Below are excerpts from a Risk and Insurance magazine interview with Brian Storms, CEO of Marsh
In the Eye of the Storms
Brian Storms pulls Marsh out of the Spitzer quagmire and reinstills in his troops the firm’s long tradition of service.
By Jack Roberts
When Brian Storms first arrived at MMC Corp. as vice chairman to then CEO Jeffrey Greenberg, New York Attorney General Eliot Spitzer’s investigation of the world’s largest broker was under way, but no action had been taken. Three months later, Storms found himself and Marsh without Greenberg. The firm was under siege with wholesale changes at the top, along with the loss of $1 billion in annual revenue and a new, untested business model based on total pricing transparency. This spring, a bit more than a year later, Storms was named chairman and CEO of Marsh Inc., the insurance brokerage subsidiary of MMC, reporting to the board and Michael G. Cherkasky, MMC’s CEO, after spending his initial tenure at another subsidiary, Mercer Inc., MMC’s human resource consulting operation. His job today is as it was at Mercer: Complete the transformation of Marsh into a new, successful organization. Editor-in-Chief Jack Roberts talked with Storms shortly after he was named Marsh CEO.
Roberts: What are your challenges?
Storms: You have a billion dollars in revenue that’s no longer available to you. You have a different model for pricing transparency that’s imposed on you — appropriately so — but, nevertheless, it’s imposed on you. Now you have to step back and take a look through an objective lens, and you have to say: “Does everything I see at Marsh make sense relative to the new world we’re living in?”
Roberts: So how has risk changed?
Storms: This discussion of risk, this is no longer buried down deep three levels below the organizations that we serve just with risk managers. The category of risk is the topic of the day. The risk discussion just has escalated exponentially in the last several years. Marsh is in this industry, risk management, that’s evolving rapidly. Marsh’s core business model was attacked and changed. You have market dynamics here, and you have your own internal issues here. We’re in the process of creating that model, and it’s beginning to work quite a bit.
Roberts: How does it work?
Storms: Marsh grew in the last 25 years through mergers and acquisitions and rapid global expansion. What we created over that period of time was a very, very autonomous operating structure. That meant that New York and London, while they might have had the Marsh name on the door, operated quite distinctly from each other. To make it even more dramatic, it wasn’t even New York versus London. It was New York versus Washington, D.C., versus Atlanta versus Chicago. Our Marsh operations in the United States were driven by very strong office leaders, and this is very important, with their own profit and loss. Every office had its own P&L, just as every country had its own P&L. When I arrived here, 64 offices in the United States had a P&L. Well, Marsh had every office, every country and every geography had its own P&L.
Roberts: And the repercussions of that?
Storms: If you ran an office, you were a king. As a result, if you’re the CEO of London or you’re the CEO of Atlanta, you had your own P&L. You were empowered to build your own organizational structure vertically. So, as the king, I had my own head of HR and my own head of finance, and I had my own IT department, and I could build all these things as long as I delivered the revenue growth. Because Marsh, like many of our other competitors, were built largely off of revenue growth. And in the last several years of Marsh’s history, when global brokering became profound, a dollar of revenue was a dollar of revenue, no matter what it cost you. When you brought it into the firm, you could get a (profit) override on it. So what was the incentive (to the managers)? The premium was if you get as much revenue as you can, then you drive volume. Volume, in turn, drives overrides. And overrides drive profits. So the organization geared itself in the last several years toward revenue growth at almost any cost.
Roberts: What happens now?
Storms: Global clients are changing rapidly, and the big global clients … have integrated their business. They say, “I need a seamless solution from Marsh.” I need to look at risk around the world. I need to integrate data. I need seamless information. And what happens, you look at Marsh and what do you say? Nothing is integrated. Everything is separate. It’s all different. Today we have three core accounting systems. In a year we’ll have one.
Roberts: What do you do about it?
Storms: We took the P&L out of all the offices. We created a different matrix now for our field managers. They are no longer concentrated on running their own, separate P&L. They are concentrating on the metrics that matter most to us. That’s client satisfaction. That’s revenue growth in their geography. They are concentrating on market-share gains. We’ve taken technology that was completely bifurcated around the world, and we’ve brought in a world-class technology chief and we have one technology team now. It’s part of a global technology group, and we’re integrating it rapidly.
Roberts: But isn’t the one-on-one relationship with the client critical?
Storms: This is key. Client executives at Marsh, for years and years and years, like the branch managers, were fairly autonomous. You heard routinely in the hallways when I joined here …, “Oh, that’s my client … You want to go see my client?” This has now morphed into a dramatic shift in the way we deal with clients. You cannot call on a top strategic client at Marsh (one of the top 250 accounts) unless you’ve done a comprehensive strategic plan in bringing together all of the knowledge of this company, including Marsh Risk Consulting. We have to institutionalize our relationships around the world. Our clients deserve to have access to the best and the brightest and most sophisticated risk management talent in the company, regardless of where it sits. If a client in San Francisco wants to access a technology genius that’s living in Hong Kong who can contribute significantly to their operations, that person’s on a plane to San Francisco regardless of whose P&L it is.
Roberts: What happened when you told the offices about your plans?
Storms: We are training, we are educating and we are communicating. I’ve had to change all the functional heads here. We have a new head of technology. We have a new head of HR. What’s important if I say to a branch manager, “You’re no longer running your P&L in Cleveland”? You’re going to say, “Well, how am I going to get paid?” So compensation becomes a huge tool. I had to bring in a new world class head of HR because we didn’t really have the skill sets to manage the transformation of our compensation.
Roberts: Is Marsh different today?
Storms: It’s changing the whole culture of the firm. You don’t do that by coming in, having a conference call, waving a magic wand, saying, “If you don’t like it, hit the highway.” Bigger companies have done this for years. This is not inconsistent with what great companies do. We’re not benchmarking ourselves against the insurance industry. I’m benchmarking against best practices in global businesses. I have met literally with over a thousand companies in the time that I have been here. If you want to know how clients are thinking, then sit down Mobil, IBM, Federal Express, GE or Boeing. Ask them how they have integrated their businesses around the world. They will tell you the same thing. It’s a tough transformation. They’ll tell you how they did it. It’s not easy. In some cases you have to change people because it’s not in their DNA to change. In all businesses, you have to model compensation differently. You have to restructure your organization to find people who can come in and stimulate that. This is the mission we’re on right now.
Roberts: How has the client side changed?
Storms: It’s changed tremendously. You have lots of new dynamics. The more interesting factor, from our perspective, is it’s now a C-suite discussion. It’s no longer a risk manager exclusively. That risk manager today is actively working with the CFOs, general counsels, chairmen and boards now when it comes to risk. Our relationships with our clients have morphed into a much more complex discussion. They expect and increasingly are demanding a lot more from their broker than simply a good, single-client relationship. They want, in this case, access to our best minds in (our industry practice groups). They want integrated data. They want complete access to our specialist people when it comes to placement. And you can’t do that in a single relationship. If Marsh doesn’t leverage all of those things for clients, then we’re losing the biggest opportunity in the world.
Roberts: What should be the role of the broker in placement?
Storms: It’s a two-way street. Markets deserve respect and brokers deserve respect. You can always get into big debates with people about is it AIG’s or Ace’s client or Marsh’s client. When we place the risk of a major company or a middle-market company with an insurance company, regardless of what the category is, we share that client together. We both have responsibilities to that client. In a healthy relationship, you work together for that client. That’s the way it has to work. We’re an intermediary. Our relationship with our clients obviously becomes far more complex as we begin to broaden out these categories of risk and start penetrating it from a consulting standpoint. The insurance relationship is a fundamental part of that.
Roberts: How would you assess progress to date?
Storms: This is totally a different way of thinking about our business. These are not subtle changes, these are big changes. We’re recruiting now. We’re empowering our people to recruit. They have the green light to recruit now. We’re reigniting our college recruitment. … We are not sitting back. We are aggressively tuning this company. We fully appreciate one fundamental fact of who we are: We’re an intermediary. We intermediate between the client and the market. The only reason for an intermediary to stay in business is to add value. That means you have to add value in products, in innovation. You have to be integrated. All the decisions that we are making today are geared toward that. You don’t do that in six weeks or six months, but that is the framework in which we are making decisions.
JACK ROBERTS is editor-in-chief of Risk & Insurance®. He can be reached at riskletters@lrp.com