Human Resource Executive, September 28, 2009, Monday

Human Resource Executive

September 28, 2009, Monday

Human Resource Executive

Curing HR

John Murabito, 2009's HR Executive of the Year, prescribed a steady dose of analytics and teamwork to fix a less-than-efficient HR function at Cigna Corp.

By Paul Gallagher


John Murabito can talk about adding efficiencies, reducing waste and reconfiguring a business function with an ease that tells you he's comfortable with the subjects and knows his stuff inside out. He's relaxed, conversational.

It's ironic to think that Murabito dreaded the study of calculus in school, considering the extent to which he calmly added, subtracted and number-crunched his way to improving his organization's health.

And the help that Murabito, executive vice president of human resources and services for Philadelphia-based Cigna Corp., brought to his organization couldn't have come soon enough.

One of the nation's largest health insurers, Cigna was suffering from anemia in 2003, when Murabito took the HR helm. A series of divestitures in property, life and casualty insurance in the 1990s and early this decade were followed by the faltering economy in 2001, as well as skyrocketing medical costs. Cigna was in the process of being reborn, but the labor pains were significant.

H. Edward Hanway, chairman and CEO of Cigna, wanted a change agent in HR to match the change the health-insurance giant was undergoing in the marketplace, and Murabito fit the bill. "It was a time when we were establishing a new strategy, and had some significant operating challenges," Hanway says.

Murabito saw that the company needed a transfusion of talent and organization, and he was willing to make a house call. His friend and colleague, Patrick M. Wright, the William J. Conaty GE professor of strategic human resources at Cornell University in Ithaca, recalls his amazement when he heard that Murabito joined Cigna. After all, Wright says, Murabito was doing well at St. Louis-based Monsanto, where he had worked for six years, the last three as head of that company's HR, and Cigna was in a tumultuous period. Then, there was the whole "glamour" thing, he adds.

"I remember when he accepted the Cigna job that my first reaction was, 'Why?,' " he says. "Even though Monsanto is not that glamorous, it's certainly more glamorous than health insurance. And Cigna was facing some horrible challenges at the time."

Murabito was undeterred, says Wright. "His reaction was, 'This will be a great challenge, and I get to be part of a turnaround.' "

As Human Resource Executive ® 's 2009 HR Executive of the Year, Murabito has met the tasks head-on and performed nothing short of triage on the HR function for the 30,000-employee organization. Steeped in the philosophy of accountability and business acumen, Murabito transformed HR from a decentralized patchwork with little focus on talent management into a "one-company" model that runs with the efficiency of a heartbeat.

"He made it much more strategic in its orientation," says Hanway. "He set, by example, some streamlining in motion that really improved the effectiveness of the function and, at the same time, contributed to cost-reduction activities."

That's as it should be, says Murabito.

"If you're in any functional area, whether it's HR or IT or finance or what-have-you, your role as a functional professional is to enable business success, and the only way you can really enable business success is to start with the business."

If that piece of wisdom reflects one of his primary business philosophies, it is followed closely by another: Murabito is a strong believer in teamwork, and rarely does he use the words "I," "my" or "mine" when describing his successful initiatives.

"I'm trying to use the word 'we,' because I really believe that the accomplishments we've made here at Cigna have been because of a really good team that has been really creative, and my job is to kind of break down walls," he says.


Centralization

One of Murabito's first tasks, in fact, was to break down walls between the various HR silos. At the time he was hired, he says, every department of the company had its own HR function. Finance had its own. IT had its own. Policies differed among them, as did the HR funding and salary increases and bonuses.

With Hanway's support, Murabito says, he bulldozed that HR Tower of Babel and replaced it with a pyramid, in which all human resources and talent management came through his office.

"As we started to think about how we go to market as one company, it made all the sense in the world to say human resources needs to have ... a more common practice across the enterprise, more common ways of approaching talent and succession planning," says Murabito. "We also changed the reporting structure, so that HR reports in a solid line to me, and a dotted line to the business." He has nine direct reports on his staff.

Hanway says Murabito wasted little time in hiring "a number of new leaders who had a similar passion for cultural change."

His department began to study the human capital metrics of each function of the organization, and saw mandates for change begin to emerge -- some of which could be steered through the right incentives.

"Things like unplanned increases from a promotional standpoint, the cost of absenteeism," says Murabito. "We looked at our retention of top talent across the company and said, 'We need a common approach that will improve that.' "

The need to overhaul Cigna's pay-for-performance structure also became an obvious task, he says.

"We had a system whereby, even in years where the business didn't do particularly well, you could still see 50 percent or more of the people in the top categories of performance," he says. In such a system, the top talent could become indistinguishable from the others, and that sent the wrong message.

"We put into place a rigorous pay-for-performance model with guidelines that we really try to align to, so that we send the right messages to the right people, so we retain our best people and use the limited budget that we have in the most efficient way possible from a human capital standpoint," he says.

Hanway estimates that, by slicing at the unplanned increases, Murabito and his team have saved the company about $20 million a year.

"We have made consistent improvement, year in and year out, in the effectiveness of our pay-for-performance system," says Hanway. "It's very visible to us, because John has put in place the metrics to allow us to measure that."


"New-Generation" HR

According to Wright, Murabito represents an emerging breed of HR executives who both accept and rely on the power of metrics. Murabito, he suggests, is as comfortable working with analytics as he is with a word processor.

Like others in this new breed, Murabito is "comfortable with data-based decision-making, and seeks out more of a data-based process," says Wright -- who, in addition to his teaching, is also the director of the school's Center for Advanced Human Resources Studies, on whose board of directors Murabito serves. Murabito is also on the board of directors of the Washington-based Human Resources Policy Association.

Although information-technology systems have long been capable of collecting meaningful data for HR leaders, he says, only recently have these systems been able to bring all the data together in large enough volumes so HR could analyze it in meaningful ways -- ways that could help the function make a positive business impact. As a result, he adds, many HR decisions that were once based more on cumulative experience and intuition have been replaced by hard data that provide business cases for policies.

"I think John has been really one of the leaders [when it comes to changing] that," he says. "Today, Cigna is trying to build a good HR information base and instill the idea in people that it's not just about intuition, but it's about bringing good data to the table."

Leader or no, Murabito says his use of metrics for everything from talent management and turnover to diversity staffing is a requirement for aligning with the business, and he says he thinks every HR leader either uses analytics now or will in the future. All of the technology Cigna uses for its analytics have been developed in-house, he says, and he and his department continue to refine the process.

The goal, of course, is to get the information necessary to continually improve all operations of the organization. When Murabito's staff analyzed the turnover rate in its customer-service areas, for instance, they didn't like what the numbers told them.

"Our service operations are obviously very critical to our success," Murabito says. "We looked at our turnover statistics ... and determined that we were far higher than what we needed to be and could be. We recognized the amount of money it was costing the company just in terms of management of entry-level turnover."

To remedy the problem, Murabito made changes to the hiring and onboarding procedures, and outsourced the hiring of entry-level service staff.

"As a result of that, we've dropped our turnover significantly, reduced our costs, gotten more productivity from new hires and have a much better outcome in that organization for our entry-level people, and that's a critical area," he says.

He also began to outsource other transactional services, such as payroll and benefits, to allow his department the bandwidth to become more strategic in business decisions.

Hanway says outsourcing did help align the department to become more strategic, and he also estimates that Murabito's shift from in-house transactional processes to outsourcing services has reduced operating expenses by $100 million.


Feeding the Talent Pipeline

For Cigna to thrive, Murabito realized soon after arriving at Cigna, developing a healthy talent pipeline needed to be a top priority.

"Because this is a head and heart company, and not a manufacturing [or similar-type] company, then it's either going to do well or not do well based on the talent that we have, and how it stacks up to our competitors," Murabito says.

With that in mind, he began to put together a succession-planning framework that he has since instituted throughout the organization, from rank-and-file employees through the board of directors, studying key roles to determine whether, and where, a gap in succession exists.

"We look at things like age demographics, for example, and [sometimes] say, 'This particular area looks like it's going to have a higher number of retirees in x number of years,' " he says. "Then, you know that's an area of focus from a recruiting standpoint."

To help keep the talent pipeline full, Murabito's department scales talent into now, mid-term and long-term readiness. Key roles are identified in every department and matched against where Murabito's department sees the business requirements in the future. Then, employees with potential are matched and trained to step into those roles eventually. One of the initiatives his team introduced to assist in this planning is known as the General Manager Talent Pool.

"The idea is, after [high-potential employees are] identified, then we can really focus on their development toward that role at a particular level," he says. "It allows us to really identify that cadre of people that are going to be prepared in the future for the really significant jobs in the company."

Among those jobs is Hanway's, who announced his retirement earlier this year, effective Dec. 31. Hanway also announced the promotion of David M. Cordani, the president and chief operating officer, to succeed him as CEO. Although he says "leadership change at that level is always a challenge," Murabito was responsible for heading up the selection process that ushered in Cordani as COO in June 2008.

Senior managers are not the only individuals on Murabito's radar when it comes to development. Another initiative, Cigna University, is a virtual clearing house that serves as the central training-and-development arm of the organization for a wide range of employees -- and even some of Cigna's customers. The university is made up of various "colleges," such as the Leadership College, the Business College, Operations College and General Studies.

"The business college basically [offers] all of the various courses and development work that are in the area of general business skills, whether for healthcare or group insurance or the different parts of the business," he says.

In addition to developing employees, some courses are available to customers and other industry constituents with the goal of helping them become more knowledgeable about healthcare and getting the most out of their healthcare investment.

While the courses at Cigna University are designed primarily for employees, Murabito says, it makes sense to continue to develop the courses offered to their customers.

"I think, particularly on the healthcare side, it certainly seems to be a good investment," he says. "It does nothing but increase our positive customer relations and the education of key constituents."

In recent months, just about every employee and customer has been inundated by the sheer volume of healthcare-related information, thanks to the pending national healthcare-reform legislation. Lately, though, the information has less to do with staying healthy and more to do with the administration of plans.

Healthcare reform -- a hot-button issue that's guaranteed to raise debates, and tempers -- remains one of the key domestic goals of President Barack Obama's administration.

Murabito says employees at Cigna, like many, are closely following the debates and are probably wondering if and how it could affect the company, though he says he can't predict the impact legislation might have.


Proudest Achievement

What can be said is that, thanks to work by Murabito and his department, the Cigna workforce may be a model of what good healthcare planning -- a key component of the proposed reform -- can produce. A marriage of metrics and a focus on increasing productivity helped to create what Murabito calls his proudest achievement: creating a healthier workforce at Cigna.

It isn't that a health-insurance company such as his didn't already have a focus on healthcare for its employees, of course. But Murabito studied the metrics around the health benefits Cigna offered through its healthcare plan and linked those with data from its group insurance plan to study the rate of lost productivity through illness, length of time to return to work, lowered morale and other reasons.

Murabito's team reasoned that if Cigna adjusted its healthcare benefits, it could both improve productivity and serve as a model of quality for its customers.

"The data get linked to ensure that we're suggesting the right kinds of benefits changes year-in, year-out, in order to reduce our overall medical costs, improve productivity, improve employees' health -- which is most important -- and get people back to work and back to their families as quickly as possible," says Murabito. "We made a lot of adjustments to our various benefits plans to account for that."

The company concentrated on weight-loss and smoking-cessation programs, and instituted a complete smoking ban in all facilities. In addition, Cigna added fitness centers and clinics at many facilities, and it offers annual health fairs. Those with chronic conditions such as diabetes or cardiac problems are more attuned to a healthy regimen now, says Murabito.

"What I'm proud of is that, when you look at the metrics and the statistics around our employees' health, we have, over the last several years, significantly improved their health," he says. And as their health improves, he says, so does the bottom line. Although he won't reveal actual figures, Murabito says healthcare costs for both Cigna and its employees have been trending down for the last few years. In addition, reports of short-term disabilities have also begun to show that employees are returning to work sooner than before the plan was instituted.

"The savings are significant," he says. "It's good for the company, it's good for the individuals and it's good for their families. You can't get much better than that."

His quest to improve people's health also extends beyond Cigna, and includes his work as president of the Eastern Pennsylvania Chapter of the Juvenile Diabetes Research Foundation, headquartered in Bala Cynwyd, Pa.


Team HR

When he's not behind the wheel of Cigna's HR department, Murabito enjoys straddling one of his two Harley Davidson motorcycles to head out of his Newtown Square, Pa., home. Neither his wife, Tammy, nor their daughter, Florence, join him on his rides ... but ... "maybe someday," he says. He laughs when he's asked whether he's a weekend warrior -- a lone wolf cut from the Easy Rider mold.

"Most weekends, I take a little ride," he says. "I don't have the time, really, to take long trips, but I enjoy a few hours at a time to take a spin in the country."

Short trips with family have included spending time at the beach, going for an occasional weekend trip to New York to see a show, or going to the ballpark. "I'm a big Phillies fan, and the three of us also go to a lot of games; more than they probably like, actually!"

At Cigna, Hanway says, Murabito is the essential HR team player.

"I told John when he came here that my philosophy has always been that the head of HR is not the sole individual responsible for the attraction, development and retention of the best people," he says. "That's the role that I have and that our business leaders have, but that John should be viewed as the primary partner in accomplishing that objective. And John has done that very effectively."

Murabito says he and Hanway have seen eye-to-eye on that philosophy from day one.

"I think HR can bring sophisticated tools to ensure that leaders have the right tools to use, whether that be in recruiting, development or retention," he says. "That's our responsibility, to enable an outcome that the business leadership really drives and takes accountability for."

In addition to the change of leadership at Cigna this year, Murabito says his plate is filled with other challenges, such as maintaining a focus on bringing value to the company while helping to control costs and maintain a competitive edge in the marketplace.

But that's not really different than the task at hand for most HR executives, really.

"In general, I think HR will continue to be challenged to bring unique value to important areas like top team development, organization development, key leader attraction and development, and succession ¿ while at the same time finding innovative ways to reduce the cost of the administrative areas of HR," he says. "HR must move to be a 'small and critical' function, not one that is viewed as bureaucratic and inflexible."