Marrying a member- first culture with commercial outcomes

Many people have written about culture in superannuation. This is absolutely warranted; as we all know, culture is the bedrock of all super funds, both for-profit and profit-for-member.

Examples from across the industry show that a robust and aligned culture leads to strong outcomes.

Culture is the guiding light that supports what is done, why, and the how an organisation achieves results.

When cultures are great it can be felt coming through the walls of an organisation and in the buzz around the floors (or these days, the Teams or Zoom screens). It manifests in many ways.

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Unfortunately, many people reading this have also survived poor cultures. I use the term “survive” purposefully – I expect you don’t want to re-live that experience any time soon.

I want to introduce another term: commercialism. This is a common concept in for-profit entities, but in profit-for-member funds it sometimes elicits a pained look on the faces of employees. Commercialism and the culture of a profit-for-members fund don’t align, do they?

But this doubt need not be the case – nor should it be.

I have had many conversations over the years about commercialism and culture in profit-for-member
super funds. Here are the big questions that usually arise, and my brief answers.

• Can they co-exist? Culture and commercialism can operate together. In fact, they must do. Commercial outcomes directly benefit members who, after all, are the ultimate beneficiaries.
• Why is it important? Funds are custodians of members’ money and these members expect that their retirement savings are being spent on the right things, for the right reasons, and that every dollar is being spent wisely. It is also a legal requirement, through the members’ best financial interest test.
• How can funds make it work? It all starts from the top – through vision, purpose, strategy, measurement and relentless communication, and by demonstration through behaviours and decisions.

I think of the combination of commercial rigour and the profit-for-member ethos as “commerciality with a
heart”.

There are always trade-offs

I recall a conversation some time ago with a person working for a super fund that was seeking to improve administrative efficiencies and to manage staff growth through enhanced leadership capability, structural and process changes, and new technology. This person was concerned these efforts would damage what had been built for members over many years. That is, the person felt the program was at odds with the
culture of a profit-for-members fund.

I listened intently. The genuine passion and care for members was palpable. So too was the concern that changing the way things have always been done and focusing “too much” on cost reduction was going to set back the culture.

After some time, I shared a simple anecdote.

Imagine a scenario where a fund hand-delivered each and every annual member statement to members. Members would hear a knock on their door and be presented with their statement by a fund representative who could take them through the fine details of their statement and answer any questions. Great service, no doubt.

But the cost would be astronomical and soon members would rightly ask: “Why are you spending so much money hand-delivering statements? This is my retirement savings and there are more efficient ways of delivering it to me.”

This rather extreme example illustrates the point. There are always trade-offs between cost, service, duties and members’ expectations. Funds need to make those choices, considering many factors. This is the case whether you operate a for-profit or profit-for-members' fund.

In for-profit enterprises, margin and profit are often discussed, but this is much less common in profit-for-member funds. However, I argue margin and profit are just as valid for profit-for-member super funds.

The difference is not whether you make a profit – it is what you do with it.

In for-profit enterprises, profits are distributed to owners, often shareholders. This is appropriate given they put up the capital. This is distinct from profit-for-members' super funds, where the capital is made up of members’ retirement balances.

So if you apply the same commercial lens to profit-for-members' funds, it is clear that distributing the surplus of revenue over costs back to members via lower fees or better products, services and advice is a good thing. It is undoubtedly a great outcome for members!

What does ‘commerciality with a heart’ mean?

'Commerciality with a heart' is as much about aligning culture and purpose as it is about the numbers.

To explain, let me be clear about what it is not. 'Commerciality with a heart' is not a race to the bottom on costs – because lowest cost does not necessarily equate to best or highest value.

So, you may reasonably ask, “Is it about value then?” The answer is an emphatic yes. 

It means ensuring that every dollar spent is the right dollar, spent on the right things, aligned to your purpose and strategy. It means that every decision is guided by a few questions:

• Does investing in this project or undertaking this work add value to members?
• Is it directly aligned to the strategy and purpose?
• Does it contribute to the long-term sustainability of the fund?
• Is the optimum amount being spent?

Assuming your organisation’s operating model is optimised, 'commerciality with a heart' involves aligning your purpose and vision to the delivery of member value. This should address what will be delivered to members as well as how you will do it, how the business will run, how decisions will be made, what hurdles will be put in place, and how and by whom decisions are measured and monitored.

Then you need to champion it throughout the workplace every day.

How to bring this to life

Much of this is probably not news to many of you. Many funds operate this way today. For some people, however, it is helpful to sit back, reflect and do a stocktake. In bringing this to life, there are several
actions you can take:

• Align purpose to value: A light on the hill or a north star – whatever term you use, it works! Culture, history and purpose are critical to success. Explicitly linking commerciality, member outcomes and purpose is invaluable. Once your people understand the “why”, they are much more likely to embrace it.

• Communicate: You can never communicate too much. Sharing what 'commerciality with a heart' means for your fund will propel it forward. Define what value means in the context of your members and quantify and communicate the value you are delivering. Tell stories and share examples where things have gone well and not so well. Both are important.

• Clarify expectations, then empower your people: Good leadership demands being clear about your expectations and demonstrating your commitment to them. Empower your people and share information transparently – trust is powerful. Seek people’s input about ways to innovate and drive change, and ensure they have appropriate delegations to make decisions. Your people will thrive when armed with clear guidelines on what is expected.

• Set hurdles, monitor and respond. Set challenging hurdles that encourage your people to strive to do better and to innovate. Reward them when they do and support and learn with them when they don’t. Supercharge your project governance and decision making, stopping projects where benefits will no longer be harvested and celebrating those that meet and exceed hurdles.

• Uplift capability: Invest in your people, supporting systems, processes and ways of working. Each supports and equips your people to make effective decisions that are aligned to your vision and purpose. This contributes to more effective decision-making, execution and communication. It helps to bring 'commercialism with a heart' to life.

• Measure, measure, measure: We all like crossing things off our “to do” list. Setting objectives, targets and measures makes it real for your people. There are many ways of doing this. A balanced scorecard is an effective way of setting and measuring objectives across multiple dimensions. It is also an excellent way of communicating what is important and what the organisation’s priorities are. To embed this, openly share the scorecard measures and outcomes with all levels of the organisation and use it as an input in performance conversations. The old adage “What gets measured, gets managed”, is true. Focus on and quantify the value delivered to members – it will become self-perpetuating

Change starts from the top

Embedding a 'commerciality with a heart' ethos into your fund will drive focus and alignment, and ultimately value to your members. You should also expect to see positive changes in your people as they embrace the challenge and demonstrate new levels of accountability, leadership and decision-making every day. Together, these will lead to better, sustainable outcomes for members.

As we know, it all starts from the top. You need to review, refine and align your vision and purpose, assess your current state and map out a plan to reach your desired state. Understand the steps you need to take, the investment in people and culture, and the processes and systems to support it.

Be unwavering in your focus as you get on with driving and building toward your desired state every day.

Michael Pennisi is principal at consultancy Nous Group.