Alignment of HRM and Business Strategies: State Farm Insurance
State Farm insurance values its employees and even provides them with access to HR resources after retirement. This paper investigates the alignment of HRM and business strategies in State Farm Insurance. It begins with an analysis of customer satisfaction ratings of the four divisions. State Farm invests and trades heavily in mutual funds, with more than 100 State Farm funds in the company's portfolio.
Customer Satisfaction: Auto, Home, Life, and Health
In a 2013 consumer study of the 20 largest insurance companies, State Farm received an 82.29% approval rating by auto insurance customers, or 8th out of 20 companies. The company has an A++ financial rating, ranking it even with Geico, Auto Owners, and USAA. It ranked 8th in claims processing, 8th in customer service, and 14th in variety of services. It ranked 7th in the provision of home insurance services, 4th in the claims processing rankings, 7th in customer service relating to home insurance, and 12th in value for service. Like Auto Owners, Chubb, Amica Mutual, and USAA, State Farm has an A++ rating in financial stability of home insurance. State Farm was not ranked among the top 20 life insurance providers even though it has been selling life insurance for more than 80 years but an interesting observation is that none of the companies in the life insurance division received top ratings in anything but financial strength. Customers simply were not happy, overall, with life insurance. It is possible, of course, that this relates more to the nature of the product than the quality of the insurance. State Farm also carries health insurance products but did not rank in the top 20 consumer companies in this category.
State Farm's Business Strategy
State Farm endeavors to sell its good through the business strategy of differentiation ("like a good neighbor"). State Farm offers mutual fund investing, unlike many of the insurance companies, and offers more than 100 products and services. In the insurance industry, a Porter's Five Forces model would show that the consumer has all the power because there are so many similar products on the market. State Farm tried to meet customer needs by having more than 17,000 agents, 343 claims offices, and 30 operations centers. It has 68,000 employees and handles 35,000 claims daily. Supplier power is low, because there are many products and services. The threat of substitute products is relatively high for some services (insurance) but relatively low for the other 90+ products the company offers. Threat of new entrants is low because there is so much competition that moving into the market from ground up would be very difficult. At the same time, rivalry from competitors is extremely high. While State Farm competes well in home and auto it does poorly in terms of life and health insurance.
State Farm uses not only a brick and mortar B2C model but an online B2B model and B2C model. Anyone anywhere in the State Farm licensing area can sit down at a computer, buy insurance, change policies or search for better options. This applies whether the customer is a person or a business. The company offers cash, check, EFT and automatic transfer payment options. State Farm has its own internal computer network but also ties into networks that offer insurance from other companies (State Farm blogspot, 2010). It also owns and operates its own bank.
Because State Farm is such a huge organization it offers a number of jobs in the HR division. These include job analysts, recruiters, HR representatives, HR assistants, Occupational Health Nurses, and Medical Assistants. State Farm considers these last two jobs to be part of the HR function. State Farm also considers benefits workers, client services workers, compensation specialist, employee health services, employee relations, information systems, credit union and talent management to be HR jobs.
Within the State Farm system I would prefer to be a recruiter or HR assistant. State Farm has its HR function very widely distilled, and I would not enjoy working with anything other than human resources. The fact that employee health services is part of HR is puzzling.
Revising HRM Strategies to Improve Competitive Advantage
State Farm might want to concentrate on an area of the company to either improve or to divest. As an example, it should either improve the medical/health insurance division or divest itself of that portion of the company by either selling off or developing it as a subsidiary. Depending on how they handle this situation it could change the HR function a great deal in some areas. It appears clear, however, that State Farm is stronger in product and service in Auto Insurance and Home Insurance. It needs to decide whether or not to continue the Health Insurance Division and the Life Insurance Division.
Three Ways to Increase Diversity
Although the HR page shows a picture of "Emily, Agency" and Emily appears to be lightly browned, the entire website appears to be very non-diverse. State Farm offers a version of the page in Spanish, but the link did not work when I clicked it. State Farm states that "At State Farm, diversity isn't a program. It's a state of mind. The variety of experiences and points of view contained in our large and diverse group of associates strengthens the organization. It helps us to understand the marketplace and how we can do an even better job of serving our customers. It helps ensure our future." The company reports that when they think of diversity, they "think about diversity and inclusion, we think of it holistically in terms of the workplace, marketplace, community, and supplier diversity." Still, the site itself appears to be anything but diverse; the only photos I saw of anyone but Caucasians appeared on the Community Involvement page.
The three suggestions for improving diversity include showing diversity, rather than just thinking about it. Hire people of color or with physical disadvantages in all areas, not just in ethnic neighborhoods. Second recommendation: Revise the web pages to not be racist. I found the Company Partners page to be very racist indeed, as the company trumpeted that it helps African Americans, Pacific Islanders, and Hispanics to "build safer, stronger, and better educated communities" especially since "we team up with great partners in the African American, Asian Pacific Islander, and Hispanic communities to make good on that promise." This page implies that Blacks, Pacific Islanders and Hispanics are uneducated people who live in crime ridden neighborhoods. Native Americans, Asians, and Middle Easterners need insurance too, and they too can be victims of crime. We all are subject to crimes in our neighborhoods! Finally, the company needs to mount a Hire Diverse, Promote Diverse initiative, and not just for Blacks, Pacific Islanders, and Hispanics.
MSN Money Investing.
MSN Money Insurance. See how your insurance company measures up.
State Farm Blogspot. State Farm blog.
State Farm Community Involvement. State Farm giving back.
State Farm Community Partners. Community partners.
State Farm Health. State Farm affordable health insurance products.
State Farm Human Resources. Become an employee.
State Farm Life Annuity. More than 80 years in life insurance.