By Noel Machado
11/12/2009
The Life Insurance Corporation of India (LIC), established in 1956, is among the world’s largest life insurers. With magnificent performance, at enormous scale, LIC dwarfs the other 21 life insurance players in India. It closed the fiscal (ending March 31, 2009) with 115,000 employees, approximately 1.4 million agents, 35% growth in new business, over 70% market-share, 322.5 million lives under coverage and Rs. 87,35,514 million in managed assets.
LIC is fully owned by the Indian government; and given the popular perception that privately-managed organisations perform better, LIC’s sustained success and dominating growth is intriguing, to say the least. What makes LIC so extraordinarily successful? Why do customers trust LIC?
This study inquires into HR and management practices at LIC to understand and explain contributing factors for its exemplary performance. The central hypothesis being studied is "LIC has institutionalized a ‘Culture of Trust’ within its organization, and this is what causes its phenomenal success".
The nature of trust
The notion of trust is relevant only in the context of risk. If there were no risk then the question of trust does not arise.In behavioural terms, trust is the willingness and actual taking of risk. Such willingness is unlikely if the perceived-risk is very high. From a psychological perspective, trust is that state of mind characterized by a sense of certainty, safety and assuredness; while lack of trust involves insecurity, uncertainty, ambiguity and risk. Therefore, trust and risk occur in degrees within a single continuum; and one could say that management of risk is nothing but the management of trust!
So what is it that makes people trust enough and be willing to take risks? Control theory provides a possible explanation: it says that in the face of risk, if controls are instituted to manage that risk, then one is more willing to take the risk. For example, a limit price on a stock-purchase order, such that you will not buy outside the specified limit is the control which manages risk and enables one to trust.
However, one of two people - given the same controls - may take the risk while the other may not. For example, a person spends all her money believing that it is okay to spend because she will have money when she needs it. She doesn’t have any specific control mechanism and hasn’t yet been proven wrong, but others may not agree with her beliefs and consequently may be more prudent than her. This example illustrates:
• The notion of trust can be non-rational and is not absolute.
• People can and do trust even without controls, and the converse is equally true.
• The idea of an enduring culture of trust is conceptually at odds with its temporal nature.
• One cannot measure trust itself - any measurement is projected from presenting symptoms or antecedents (such as independence, competence, fairness, respect)
The above four characteristics of Trust makes it very challenging to measure - which is one of the reasons why the research at LIC makes for a truly meaningful study.
We may agree with the established view that controls (independent variable) influence trust (mediating variable) which in turn shapes performance (dependent variable); at the inter-personal level the idea that controls cause trust is dissonant with the concept that independence (sense of freedom) fosters trust. It is the general human experience that we trust those people most who love us unconditionally (without controls). Therefore, it is proposed that trust could be an independent variable in itself. The implications of this proposition, for the research at LIC, are that we will study not only HR practices (controls) which builds trust; but we will also seek evidence of LIC people trusting each other "unconditionally" i.e. even without explicit policies or controls. If the proposition is found to hold good then this research will shed new light for HR strategy and business success.
Managing scale at LIC
Most management scholars and business strategists advocate specialization and division of labour as the means to building efficiencies of scale. The industrial revolution is a prime example of large businesses achieved through division of labour; and this strategy of specialization remains dominant even today.
However, LIC has done quite the opposite: large-scale success at LIC is engineered, not by specialists, but by generalists - who are products of the counter-intuitive HR practice of managing large-scale risk through generalization. LIC does not also do lateral hiring - a popular approach to talent acquisition and growth - instead it invests significantly sums over 8 to 10 years to shape officer-recruits into generalists-cum-entrepreneurs, who acquire deep understanding of its overall business and inter-dependent needs of multiple stakeholders.
Each year, about 10% of its workforce is relocated to new roles and/or functions via transfers and/or promotions. This year over 10,500 employees were moved across 2853 offices spread all over India - and much of this mobility was effected during April and May 2009.
The success of this strategy is dependent on the ability of LIC to retain its workforce over several years, even decades - which it does. This poses another curious question, from the perspective of organisational behaviour: "why do employees trust LIC enough to spend their lifetimes with the organisation - in a variety of roles and locations - especially when the salaries at LIC are far from premium?”
In preparation for their new roles, LIC offers a five-day induction and that too for people at select career levels only. LIC is also a technology pioneer, in that, it has adopted advanced computing technology (enabling efficient processes) during more than 50 years when it has practiced mobility and generalization. So, maybe induction and technology are the sufficient conditions (controls) that engender trust at LIC. We are intrigued with how a government-owned corporation like LIC manages to generate trust within itself and in customers to far outperform a competition that has adopted the "proven" path of specialization?
The secret probably lies in what a Senior Divisional Manager at LIC said "I owe my success at LIC in no small measure to the many assistants and junior officers who coached me without any quid pro quo".
HR practices and the culture of trust
Dominant HR perspectives about on-the-job coaching indicate that it is the role of a manager to coach his/her subordinates. However, the culture at LIC is embedded with the wide-spread practice of junior officers coaching senior executives. Most transferees and promotees at LIC, learn their new jobs from their junior managers. When knowledge can be considered as power, how is it that LIC people trust their seniors enough to part with knowledge and coach them? Is it not better for a junior officer to have a dependent-boss?
This practice of coaching from the bottom-up is another reason why LIC is a rare entity. What is even more fascinating is that such coaching occurs without any official policy or pressure. This is a practice of people freely sharing knowledge to make the boss independent and successful. Could this be a reflection of the culture of "unconditional" trust in interpersonal relationships at LIC? If so, then would it explain LIC’s spectacular performance?
There is far too much at LIC which is out of the ordinary; some of LIC’s counter-intuitive HR practices are:
• It succeeds at scale by generalizing instead of specializing
• It does not acquire talent laterally; instead, it retains and grows people to be entrepreneurial
• It not only coaches its people top-down but importantly, also coaches its people bottom-up
• People freely share knowledge - especially junior officials with senior - when they could have been "powerful” by hoarding it
The story of LIC is quite special and magical: its stellar success has been achieved by doing all the things that a typical organisation would not normally do.
This research will address the relevance of each of these off-beat paths that have led to superior performance. A visit to the LIC HQ in Mumbai reveals the relaxed, pleasant and comforting behaviour of people at all levels. This relaxed demeanor is quite unlike complacency - it is instead a sense of quiet-confidence and self-assuredness.
The author is Principal Researcher representing the Tata Institute of Social Sciences, Mumbai
*This is an ongoing study. The full results and analysis will be published early next year.
