As actuaries, we are generally comfortable dealing with visible numbers and dollars that we can quantify.
We calculate large values such as profit, liabilities and sales, and we make it our business to understand the drivers of these figures. Why have sales dropped? What does the analysis of profit show? These figures are tangible, with measurable units and actuarial science to inform our analysis.
But communication within teams, across organisations and with clients and external providers has a direct (albeit often less visible) impact on an organisation’s bottom line. Effective communication enhances productivity and staff engagement, while poor communication can result in a range of problems such as inefficiencies, mistakes, higher staff turnover and even lost clients and revenue.
In 2020-21, $98 billion (39%) of total expenses incurred by Australian professional, scientific and technical services organisations related to wages and salaries. Are Australian businesses getting the most of their human capital? What are the actual costs to organisations due to ill-equipped managers and ineffective workplace communication? What does this mean for actuaries?
Workplace conversations involve everyone
New managers tell me that ‘difficult conversations’ training is usually available once actuaries are well into people management roles. However, considering the range of workplace conversations that can happen, we see that not all conversations are necessarily ‘difficult’, nor the sole responsibility of people managers.
Common types of workplace conversations include:
- Workflow briefing and task management.
- Negotiation e.g. pay rise, promotion, change in deadlines and deliverables.
- Feedback e.g. ongoing positive, addressing poor performance.
- Engaging with clients or people outside your team.
- Coaching and developing team members.
While these conversations often involve people managers, every conversation involves at least two people! Actuaries at all levels need to know how to initiate and participate in a range of workplace conversations, such as confidently asking questions and negotiating promotions or changes in deadlines. People managers also need skills to effectively delegate tasks and develop teams. Actuaries across the career continuum need the support and skills to take on new challenges without damaging relationships or reputations.
Most workplace conversations would not be considered ‘difficult’ conversations, but every single conversation has the power to make or break a productive and engaged team.
An actuarial story
Let’s meet Anne Actuary, a newly qualified and well-respected team member. She has a proven track record of having strong technical actuarial skills. Anne is driven and has a career goal to become the Chief Actuary in her company before she turns 30.
Hidden cost 1: Poor workflow and task management resulting in wasted time.
The CFO, Ted the Talker, is outgoing and loves to help develop junior team members. He hears that Anne has recently qualified and he wants to allow her to raise her profile by helping on a challenging project.
Knowing her potential, Ted gives Anne a brief outline of the task and asks if she has any questions. Determined to prove how capable she is, Anne politely nods and smiles, even though she doesn’t know exactly what Ted wants.
Three weeks later, Anne is still grappling with the problem. Unwilling to ask for help, Anne independently produces what she thinks Ted wants. Unfortunately, Ted’s priorities have evolved since the original discussion and Anne’s output is not what he needs. Ted is surprised that Anne didn’t ask any questions when she didn’t understand the brief. Anne is embarrassed to have disappointed the CFO and annoyed that he didn’t tell her when his priorities changed.
This example of poor task management caused frustration for both Anne and Ted, which can contribute to poor morale and lower trust between these two employees. There is also a direct cost to the company of Anne’s three weeks of wasted time. At an average newly qualified actuary’s salary and costs, the cost of unclear communication to this organisation is in the order of $10,000. If Ted was clearer about what he needed and Anne had the skills to clarify the brief, this cost could have been avoided.
|Unclear communication around a single task that results in three weeks of wasted time for one newly qualified actuary could cost an organisation $10,000.|
Hidden cost 2: Ill-equipped managers contributing to poor engagement and performance
Keen to prove herself to the Chief Actuary, Anne volunteers to supervise Lee the new graduate. Anne can’t wait to teach her awesome technical skills to young Lee.
Lee is a driven and aspiring actuary and wants to show Anne how capable she is. Anne clearly explains the task to Lee, but when Lee produces her work Anne isn’t happy with the outcome. Anne wants Lee to give her a good review and she is also worried that Lee’s weak attempt will reflect badly on Anne. Instead of giving Lee feedback about how to improve her work, Anne corrects the work herself.
Anne spends more time on this task than required and Lee doesn’t receive the opportunity to learn and develop. Lee feels disengaged, so starts coming in late and taking longer lunch breaks. Lee asks her friends in other companies whether they are having similar experiences.
This is an example of an ill-equipped manager contributing to staff disengagement and underperformance. While the exact impact on productivity will vary, even a 10%-20% reduction in productivity could cost the company in the order of $10,000 – $20,000 p.a. for each under-utilised new graduate. The cost of more experienced staff disengagement increases with their salary, with the cost of a senior actuary being 10%-20% less productive approximately $30,000 – $60,000 p.a. If Anne was equipped with better delegation and management skills this cost could have been avoided.
|Poor delegation and management can reduce the productivity of team members. Disengagement and reduced productivity of 10% – 20% could cost an organisation anywhere from $10,000 – $60,000 p.a. per underperforming actuarial team member.
A disengaged team of six actuaries could cost the organisation $110,000 – $230,000 p.a. in reduced productivity.
Hidden cost 3: Poor listening skills contributing to reputation damage and lost revenue or profit
Pat runs the claims team at Anne’s organisation and wants some detailed analysis of mental health claims. Knowing Anne’s technical ability, Pat asks Anne to conduct some analysis and report back with practical strategies that the claims team can implement.
Eager to please, but stressed and very busy, Anne remembers some previous analysis on mental health claims and sends this to Pat. Unfortunately, the analysis is out of date and does not reflect the current claims profile, nor recent changes in product definitions and doesn’t include any practical insights that Pat’s claims team can use.
Pat makes decisions on the old analysis and the organisation continues to make losses on mental health claims. An extra mental health claim for a policyholder on average weekly earnings could cost the organisation an extra $70,000 p.a. in claims costs alone. Pat may decide to outsource this analysis to consultants in the future, instead of to the actuarial team, attracting additional costs for the organisation.
There are many examples of where poor listening costs organisations money, including remediation miscalculations and misinterpreted data leading to inaccurate pricing. For consulting actuaries, poor listening skills can weaken client relationships and lose business opportunities and revenue. These costs could be avoided if team members were equipped with listening skills that can be taught and practised.
|Poor listening skills can result in low-quality work, reduced sales, increased expenses and possibly even reputation or legal damage, which can cost an organisation anywhere from tens of thousands of dollars to millions of dollars.|
Hidden cost 4: Insufficient communication skills contributing to higher turnover
The Chief Actuary, Adele, usually catches up with Anne regularly. However, the organisation is preparing for a sale, and Adele has been under immense pressure.
Adele cancelled their last few 1:1 catchups, and Anne worries that Adele is disappointed about Anne’s handling of Ted’s request. Anne’s stress levels increase as she worries about her future career and she is incredibly busy correcting Lee’s inadequate work.
Anne has lunch with a friend who works in consulting and feels envious hearing about more regular promotions and bigger annual bonuses. Her friend offers to introduce her to the Partner in her team, as they are looking to hire more actuaries.
Within a fortnight, Anne resigned and accepted a new job with a better salary at her friend’s consulting firm. She’s sure that her next job will be a better fit for her. Adele is shocked that Anne hadn’t spoken up about her concerns and apologises that she was too busy to catch up.
This is an example of poor communication and team members making career decisions based on flawed assumptions. Replacing a staff member can cost anywhere between 33% – 250% of their annual salary, due to off-boarding and on-boarding time, recruitment fees and other expenses.
As a newly qualified actuary, Anne’s departure could cost the organisation more than $150,000. This departure could have been avoided if Adele had made time to talk to Anne, and Anne had been willing to share her concerns with Adele. In addition, if Anne had received some help to build her management skills, she might have been able to manage Lee more effectively, resulting in less stress for Anne and better engagement (and possibly retention) for Lee.
|Poor communication can lead to turnover, which is expensive for any organisation. The loss of a newly qualified actuary could cost an organisation more than $150,000, and the loss of a senior actuary could cost more than $250,000.|
Poor communication skills can have a direct and substantial financial cost to organisations. Yet as a set of skills to be developed, the focus is overwhelmingly on ‘difficult conversation’ training provided to people as they enter leadership roles.
Actuaries across the career continuum need to know how to have effective workplace conversations. These skills do not always come naturally or easily, and they can be difficult to measure. The cost of poor workplace conversations can be very expensive, although it is often a less visible cost to an organisation’s bottom line. These costs can be hidden, but strong communication skills are part of the secret sauce of high-performing teams and profitable organisations.
Effective communication can be broken down into tangible skills that can be learned and practised. When we consider the cost of inefficiency, disengagement, underperformance and higher staff turnover, it is clear that a small investment to help actuaries build these skills can yield a significant financial return for individuals and their organisations.
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