Question

1. Discuss which forms of organizational design and structure that fit nationwide insurance company. Explain and cite your sources. Evaluate whether or not you think this organization structure is the most effective. If not, what other design/structure from your textbook would you recommend?

2. Explain Collins' "Culture of Discipline." What evidence would tell you if nationwide insurance company practiced a "culture of discipline"?

Answer 1

1. Ans :-

a) Mutual Structure
b) Stock Structure
c) Mutual vs. Stock Companies
d) Demutualization
e) Advantages of Demutualization
f) Policyholder Benefits

a) Mutual Structure :-

• A mutual insurance company is an insurance company that is not publicly traded.

• The company is effectively owned by the policyholders. Because of this, the interests of the management are aligned with those of the policyholders in a direct way.

• ​The management is incentivized to work for the long-term benefit of the policyholders, since actions that work against the policyholders may cause them to leave the company.
• Mutual insurers generally have only one way to make money. They must sell new policies. The exception to this is life insurers, which may also raise funds through interest on policy loans.

b) Stock Structure:-

• A stock insurance company is publicly traded. The company is not necessarily disincentivized to work for the long-term best interest of the policyholders.
• ​However, the insurer has to balance the interests of the policyholders with that of outside stockholders.
• ​These stockholders may or may not own policies issued by the company. A stock company may raise money by selling policies or issuing more stock of the company.
• ​In the case of life insurance companies, stock insurers may encourage policyholders to take policy loans and collect interest payments.
• The Stock Structure is much popular among the Insurance Companies. As Insurance Company is a big institution to handle and also require heavy capital which can be collected from the stockholder.

c) Mutual vs. Stock Companies :-

• The first mutual insurance organizations were loose-knit groups of merchants who pooled emergency funds for their mutual benefit in case of fire.
• Modern mutual insurance companies are run as cooperatives, in some ways resembling credit unions.
• Every policyholder is also a part owner in the company and enjoys better dividends or cash values when the company flourishes.
• Stock companies sell shares in the business, like other companies, and the shareholders own the company.
• This creates a potential conflict between the shareholders' interests and the policyholders' interests, and well-run companies are careful to address the needs of both groups.

d) Demutualization :-

• Although several of the industry's largest players are mutual companies, they operate at a disadvantage in the corporate marketplace.
• Borrowing is their only option for raising large quantities of capital, and it's not always possible to fund a proposed acquisition or expansion through borrowing.
• To overcome this difficulty, some companies choose to convert to a publicly traded structure, a process called "demutualization."
• A majority of policyholders must vote to support the decision, and an initial public offering must be underwritten.
• The policyholders' stake in the new company is calculated through a formula that accounts for the quantity of insurance they own and the length of time they've made premium payments.

e) Advantages of Demutualization :-

• Demutualization typically takes 18 to 24 months. Once the process is complete, the newly reorganized company can trade its shares on the open market and float new issues as needed to generate capital.
• That makes stock-based companies nimbler and better able to respond to changing market conditions.
• It's easier for them to make an acquisition, attract a takeover bid, or -- if necessary -- repel a takeover bid.
• A stock company can benefit from any increase in its share price, as well as the performance of its own investment portfolio. At least in theory, it results in a stronger company that's capable of faster growth.

f) Policyholder Benefits :-

• When a company proposes demutualization, policyholders are offered compensation for their ownership stake.
• The company's proposal will outline a variety of options, usually including a cash settlement, stock in the new company, increased cash value in your policies or a combination of several benefits.
• Policyholders who accept stock in the new company continue to hold an ownership stake.
• Those who accept cash can reinvest it as they please. Any existing policies will remain unchanged, as long as they're kept in force.

2.Ans :-
​
a) Collins' "Culture of Discipline.":-
b) "culture of discipline":-

a) Collins' "Culture of Discipline.":-

• Jim Collins said that “a culture of discipline is not a principle of business, it is a principle of greatness.”
• ​Those words might resonate with many leaders who are feeling frustrated about aspects of accountability, attention to detail, collaboration, or some other area in their organization. The reality is that discipline must start with the habits, routines, and rigor of leadership.

​b) "culture of discipline":-

1.Discipline Starts at the Top
2.Culture Core – Your Purpose and Values
3.Priorities and Measures
4.Daily Management

1.Discipline Starts at the Top:-

• ​Many leaders jump to conclusions about the source of potential cultural problems or frustrations in their organization.

• A good example is accountability. While a leader might be frustrated with the lack of follow-up, proactive action, and attention to detail of their employees, those same employees are often complaining about a lack of clear priorities, expectations, and support.

I regularly ask top leaders to identify their #1 performance priority (priorities like growth, profit, customer satisfaction, etc. are often raised). I then ask them what their #1 frustration or challenge is with how their team works together to support their #1 performance priority. Accountability is typically the top response, but it’s closely followed by challenges related to collaboration, teamwork, innovation and creativity. After deeper discussion, in nearly every instance, the issue was not accountability, teamwork or creativity, but a lack of discipline at the top of the organization. It didn’t matter if it was a large global organization or a small business, the lack of consistent habits and rigor was clearly impacting performance.   These same organizations often try everything from performance management systems to training, coaching and other approaches to deal with the symptoms, rather than the root cause.

2) Culture Core – Your Purpose and Values :-

• The purpose and/or mission is clearly documented and consistently shared
• Values are documented and further clarified with expected behaviors captured in stories, definitions, or examples

3) Priorities and Measures :-

• The top leader has clarified the top performance priorities and their vision for the focus of any improvement necessary (Note: John Kotter highlighted that most leaders under communicate their change vision by a factor of 10, 100 or even 1000X)
• The strategy of the organization is documented
• The general strategy is communicated clearly to the organization with explanation of supporting strategic priorities (areas of focus)
• Top leaders use a consistent approach to engage the organization in defining the goals and related improvements that support the strategy
• Goals or objectives are clearly documented and rigorously tracked in a standard format
• Leading and lagging measures are defined
• Standard formats are used for at least a sub-set of the measures

4) Daily Management :-

• A regular management meeting (staff meeting, leadership team meeting, etc.) is held to track the status of goals and measures
• A standard agenda framework is followed for management meetings
• Actions are captured and tracked from management meetings
• Top leaders “confront reality” and surface difficult issues for resolution during management meetings
• Regularly scheduled group communication meetings, webcasts, or other approaches are consistently maintained
• A standard agenda framework is used for regularly scheduled communication activities
• Top leaders periodically check with individuals and sub-groups before, during, and after communication activities to confirm and/or improve clarity
• Top leaders surface drama, rumors, and the most serious concerns for open discussion in communication activities
• There is accountability among top leaders for making and meeting commitments related to goals and measures
• A disciplined process to hire for competence and cultural fit is rigorously followed

​1.Ans :- Introduction:-

Insurance companies operate under one of two business structures. These structures have their own unique features, advantages and disadvantages. The structure of the company also drives the long-term business activity and how the company operates. It may affect the investments it makes and even the types of policies it designs and sells.