Case study: How Equitable Life is keeping its members happy

Director of Finance catches up with Simon Small,  Finance Director of Equitable Life.

Simon, what is the greatest financial challenge of winding down a business, instead of growing it?

There is not one greatest challenge, but three complementary must-dos. First, we have to live within a shrinking income and therefore reduce our cost base accordingly, year in, year out.  Secondly, with no front book there are limited opportunities to grow capital, so we have to focus on removing the need to hold back capital for things that can go wrong.  For example, as we are not open to new customers, we could not grow our annuity business so we sold it to reduce the capital requirement, enabling a distribution to members.  Which brings me to my last point.  As a mutual, our policyholders own the Society, so we need to ensure that when they transfer their benefits elsewhere or retire, they take with them a fair share of the capital they own, while leaving enough to protect those that remain.

What are the most effective ways you have found to keep shrinking costs in line with the number of insurance holders?

We reduce costs every year, faster than the run off in policies as we have to absorb inflation which we cannot pass on through increased charges. We deliver cost reductions in a structured way, for example analysing cost drivers and then removing or reducing activity.  Our Simplification Programme is designed to do this by among other things, aligning our product offering to essential funds, such as with-profits and unit-linked, by exiting small scale, unprofitable lines.  We also use Lean techniques to focus our processes on what really needs to be done and ensure it is as efficient as possible.  We negotiate with suppliers to deliver only the service we need, at a variable tariff that will reduce in line with volumes.  We invest in technology to reduce complexity and in an overall shrinking resource pool, seek scale by avoiding small teams.

How do you attract new employees to a company that is shrinking?

We are unique – a company growing smaller successfully – certainly no sleepy hollow. Our major de-risking programmes in the last five years provide very interesting work to not only new employees but existing ones. Many people want to join the Equitable because of its history and interest level. We offer early responsibility for newcomers, who often prefer to work locally at our Aylesbury office rather than commute to London. Our situation forces us to think – “why would someone want to work here, with us?” and then to see how they get the experience they are seeking, whether as a manager, subject matter expert or generalist.

How do you motivate current staff while running an ongoing redundancy programme?

We aim to ensure that our people leave with dignity and pride and are well-prepared for the next stage in their lives. We are open and honest in our communications so that everyone knows our strategy and plans so that redundancies are not a surprise and people can volunteer at a time that is right for them. Wherever possible, we work with local companies who may be interested in employing our folk.  This all means that those who remain see that the departure of their colleagues has been handled with empathy, giving them confidence that this will happen when their time comes.  We invest in learning and development programmes designed not just to help staff in their current role but make them more employable in the future elsewhere.  Because we reduce costs faster than we run off, our productivity improvements have been significant, allowing us to invest back into our staff, for example by providing pay rises throughout the post-financial crisis years when others did not.  And finally, many of our people like to work flexibly, which we are able to provide given the nature of our workloads.

How do you weigh up the importance of the history and knowledge of employees with the need to reduce the size of the workforce?

We are fortunate in that we have a very loyal workforce many of whom have spent their entire career with the Equitable. This vast store of knowledge is vital in delivering a great customer experience, and it is spread around, not just within a few pockets. By moving people and work around teams we can document and pass on knowledge so it is not lost.  Our Simplification Programme is also designed to remove the need for over reliance on just one or two individuals.  Over the last five years we have nearly halved the workforce but still maintained high levels of service and a robust control environment, so something is working right.