Situation Audit The Progressive Corporation

Situation Audit: Progressive Mutual Insurance Company

Executive summary

This document presents a situational audit for Progressive Mutual Insurance Company, an insurance company with its headquarters in Mayfield Village, Ohio. The Progressive Corporation was created on Mar. 10, 1937, by Joseph Lewis and Jack Green when they set up Progressive Mutual Insurance Company. The current CEO and President is Tricia Griffith, who succeeded Glenn Renwick in 2016. The corporation’s mission is to be an excellent, innovative, growth-oriented, and enduring business. They plan to achieve this by profitably and cost-effectively cutting-down the human trauma and costs of accidents and developing a recognized, trusted, admired, business-generating brand. The objectives for the company are; profitability and growth. The most prominent business strategies that the Progressive Corporation has adopted include product development, innovative products, integration, and market development. Progressive Corporation the biggest car insurance company in the United States.

According to the latest statistics, the company has over 39,000 talented employees. It has a clear organizational structure with the CEO and president at the top and all departmental heads reporting to her. The company’s critical resources are its flexible and talented human resources, technology resources, and organizational culture. The management and leadership style at the Progressive Corporation can best be described as transformational. The leadership has played a crucial role in navigating the organization towards improvement by changing existing through and procedures. Corporate governance for the corporation is under the responsibility of the board. Learning and change in the company are facilitated by the company’s transformative leadership and change training programs. Based on this audit, it is recommended that; 1) The management should seek ways to expand on the insurance business by providing additional covers for uncovered risks or venture into other related business, 2) it should take in riskier customers or give more discounts for some segments, and 3) consider opinions, views, and reviews from their customers.

Introduction

This document presents a situational audit for Progressive Mutual Insurance Company, popularly referred to as The Progressive Corporation. A situation audit is the appraisal and analysis of the basic planning premises and covers all the processes. It presents a sense of expectations, needs as the organizations’ current status in creating awareness throughout the organization, crystallization of a development-oriented focus, and making people committed to realizing specific goals (Clarke, Friese & Washburn, 2017). This information is vital for strategic planning as the organization’s top management makes current risk-taking decisions. The report provides the best possible information on the organizations’ current status, the operational environment, and the target customers, thus enabling future situations and consequences.

More specifically, the situational audit for The Progressive Corporation is important because;

i. it identified and analyses the key trends, phenomena, and forces that can impact the organization on the formulation of strategies. This will help top management identify specific elements in the operational environment to be addressed

ii. . It emphasizes the importance of conducting a systematic evaluation of how the environment affects the organization

iii. . It is a forum to share and debate various and divergent views about appropriate environmental changes. The more open the debate, the more effective it is for strategic planning

iv. the attempt to assess the environment helps sharpen vague, amorphous altitudes concerning operations in the environment, and

v. all the information presented in the report provides a base for the completion of strategic planning in all its phases, from re-evaluating missions, visions, and goals as well as the formulation of strategies and implementing them.

Fact sheet

The Progressive Corporation was created on Mar. 10, 1937, by Joseph Lewis and Jack Green when they set up Progressive Mutual Insurance Company (Progressive, n.d.). The company, which has its headquarters in Mayfield Village, Ohio, was set up to provide vehicle owners with security and protection through insurance. The company’s legal status is a C corporation, and it was incorporated in 1956 as Progressive Casualty Insurance Company (Insurance Business America, n.d.). Its legal form is taxed under the corporation level based on the corporate income tax rates. Shareholders are required to pay dividend tax earned, and all employees who draw a salary from the company are also required to pay tax under income tax rates.

Its current CEO and President is Tricia Griffith, who succeeded Glenn Renwick in 2016. Over the years, the company’s insurance products have expanded beyond vehicles to include; finance, commercial, property, building, and personal risks. The corporations’ impressive book includes R.V. insurance, pet insurance, boat insurance, motorcycle insurance, life insurance, snowmobile insurance, and insurance bundles (Insurance Business America, n.d.). As a corporation, Progressive has subsidiaries. It is ranked as the third-largest insurance company in continental America and 2019; it was ranked position 99 by Fortune 500 as the largest United States Corporation by total revenue (Fortune, 2019). As per 2019 statistics, the company has over 39,000 employees and a USD 39 billion revenue.

Progressive Corporation is in the insurance industry, and its general purpose is to reduce the human trauma and economic costs that come with auto accidents and other mishaps. It is captured in the phrase “True to our name. progressive” (The Progressive Corporation, 2020). To deliver on this purpose, the company has remained innovative by sought to grow by building solid partnerships with independent agents over the years. As per 2018 statistics, the company worked with about 38,000 agents and brokers across thousands of insurance agencies in the U.S. (Insurance Business America, n.d.). In 2018, the company adopted a direct-to-consumer approach by using digital tools that allow for 24/7 services.

Mission, Vision, Values, and Goals

Progressive Corporation mission is “to be excellent, innovative, grow, and enduring business by cost-effectively and profitably reducing the human trauma and economic costs of auto accidents and other mishaps, and by building a recognized, trusted, admired, business-generating brand” (“Vision, strategy & values,” n.d.). Since its inception, the mission statement of Progressive Corporation has changed in addition to reflecting the changing operational environment. For example, in 1988, after California passed Proposition 103, the company changed its mission to “reducing the human trauma and economic costs of auto accidents.” This is meant to help customers see the value of their insurance when they use their coverage.

The Progressive Corporation’s mission statement marries with its name and provides a clear direction for almost every operation – progressive. The stamen answers the questions what, who, and how (Cochran, David & Gibson, 2008). In the 1930s, when the company was created, the mission was relevant given that insurance products were rather static and traditional. However, through the provision of high-risk and previously uncovered aspects, it is obvious that the company was truly progressive. The mission, therefore, reflects the company’s philosophy and the culture of the organization. Given the connection between the name and the products on offer, it is concluded that the mission statement is well understood by the various stakeholders; customers, innovators, product designers, and management. The mission can inform key decisions for the company, especially in the innovative products offered and their relevancy to the customer needs.

The vision for the corporation is to “become consumers’ number one choice and destination for auto and other insurance” (“Vision, strategy & values,” n.d.). This vision statement has been written in the present, describes a clear outcome, uses unequivocal language, and helps build a clear picture in stakeholders’ minds. The company’s core values are; revere honesty, respect all people, communicative objectives, strive for excellence, and earn profits. These core values are aspirational, enabling, and authentic for an effective organization (Tessema et al., 2019). The vision and core values are part of operations and are visible to all on the company’s website, thus, well known. Also, given the nature of the company’s business, it is evident that the vision and core values align with its mission.

The company’s goals are clear, but they might not be understood by the company’s stakeholders as they are not independently stated; they can only be deduced from the strategy statement. However, with the strategy statement they are clear, align the organization’s mission, vision, and values. In conclusion, it is argued that the mission, vision, core values, and goals for The Progressive Corporation are in alignment.

Organizational Strategy and Objectives

The Progressive Corporation’s strategy is made up of four pillars; 1) ensuring people and culture collectively remain the powerful source of competitive advantage, 2) meet broader needs for the customer throughout the lifetime, 3) maintain a leading brand through innovation and confidence-building experiences, and 4) competitive prices are driven by accuracy of claims and operational efficiency (The Progressive Corporation, 2020). The objectives for the company are; profitability and growth. The most important goal for Progressive Corporation is for their subsidiaries to produce a total calendar year underwriting profit of 4% and above. On growth, the corporation aims at growing as fast as possible and be only limited by profitability and ability to provide high-quality customer service.

Based on 2018 financial results, the company had an underwriting margin of 9.4%. For the last decade, the company had an average underwriting margin of 7.1% - compared to 2.1% for the insurance industry, which is well high above the 4% minimum (The Progressive Corporation, 2019). The net premium written growth for the Progressive Corporation in 2018 was at 20%. Moreover, policies in force growth for personal auto were at 14%, and properties at 32%. The corporation’s net income attribute for 2018 was 28.7% (The Progressive Corporation, 2019). The performance indicators based on a balanced scorecard (Kaplan & Norton, 2005) indicate that the organizational strategy is effective and the objective is being met.

Strategy types and competitive advantage

Over the years, and as a factor of The Progressive Corporation’s growth level as an organization, the management has employed several strategic types to create value and competitive advantage. Currently, the organization can be considered to be at the optimum. Thus, growth is meant to ensure market share expansion, attract new customers, create innovative products, and maintain the current customer base. As a result, the company’s strategy type is an integrated type that combines business strategy, corporate strategy, and functional strategy (Kaplan & Norton, 2001). The various strategies are then used to generate a competitive advantage.

Corporate strategies

Through corporate strategies, the Progressive Corporation invests in people as the primary resource for the company. Through its personnel, the company seeks to touch its employees’ lives through training and non-staff persons through acts of kindness. For instance, the company has the Keys of Progress Campaign used to award deserving veterans with cars. Also, the company has a variety of initiatives and programs for the motivation of their staff.

Also, and of prominence, is the diversification strategy that Progressive Corporation has adopted. To reach a wider consumer base, the company began undertaking partnerships with independent insurance agencies. The company operates commercial and personal lines businesses through more than 35,000 independent insurance agencies spread throughout the united states (The Progressive Corporation, 2020). This corporate strategy has served to increase the availability of their insurance products. The company has also adopted digital tools to avail their products directly to the customers on a 24/7 basis to partnerships.

Another aspect of diversification is through the number of insurance products on offer. At its inception, the company targeted and covered only high-risk vehicles. However, with time and up to date, the company is still diversifying its products. At the movement, it offers insurance covers for personal cover, property, pets, R.V.s, watercraft, snowmobiles, and motorcycles, among others. This diversification strategy has enabled the company to rise to be one of the top insurance companies in the U.S.

Business strategy

The most prominent business strategies that the Progressive Corporation has adopted include product development, innovative products, integration, and market development. The company seeks to provide progressive insurance products. To do this, the company has always undertaken intensive market research to establish consumer needs, which then inform their designs. As a result, the company has developed and continues developing innovative products relevant to consumer needs through insurance coverage of various high-risk possessions.

The company has also sought to develop the market, mainly through integration with insurance agents. Through their partnership strategy, the Progressive Corporation is also developing the market, expanding its reach, and reaching more uncovered persons in urban areas and rural America.

Functional strategy

One of the functional strategies specific to Progressive Corporation is its marketing strategy. Flo is popular in the company’s adverts. On their website, Flo provides an interactive advertising option where the company can interact with existing or potential customers. Flo is also available through the social media accounts for the company, especially Facebook. On televised adverts, e.g., during super ball break advert sessions, Flo is popular. Through Flo, the audience can identify the company, creating a clear brand image in target consumers’ minds.

The company’s three types of strategies all work towards creating, developing, and maintaining a competitive advantage for the company’s products. For instance, through diversification, the company can establish a competitive advantage against its competitors. The company also uses cost to create a competitive advantage by ensuring that its products are competitively priced.

Organizational size and structure

Progressive Corporation is the biggest car insurance company in the United States. According to the latest statistics, the company has over 39,000 talented employees – referred to as progressive people and six major campuses located in Cleveland – the headquarters, Tampa bay – the second-largest campus, Austin, Texas, Phoenix, Colorado Springs, and Sacramento. In addition to in-office working, the company also allows for working from home (“Progressive careers,” n.d.). However, the current size of the company has only been achieved through the years.

Over the years since it was established in 1937, the company has grown by leaps and bounds. When the company was created, it was the first in the industry and established drive-in claims location. In 1956, Progressive Casualty Insurance company had only 40 employees and $2.6 million in written premium. In 1965, the Progressive Corporation was founded and continued growth by targeting fair profit and sometimes choosing lower-priced insurers. In 1974, the corporation moved to the current headquarters in Mayfield Village, Cleveland, Ohio, and started the Progressive Art Collection. In 1990, the company adopted the internet and made available claims on a 24/7 basis from wherever, which in 1993 was followed by a 24/7 customer service. Through capabilities availed by the internet, the company has offered various products, and the company has grown to what it is to date.

The current size of the company is an asset towards the realization of its mission. Due to the various offers and customer-centric services, the company has eleven departments referred to as teams. From Product & strategic account management to Customer services, these teams are vital in providing the fuel required to realize its mission, vision, goals, and objectives.

To ensure a smooth flow of instructions and communication, Progressive Corporation has a clear organizational structure. At the top of the organizational structure of the company is the CEO and President, Tricia Griffith. Under the CEO and President are all the department heads, who report directly to the CEO. These include the Chief Strategy Officer, The Chief Legal Officer, the Chief Marketing Officer, The Chief Relationship Management President, the Chief Finance Officer, the Chief Human Resource Officer, Claim President, Personal lines President, the Chief Information Officer, and Commercial Lines President as illustrated in figure 1 below. The company also has a board made up of twelve individuals, their chairperson is Lawton N. Fitt, and the rest are Directors. The board also serves as advisors to the management team headed by the CEO.

Figure 1: Organizational structure for The Progressive Corporation (Adopted from “Progressive org chart,” n.d.)

With all the team leaders reporting directly to the CEO, this reduces bureaucracy and easiness decision making throughout the organizations. Also, it brings the leadership closers to the employees, which serves to generate the family and progressive culture within the organization. While this organizational structure might not be said to affect the mission of the organization in any significant way – the mission is all customer-centric, it has a real impact on the core values of the organizations; for example, it improves on objective communication even within the organizations, and because of the limited structures within the organizations, e.g., there are no deputy CEO or Assistant Departmental heads, it reduces operational expenses in the form of salaries and wages, which increases the profits for the company, and dividends to shareholders.

Critical resources

The Progressive Corporation has several resources that may be considered critical for their operations. This paper has a crucial role in setting the company aside and generating a significant competitive advantage.

Human resources

The corporation has managed to attract a diverse and talented team of primary human resources through this flexible and diverse culture. The management encourages employees to take ownership of their careers, and it continually invests in a variety of career development resources;

· one of these is A Multi-Cultural Leadership Development Program that encourages intercultural competence while at the same time develops employees

· another is Own it, which is an internal career development hub that has tools and guidance that employees can use to develop their competencies and help them learn and grow in their careers

· the third program is business-area training for technical, personal, or career development offered through Claim University, I.T. University, Marketing University, Agency Sales Learning & Development, and more (“Progressive culture,” n.d.).

Progressive Corporation’s culture has formal and informal mentorship opportunities that allow employees to learn and develop technical skills that foster their leadership capabilities. Through their development, employees share with their managers, supporting them to keep their careers moving forward.

Technology resources

The other and probably the most crucial aspect for generating competitive advantage is the Progressive Corporation’s technology. Since its inception, the company has undertaken active innovation, and as a result, they have brought into the insurance industry several initiatives and tools that are firsts. The business model and the operational model have been aligned to realize true operational innovation (Vkern, 2015). The Corporation differentiates itself from other insurance companies through innovative initiatives such as;

· Pay-as-you-drive. Progressive Corporation used this revenue model to track car mileage and their customers’ driving habits. It is promoted through Snapshot, a voluntary discount program, and drivers have the opportunity to save money on car insurance by opting in.

· Consumer convenience. The corporation provides easy access to car insurance so that consumers can reach it whenever, however, and wherever it is most convenient.

· Personalized consumer engagement through data analytic. Recently the company has established analytical capabilities to better understand and engage with its customers.

Through their operating model, the corporation has developed initiatives that enhance their ability to maintain their customers (Vkern, 2015);

· Claims processing re-engineering. The corporation has developed an Immediate Response Claims Handing approach, allowing claimants to get hassle-free service 27/7 and faster.

· Underwriting improvement. Even though they began to focus on high-risk drivers, they shifted to low-risk drivers who want credit ratings during the underwriting process and price risk than competitors.

This operational model achieved through innovativeness has helped to support customer satisfaction, convenience, and retention, thus creating a competitive advantage.

Organizational culture

The culture of the Progressive Corporation is modeled around its core values. The values of integrity, objectives, Golden Rule, Excellence, and Profit guide business decisions for the corporation and determine how each person – customers, business partners, and investors – are treated. These core values create a culture that sets aside the corporation. The corporation has generated a diverse, inclusive, and flexible culture, and, as a result, they are a welcoming place for a diverse population as employees, investors, and partners. The corporation encourages all to bring their entire self to work, and they value the input being brought in the form of ideas and energy (“Progressive culture,” n.d.).

Leadership, governance, and management

i. Management and leadership styles and effectiveness

The management and leadership style at the Progressive Corporation can best be described as transformational. The leadership has played a crucial role in navigating the organization towards improvement by changing existing through and procedures. This is supported by the culture that exists within the organization. At the top of the management of the Progressive Corporation, I the CEO and President. Tricia Griffith. Since she was named the CEO in July 2016, she began a journey of changing some of the organization’s processes, especially in her strategic approach to increase the book of business for the company among a preferred segment of customers who bundle auto and home insurance. This approach indicates the transformative nature of her leadership, and as a result of this change, the company saw a growth of this segment from 400,000 to more than one million (“Leadership…,” n.d.). As a result of her management and leadership style, it is also noteworthy that within two years of her tenure as the CEO of the corporation, it improved from fourth to being ranked as the third on the list of U.S. auto insurers based on written premium in 2018. This is a clear indication of the effectiveness of Griffith’s leadership and management style.

It is also to be noted that Griffith joined the company in 1988 as an entry-level claims representative, and she has worked in numerous positions while at the same time progressing through the ranks to the CEO. Based on this business acumen, her management style is approachable and authentic, and many employees cite this leadership style as the key to the company’s success (“Leadership…,” n.d.). The CEO puts a premium on creating a diverse and inclusive environment for all employees and frequently speaks to the importance of being engaged on the job. Based on this leadership style, a Culture Survey on the company placed it as the 96th percentile of all companies who use Gallup’s survey; thus, it can be concluded that the engagement culture the CEO has created is effective and leading to success.

ii. Management control systems

The first and most evident managerial control system used in the Progressive Corporation is the culture that has been created within the company. The company’s core values are part of everyday operations within the organization, and employees are required to operate within these values, and this is a management control structure. Another management control system used in this company is resource allocation (Crespo et al., 2019). By their very nature, resources are limited, and through resource allocation, the company can control operations within the various teams for projects and programs. The other managerial control system, given the company’s leadership style, is communication, modeling, and inspiration. The management has to communicate what is required, model the operational process, and seek strategies to inspire their teams to deliver the required results.

iii. Organizational leadership

Organizational leadership for the Progressive Corporation is structured towards ensuring productivity and efficiency. Overall is the CEO, and under her are several team leaders who report directly to the CEO. These structures improve efficiency by eliminating bureaucracy that often blurs communication and distorts the staff’s leadership. Also, productivity is seen through the increased innovative products, higher underwritings, and increased profitability for the company. In general, organizational leadership structures its inputs to produce outputs (Dinh et al., 2014).

iv. Governance

Corporate governance for the Progressive Corporation is under the responsibility of the board. The board for the company is made up of twelve directors, with one functioning as the chairperson. The qualification for directors, director responsibilities, shareholder communications, election guidelines, access, and directors’ compensation is contained in its corporate governance guidelines. Board committees and code of business conduct ethics are also outlined in various documents. The board oversees the management and sets out goals, objectives for the company on behalf of the shareholders.

Strengths and weaknesses

Strengths

· Strong brand equity and brand awareness – the company is one of the top recognized insurance companies in the U.S., and thus, it’s easy for the company to attract new customers

· Superior product and services – the insurance covers available from the company are some of the most preferred in the market as they address customer needs

· Embracing technology – the company has adopted technology, and it has used it to better its products and create some pioneer initiatives and approaches in the insurance industry