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IMD320
02.10.2006

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PRUDENTIAL UK:
REBUILDING A MIGHTY BUSINESS
Research Fellow Jean-Louis
Barsoux and Professor JeanFrançois Manzoni prepared this case as a basis for class discussion rather than to illustrate either effective or ineffective handling of a business situation. 5, 4, 3, 2, 1…. It felt like New Year’s Eve as Prudential senior managers joined their chief executive, Mark Wood, in counting down the seconds to midnight. The date was October 4, 2005.
The venue was a trendy London restaurant. And they were celebrating the completion of the company’s 1,000-day journey.
Wood gave a very personal speech, thanking several individuals. He also recognized the tremendous collective effort that had propelled the insurer from seventh position to second in terms of domestic market share. In less than three years, there had been a 55% jump in sales, a 58% increase in new business achieved profit and a 22% gross reduction in cost base.
Yet the success had not been achieved without pain. The UK workforce had almost halved since Wood had been appointed
CEO in February 2001. Indeed, of the 87 executives present that evening, 38 were new to the senior management group.
And from the top executive team he inherited, there were only two survivors.
As he completed his speech, Wood’s mind wandered back to the state of the company he had joined.

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The “Mighty Pru”
The Prudential boasted a long history stretching back to 1848. It made its name as a provider of life and pensions products to the masses, with agents visiting clients weekly to take cash payments. By the mid-1920s, it had become the leading company in the field and its army of sales advisors and collectors were calling at one in three UK homes.
The “Man from the Pru” became a household phrase and, in 1949, the slogan and image were incorporated into the company’s advertising (refer to Exhibit 1).So close was the relationship that agents built with customers in their territories, that they were sometimes even invited to family events.
By 1986, the self-styled “mighty Pru” had 12,500 field staff, constituting the largest direct sales force in Europe.i The same year, the company started flexing its muscles overseas, with the acquisition of Jackson National Life in the US.
But by the mid-1990s, Prudential’s traditional asset was becoming a liability.
Collecting premiums in person had become expensive with the advance of direct debit payment. And customers looking for insurance were increasingly turning to new channels like the telephone, independent brokers and the internet. Allegations of pensions mis-selling were also surfacing, denting Prudential’s image with both consumers and the regulator.
As the direct sales force was progressively cut back, Prudential invested in new call centers to handle sales. It also acquired Scottish Amicable, in 1998, to buy into its track record of working through intermediaries.
In February 2001, a week before Wood was appointed, Prudential announced that the remaining group of 2,500 direct sales and support staff would be leaving within the year, thus ending its traditional home-based relationship with clients
(refer to Exhibit 2). The economics had changed, particularly as a result of increased regulatory requirements, and it now cost £2 to service every £1 of policy sold.
A Hard Sell
Preparing for his new role as head of Prudential’s UK and European businesses,
Wood wondered to what extent the loss of the direct sales force might damage the
Pru’s unique place in the minds of customers. But he also had more pressing concerns. Wood needed to stem a steady decline in UK sales, which was – fortunately – offset at group level by strong international sales. For the first time, in 2000, these had outstripped UK sales. Indeed, the UK operation was increasingly looked upon as the feeder of development in Asia, where sales had grown 75% over the previous year.
Domestically, the existing range of products was looking tired and uncoordinated.
There were very different customer service philosophies and service levels – and over 500 phone numbers for customers to call. There was a heavy reliance on its

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flagship with-profits products.1 Yet, the near collapse of Equitable Life in late
2000 shook public confidence in with-profit guarantees. Brand image, though solid, was not fresh. And, with the likes of Virgin, Tesco and the high street banks emerging as competitors, it was not clear whether the sales machine was focused on the right products in the right markets.
Wood also needed to address the cost base. In a bid to increase accountability, the company had been split into nine semi-autonomous business units, each with its own managing director. Each also had its own IT, accounting, marketing and, until recently, HR function. One insider confided to him:
Recently, three of the divisions were each trying to develop low-cost pension products in parallel – and when they found out, they carried on.

Among suppliers of basic services, Prudential was well known for being easy to out-maneuver and overcharge:
You’ll meet nine different people and they don’t talk to each other.

Besides the infighting and internal focus, there was also a worrying sense of complacency, captured by one manager’s characterization of the company as “a loose confederation of competing bureaucracies.”
A former banking executive who had joined Prudential the previous summer described a “flabby” organization with the feel of a “country club.” He told Wood that the symptoms were exactly those that he had witnessed 10 years earlier in banking: They don’t take new competition seriously, don’t take any moves in the market seriously, don’t believe that bancassurance will take off, don’t see the value of internet…

Another insider confirmed that the organization was “still living in the belief that we can move the market where we want it to go.”
Wood realized he would have his work cut out. There did not seem to be much internal readiness for change. But he could not afford to start ringing alarm bells, given the importance of dependability in an industry that holds people’s lives in its hands.
Moreover, the existence of a large life fund concealed the underlying economics of the business to all but a few specialists. The bulk of any expense overruns were absorbed by the capital of the estate instead of appearing on the bottom line as a loss. Wood faced the unenviable challenge of attempting to fix Prudential UK without anyone truly realizing how broken it was.

1

With-profits policies are insurance contracts that pay out an annual bonus. Money is held back in the good years to maintain bonuses in the bad years.

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Pru’s Rude Awakening
After four months of “garden leave,”2 Wood took charge on June 21, 2001. He wasted no time in making his presence felt. As one senior manager put it: “He came in like an absolute tornado.”
The contrast with his predecessor who had been based at group head office was striking. The actuarial director, David Belsham, noted:
Previously, I had very little interaction with the chief executive. But from day one, there was a lot of interaction with Mark.

Another senior executive described Wood as “completely in your face”:
He would make comments like, “Why on earth have we got these different businesses?
Why on earth have we got all those buildings that we don’t need? My goodness, look at the cost.” A mid-level executive recalled:
He had the executive team running around like lunatics for the first three months, firing stuff at them, phoning them every night at home, phoning them on Sundays.

Within two weeks of arriving, Wood called a strategy meeting on a Saturday. The meeting resulted in a classic “90-day plan.” Wood created an internal task force made up of a dozen rising stars whom he had spotted or had been recommended to him. The team was charged with reviewing the business – from products and locations to branding and organizational design.
At the same time, Wood started asking questions about how many people were working in customer services and how many projects the company was running, but could not get quick answers. On investigation, it turned out that there were around 70 ongoing projects. When he asked for summaries of the expected benefits from each project, the responses were often vague. An external contractor recalled: In the first 30 days, having got this list of projects together, he just closed about half of them down… That was a real shock to the various sponsors around the business.

Managers spoke about a clear change of pace. “He talked in terms of days and at the very longest weeks.” And that urgency was also visible in meetings, according one senior executive:
He wouldn’t give you the chance to work your way into a presentation… He had read the papers in detail and he would have specific questions.

2

When joining a competitor, executives may be asked to work out their notice period as “garden leave” from home, to avoid any potential conflicts of interest.

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And after the meetings, he would often send follow-up notes. Another midexecutive vividly recalled their first encounter:
He asked me three good, solid questions to make sure I knew what I was talking about…
And then every time he saw me after that he remembered me, which I found eerily spooky.

At 30-day intervals, Wood convened a big meeting with the top 100 managers. At the first of these meetings, in Insurance Hall in the City, Wood pulled everyone together in a big circle. Standing in the middle, he evoked the “mighty Pru” and talked about recovering “Prudential’s birthright.” As one senior manager put it:
I remember everybody having this amazing feeling that we’d not been talked to like this before, with such direction, such intensity and that whole focus on communication.

On September 13, in the last third of the “90 days,” Prudential announced the creation of six new centralized roles to be filled by internal candidates.
Significantly, one of these new appointments would be to head up PruLab, a division created to develop new products. As a result of the new structure, five senior managers would be leaving, to cut duplication between Prudential and
Scottish Amicable. It underlined Wood’s determination to operate as a single integrated business. His predecessor had already initiated moves in this direction by centralizing the HR function under the newly appointed Russell Martin, previously with the media firm Thomson Financial.
In mid-October 2001 Wood appointed a new group marketing director, Roger
Ramsden. Like a growing number of senior hires, the former Safeway stores marketer was not only from outside the insurance industry, but also from outside the financial services sector.
On November 2 Wood unveiled the full plans for streamlining the group and releasing capital. He pledged to take £175 million worth of costs out of the business through the creation of a single customer services organization and the centralization of its support services.3 This would involve 2,100 job cuts (1,000 of them compulsory) and the rebranding of all Scottish Amicable products under the
Prudential name.
More unexpected was the sale of Prudential’s general insurance business, making it clear that there were no sacred cows. As one senior executive observed:
It was a well-thought-of, profitable business run by one of the most respected individuals in the business and he just sold it. So that kind of showed who’s in charge.

It would have needed a lot of capital to remain competitive, so Wood chose to transfer the entire business (and its 1,200 staff) to Swiss rival Winterthur, yielding
£353 million in cash (and £810 million in total).
At the same time, Wood announced that the advertising budget would be quadrupled to £20 million with a return to above-the-line advertising – and that
£50 million would be plowed into PruLab. Henceforth, Prudential would focus on more profitable, higher margin business through a targeted product range.

3

£1 = $1.44 = €1.57

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The financial workers’ union said it was shocked by the scale of the cuts – but the company said it had consulted the union about the losses and would pay for staff to revamp their CVs and train for job interviews. The City, by contrast, welcomed the news, lifting Prudential’s shares 6%.
The Rocky Road to OnePru (November 2001–December 2002)
On the back of these announcements, Wood set off on a series of roadshows with the executive team. He met all UK employees, scattered across 16 locations, in the space of one week. Wood’s aim was to allow staff to “see the whites of his eyes,” but also to let them know “the change we have to go through may be painful, but it’s worth sticking around for.”
At the same time, the HR support program kicked in – helplines, outplacement services, redundancy processes – and a monthly e-newsletter, Forward Focus, was launched to communicate the context and timescales of what was happening.
As one HR manager put it:
The fact that HR had already started to reorganize itself into one function helped because we could support the rest of the integration.

The objective was badged “OnePru.” Each area had its own cost and headcount challenge to achieve. Ramsden remarked:
There was a problem in the beginning letting people know that this was for real – expectations were low. Then we started working our socks off and people got it, there was no space to opt out or do your own thing.

In early 2002, as the far-reaching change program swung into action, HR launched Prudential University with Warwick Business School. The campus week, with follow-up programs in coaching and change management, targeted the
350 middle and senior managers identified as catalysts for change.
From the outset, Wood attended the final presentations to hear their proposals on some “live issue” and to check the pulse of the organization. The program was also designed to challenge participants on their own willingness to adapt – and Wood’s closing comments urged them to decide, “Are you on the bus or off the bus?”
Of course, the same principle applied at senior levels. In late March 2002, after a particularly frustrating retreat in Edinburgh with the senior management team,
Wood decided to take action. He set up “Project Shepherd.” Two months later, 18 of the top 100 executives left the company in one day, followed by another 12 in the weeks that followed.
Staff were stunned, some referring to the episode as “the night of the long knives.” As one manager recalled:
It was announced in the morning and the people were walked out of the building. That had never happened before.

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Another commented:
There were some very big names, big profile roles, and he was clearly focusing as much on people’s behavior as on delivery.

The message seemed clear:
It was a smashing-down of the empires. You’re working for one organization now, the UK.
And we’re in this together.

In the weeks following these announcements, many outsiders were appointed to senior roles. Most notably, Neil Berkett came in as chief operating officer, Tim
Tookey as finance director, Nick Smith as director of distribution, Isabel Hudson as corporate development director and Jan McNish as business transformation director. The last was a very new role to the organization. McNish would be responsible for pulling together the project management capability from the business areas and forming “resource pools,” similar to those found in consultancy firms, and then ensuring that the best people were assigned to the most important projects.
She quickly set about assembling a four-person team capable of driving forward the change program and instilling some project discipline into the organization. In particular, she recruited a former venture capitalist to establish better financial controls around the assessment and prioritization of projects, as well as the monitoring of project expenditure and the delivery of benefits.
The prevailing atmosphere within the firm was difficult to pinpoint. One incoming manager noted:
Project Shepherd was like a line in the sand from Wood and the team around what is and isn’t acceptable behavior. You couldn’t get away with things any more.

Another new entrant observed:
I found an organization that really seemed to be in some kind of shellshock… I sensed a nervousness about putting your head above the parapet at that time, because so many people had left the business.

Staff also had to contend with a destabilizing mix of good and bad news, epitomized by three announcements in September 2002: x On September 5, like most competitors, the company was forced to cut bonus rates for its 2.5 million with-profits policyholders. Since the
September 11 attacks in New York, the UK stock market had plunged by
40%, significantly eroding with-profits funds, which were predominantly invested in shares. It had also hit demand for with-profits policies.

x

On September 22, the screening of the first TV ads since 1997 put Prudential back into the public eye. Leveraging 50 years of advertising heritage, the theme was “The plan from the Pru.” It was novel in using poetry to encourage people to stop and think about their financial security. Customers

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were invited to call a memorable phone number – 0800 000 000 – which had lain unused and apparently forgotten (refer to Exhibit 3). And instead of automated answering, all callers talked to a person. At the same time, Pru announced that it would be giving all UK staff an extra day’s holiday each year to plan their own personal finances. x On September 30, the news broke that the company planned to move 1,000 jobs to Mumbai. Prudential joined a growing list of global firms moving call center and support jobs to India. After negotiation, the company agreed that the move would involve no compulsory redundancies.

Ahead of the final decision to open the wholly owned customer service subsidiary in India, Wood had taken the entire executive team to Mumbai. He wanted to make sure that they took a unified decision on the proposed £20 million investment. He also wanted to give the team a chance to step back from the operational pressures and to talk.
Other strategic moves followed. In October 2002 Prudential announced a
“bancassurance” deal with Britain’s sixth largest bank, Abbey National, to distribute Prudential’s with-profits bonds – in anticipation of “depolarization.”4 In
November 2002 Prudential sold off its German life operations, which employed
232 people, to Canada Life for £82 million. And the same month, Prudential UK’s head office employees relocated to smaller, modern offices near Paddington.
Meanwhile, Tookey was busy trying to bring clarity to the finances of the organization. The legacy of nine business units meant that profitability and resource usage were difficult to evaluate – as were the financial implications of proposed actions affecting several areas.
At the same time, Russell Martin was busy revamping the HR systems to support the change effort. A new bonus scheme for managers was tied in with the company meeting all of the key performance indicators (KPIs) already introduced
(entitled shareholder value, cash flow, profitability, happy customers, happy people and a happy regulator – refer to Exhibit 4). Martin explained:
Hard wired into our system is the need to take due account of how happy our people are – and we calculate that using a quarterly employee questionnaire.ii

A flexible benefits scheme, You Choose, was also launched, allowing employees to select from a range of 10 leisure and healthcare benefits, including private medical insurance, previously reserved for senior staff. It encouraged employees to take responsibility for their benefits, just as customers needed to do for their savings. As Martin pointed out, it helped line up “what we were asking people to do and how we were asking people to think.”iii

4

Existing rules requiring distributors to be either tied to one product provider or independent of them were to be swept away by the Financial Services Authority, allowing a degree of multi-tying among big distributors such as banks and building societies.

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Martin was also pushing for more active talent management processes, not just for the high potentials but also for a group labeled “special assets” – those with specialist skills, who were less amenable to promotion or rotation.
In December 2002, at Wood’s request, Drew Watson, the newly promoted head of organizational development, took the executive team for an “honest dialogue workout.” They worked on how the team was doing against a number of team principles they had talked about in Mumbai. The idea was to promote the principle of “straight talk,” based on trust, in contrast with “polite talk” or “fight talk.” The team also adopted the image of the “dead moose on the table” which became shorthand for skirting around issues.
At that session, the idea of Wood’s story also crystallized.
Wood’s Story
Sensing that the cost-cutting drive was taking its toll on employees, Martin urged
Wood to write a story about where the organization was heading. Wood chose to write it unaided and to set it in the future looking back. Nine drafts later, he felt his story captured what he wanted in content, style and emotion and he was ready to share it with the top 80 executives. Though more comfortable improvising, he insisted on reading it out because, he told them, he had slaved over every word.
Sitting on an old chest, Wood began: “While most stories evoke a time gone by, where everything was better than today, in this story I want to evoke a future time where we will have spent 1,000 days rebuilding our once great business.”
He started by reminding them of the purpose of their work: “In an uncertain world we will make it possible for everyone to enjoy a secure future.”
He painted a picture of business growth and dynamism that was in marked contrast with the period of cost cutting they had just been through. He described a company that was
“professional” yet “jargon free,” “prudent” yet “prone to action,” “caring and conscientious” yet “disciplined in the pursuit of return on capital,” and quick to “hunt as a pack” while maintaining “a reputation for squeaky clean compliance.”
Indirectly alluding to existing problems, he added: “Each of us… will be here because we want to be. The pulse rate of the organization has quickened. The acceptable standard of performance has risen. The error rate has dropped. Decisions result from analysis not opinion.” He closed by telling them: “The job we have chosen to do is amongst the most valuable in society… We are the custodians of people’s material well-being. People trust us. We must be worthy of that trust. Prudential is a mighty business.”

Initial reactions were mixed. Some greeted the approach with cynicism. A few were confused:
We were a top-class PowerPoint company, so why was he sitting there and reading from a book? Some people just didn’t get it.

But many others found the approach refreshing:

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I remember sitting there thinking, wouldn’t it be fantastic if we’re all there in 1,000 days and we’ve done it.

Another manager noted:
The values-driven stuff appealed to a lot of people, where the numbers just leave them cold.

And a relative newcomer to the firm remarked:
It was all very symbolic – with him just sitting on the trunk holding the big red book – and it felt like a watershed.

The Story Becomes the Plan
The 1,000-day story gave employees a feel for what the new environment might be like. The question was how to deliver change on that scale – covering everything from cost saving and infrastructure projects to product, distribution and regulatory changes. Just to meet all programs in force at that time was estimated to require 3.5 times the actual headcount in Prudential UK.
The 1,000-day plan was therefore set up in order to create clearer priorities, lines of accountability and focus. Wood wanted some way of keeping track of progress on a weekly basis, which was almost unheard of for a whole reporting cycle.
So Ian Martin of the business transformation team came up with a quarterly document called the “release schedule,” listing all the programs and the individual projects, together with their key milestones. Of course, the deliverables varied in size,5 but a weekly update gave Wood a simple means of reviewing the percentage of deliverables made that week – and of focusing discussion on the trouble spots.
Project slippage and non-completion had become routine, and Alan Wright, a 30year veteran of the company now heading up the Project and Program Office, was determined to put a stop to it. In the first week, the actuaries hit none of their deliverables and were surprised that someone was actually monitoring them. But with the discomfort of visibility, they quickly became accustomed to planning and delivering on time.
As Wright pointed out:
Previously, I didn’t own the project managers. If they and their executive sponsors were delinquent in allowing slippage and cost overruns, then I didn’t actually have a line responsibility to correct that. I could just tell people it was unacceptable. But the moment that changed, I could start to take different actions.

Members of the executive team were even asked to sign off on the release schedule to indicate their commitment to each quarterly plan – a document that

5

Deliverables are tangible “things” that the projects produce, such as new systems, trained people or new products.

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was then laminated. As the director of customer services, Rosie Harris, commented: Laminating it was a bit ridiculous really because as soon as you signed it, it was out of date.
But it was a statement of intent regarding the cost and the sort of time scale we were signing up to. It certainly focused the mind.

It also helped put an end to the “pets and bets” projects that executive members had grown accustomed to launching.
In 2002 the company had become what one executive called “dripping roast” for the big consultancies. Ahead of day one of the plan, the company purged itself of close to 100 management consultants, retaining only a handful of specialists.
Henceforth, it would be an internal effort, with the rousing slogan “A thousand days for a hundred years.”
The Quartermaster Experiment
With McNish concerned that the whole responsibility for the change program would rest on her shoulders, Wood agreed to try a novel approach to driving these quarterly plans.
Every quarter a different member of the executive team would take on the lead role of “quartermaster,” with full authority across all divisions and his or her peers. The task was simple: Ensure the delivery of everything in your quarter.
Rotating responsibility seemed a sound principle, but it was also a big risk.
Several people expressed doubts about the concept. One HR manager conceded:
I was really skeptical about whether Mark would actually let the quartermaster do the role.

Every Friday, after talking to all the program managers, the business transformation team would produce a progress report. They would brief the quartermaster who would raise any issues or risks at the Monday morning executive meeting. As one manager put it:
The quartermaster provided a fast track to the top team every week, instead of letting issues swim around for three weeks before they got escalated.

Ramsden became the first quartermaster and by the time he handed over the responsibility to Russell Martin, the concept was already well accepted. One executive appreciated how “it really helped on cross-boundary issues.” Another noted: It locked everybody in the executive into understanding everything that was going on in the whole business.

At the end of the first quarter, there was a quartermaster event for the top 80 executives, which provided an opportunity to review achievements, focus on hotspots and introduce the new quartermaster.

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Wood kicked off the event by re-reading his story to the same audience, but this time with comments interspersed showing where the story was starting to come to life. The event was filmed in order to allow managers to view the story with their teams. There was a symbolic aspect to the proceedings. The trunk was there. So was the big red book in which members of the executive had each committed their own thoughts about what they would have contributed at the end of the 1,000 days.
And there was a ceremonial handing over of the book from the incumbent to the next quartermaster.
But it was not a solemn ritual. There was often humor. And the event as a whole was highly participative, giving executives a chance to comment on how they felt the change was going and what needed to be done next. There were also unexpected elements thrown in, like creating a live percussion symphony or writing poetry.
Further down the organization, the quartermaster concept engaged employee interest and speculation. One manager commented:
I can remember people talking about what it would be like when Russell took over… It really ignited the curiosity of the organization.

At the same time, the rotating responsibility reinforced the growing sense of collective ownership and shared aims. As one mid-level executive put it:
It was our plan. It wasn’t Mark’s plan. It was Mark’s story – but it was our plan.

2003: Heaven and Hell
As the 1,000-day plan got under way, there was a significant increase in the volume of internal communication. There was a weekly e-mail from internal communications providing a news roundup. There was a monthly quartermaster e-mail to all employees reflecting how the company was doing on deliverables.
For the managers, this was accompanied by a briefing pack, including an overview from Wood, a KPI update and key areas of focus for the coming month.
Teams that had not been briefed within 10 days were invited to contact the communications team to “identify areas that need more support.”
Every three months, there was also a quarterly release reflecting on the previous and the coming quarters. And, on the back of the quartermaster event, members of the top team visited sites in pairs to take questions from randomly selected employees at each of the sites. Wood also visited one site every quarter to run an open forum.
At the same time, Wood launched “Small Company Pru” as an additional cost cutting drive. Designed to remind managers to think about unnecessary expenses as if they were spending their own money, it was perceived by some as “penny pinching.” This document is authorized for use only in MBA FT MPIO by Phil Taylor, University of Strathclyde from October 2015 to April 2016.

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In April 2003 Prudential suffered a major setback in its relationship with the independent financial advisors (IFAs). A critical-illness product it had recently introduced was too keenly priced and attracted excessive demand. With up to 500 applications a day for policies, it became clear that sales of this product would quickly exhaust the company’s reinsurance capacity for the next year. Prudential was forced to retract its offer, generating a lot of bad press. It tried to make amends to the IFAs by offering them £75 of compensation for each policy affected.
As part of the fall-out, three senior executives resigned and Rodney Cook, a former chief executive of Pearl Assurance, stepped up as head of PruLab. Wood saw the painful and embarrassing episode as evidence that the company was still not “joined up.” As Watson put it:
Every single area did its bit carefully… but somehow the overall result was unsatisfactory and showed up the need for end to end overview and accountability.

He wrote up the incident as a case study for use at Prudential University.
By contrast, other recent initiatives were starting to gain external recognition. In
March, Prudential’s “Plan from the Pru” campaign had already picked up five awards at two separate ceremonies. And in May, the company received two awards for its flexible benefits plan and for its communications strategy.
To improve relations with the IFAs, the company introduced a Queue-Buster system. This allowed financial advisors to select a call-back option, thus keeping their place in the queue but letting them get on with other things.
The company also introduced Viewscast, a system to monitor customer satisfaction levels. Previously, customer service was measured by the number of calls taken and how fast they were answered. Perversely, this generated the highest scores on days when the system went down and all staff could do was pick up the phone, apologize and hang up. Qualitative input came every six months by calling back selected customers who had dealt with the company in the previous four weeks.
The new system, by contrast, could monitor 25% of all daily calls, allowing customers to key in scores and to leave a message if they chose.6 The system even allowed the company to track customer satisfaction scores for individual call service representatives. Yet the cost was no higher than the two six-monthly surveys previously used. Wood decided to make an exception to the “real person” principle. In addition, customer services started surveying all new customers, on the basis of evidence from Jackson National in the US that it resulted in fewer overall complaints. As one manager observed:
This takes out complaints early in the process, rather than allowing them to fester.

6

Any request for action was picked up by a manager who called the customer or advisor back within 24 hours.

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The closer measurement of customer satisfaction was part of a wider movement to develop a better understanding of customer needs, expectations and preferences.
An existing customer insight team was bolstered with additional hires from fastmoving consumer goods (FMCG) companies. And a customer response team was set up to deal with complaints that could not be resolved by phone or letter.
Wood highlighted several of these advances as he retold his story at the July quartermaster event. He also encouraged employees to develop their own stories.
Some were not interested, others found it a useful exercise. The customer response team actually wrote up their story collectively.
The same month, the company stopped writing business in France. Following on from the sale of its German operation, it marked the company’s exit from its fouryear-old business in continental Europe.
Wood spent much of September and October championing with-profits savings whose sales had, in his words, “fallen off a cliff.” He fronted a with-profits roadshow where financial advisors were able to question the company’s actuaries and fund managers. He gave press interviews urging investors to discriminate between stronger providers and weaker ones – while welcoming moves to make the product more transparent. He also launched a two-pronged marketing campaign
(costing £3.6 million) to explain the benefits of with-profits to IFAs and investors.
In November 2003 the company rolled out Single Customer View, a system designed to allow operators to handle any queries in a single call. Over the years, the company had developed systems that were product-based. For a customer with several policies, even changing address meant phoning several call centers.
The new system was the result of an 18-month project, involving 350 people, a dozen suppliers and half a million lines of code. The £20 million project was of unprecedented scale and complexity for PruTech, the company’s IT arm – and it had required the full support of the business transformation team.
Reflecting on the effort, Tony Suwalski, who ran IT development, commented:
PruTech and BT [business transformation] worked incredibly closely together, right from initiation through to testing and implementation. We couldn’t have completed a program that big without the governance structure that we had.

Regarding their collaboration, he added:
It was very clear what we had to achieve. There was nothing to be gained from pointing the finger at somebody else. There were still the usual “them and us” discussions and issues across a number of different areas, but the bottom line was, everybody knew that you had to resolve them.

Of course, delivering the new customer service technology was only half of the equation. It also required multi-skilled operators. In parallel, the customer services staff were going through intense technical and behavioral training to allow them to deal with greater complexities than before. “Why do we do that” days were hosted at call centers to look for possible improvements to the customer experience. And Prudential’s e-learning platform provided additional support.

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Den Ratcliff was the program manager who oversaw the transformation of customer services, including the creation of a new front-end system and the migrations to Mumbai. Reflecting back on 2003, he compared it to heaven and hell:
It’s heaven because we absolutely know where we are going, we’re completely supported in going in that single direction and everybody wants to go in that same direction. We never had that in the past. And it’s hell because it’s completely relentless. Constantly, you’re always on the edge of just about keeping up.

2004: Fewer Fires
As the change program gathered momentum, the business transformation (BT) function swelled from 250 to 400 (including project managers, analysts and testers). They worked closely with 400 IT employees, and another 300 people in the business areas also working full time on change – out of a total of fewer than
7,000 employees.
Progressively, delivery confidence grew. As the investment and savings director,
Hugh McKee, explained:
We became familiar with the process, but also we didn’t uncover so many fires. There was less fire-fighting.

Ratcliff added:
The perspective of what was important and big completely changed. Prior to Mark coming along, any one of those projects would have been regarded as mega in its own right… But as we gained experience, we had as many as a dozen of those things running at once.

Of course, as the number of projects grew, the pressure became intense. The various programs and their associated deliverables were increasingly interdependent, putting tremendous strain on the BT function to keep the show on the road.
The BT function responded by introducing metrics designed to assess each area’s
“change absorption capacity.” Realizing that “the same names kept cropping up on different projects,” the business transformation team came up with a way of measuring how much change would be landing on each area per quarter. It enabled the areas to gear up for the peaks, but it also allowed the business transformation team to stagger the implementation of projects, so as not to inundate one area. As Angus Robertson, head of actuarial, put it:
Stopping an excessive number of demands was critical in ensuring that the key things that had to be delivered were delivered.

This dovetailed with the concept of bandwidth that had struck a chord with the executive team. Introduced at a retreat in Scotland, the idea was that overstretched executives – with no spare bandwidth – did not have the processing capacity to focus on the most important issues. So the team created A, B and C lists to designate tasks they needed to drive, those they needed to be informed about and those that should be off their radar. Wood himself observed:

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When you are not persistently chasing things up or hearing excuses for late delivery, you free up a lot space for higher value tasks.

In March 2004 Wood followed up on an idea that emerged from Prudential
University to interact directly with policyholders. Dubbed “MeetPru,” the monthly events involved Wood and three senior executives visiting regional towns to take questions. The sessions were filmed to support team discussions further down the organization. Each week, Wood also phoned around 20 customers with issues to find out how well their concerns had been resolved.
In April 2004 Prudential announced a joint venture with the Johannesburg-based company Discovery. As with Mumbai, there had been team-time in South Africa ahead of the decision, this time punctuated by speakers from the mining and petrochemicals industries. What had become known as the Walk in the Woods was now a twice-yearly event – mostly in less exotic locations – providing a chance to think ahead, mend fences and renew commitment (refer to Exhibit 5 for guiding questions). According to distribution director Andy Briggs:
We quickly became fanatical about planning, execution, numbers, flash reports and audits.
Our team developed an operational mindset as its default setting. What made a difference was investing time to think both strategically and about how we engaged people around a common direction and cause.

Off-site meetings also took place one rung down. McNish, now promoted to chief operating executive, was running regular sessions with her team to see how everybody was doing, how they were working as a team and to reassess priorities.
McNish had also sponsored the setting up of two “experience centers” in Reading and Stirling. Equipped with two-way mirrors and sophisticated technology, these facilities allowed interactions to be observed under laboratory conditions. Among other uses, they served to fine-tune products by analyzing the way that financial advisors sold them.iv They were also used to modify procedures for dealing with customers, notably the recently bereaved.7
There had been a dramatic increase in the amount of customer profiling and analysis conducted – including the PruBus, which toured to host focus groups.
And to a far greater extent than before, customer complaints were feeding back into product design and material support.
In the summer of 2004 two new products came out in the same month. August saw the launch of PruHealth, an innovative health insurance based on promoting health – including exclusive deals with fitness groups – rather than paying for sickness. A few weeks later, the company launched the PruFund. The new withprofits product was designed to answer conventional criticism of lack of

7

Due to its large customer base, Prudential is notified of one in four UK deaths and has to deal with what that means for policies, authentication and options for payout or transfer of ownership.

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transparency and high exit penalties – and targeted the £107 billion of excess cash estimated to be languishing in UK savings accounts.
As one executive confided:
We started making new products that reflect what customers actually want, rather than what people internally had good ideas about... So we test new products now – quantitatively. That was never done before.

The innovative new products marked the rehabilitation of PruLab. They also lifted the visibility of the UK operation. Until now, the UK story had been mostly internal – about changing the product mix, the distribution channels and building systems. But by September 2004, the prospects for the UK – the world’s third largest personal investment market – had improved considerably. Sales in the first nine months were up 19%, outpacing both the US and Asian operations – and representing a jump from 30% to 40% of total revenue. Wood made the case to the board for raising finance to take advantage of these new growth opportunities.8 On October 19, the company surprised the City with a huge £1 billion rights issue, with the majority of the money earmarked for UK growth. Some investors saw the company’s decision to build up the UK business as a U-turn, having trumpeted
Asia as the focus of growth. The announcement drew criticism not only of the strategy but also of the communication skills of group chief executive, Jonathan
Bloomer. Prudential shares fell over 7% on the news.
Nevertheless, the prospects for Prudential UK looked healthy. The board’s approval of the rights issue was in itself an endorsement of the progress made.
And the company had exceeded City expectations by removing £200 million from its cost base, making it one of the lowest cost operators in the market – according to an industry review by Harvard Business School.
By the end of 2004, a significant change had occurred in the profile of the projects undertaken. The initial focus on cost reduction had given way to more revenue generating initiatives. Of course, there were still cost cutting projects – like the recent outsourcing of document management operations – but there was a clear shift toward growth projects. The trend was set to intensify in 2005 (refer to
Exhibit 6).
Each of the buildings had a digital display reminding employees how far along they were in the 1,000-day plan. And this also featured prominently in all internal communications. But as they entered the final year, they reversed it and started counting down. As one senior executive noted:
It just made everybody realize that, although we’re in the last transformation year, every day counts.

8

The change in product mix meant increasingly that shareholders rather than policyholders were funding new business.

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2005: Back in Contention
As at the beginning of 2003 and 2004, there were a series of off-site events throughout the organization to kick off the year. These events all had the same
“front-end” – a summary of overall progress against the story – then each business area celebrated its own contribution to the story and assessed what it still needed to do. But no sub-branded programs or campaigns were introduced. As the head of internal communications, Lisa Walden, put it:
Everything was explicitly linked to the banner of “A thousand days for a hundred years.”

By the start of 2005, the rhythm was firmly set. Small Company Pru was continuing to squeeze out costs – and looked set to achieve a total of £70 million over the 1,000 days.
Benchmarking by the business transformation function indicated that the typical level of deliverables met on time for a change program that size would be around
60%. Within Prudential, executives had grown accustomed to delivery rates upward of 90% and they were edging close to 100% – this across 28 programs and 100 projects with 70 to 80 deliverables scheduled each week. As Ramsden put it, meeting deadlines had become “part of what we can expect of each other.”
The consistency impacted the quartermaster events, where less time was spent
“congratulating ourselves or teeing up stuff for the next quarter.” Belsham noted:
As time went on, there was such confidence that almost everything was happening according to plan, that a lot of the agenda was used for other things completely... So we started having more break-out sessions, brainstorming and creative activity.

In January 2005 the company became the first insurer to establish an independent body to represent policyholders in its £80 billion with-profits fund, adopting a suggestion put forward by the regulatory authority.
The following month, Prudential bucked the gloomy payout trend on with-profits policies. With rivals all cutting annual bonus rates, Prudential announced that for the first time since 1990 (when rates were around 11%) it would be maintaining its bonuses at the current level.
The UK business also boasted a 40% rise in UK sales and a 25% rise in achieved profits (refer to Exhibit 7). This was notably fueled by a 71% surge in bulk annuity sales, with Prudential fully leveraging its more accurate life expectancy tables to price its annuity products much more competitively.
Meanwhile, the company continued to receive awards. In March, it won an innovation award for PruFund and another award for best TV ad (refer to
Exhibit 8 for list of key awards).
Against the backdrop of this success, the dismissal of Bloomer came as surprise.
Yet, he had not fully regained the confidence of the City since the announcement of the rights issue – and had in fact generated more negative press in the previous year than any other FTSE 100 chief executive.v

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He would be replaced by Mark Tucker, who had previously spearheaded
Prudential’s growth in Asia before joining HBOS as finance director. Prudential’s shares gained 6% on the announcement of his appointment.vi
In April the UK operation launched the customer retention team. The unit was set up to identify customers about to move their account and to persuade them to change their mind. The initial discussions on how this might be achieved involved people from across the organization and took place in one of the experience centers. Participants were each asked to bring along a cherished object to stimulate thinking about why they would want to keep it. As one executive pointed out:
To seek something completely different has now become part of the way we do things.

At the same time, Prudential was continuing to sign partnership deals – both single-tie and multi-tie agreements. It had built up its share of the advisor market not by offering more commission, but rather through its products and services to advisors. And it continued to innovate, with a new-style equity release scheme soon to be unveiled.
After five straight quarters of growth, investors were really starting to take notice.
As one investment journalist noted:
Since raising the money to expand its UK business, sales have gone from strength to strength, with most investors now reluctantly conceding that the cash call was in fact the right move to make to capitalize on a return to saving by the UK public.vii

A Hard Act to Follow
With five months left of the 1,000-day plan, Wood felt confident that the scheduled projects would all be delivered and that the KPI targets would be met – especially with him taking over the quartermaster role for the final quarter.
In secret, he booked the cool venue for their anticipated celebration. He also made arrangements with HR for all employees to receive a free meal and a day off. At the same time, he was asking himself: “What next?”
Having built up considerable capability and momentum, the collective energy needed channeling. His story, the 1,000-day plan and the slogan – “A thousand days for a hundred years” – had provided focus and helped to mobilize efforts.
But what should replace them?
The 1,000-day plan had already lifted Prudential from being a disadvantaged organization to one that could compete in the UK market. It had successfully evolved from a direct-sales operation focusing on with-profits products into a company selling mainly shareholder-backed products through IFAs, direct to customers, business to business and through partnership agreements (refer to
Exhibit 9).
But the market, the competition and the legislation were also shifting – and there was a sense within the top team that they would have to do something different just to maintain their position.

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There were also questions surrounding the levers put in place for the change effort. Should they preserve the quartermaster role and the release schedule? Did they need to communicate as much, both internally and externally? Should Pru
University continue to operate in the same way? And what about the future of business transformation as a stand-alone function? Should they scale back the numbers or even reintegrate the project managers back into the areas and eliminate the function altogether?
He also faced personal dilemmas. Having led an impressive turnaround, did he want to sign up for the next drive? McNish planned to bow out at the end of the
1,000 days. Should he do the same? The recent arrival of Tucker as group chief executive had closed off that route. So should he look for a new challenge?
These issues preyed on his mind as he prepared a June retreat with the executive team to agree on next steps.

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Exhibit 1
The Man from the Pru Is Born

First introduced in 1949, the “Man from the Pru” was dropped from Prudential’s advertising in 1969. Though regarded affectionately, the old-style figure was seen as anachronistic.
The slogan was revived in 1997, but this time he was incarnated by the group chief executive Sir Peter Davies. He appeared in person in the new advertising campaign, fronting two of the television commercials and signing poster and newspaper ads as “The Man from the Pru.”
Source: Company information

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Exhibit 2
The Evolution of Prudential’s Financial and Workforce Figures

Year ending March

Workforce
(Pru UK)

Sales
(Pru UK)
£m

Operating profit (Pru UK)
£m

2000

11,500

736

230 (1)

2001

9,330

822

243 (1)

2002

6,930

781

222 (1)

2003

5,970

616

166 (1)

2004

6,640*

817

241 (2)

2005

6,930*

900

243 (2)

*About 1,000 in Mumbai
Source: Company information

(1) MSB operating profit
(2) IFRS operating profit

Exhibit 3
Poster Ad Inviting Customers to Request a Plan from the Pru

Calls may be recorded

  
(Sorry about the 8.)
The Plan from the Pru

PRUDENTIAL

Source: Company information

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Exhibit 4
The Key Performance Indicators
Three financial KPIs:
1) Profitability KPI: Profit made during the year
2) Share Price KPI: Total value of business
3) Cash Flow KPI: The cash available to invest in the business and to pay dividends to shareholders
Three qualitative KPIs:
4) Happy People KPI: To be the employer of choice measured by
a) Overall employee satisfaction
b) Overall communications
c) Overall management competence
d) Overall career, training and development
e) Overall reward and recognition
In addition, these five targets will be measured against the acceptance rate of external applicants.
5) Happy Customer KPI: To restore Prudential as the trusted first choice provider, by focusing on two key areas:
Very happy to deal with Prudential: Monthly tracking of cross-section of
600 UK adults on attributes:
a) Listens and adapts to customers’ changing needs
b) Can be completely trusted with their money
c) Provides good advice
d) Convenient and easy to deal with
e) Communicates clearly
The Quality Mark awarded by the Pensions Protection and Investments
Accreditation Board
6) Happy Regulator KPI: To comply with all the rules and regulations set by the Financial Services Authority. EVERYONE is accountable for ensuring that everything we do is squeaky-clean.
Source: Forward Focus, December 10, 2002

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Exhibit 5
The Walk in the Woods
The Walk in the Woods sessions were three-day retreats that took place twice a year. They were designed and facilitated by Drew Watson, the head of organization development. Discussion, sometimes stimulated by outside speakers, centered on four critical questions:
1) How are we doing in getting the results we need to get and where do we need to go from here?
2) How are we doing as a team?
3) What are we doing to shape the culture we need to be a successful business and employer?
4) What commitments do we take away from here and how do we communicate and action these?
Source: Company information

Exhibit 6
Evolution in the Projects Undertaken
Over the 1,000 days the allocation of funding to the main project types gradually shifted:
2003

2004

2005
(anticipated)

Infrastructure

53%

53%

30%

Risk/Mandatory

5%

8%

14%

Cost Saving

29%

14%

12%

Revenue Growth

13%

25%

43%

Source: Company information

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Exhibit 7
Excerpts from Mark Wood’s Voice Message to Employees to accompany announcement of full year 2004 results

January 25, 2005
Good morning.
This morning we announced full year results for 2004. And given that all the material is on the intranet this morning I just wanted to give you the headline numbers for the UK.
We certainly have something to feel proud about. As you know we achieved 40% sales growth. And that takes us to second place in the market, increasing our market share to 8.9%. Last year we were in seventh position.
In terms of profit the UK business has delivered a fantastic 40% increase in new business. And this means we’ve maintained margins at 27%.
We reported record new business achieved profits for the group up 23% at
£688 million.
These are strong numbers. Our shareholder backed business is growing, replacing the with-profits volumes of a few years ago.
These numbers in fact are so good that some analysts may dismiss them as a one off. We need to prove them wrong.

Source: Company information

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Exhibit 8
List of Key Awards (2003–2005)
2003
March: Four awards at the “Financial Oscars” (Money Marketing Financial
Services Awards) including one for the “Plan from the Pru” and one for “Sorry about the 8.”
May: Two awards at the Employee Benefits Awards – “Most effective use of a flexible benefits plan” and “Communications strategy of the year” for You Choose.
July: 2003 HR Magazine Awards for “Most effective benefits program.”
October: Three awards for flexible working environment introduced in new HQ.
2004
March: Two awards at Money£acts Investments, Life and Pensions Awards for
“Most competitive annuity provider” and “Best with-profits bond.”
May: Employee Benefits Award 2004 for “Most effective use of financial advice in the workplace.”
July: “Best pension provider” at What Investment Awards.
Voted “Best post-sales service” by IFAs at Annual Investment Forum.
October: Award from the International Association of Career Firms for
Prudential’s innovative approach to career management and outplacement.
November: “Best call center 2004” for IFA call centers at the Financial Adviser
Sales Awards.
December: “Best investment site” at the Online Finance Awards for its IFA extranet. 2005
January: Highest scoring participant in Accenture’s benchmarking exercise of procurement teams.
March: “Innovation award” for PruFund at Money£acts Awards.
July: “Best pension provider” at What Investment Awards.
September: Management Today “Service excellence” award for financial sector.
October: Investors in People award for management and development of employees. November: Communications Excellence Awards for the “Customer Experience” campaign and for “Best internal communications strategy.”
Source: Company information

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Exhibit 9
Market Share Comparison
Sales by distributor or type

The Market 2004 (%)

Prudential 2004 (%)

Employee benefits consultants

9

28

Direct

10

13

Single tie

26

25

IFAs

55

34

The Market 2004
(%)

Prudential 2004 (%)

Bulks

3

19

Individual annuities

10

27

Protection

17

11

Bonds

26

14

Group pensions (fee based)

10

17

Other pensions

31

8

DWP rebates

3

4

Sales by product

Source: Company information

References i Williams, I. “The New Men from the Pru.” Sunday Times, January 5, 1986: 12.
Simms, J. “Bear Market Necessities.” Human Resources, May 22, 2003: 38. iii “Prudence in Perks.” Employee Benefits, June 4, 2003: 39. iv McMillan, P. “Pru Puts IFAs in Lab to Study Behaviour.” Money Marketing, May 26, 2005: 3. v Tooher, P. and L. Buckingham. “Blundering Bloomer.” Mail on Sunday, March 6, 2005: 8. vi Connon, H. “A Birthday Coup at the Pru.” Observer, March 27, 2005: 7. vii Foley, S. “The Investment Column.” Independent, April 21, 2005: 73. ii This document is authorized for use only in MBA FT MPIO by Phil Taylor, University of Strathclyde from October 2015 to April 2016.