Aetnas Odyssey Comes Full Circle

Staying in business for nearly 160 years requires endurance and the ability to adapt. That need is acute in the ever-changing health care industry. Few U.S. health insurers have weathered more storms, or arrived at their destination more circuitously, than Aetna Inc.

Launched as a small regional insurance company in 1850, Aetna grew into a behemoth and a bellwether of the U.S. economy. In 1990, Hartford, Connecticut-based Aetna was listed as one of Fortune magazine’s most admired companies.

But after plunging into the murky confluence of financial services, insurance and health care, Aetna practically sank of its own weight. By 2000, the insurance giant was nearly out of business.

Aetna had miscalculated its market, loading up on acquisitions of HMOs in the late 1990s at a time when the country’s managed-care landscape was dramatically reshaping itself. By the end of the decade, Reagan-era HMOs had fallen out of favor with the public, leaving Aetna with a slate of products and services its customers no longer wanted.

“Aetna was in a heap of trouble,” says Deborah Kelley, Aetna’s director of learning services and a 25-year company veteran. “Our customers were mad at us, our member [hospitals] were mad at us and the doctors were mad at us.”

But the low point actually proved to be Aetna’s start on the road to recovery. The journey began in 2001 after a new team of top executives, led by current CEO Ronald A. Williams, was installed to engineer a turnaround. High on the priority list: bringing order to Aetna’s scattershot approach to learning and development.

The new regime issued a mandate: Employees would be required to maintain a yearly performance scorecard, developed in partnership with their managers. It helps determine whether an individual is competent to handle the job and provides a guidepost for development.

Although unaware of it at the time, Kelley says Aetna was embarking on a radical, if profoundly simple, path: Clarify expectations and hasten peak performance. In hindsight, she jokes that had company leaders realized the painstaking work involved, the project might not have gotten off the ground.

“We did it in the days before people knew how hard it really is,” says Kelley, who gets invited to speak about Aetna’s sojourn at business conferences. “If I were in the audience listening to us explaining how we did what we did, I’d probably want to run away and hide.”

Hiding isn’t an option for Aetna. Although its work is far from complete, the 35,000-employee firm boasts a sophisticated set of processes for evaluating people according to “the Aetna way,” including performance and behavior.

It’s not the only reason for Aetna’s revival, but renewed appreciation for employee skills is credited with helping Aetna regain its stride. After seven years spent developing competencies, instituting performance scorecards and forcing people to confront their career goals, Aetna is back in contention. Despite the global economic slide, Aetna in 2008 posted revenue of $31.6 billion, a one-year jump of 14 percent.

And despite healthy revenue growth, Aetna is not immune to economic pressure. Shortly before Christmas, the company said it would cut 1,000 jobs—about 3 percent of its workforce—in response to continued turmoil in U.S. financial markets.

In terms of market capitalization, $11.5 billion Aetna is the third-largest U.S. health insurer, behind UnitedHealth Group Inc. ($26.68 billion) and WellPoint Inc. ($18.95 billion).

Like many marquee companies, Aetna is engaged in a Darwinian struggle to survive. To remain among the fittest, the company plans to ratchet up the pressure on managers in 2009, including a new “dual rating” strategy that assesses their leadership and business skills, Kelley says.

Compliance breeds commitment
Aetna has roughly 1,300 distinct jobs, with each one mapped to a list of specific competencies. Scorecards are used to analyze whether people are competent to perform their job tasks. The idea is to help people take stock of their skills and see how they measure up.

Although the scorecards are mandatory, Kelley says employees have come to embrace them. But it wasn’t always that way.

“For the first couple of years, employees were identifying their own behaviors. When we introduced competencies [for each job], it was a relief to them. Now they have help thinking through which behaviors are critical,” Kelley says.

That in turn leads to more meaningful conversations between employees and managers. As a result, employees are moving from “compliance to commitment” in the scorecard process, with managers playing a key role.

“We have managers asking [how] to identify not only an employee’s performance, but also the potential for role change and retention risk—conversations that managers would normally avoid having with employees. But this approach not only makes those conversations possible, but expected,” Kelley says.

Tamara Pinckney, a payroll services manager, aspires to be an executive at Aetna. Having a full set of competencies to work on makes that lofty goal more attainable.

“Competencies have provided me with a clear direction on the expected roles and responsibilities of my position. It ensures that I am successful in my role and assists me with setting expectations for my team,” Pinckney says.

Longing for learning
Aetna’s past trials and tribulations led to its increasing reliance on technology systems to deliver training and manage performance. All formalized learning comes through Aetna Learning Center, a learning management system provided by Mountain View, California-based SumTotal Systems. Kelley says that this ensures “consistent processes” and avoids duplication.

“If it’s not through the learning center, it doesn’t count,” Kelley says.

Likewise, employees are “intrigued” by Aetna’s talent management system, which is provided by Authoria Inc. of Waltham, Massachusetts, Kelley says. It enables employees to search for jobs within Aetna and be notified by e-mail when a position matches their qualifications.

Leaders face a pair of new requirements in 2009: completing leadership curricula with two levels of certification. The first level, known as foundations, focuses on performance management, with an advanced level on talent management.

The certification training is designed to ensure that managers obtain baseline sets of skill, Kelley says. Roughly half of Aetna’s 5,400 managers have attained certification, with the remainder expected to complete the work this year.

“I think it helps us much more effectively identify, select, motivate, develop and move talent across the organization,” Kelley says.

Pinckney has earned certificates in talent management and performance management, along with Aetna’s Performance Improvement certification, “which is equivalent to a Six Sigma Yellow Belt,” Pinckney says.

Like most organizations, Aetna has a system for rating the business performance of managers. Aetna this year is implementing a second score for leadership, separate from the foundation and advanced certification programs. The two scores won’t be averaged, thus giving Aetna a clear snapshot of which areas individual managers need to address.

Changes to performance rankings typically make employees nervous, and that’s probably the case with some Aetna managers. That’s not so for Crystal Baldwin, who is manager for call-center operations at Aetna RX Home Delivery.
“I believe this approach will assist in my professional growth by providing a bird’s-eye view of my strengths and areas of opportunity [to improve], as it relates to my coaching and mentoring skills,” Baldwin says.

Aetna started the dual rating last year for executives, but all leaders will receive two scores beginning in 2009.

“The combination positions us to move the needle. We’ve got aggressive goals, so this is how we know if things are working,” Kelley says, including goals of increasing membership, boosting revenue and hitting other financial and performance targets.