A Needle in the Haystack
The search is on for chief digital officers to lead insurers' digital transformation strategies. But is demand for that talent outstripping supply?
A chief digital officer can hold the keys to an insurer's future. But finding an individual with the right skill set can be a tall order to fill.
Chief digital officers are change agents who need to understand a little about a lot. For those working in the insurance industry, they not only need to understand technology, but insurance, customer expectations and the organization's internal politics, according to consultants, executive search firms and recruiters.
At a time when chief digital officers are in demand in many other industries, finding a candidate who is a good fit for an insurance organization is not always easy and may involve more than just a competitive compensation package. Insurers may need to offer candidates a compelling vision for change, the potential for advancement and even consider locating the job in a major city, they said.
Today, about a dozen of the 20 largest global insurers either have a chief digital officer sitting at their companies' management tables or are actively recruiting one, said Tim Bourgeois, executive editor of ChiefDigitalOfficer.net, a global community of senior digital marketing and IT professionals.
That's just the tip of the iceberg. He expects more carriers, including small and midsize companies, to soon add the new and upcoming CDO role to their staffs. While demand is rising, the supply for CDO talent remains low. That is fueling a competitive talent war in the industry, Bourgeois said.
The Talent Search
The challenge for insurers is finding people who can lead the change. Asked, at a recent A.M. Best roundtable on digital transformation in the insurance industry, whether insurers were getting the tech talent they need, McKinsey & Company Senior Partner Parker Shi said:
"The short answer is no. Fortunately or unfortunately, it's not just a problem for insurance. It's a problem for almost all the industries today. Everyone is looking for talent for the digital transformation. Let's put the compensation aside for a second. Assuming that everyone will be willing to pay for the talent, we think that there are three dimensions that a lot of companies are looking for.
"They're looking for people who understand insurance. They're looking for people who understand technology. They're also looking for people who are willing to move to the locations that typically are not technology-centric," Shi said.
Compensation, of course, is always a key consideration when recruiting talent. Chief digital officers can typically command big salaries, sometimes upward of $500,000, said Scot Dickerson, president of Capstone Search Group, a national staffing and recruiting firm.
"That's in line with the compensation of other executives like chief marketing officers, chief information officers and chief risk officers," Dickerson said. CDOs' annual salaries, according to salary reports, generally average about $250,000 to $300,000.
In addition to the salary, compensation may include additional incentives, according to Marc Gyimesi, senior search consultant at The Carlisle Group, an executive search and recruitment firm.
"We're also seeing the growing use of hefty bonuses for benchmarks and milestones hit during a CDO's tenure," Gyimesi said.
The Digital Vision
But compensation alone isn't the only draw. The opportunity to make a mark and bring about important change is also a compelling factor.
"CDOs want to join a company that's committed to a digital transformation. Make sure it's not just something they're being told but rather something that's actually happening," said Ido Segev, a partner in McKinsey & Company.
Dickerson of Capstone Search Group agreed.
"They need to get out there and tell their story because there's a great story to tell in the insurance industry," Dickerson said.
CDOs--tasked with all things digital--now have many opportunities being presented to them, said Robert Boroff, managing director at global executive search firm Reaction Search International.
"There are definitely sexier industries than insurance out there, so it comes down to carriers offering interesting projects that CDOs can work on to transform a company. It's all about how insurers position where they are and where they're going," he said. "Also, CDOs want to work with new technologies, so companies unwilling to invest in the future will have a very hard time attracting these folks."
CDO candidates want to understand what a company is trying to solve for and ensure that it's mapped back to customers' behaviors and needs, said Limore Zilberman, a consultant with Russell Reynolds Associates, a global executive search and leadership advisory firm.
"Instead of it being driven from the inside out, it needs to be driven from the outside in," Zilberman said. "The right organizational structure needs to be driven by this systematic review of how companies digitally enable every touch point with the customer through an entire experience.
"That's sometimes the table stakes to get the best digital talent interested in the role," she said. "They want to ensure they're going to an organization that focuses on integrating front-end and back-end capabilities."
Another challenge is retaining that talent, Segev said during the A.M. Best roundtable. "If you bring in somebody with the value proposition that they're going to move fast, to change the world, that they have money to develop the most exciting tools and solutions, you better be able to deliver on that. Otherwise, they get bored, they get frustrated and they go to Facebook."
Finally, show CDOs the land of opportunity they have before them, The Carlisle Group's Gyimesi suggests.
Often, the role is a stepping stone for more senior-level positions--even CEO. "Because these are very business-savvy executives who understand the drivers of the P&L [profit and loss statement] and are constantly being exposed to all facets of that statement, they'll often find themselves vetted for broader opportunities in the company," he said.
That's already happening in other industries. More than 75% of CDOs surveyed in The CDO Club's Talent Map moved up to become CEO, president, partner, managing director, founder or another position in the C-suite.
Other Considerations
Persuading top talent to join an insurer may involve other incentives as well. Top talent may be less than enthusiastic about moving to a location away from the major tech hubs, Segev said.
"It's difficult to find people willing to go to smaller cities or suburbs," he said. "It's much easier to attract and retain talent in large cities like New York, Boston and San Francisco. Done well, the improved productivity from locating talent in a major city could outweigh the increased costs associated with those locations and those individuals."
Where to Look
Industries such as retail banking, consumer financial services and health care are breeding grounds for digital executive talent, Zilberman said. "We've had much success recruiting from those sectors. [Candidates] come in with an appreciation for and understanding of a very heavily regulated industry and a risk management mentality."
Sometimes good digital talent can be found inside carriers' own four walls. Sean Ringsted, executive vice president, chief risk officer and chief actuary at Chubb was appointed in February to the newly created position of chief digital officer. The company said he would lead the company's digital efforts aimed at transforming the company into a digitally integrated organization and said he would continue to serve as chief risk officer.
Today, about half of organizations follow a similar path, "and perhaps instead of being an executive vice president of e-commerce, for example, they make them a CDO," Bourgeois said.
"There's a comfort level of understanding the business," added Greg Jacobson, co-CEO of insurance search and staffing firm The Jacobson Group.
Fitting the Mold
What are insurers looking for in prospective CDO leaders?
Strong emotional intelligence and leadership skills, Reaction Search International's Boroff said. "The days of professionals tasked with actuarial functions sitting in a room by themselves are long gone.
"CDOs need to articulate the value proposition to all business segments, take something highly analytical and speak about it and, most importantly, lead and manage a team of highly sought-after individuals in the market so there isn't random turnover within the group," Boroff said.
Along with digital acumen, CDOs, which Russell Reynolds Associates describes in a report as executives who hold the keys to a company's future, should be able to understand the markets they serve and show their executive teams the return on equity they'll get by investing significant dollars into digitizing the business, Boroff said.
CDOs are caught in the intersection of business and technology, so they "should be wired in such a way that they have creative spins that come from marketing, are quick to understand technology and realize it's moving at lightning speed, can keep up with the competition, and understand functional areas of insurance and how those areas come together to create synergy," he said.
While education backgrounds vary, CDOs with an MBA are a plus, Boroff said. "I'm not saying they need to have it but if they're going to have a seat at the table it will definitely help."
Building a Team
CDOs also face challenges when trying to attract talent and put together their own teams, Gyimesi said.
"Most people coming out of college don't wake up one day and say, 'I want to work in insurance,'" he said. "CDOs need to lay out their vision and find individuals excited about what they're working on and possess the technical skill sets needed to be successful on those projects. They can also develop their own talent, if necessary."
Insurers constantly need to be on the lookout for digital talent, Boroff said. "They should already be fishing where the fish will come from, which may mean reaching out to graduate schools, developing robust internship programs or looking outside of their organization."
The Beginning of the End?
Insurers' search for CDO talent in many ways mirrors what the industry saw in the 1990s with what Jacobson calls the product management boom.
"People didn't exactly know where to put those roles, what types of background they were looking for, how broad the scope of a product management role would be," he said. "Then all of a sudden there was clarity and a growing demand for people who fit the role, which completely outstripped the supply. This is almost a repeat of that scenario."
But things could soon change.
"The jury's still out about whether CDOs will even exist 10 years from now," ChiefDigitalOfficer.net's Bourgeois said. "By then companies who haven't been able to reinvent themselves digitally will have either gone out of business or have been acquired; they won't need a change agent in place."
That's already happening in large organizations such as Netflix and Amazon, Segev said. "They don't have CDOs. If a company is successful, then digital and the things those executives promote will have been embedded into the daily business. Agility will be part of the DNA and driving digital will be a top priority, thus eliminating the need for the CDO role."
Some signs are already pointing to a decline in CDO demand. But Segev says numbers suggest otherwise. "After growing aggressively from 2014 to 2016, the rate of growth may have decreased a bit but it's still a growing pie. What's important is for carriers to have the right talent in place to push the digital and agile agendas, regardless of title."
For now--or at least for the next several years--CDOs will remain a valuable asset in insurance, Gyimesi said. "As carriers continue to fight for market share and understand that the product they sell is a commodity-driven one, anything they can do to gain a competitive advantage from an internal process standpoint will add significant value to the P&L.
"So if a CDO can come into a company, improve its internal workings and analytics function and help collaboratively communicate with its customers, the ROI for the dollar amount companies are spending on that individual is a no-brainer," he said.
By Lori Chordas, senior associate editor, Best's Review: lori.chordas@ambest.com
