What gets measured gets done

"What gets measured gets done. What gets measured correctly gets done correctly." Peter Lewis, Founder, Progressive Insurance

Many years ago, I had the opportunity to interview the senior executive team at Progressive Insurance about what made the company so successful. It's not everyday you get to ask a billionaire and his team how they built their company. (Note: This article is based on those interviews including only things that have been published elsewhere or are widely known.)

There were many answers focused around the firm's unique culture. It's ability to price better than other firms. Willingness to experiment with different types of technologies. The amazing art collection that made the office fun - they had clouds in the office people. The dress code that allowed lawyers to come to work in blue jeans. Everyone was always learning....but the real answer was more fundamental.

What Peter told me though really got to the heart of it. (Forgive me this is not an exact quote but it is close.) Peter said, "John, most companies have one CEO. Progressive has dozens of CEOs. No one person could come up with all the ideas that drive this company's growth over all these years. I don't need to come up with all the ideas. I just need to know what needs to get measured and make sure it's measured correctly."

A senior human resource person at the time told me if Peter had his way he would make everyone's salary public. Peter believed in radical transparency.

Years ago Peter had determined that they needed to know profitability down to the market manager on a monthly basis. They then rank ordered the list and publish it back out to the market managers. The managers got feedback on a monthly basis. They hire competitive people for these roles. That ranking fosters a lot of creativity and motivation. Everyone wanted to be at the top of the list.

Progressive gives people the knowledge and the responsibility they need to make decisions that impact profitability. Then they are able to learn from the performance of each of the markets. They are their own competitors with each manager striving for the top of the list.

When Peter started Progressive not everyone in the United States could get auto insurance. Some people were denied because they were deemed "too risky." Peter thought everyone should be able to get insurance at the right price. This was the core idea that made the company successful - getting the right price for each customer.

Most insurance companies sell insurance at a loss and make up for it with return on investing the premiums. Progressive always sold at a profit because they were better at pricing the risk of each driver thus even if the investments didn't return a profit the policies would.

Progressive managers had a card that they all carried in their pockets. One side had the financial metrics - combined ratio - that they needed to hit. That combined ratio directed them to sell the policy at a profit.

The other side of the card said, "We reduce the human suffering associated with auto accidents."

Before Progressive became one of the top insurers it started giving the price of it's competitors to it's customers. By sharing the price of other companies they insured that they were one of the companies the customers would call even when they were far down the list of insurance companies. They were saving the customers time and that often resulted in sales even when they were not the cheapest price.

Some auto insurance companies prefer to drag out the claims process and often low ball claims. Progressive tries to settle claims quickly. This reduces theft and litigation costs which is often more than the cost of the physical damage.

Selling through independent agents meant that Progressive didn't have the overhead and training costs of other firms. Selling direct was even better because it reduced the churn that can come from an agent channel and reduced the costs of commissions. All of this contributed to a lower cost basis for the company which in turn reduced the risk.

The team at Progressive is fun. This is communicated so effectively in their ads yet it is a part of their culture to make work insurance fun. This later influenced me when I brought humor to card not present payment processing.

Factors that made Progressive successful that you can apply to your business.

1. Measure profitability and make it available to your team
2. Give people recognition and responsibility to managers for their decisions
3. Allow your team the freedom to experiment
4. Efficient processes are less costly than nickle and diming customers - how can you automate work so it can get done faster?
5. Motivate the team with a clear purpose and targets that is easily accessible to them
6. Independent agents as a channel meant lower capital costs, more flexibility, and on average better agents.
7. Sell direct to customers whenever possible to own the relationship

I have directed many of my friends to work for Progressive Insurance. While Peter no longer runs the firm the culture he created lives on. One of the proudest moments of my career is the small part I played in changing the way people buy insurance by being part of the team that made it available online. I am grateful to have learned so much from a great team of leaders early in my career. I only wish I had bought more stock in the company.