Service Comes Firstº

An interview with USAA·s Robert F. McDermott

Presented toº Prof. S. K. Mukherjee
By«Group 1 Rahul Rakhee Shweta Sourav Tanuja Vipin Vinayak

The case deals with« ¶ How McDermott·s revolutionary approach to USAA·s business & to its customer·s needs carved out its the
fate of towards the an all new horizon«·

Under his leadership, USAA grew from the 16th to the 5th largest insurer of private automobiles in the nation and the nation's 4th largest homeowner insurer. In his 22years as CEO of the United Services Automobile Association, Robert F. McDermott has built a company with a reputation for superb service in an industry infamous for its indifference to the customers«

and Internet sales and service was launched in 1999 via its website. . In the late 1960s USAA began a transition from mail to phone based sales and service. The company was one of the pioneers of direct marketing and most of its business is conducted over the Internet or telephone using employees instead of agents. banking. investment and financial planning products and services. A toll-free number was launched in 1978.USAA«An Overview Formed in1922 by 25 army officers to self-insure each other when they were unable to secure auto insurance due to the perception that they were a high-risk group. Until the 1960s the bulk of its business was conducted via mail. USAA has since expanded to serve all members of the US Armed Forces & their families with property & casualty insurance. life insurance.

Holds $20.000 employees for 2 million customers. .7 billion worth assets & 14. 3. including imaging and expert systems.USAA after McDermott·s revolutionary reign« Fifth largest insurance company in US & amongst Fortune 500 companies. Customers«A niche market (active and former military officers and their families) along with a parallel market of civilians. Technology«Innovative use of technology. Single-minded Focus ² Service Quality & its 3 components« 1. 2. Workforce« Progressive employment practices and commitment to continuous development of its work force.

USAA has grown from $ 200 million (as under Ernst & Young) to $ 20. .7 billion under McDermott.The secret behind growth & profitability ´Service comes ahead of profits or growthµ That·s the key ´the travelling of extra mile for the customer serviceµ that even without any independent external agents or national advertising campaigns & the customer base for principal financial product base being just 2-3% of USs· population.

00. µOur members started this company & own it . so this company exists to serve their needs. Justification for generousity : ´Service isn·t a matter of generousity .000 were incurred during the Gulf War which as per the company were insignificant as it considered human loss to be more terrible.McDermot took the first step with the concept of Customer Strategy Organisation i.e«. its our daily bread«µ Was the path of service orientation that simple ! & the Losses ? .µ Example : Selling policy even during Desert Storm & Setting up of hotline ² The Desert Storm Assistance Center The losses worth $8.

No horizontal communication (Lot of smaller departments mostly run by war lords who didn·t communicate) No vision of company as a whole. application. correspondence etc.50. claim forms. Company was into 2 divisions : auto & multiple line.000 employees for 6.) . Loads of paper work to hamper efficiency (Most of the files were lost during the process so even 200-300 college going people were hired during nights to find files) 3.USAA before McDermott« Majorly bureaucracy problems.000 members (So every desk was covered with stacks of paper files.

we were good on price. it just didn·t always succeed«We were good on claims. we were honest & honourable. In most other categories.´ The company always tried to give good service. we fell short«µ .

Gap Model of Service Quality of USAA initially« CUSTOMER Expected Service Customer Gap Perceived Service External Communications to Customers COMPANY Service Delivery GAP 3 Customer-Driven Service Designs and Standards GAP 4 GAP 1 GAP 2 Company Perceptions of Consumer Expectations .

Allurement for sticking to USAA inspite of poor service initially .

McDermott·s initiations to get the company back on track« The four basic decisions ² Automated the policy writing system.(´Enrichedµ employees) Decentralized the organization. Had an education and training program to upgrade employee quailty. . Reduced the number of employees by the means of attrition without actually firing anyone.

Impact on USAA·s Service & Reputation« The pro-active approach towards within the organization transformed the company in a revolutionary manner« Decentralization Education & training base The application of the buzzword ¶Empowerment· With a dawn of excellent service Service Insurance Core Product Augmented Product .

Bringing teachers from 6 local colleges and university and introducing training programs for professional designations. .The 3 criterions of Empowerment of Employees« Empowering with knowledge ² Giving them training and education with 211 full time instructors & 75 class rooms. Development of a tuition program & pay the fees for anybody perusing a business degree. 30% of the employees are in education & development programs.

The 3 criterions of Empowerment of Employees« Empowering with technology ² Information Expert systems Image processing Thus. . allowing them to serve the customers better than any other insurance company.

The 3 criterions of Empowerment of Employees« Empowering with delegated authority ² Service representatives can make policy changes on the spot. . To improve service its got to come from the people in the front line. Can also invent new improvements in the systems. Claims representatives can authorized certain payments without any inspections.

most left when transferred. ‡ People who refused to change with the company. . ‡ Another group left when job got harder.People not ready to adopt change ‡ When change was promised it scared some people.

. It will also make the organization immoral and inefficient and inflexible.Why there were no quotas at USAA It has got military background where integration worked. Segregation is bound to come if quotas are given.

‡ Created a forced distribution system. . ‡ Gave pay for actual performance. ‡ Put in a new merit evaluation system and worked with supervisors until the understood it. ‡ Preservation of old inequalities based on seniority and habit were abolished.Changes made in USAA to gain efficiency« ‡ Minorities were hired and later discovered that they were excellent employees and conscientious and hungry for opportunities. ‡ Changed the merit system which wasn't totally objective ² there was a bias in the system.

Each months· FOM tracks 5 areas« 1. Developed a separate tool called the family of measures to track the quality of individuals & unit performers.Merit evaluation and Family of Measures« Supervisors conducted annual evaluations of employees on a range of performance and behavioral skills and rate quality of judgment & initiative. Service Timeliness 4. FOM principal function is to measure progress & not to give grades«µ . Resource Utilization 5. Quality 2. Quantity 3. Customer Satisfaction ´USAA·s goal is continuous improvement.

We were not making changes just to weed out poor performers. We were also improving management along-with a new concept's introduction ´Painting the Bridgeµ .

‡ ¶ Love thy neighbor as thyself ¶ Golden Rule ENRICHES THE JOB & ENRICHES LIFE« . ‡ Educate themselves for experienced & changing jobs ² Job Enrichment.Efficiency to rewarding jobs« ‡ Painting the bridge ² provided a meaning to jobs.

Service«Is it that important ? ? ´ We know they·ve got a problem. that·s why they·re calling. & our people know that. Members trust us to help them. I think that makes them feel good« I think they like being needed«µ ...

HIGH Relational Sellers· interest in relationships Exchange Discrete / LOW Transactional LOW HIGH Buyers· interest in relationships .

the car & that costs a lot of moneyµ . addressed . stamped and sorted by the computer Most other companies would look at computer. stuffed .Speciality Provisions for Niche Members as cost cutting« USAA tended towards believing their customers on some contexts rather than checking all applications & the facilitator was their Support System·s enhancement of the functionability of their ground level employees through recording of all possible relevant data (including even minutest of details). ´And the check would go out that very day ² written . For claims also USAA tended to believing their customers & reflected promptness in delivery of cheques for reimbursements of losses.

Adding yet another group of associate membership (without ownership) which till now provides most of growth as a segment.Contingency Planning«In case the customer base shrinks ! USAA took two ways to it« Property & causality insurance (for auto & homeowners) was only sold to members. . life insurance or mutual funds were meant for all. While bank & credit cards .

architects and engineers outnumbered the number of officers then they have to put in a war clause if the country goes to a war. ´I wanted USAA to think about the events in the life of a career officer and then workout ways of helping him to get through them«µ .Broadening of membership ² a NO ² NO Strengthening the niche ! ! ! If doctors. They want to stick to a niche market instead of skimming the market with a series of gimmicky products ² thereby forming a bond with customers & even serving for their in-depth needs ² by asking for an intimate involvement by seeking for their needs & then moving accordingly.

USAA ² From heaps of paper work to a step beyond paperlessness« Every letter had to undergo 55steps in Auto insurance Start up automation ² Automated Policy Writing System ² bought Quasi on-line system For claims Integrated Workstation Multimedia System Imaging 5 year policy & creation Of AIE (Automated Insurance Environment) Knowledge based systems ² Expert Systems .

strong achievement motives . thereby tracking their requirements· from horse·s mouth.Service Leadership Leadership Issues in USAA« 1. Primacy of service issues«Ever since McDermott·s leadership. High Achievers«McDermott·s charisma . service has been the orientation of USAA. 2. Expectations of customers«Niche customer base was asked to tell the company about their needs & needful was then done. 3. Internal Marketing«Enrichment of ground-level employees (technologically & through training) was the buzzword for the company. 4. drive to beat competition & a service & customer centric approach made it all as.the dream come true. Interactive Marketing«The effort was on making perfect service encounters through IT enabled Support Systems. .

Conclusion« The reason for it lies in the overall vision . the revolutionary leadership of McDermott« Top Mcdermott·s revolutionary leadership with pro-active approach towards technology . customers & internal management« Support System provided by the middle level to facilitate the functioning of ground level« Enrichment of ground level through proper training programs« Leadership Issues Support Service Level Middle Level Ground Level .e. mission & management of USAA at all levels for which the motivating factor was the top level i.

McDermott because he lead USAA by carrying the company . its internal management .USAA under McDermott touched those distant heights and became one amongst those companies which drafted out a new definition for the term service . . CRM & customer satisfaction. others customers with his pace. its niche members . Good Service Quality Satisfaction Repetition Affiliation being the kind of drive for Leadership Motivation in case of Robert F.

e.The service quality of USAA could be easily estimated by just giving a glance to the points the company has scored out of a CSI Scale i. 886 out of 900 .

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