Much time has been spent in the media on the subject of this stain on the 'free enterprise' system, an icon worshipped with too much faith for too long by too many financial services executives and politicians in Canada as well as in the U.S. and elsewhere. One subject too often ignored is the impact on and role of what used to be an important currency in the financial services business: loyalty to one's employer. This is an area of steadily increasing deficit in financial services -- and for good reason.
Employee loyalty is an asset although one of declining value in many large companies. In the past one found it commonly in terms of employees' attitudes to their longtime employers. To go the extra mile, to act in the larger interest of the company were characteristics one used to see among employees who felt a loyalty to 'their' company. How naive this seems in 2010.
Before and especially after the recent Wall Street debacle, the longer term employee in financial services and even more so the younger, shorter service employee will typically wonder why they should feel loyalty to their employers. Consider as an example a company with which I am familiar -- Sun Life Financial. Indeed a major attitude/satisfaction survey of Sun's Canadian employees done not all that long ago produced a far from stellar result -- from Sun's perspective. [I will comment on Sun's 2009 results in a future column.]
Of course such surveys reflect a variety of factors influencing employee attitudes and morale. For example, what does it do for the morale and loyalty to the company of employees in Sun Life's Canadian operation to accumulate an understanding (since the takeover of Mutual/Clarica) embracing factors such as these?
-- after Sun's takeover of Clarica 1800+ Clarica Life and Sun Life employees in Canada were put on the street to help Sun pay for a high-priced and -- outside Canada -- not always well thought out growth through acquisition strategy [q.v., Keyport Life in the U.S.],
-- Sun senior management chose to terminate in 2009 at least 10% of staff in its Canadian operation (still the fountainhead of Sun's profitability, accounting for 82% of Q4 2009 net operating profit) in order to help company finances under the guise of greater efficiency when its self-evident purpose was to contribute to the offset of huge losses in the U.S. resulting from (to put it charitably) flawed investment and operational decisions,
-- having listened to the sound of hundreds of millions of Sun dollars in the U.S. flushing down the porcelain convenience, Canadian employees experienced the continued squeezing of Canadian operational budgets and employee compensation as well as career agent commissions while senior management continued more than generous compensation for themselves; less than positive for employee morale (to say the least based on comments to me from Sun Life people),
-- a very recent example: Sun just committed $40 million to putting "Sun Life" on a Miami stadium, a move of more than questionable value to sales through its U.S. distribution system since Sun is not in the business of buyer-initiated purchase over-the-counter of branded products like beer or cell phones or even the opening of bank accounts. However the Miami move should delight Sun Trust, a retail financial services company operating 1700 branches in the U.S. southeast, a company which will now receive the benefit of a free PR ride on this SLF effort at high profile 'Sun' branding in Florida, and
-- the as yet unpublicized decision to close out the Mutual/Clarica (now Sun) operation in Ottawa with its 600+ jobs, an operation whose origins lie with the decision and the commitment by Mutual Life to keep jobs in Ottawa when it took over the Canadian operation of Metropolitan Life whose Canadian head office had been in Ottawa for a century.
Employee loyalty is not only misplaced but regarded as foolish by employees themselves if it is betrayed by the employer; loyalty is a two way street for company and employee no less than for company and agent. Unearned employee loyalty benefits the employer only in the short term.
Of course if the employee is a member of a company's senior management group then even though the company may have lost ship loads of money (or, in the U.S., may have had to be bailed out by taxpayers) they are likely to remain happily over-compensated.
When I worked for Canada's first mutual life insurance company and the only one operating like a genuine mutual company (The Mutual Life Assurance Company of Canada) I gained more than a little job satisfaction as well as morale support from knowing that my efforts were serving the interests of the company's par policyholder owners.
After the company demutualized, became Clarica Life and soon thereafter the inevitable happened (takeover by another company, in the event Sun Life), I and more than a few of my colleagues found that there was very much less job satisfaction to be derived from working to enrich institutional investors, to trying to please stock market analysts on a quarterly basis and to enlarging the size of the bonus and stock option purse dedicated to senior management.
In the wake of the recent financial crisis and scandals it is beginning to dawn on more Americans and some Canadians (although not nearly enough) that the first purpose of much of today's financial services industry is to make a great deal of money for a distinct minority of those who are associated with it.
In terms of this, the third part of my screed, with its focus on the loyalty and morale deficit, the reality is increasingly not being lost on the employees of financial services companies. It will take rather more than another serving or two of warm and fuzzy senior management rhetoric to regain the sort of employee loyalty and morale that once played an important part in the past success of so many organizations.
[To be continued]