurance Department about six years ago, I was pleased to discover the collegial relationships among state regulatory actuaries. I also learned that a regulatory actuary sometimes addresses issues he or she has little or no prior experience with. The Kansas Insurance commissioner at that time, Sandy Praeger, had served previously as president of the National Association of Insurance Commissioners (NAIC) and wanted her staff to be actively involved in NAIC working groups. So, I joined all three actuarial task forces at the NAIC and became involved in some of the subgroups of those task forces. I quickly learned that if I was going to be an effective member of those groups, I needed to be honest with others and myself about what I didn’t know. In effect, I had to set aside my ego and allow myself to become vulnerable to others. As I did this, my discovery was that my regulatory colleagues, as well as representatives of the American Academy of Actuaries (the Academy) and other groups, turned out to be generous (and patient) with their explanations in answer to my questions. I also discovered that asking questions appeared to help clarify issues for others. Laying aside ego and making myself vulnerable to “you should know that already” turned out to be one of the best approaches I could take in becoming a more effective member of the NAIC task forces and subgroups. I not only learned a lot from participating in those discussions, but I was able to contribute meaningfully because I was willing to ask questions.

Be Open-Minded and Resilient

Earlier in my career, I had the opportunity to be a member of cross-functional company teams for developing new products. The sizes of these teams varied with the size of the company and the complexity of the products being developed. In these product development projects, a balance had to be struck between competitiveness and profit, between leading-edge creativity and practical implementation, and between the iterative nature of the product development process and achieving target dates.

Members of the product development team adopted different roles. Competitive intelligence about products already in the marketplace was necessary. A team member needed to record detailed notes of the discussion to ensure any progress made was retained. Certain team members were terrific at generating ideas. Others were knowledgeable about current administration system capabilities and what it would take to make modifications, if needed. Someone (or perhaps everyone) on the team needed to be mindful of profits and surplus. But perhaps the most important aspect of the team was developing a joint confidence that the project would be successful—that the team would be capable of surmounting any obstacles that arose.

On several of these projects, we reached a point where it seemed that we could go no further because a suitable balance between competing goals, such as competitiveness and profitability, could not be achieved. However, as product development teams, we learned that there was always a solution, even when we couldn’t yet see what it might be. The keys to finding the solution were to be open-minded and persistent in experimenting with different ideas. Much of this work was done outside of the formal team meetings. With analytical skills that often crossed departmental boundaries, an actuarial team member always was instrumental in helping to generate these ideas and in making connections with team members from other areas in the company.

Being on an effective team brings great personal satisfaction, builds confidence in the team process and promotes relationships of respect among team members. Being a good collaborator on a team can overcome stereotypes, as team members get to know each other as people instead of titles.

See the Big Picture

John Abele wrote an article titled “Bringing Minds Together,”² in which he discussed building a community of collaborators. This community could either be inside of a single entity, or include collaborations among individuals or entities that are not organizationally related. He states: “Community building begins with convincing people who don’t need to work together that they should. This depends on:

• Inspiring them with a vision of change that is beyond any of their powers to bring about individually;
• Convincing them that the other collaborators are vital to the effort and equal to the challenge; and
• Preventing any one party from benefiting so much that the others feel their contributions are being exploited.”

He quotes Margaret Mead as stating: “Never underestimate the power of a small dedicated group of people to change the world. Indeed, it’s the only thing that ever has.”

People are motivated by feeling that their work is making a difference. The prospect of truly having a significant positive impact on our organizations through our daily activities can overcome cynicism and engage people to put forth their best efforts. Actuaries are uniquely qualified to help people see and understand the significance of the work being done because of the integrated nature of our educational system. The road to fellowship incorporates detailed study of many topics, including marketing, underwriting, accounting, investing, economics and risk analysis. We can see how the various parts of a financial organization or system interact with each other.

In a company setting, I have had interactions with people from every department because actuarial work touches each aspect of company operations. Even in discussions about principle-based reserves (PBR), it has been helpful to remind people of PBR’s original purpose—embedding risk analysis in reserve and capital calculations. Keeping our eyes on the bigger picture helps improve communication, avoid distracting side-issues and stay motivated to complete worthwhile projects.

Build Trust

Abele also mentions the importance of trust among collaborators, trust that is earned by “true authenticity.” In my experience, this authenticity must start with the person or organization initiating the collaboration as other participants are invited to join the collaboration community or project. I have found honesty to be disarming in my communication with others. There is so much “spinning” in communications these days that straightforward honesty sometimes may come as a surprise.

In management training, communication styles are examined and techniques practiced. However, using these skills to manipulate others in a collaboration must be scrupulously avoided. Each party must be committed to helping the other participants in the collaboration succeed, as well as themselves. In The Seven Habits of Highly Effective People, Stephen R. Covey states this principle succinctly as “Win Win or No Deal.”³ In a collaborative setting, this axiom may be expanded to “Win Win Win Win … or No Deal.”

Value Diversity

While I was serving as a group actuary for a mid-sized life insurance company, a team was assembled to develop a new group administration system for group term life insurance business. The group was led by an experienced IT person, and the team consisted of subject-matter experts from different parts of the company. Up to a point, this project was one of the most enjoyable team projects that I have experienced. We each found our natural roles on the team. We respected each other and enjoyed working together. Ultimately, however, this collaborative project was not successful. Why? We designed a luxury car system instead of the economy car our company could afford. Our design for the new group system was not implemented.

We were a unified team, but we didn’t realize that we were missing several pieces for a successful project. As a team, we did not lay out the expectations and parameters of the project well enough. Each of us on the team needed to become “self leaders”⁴ on the project, each taking responsibility for the entire project and not just representing our departments. Most important, we were missing a team member in the role of a constructive skeptic. There was no one to question our luxury car approach to the design. We were participating in groupthink and didn’t know it.

The role of constructive skepticism in creating a healthy and successful collaboration relates to valuing diverse points of view. Some collaborators may be hesitant to express points of view different from the more vocal members of a collaborative community or team, so the group (and particularly its leaders) must intentionally solicit such input. It is important to discern whether the diverse point of view is expressed because of misunderstanding the issues or because of a correct understanding of the issues. If the latter is the case, this additional point of view can become a valuable catalyst for producing a better project result. The authors of Collaboration Begins with You state: “Conflict can be very healthy within a collaborative group, as long as everyone sticks to the issues and things don’t get personal. It can lead to breakthrough learnings and innovation.”⁵ Open-minded skeptics can be among the most valuable collaborators, whereas closed-minded skeptics are rarely constructive.

Build a Collaborative Group, including for Peer Review

One important form of collaboration is peer review. Within our company, I have had the chance to review documents produced by others and offer suggestions. Likewise, I have been the beneficiary of helpful reviews of my work. Recently, I discovered that collaborating internally on an assumption- setting project with two other people in our firm provided significant value. These two individuals have more expertise than I do in certain areas, and collaborating with them produced excellent discussions and useful insights in both directions. Peer review improves project quality, helps avoid mistakes and creates a collaborative relationship for the benefit of all parties that can include sharing ideas and asking questions unrelated to the peer review.

Somewhat to my surprise, I have found that I enjoy research, including expanding experience studies in support of setting assumptions for cash flow projections, such as PBR calculations. Since I don’t have all the tools needed to do the job alone, I have sought to build a network of collaborators with whom to work. I was very fortunate to readily find like-minded individuals and organizations that genuinely share common interests in the subjects we research.

Together with one group of researchers, we are looking at final expense and preneed mortality and lapse experience, and we are devising ways to improve company experience in those lines of business. We are working on using predictive modeling tools to develop dynamic functions of surrender and utilization for variable annuities with guaranteed lifetime withdrawal benefits, along with fixed indexed annuities with similar living benefits. With other researchers, we are going to be looking at level premium term life insurance mortality and lapse experience, as well as using predictive tools to develop dynamic functions of shock lapse and mortality deterioration. With still other researchers, we are looking to build a multirisk scenario generator that will be able to produce scenarios at specified probability levels for the key risks of long-tailed insurance products. We are also looking to develop an objectivity measure of assumptions that can give regulators greater assurance of reasonable assumptions and therefore be used in regulatory submissions.

Collaboration is a powerful tool to accomplish goals beyond the reach of one individual or organization. Truly, “None of us is as smart as all of us.” To overcome obstacles such as organizational culture and interpersonal communication styles, the prospective collaborator must look first in the mirror and lay aside his or her ego to become an active participant in asking useful questions, become open-minded and resilient in the face of challenges, help other collaborators understand and stay focused on the important meaning of a collaborative project, build trust with other collaborators through authentic interest in the success of all collaborators, and learn to value and generate new insights based on diverse points of view.