Sun Life Financial Inc. is moving to tie employee compensation to client feedback as it plots its strategic direction for the next few years.
The move is part of chief executive officer Dean Connor's plan to quantify one of his top priorities after five years at the helm of the Toronto-based insurer.
"We're changing our annual incentive plan starting this year – we just announced this to our [21,000] employees around the world – so that 25 per cent of the annual incentive rewards is based on client feedback," Mr. Connor said ahead of the company's annual investor day on Thursday where the insurer mapped out where it expects to find profit growth in its Canadian, U.S. and Asian businesses.
For Mr. Connor, this represents a heightened focus on a culture shift that he began five years ago at Sun Life. While some facets of the plan were immediately successful, inspiring the sort of client obsession he once witnessed from tech firms on a trip down to Silicon Valley has proven more challenging. This comes after the company rolled out some other initiatives aimed at driving better performance from staff, such as making promotions harder to earn and increasing the pay gap between top and bottom performers.
In the meantime, Mr. Connor was busy making other changes at the company, from resetting and repositioning Sun Life to grow despite the persistent low-interest-rate environment, to selling off a beleaguered U.S. annuity business. Now, amid updates to technology and advancements in medical testing, Sun Life is counting on making customers happier – and interacting with them more often – to help drive profit growth for investors.
It may sound like an amorphous goal, but there are a few key ways that Sun Life advisers, management and even Mr. Connor himself will be judged on customer satisfaction. That includes Net Promoter Scores, which are an assessment of customer loyalty, and changes in "lapse rates," which measure how often insurance policies are terminated because premiums aren't paid. Lapse rates are higher in Sun Life's businesses outside Canada, and fewer lapsed clients is good for both shareholders and customers that bought the product. Other proprietary assessments of abilities to solve customer problems and the ease of doing business with Sun Life are also used to gauge success.
The company wants to increase and personalize adviser outreach so that customers will do more business with Sun Life, stay with the insurer longer and refer more people they know. Sun Life said at its investor day that it will use new types of data and digital applications to do this.
One analyst questioned whether those tech tools could reduce the value of the Canadian force of more than 4,000 career advisers network that sells Sun Life products. Kevin Dougherty, president of Sun Life Financial Canada, said he can't see the network diminishing in the next decade. "Retirement is not a do-it-yourself project," he said. "Going on the Web and making a financial plan? It's not really going to do it. It's a very personal process. Lots of emotional considerations, and lots of tradeoffs."
Mr. Connor says his ambition is now to be one of the best life insurance and asset management companies in the world. He would measure that by "top-quartile client scores" and a "disproportionate share of the best talent in the industry." The third necessary component is to make sure shareholder returns are within the top quartile of competitors. Sun Life has achieved that in the past five years, posting an annualized total return to shareholders of more than 27 per cent.
In 2015, Sun Life set a target of between 8 and 10 per cent earnings per share growth over the "medium term" – a period Mr. Connor said carries the company through to about 2020. The company reaffirmed this goal on Thursday, and Mr. Connor said that the path to that growth doesn't come from one big engine.
Instead, it comes down to pieces stitched together, including the integration of eight acquisitions that have cost the insurer $2.5-billion.
"We've been investing in all these businesses for the past five or six years that are just starting to be profitable – like our mutual fund business here in Canada," Mr. Connor said. "It's just punching through. It made a little profit in the fourth quarter. It will make a little more profit this year – after five years of losses."
Mr. Connor is also looking to operations in Asia for growth, now that the business accounts for about 14 per cent of the company's earnings, with a target to reach 20 per cent. "We have scale now in Asia," he said.