Balanced Scorecard Helps Insurance Company to Manage New Operational Complexities

Balanced Scorecard helps UNUM Insurance to Manage New Operational Complexities and Diverse Stakeholder Groups

UNUM Insurance

UNUM is a Fortune 500 company and a market leader in disability, group life, long term care and voluntary benefits.  In 1998, when the company first implemented a Balanced Scorecard approach, it had 7,200 employees; today it has more than 10,000 staffing operations in the US, Canada, the UK, the Pacific Rim, Europe, Bermuda and Latin America.UNUM Balanced Scorecard Example

Source: View UNUM Scorecard online in BSC Designer UNUM Scorecard.

UNUM Insurance was growing exponentially in size and complexity.  They had reached and outgrown their five-year financial goal, and needed to:

  • set new goals capable of directing and motivating their organization to engage employees,
  • optimize operations and
  • meet the expectations of a range of stakeholders.

The Balanced Scorecard helped them set appropriate goals that employees could understand and use to increase customer service and company profitability.

The Challenge

UNUM was coming out of a period of rapid growth and acquisition that had resulted in a much more complex organization.  Although from 1986 to 1992, the company had achieved its stated five-year goal of earning six dollars a share with a 15 per cent return on equity, it now needed to set its next-phase goals.

For this next five-year period, an exclusive focus on financial results would no longer serve the best interests of the corporation or adequately direct and motivate its employees.

UNUM needed to set new goals that would be relevant to the organization in all its complexity and meaningful to all employees.  After pursuing a narrowly focused and easily measurable goal for five years, the challenge would be to develop new goals appropriate to the business’ growing complexity while ensuring that they were still tangible, measurable and understood by everyone in the company. Most importantly, all goals needed to support excellent shareholder returns and represent the interests of all UNUM’s stakeholder groups: customers, shareholders and employees.

The Solution

UNUM adopted the Balanced Scorecard approach to help them set and balance a number of targets related to financial, customer, employee and productivity goals.

  • A team of senior managers who represented different areas of the corporation was assigned to develop these targets and the corresponding Scorecard areas.
  • Subcommittees were appointed for each focus area, and
  • employees were co-opted to provide input and test the draft goals and measures.

Participants were charged with developing a Scorecard that supported the corporate vision:

  • “We will achieve leadership in our businesses.”

The corporate vision is internally understood to mean a focus on special risk-relieving products that meet customers’ needs and establish and sustain profitability for the company.

The UNUM Balanced Scorecard was developed with four perspectives that covered all stakeholder groups:

  1. UNUM people;
  2. operating effectiveness;
  3. customer satisfaction; and
  4. shareholder value.

Next, they identified time-limited and quantifiable achievements in each perspective area.

The UNUM people perspective was intended to instill the “mind of a customer, pride of an owner” into all employees.

  • A set of employee expectations and aspirations was developed, and
  • A new 360-degree performance review process engaged all employees in thinking strategically about their own performance and that of others organizationally above and below them.
  • A benchmark survey was implemented as a tool for gauging progress.

The company also implemented a ‘1998 Goals Stock Option Plan’. Each UNUM employee was provided with a stock option grant to purchase 300 UNUM shares once the grant was vested, a move that fostered a true sense of ownership among employees.

The operating effectiveness perspective was supported by an commitment to increase customer value by rethinking, improving and streamlining UNUM’s business processes, with a clear goal of keeping operating costs at no more than one-half the rate of the top line.

For the customer satisfaction perspective, each UNUM area with an external customer chain was charged with developing a customer value measurement tool that would help the company determine its customers’ assessment of the overall value of our products and services.

The shareholder value perspective was expressed through “Money Machine,” an easy-to-understand presentation designed for employees.

The presentation walks the audience through the whole organization’s process, from sales to customers to the issuing of shareholder dividends, allowing everyone to clearly see how their individual efforts affect shareholder value.

UNUM also made superior long-term value to shareholders a formal goal, measurable in terms of dividends plus share price appreciation.

The Result

Using the Balanced Scorecard approach to manage new business complexities brought UNUM closer to its ultimate goal of world leadership in disability and special risk insurance.

  • The company improved its operating cost structure by 22 per cent over a 1992 base year, and was on its way to achieving the 1998 target of 33 per cent.
  • UNUM exceeded its people-focused goals, and won a raft of top employer awards from Fortune, Working Mother, BusinessWeek and Equal Opportunity magazines. The new sense of “ownership” among employees was also evident in initiatives such as the “trust workshop” developed by employees at UNUM America.  The workshop explored trust barriers between employees and managers, and key findings from the workshop were shared throughout the organization.
  • By making Shareholder Value a goal, they have given investors, stockbrokers and financial analysts a ‘yardstick’ by which UNUM’s progress toward its other stated goals can be measured. Their attitude is that companies that meet their goals win favour with investors and therefore enjoy a more favourable capital position.

And although UNUM did not reach their aggressive goal of reaching top-quartile performance of the Standard & Poor’s 500 at 1997 year-end, the company did make the second quartile, and delivered annualized returns of 30.2 per cent.  This excellent performance helped rank the company 39th of the 457 current Standard & Poor 500 companies with 10-year stock histories.

Trademarks mentioned in this article belong to the respective owners.

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Cite as: BSC Designer, "Balanced Scorecard Helps Insurance Company to Manage New Operational Complexities," BSC Designer, January 23, 2010,

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