State Farm Insurance HRM System Analysis

Introduction

One machine can replace the work of thousand ordinary men, but not a single extraordinary man. Human resource management (HRM) entails acquiring the right talent for the right task and developing their skills for their personal and organizational mutual benefits. In the 21st century, businesses have adopted HRM as the focus of competitive advantage with the view of integrating and synchronizing employee selection, training, performance, and career development systems to conform to customer service requirements (Noe et al., 2020). HRM systems integrate and centralize the company’s processes for efficient management of the organization’s workforce.

I recently experienced the benefits of HRM system automation while working at State Farm Insurance, where I served as an Insurance sales representative. The giant US insurer has leveraged information communication technology inventions to streamline HR processes, transaction processing, and payroll management by centralizing all workforce operations in a single intelligent solution. This paper provides a transparent background of State Farm Insurance before analyzing its current HRM systems and recommendations for redesigning them.

Background of State Farm Insurance

History

State Farm Insurance is one of the leading US insurers incorporated in 1922 by George Jacob Mecherle, a hitherto insurance salesman and a retired farmer. The insurance company started by targeting the few farmers who drove cars in the rural areas and whose automobile insurance services were not covered due to the few accidents noticed by the leading insures of the times. State Farm designed insurance policies that were fair to the target farmers before diversifying their risk coverage to other policies. The founder believed in providing insurance covers with effective claim settlements.

Today, the Insurance Company is one of the giants in the US market and the leading motor vehicle insurer in North America. In 2000, the company extended its scope of operations by launching State Farm bank, an SBU that would provide financial products and services (State Farm, n.d.). The firm’s growth strategy is differentiation to offer services demanded in the neighborhoods (State Farm, n.d.). The differentiation has assured the company a distinctive competency that enables it to compete successfully in the market. It has over 17,000 agents, 343 physical offices, and 68,000 employees who perform over 35,000 claims per day to maximize customer satisfaction (State Farm, n.d.). The above information is evident that State Farm has grown significantly over the years.

HRM Policies Associated with Success

The company also focuses on helping people solve their financial needs by focusing on managing business and individual risks and recovering from unexpected hazards to promote dreams. The firm’s current growth can be attributed to quality service delivery, integrity, and mutual trust (State Farm, n.d.). It has a unique long-term objective of maximizing growth by providing automobile insurance policies to young adults, a market for years not adequately targeted. They wish to achieve the primary goal by affecting young Adult renter’s policies, Legacy Young Adult Auto policies, and Independent Young Adult Auto Renters’ policies.

State firm believes in valuing their employees, and thus it has convenient retirement policies to assure the welfare of their retirees. Generally, HRM policies have been implemented that integrate the development of long-term business strategies. The company has also automated its HRM systems that have seen them among the leading in quality service delivery. In 2013, the insurer ranked 8th in the efficiency of claim processing and customer service effectiveness, fourth in customer claim processing, and seventh in providing quality home insurance policies (State Farm, n.d.). Several policies provided by the insurance company such as Auto owners, Chubb, USAA, and Amica Mutual are among the most stable in the US insurance industry.

HRM System Challenges

While the Insurance Company’s performance is considerably associated with efficient management of its human capital, the aspect is not holistic since some of its SBUs have reported retarded growth and underperformance. The company has failed to ensure balanced growth due to poor employee morale in some departments, poor integration of HR functions, and failure to implement long-term HR policies already existing on paper. Poor management of employees’ welfare has also resulted in conflicts with labor unions and a deteriorating public image. Poor employees’ satisfaction also led to poor customer service and decreased revenues. With 80 years of selling life insurance policies, the company still does not rank among the 20 best life insurers in the US market (State Farm, n.d.). This implies that the firm has failed in its management.

While the company operates under minimal threats of new entries, the market is characterized by industry rivalry. Since it is a service provider, human capital is an essential factor of production. The firms in the sector compete for the skilled and experienced labor force (State Farm, n.d.). State Farm customers report dissatisfaction with the services offered by employees in the life assurance department. The company’s health insurance products are also among the poorly performing products in the market. While the failures of some products can be associated with many operational challenges, the failure is also attributed to poor human capital management. State Farm concentrated on customer satisfaction and failed to recognize the contribution of human capital in creating value for the customer.

Analysis of State Farm’s Specific HRM Processes

The principle goal of HRM processes is to gain a competitive edge in maximizing the performance of employees. This is through getting the best employees in the market, efficient selection, recruitment, orientation, training, induction, disciplinary, training, skills development, compensation security and safety compliance, termination, and retirement of the employees (Noe et al., 2020). An organization is thus a system that acquires human resources from the community, utilizes them for the organization’s benefit, and returns the employees to the community through retirement or termination of employment.

While the firm’s goals are to maximize production, growth, and development, the employees’ objectives are unique to the individuals. An efficient HRM system aligns the goals of the organization with that of the workers. The company designs the system to maximize the quality of employees against minimizing the costs of acquisition training and development. An essential practice in HR is to retain experienced and talented employees. The main processes of concern include selection and placement, training, performance management, career development, and succession planning.

Selection and Placement

Selection and placement of employees is a process that follows the recruitment process. The exercise entails posting vacant job openings and encouraging prospective job seekers to apply. A recruitment process is ideal when the application volume is high, which creates a large pool of employees to select (Noe et al., 2020). Many applicants portray a wide range of skills and talents to select. The selection panel obtains the applicants recruited and takes them through an interview to eliminate the unsuitable candidates based on their qualifications, experience, personal attributes, and talents (Christopher, 2019).

The panelists synchronize the company’s job requirements against the applicant’s attributes to determine the best candidates. The selection processes include a preliminary interview of candidates, screening candidates’ employment tests, and selection interviews to obtain the best out of the bests (Christopher, 2019). After selection, the following HRM process is placement, where the qualifications of new employees are analyzed, and each employee is assigned the most convenient task. Proper placement promotes the free flow of work, elimination of errors, and promotes employee morale.

In effecting the selection and placement processes, State Farm Insurance leverages as an equal opportunity employer. The company aims at hiring, retaining, and promoting terms and conditions based on the company’s requirements and the applicants’ needs. Moreover, based on the organization’s equal opportunity employer statement, the selection process is undertaken with zero tolerance for the applicants’ race, age, color, religion, national origin, and sexual orientation. The company has a diversity and inclusion policy that aims to maximize the employees’ performance through representation in different employment positions.

The employees from diverse social, political, and regional backgrounds are also equally encouraged to make significant organizational decisions, promoting quality management decisions. After placement, the state is far encouraged to maintain a good working relationship between employees and the clients and among fellow employees. The entire process is also affected by the law, government policies, and international labor laws. The selection and placement procedures are made effective through the use of process automation (Christopher, 2019). In the digital age, developments have been made where the company recruitments have been placed and applied online to save time. In some cases, the applicants have been interviewed through videoconferencing with minor conduct with the selection panel.

Challenges

Although the company website portrays an equal opportunity employment policy, the company labor force is neither diversified nor inclusive. The company considers diversity as a program that only exists in mind meaning that the policy is not implemented. Additionally, with the recent development of human intelligence, the selection process has become more complicated since some responsibilities that people do could be replaced with machines. The organization faces the challenge of determining the adoption of capital versus human resources in making decisions. Apparently, the website outlook is not designed to portray inclusion. The home page wall picture represents themes of white-skinned people all through. Implementation of diversity should be represented throughout the company departments.

A SWOT analysis of State Farm revealed that the industry-specific competition increased with new firms entering the market. Since the insurance industry is a service industry, competition is based on human capital skills acquisition. Competition for employees with expertise has increased in the last ten years, leading to increased labor costs. Firms thus seek to retain experienced employees to avoid the costs associated with training employees. Labor unions have also pushed for better employees’ welfare and threatened to down tools if the employers in the industry do not address their social and economic needs. For example, the internet adoption in the selection and placement system has led to State Farm laying off workers. The technological revolution of the insurance industry is viewed as a threat by the labor unions. The company faces the challenge of determining the selection and placement systems convenient to both the company and the employees (State Farm, n.d.). This is a result of employees being resistant to changes even though technological changes are necessary and considerably inevitable.

Training as an HRM Process

Training is the human resource function associated with boosting the knowledge of the newly recruited employees. The process involves updating the skills of the selected candidate to conform to the requirements of the job (Noe et al., 2020). The first phase of training is the orientation, where the new employees are made conversant with the company profile, history, vision and mission statements, and management philosophies. The human resource function aims at training to make the best employee using the minimum cost of the training (Ahammad, 2017). HRM also aims at optimizing or maximizing the efficiency of the selected candidates.

Employees in State Farm are taken through a mandatory induction course presided over by senior management officers from different departments. The induction program takes five days to welcome the recruits to learn the organizational culture and orientation to different organizational premises. After the induction process, the employees are taken through intense training on the general work policies and ethics followed by intense training on the specific job responsibilities the employees will perform. The company structure and communication command are made clear to all the employees. An employee is also made conversant with their rights and responsibilities together with grievances and complaint management protocols (Ahammad, 2017). For senior employees, the company outsources the training services to organizations specialized in training, such as tertiary institutions in the locality.

Employees obtained directly from college must go through a more extended training session while those with experience are trained for a shorter period. The company also has an on-the-job education session policy since they believe that learning is an ongoing process. Their philosophy is valid because the industry is dynamic, with new changes and technology coming up all the time. Since the company is going online, a key training area is the cybersecurity management course that equips the workers with skills and knowledge of protecting both the organizational and employees’ data resources. Employees are also trained to use the various management information systems such as electronic data Interchange, HRM systems, decision support systems, enterprise resources planning, group discussion support systems, and customer complaint management systems.

To encourage on-the-job training, the company has programs of job rotation where employees are shifted from one department to the other to promote the acquisition of a wide range of skills. Employees with little experience are also assigned a mentor who conducts close supervision of the employee, close job instruction, and coaching by assigning tasks to promote confidence (Ahammad, 2017). For example, junior employees in the sales and marketing department will be assigned an experienced sales or marketing officer who will facilitate the fast acquisition of skills. The off-the-job training is done away from the work where staff members attend professional courses, seminars, or workshops either solicited or not solicited.

Performance Management Processes

In any business organization, promotions and demotions are based on the performance of the employees. Firms primarily operating in the service industry should develop a fair performance management system that motivates employees to work hard for the organization (Jali et al., 2017). A fair performance appraisal system promotes employees’ confidence level—companies’ initial performance appraisal processes enhance and encourage employees’ performance in an organization. A standard appraisal policy is managed by an objective appraisal technique where employees collaborate in identifying, planning, organizing, and communicating their objectives to be targeted in the appraisal (Jali et al., 2017).

Appraisals aim at integrating both the employees’ and organizational goals in evaluating the employee’s performance. The SMART technique is applied in assessing the viability of the objectives of both the organization and the employees. The appraisal system develops standards of achievements to be expected from the employees upon which the assessments are affected.

Employees achieving standard performance levels are rewarded with promotions or salary increments, while those against the requirements stated are either demoted or slammed with pay decrements. Failure in the assessment may also indicate the workers to be enrolled in the training program (Jali et al., 2017). Performance management relates to training in that training depends on the appraisal to determine the employee’s training requirements.

Moreover, employees must also be trained on the performance appraisal. This process entails planning where the objectives are defined, control procedures set, and timelines made specific. After designing, the assessment is monitored to reassess goals, offer timely feedback, and check the general progress of the appraisal process. The HR management has the responsibility to keep a continuous and persistent review of the process to improve it. Other appraisal methods include the 360-Degree Feedback, assessment center method, the behavior and anchored rating scale method, and psychological appraisal techniques. State Farm does not have a clear performance appraisal criterion, making it difficult for the organization to determine the best employees for promotion or when demotions are to be fair. Unfair advancements in the company have led to poor employee morale, lack of motivation, and ultimately poor performance.

Career Development

A career is a sequence of related work activities that promote meaning to an employee. Human resource systems develop career development that provides sequenced roles and experiences that improve their employee’s status, power, and reward. Employees should be encouraged to engage in those activities that promote the development of their careers. Career development is not a one-time activity but a process where employees plan where they would like to be in both the long-term and short-term (Nagarathanam et al., 2018). HRM systems establish a career development plan that defines how employees at different departments should grow their skills and talents.

While a career path entails jobs that form a career, the goals are the future positions one needs to achieve in the current organization or other firms. To promote employee competitiveness, firms develop an attractive environment for them to build their professions. Career development is essential in that it makes the needed talents available in the organization (Nagarathanam et al., 2018). The company can retain the right people for the right jobs. Career development provides clear career progression guidelines that offer advancement, challenges, and responsibilities and reduce workplace frustrations. The process also enhances cultural diversity, which improves organizational goodwill. Employees who feel that their organizations support their career development goals will naturally project a positive image.

To encourage their employees to grow their professions to the organization’s requirements, State Farm ensures that its workers sign performance contracts to declare their performance will meet the set standards. The company also provides benchmarking programs where the employees are exposed to other business processes to acquire relevant skills for their tasks. It also provides a provision for the employees to resign from the insurance company to develop their talents and skills in other organizations. State Farm has also employed career guidance and counseling professionals to help employees facing career development issues.

The organization’s career development does not adequately include women. Although females have proved to be efficient in the workplace, State Farm does not assure them a career development program equivalent to men’s. The career development plan is tailored to male employees without considering the family responsibilities of women. Women will not adequately grow their skills due to unfavorable career projection systems. State Farm also targets the young adult generation, characterized by dual-career couples. The couple encourages each other in a work environment, and the pair’s success depends on the success of the other. Clearly, the current career development plan does not promote dual couple retentions.

Succession Planning

Succession planning entails planning and managing people’s development to incumbents holding critical positions in the organization. The process enables the organization to gloom people from within the organization to take up essential classes held by crucial management or technical responsibilities (Ballaro & Polk, 2017). Succession is supervised by the organization and aims at identifying, developing, and making junior employees ready to take up critical positions expected to be vacant. This can be as a result of retirements, promotions, resignations, and the creation of new leadership positions or even deaths.

While most organizations conduct successions, only a few have a clear plan. Most firms perform succession procedures to only managerial roles, with just a few firms bothering to execute succession plans for non-executive positions. Succession planning enables the organization to retain the skills and expertise of an outgoing employee to ensure that organizations do not lose essential skills from the company. It is identified as a critical tool of competitive advantage in the labor market where the organization can develop the skills without incurring high costs of pieces of training.

Succession planning promotes business continuity by ensuring that organizational processes do not halt when key leaders suddenly die, resign or retire. The method also develops the competency of the workforce by glooming the next possible successor (Nagarathanam et al., 2018). The process is also cheap as compared to training new employees and thus reduces organizational expenditure. Through succession, there is the smooth functioning of the organization since crucial leadership positions always have suitable replacements (Ballaro & Polk, 2017). State Farm Insurance Company does not have a succession plan. The organization has a policy of employing new employees to take up leadership positions. New employments risk the organization having unsuitable employees due to a lack of knowledge of the organizational culture. The market costs of acquiring experienced managers are relatively high compared to the expenses incurred in the succession process.

Processes Redesign Recommendations

Selection and Placement Redesign Recommendations

Selection and placement policies should not be a program appearing on a paper without implementation mechanisms. The organization should note the financial benefits of an organization implementing diversity and inclusion policies. The implementation promotes corporate social responsibility, which improves the organization’s image in the public’s eyes. Positive corporate social responsibility attracts the best talents to work in the organization and thus promotes production. State Farm should also leverage online selection and placement of employees. They should design an attractive website that attracts applicants to work in the organization. In determining the right employee to be selected, the organization should install decision support systems that boost management decision-making. Group discussion support systems also improve collaboration leading to viable selection decisions.

The digitalization of insurance services is inevitable since it promotes the quality of services offered in the insurance industry. Through company automation, both internal and external customers can make transactions online. Employees’ selection process has also been streamlined to attract a vast pool of applicants effectively. The candidates can also follow their applications online and determine when they are considered for the various positions. State Farm should balance the digitalization process against the employees’ union demands and lay off workers only when necessary.

Training Processes Recommendations

State Farm’s training requirements should be aligned to the company objectives. The company targets providing insurance services to the young population, and they should allocate more resources to training young employees who can better interact with the young people. Young employees require longer, extensive programs due to little skills against the expertise required. State Farm Insurance acknowledges the long-term loyalty of the baby boomers in consuming their services. The baby boomers require an old employees, and thus the workers’ structure should be diverse. While generation X, generation Y, and generation Z employees are well-versed with digital technology, the baby boomers use analog service delivery. The company should seek to choose the correct employee for the right job and job training. Training involving advanced communication technology will require young employees who are relatively tech-savvy. However, all the employees should learn fundamental technological developments.

Performance Management Processes Recommendations

State Farm Insurance should have an efficient performance management process that promotes fair promotions with equal opportunities for advancement for the diverse community of employees. The company should set standards of achievement for use as a reference in comparing the performance of all the employees. The performance appraisal policy should be known to all the employees (Jali et al., 2017).

The HRM should provide regular feedback to the employees to understand their level of performance against the company’s expectations. The performance appraisal should be made clear and open to all the employees. State Farms should also develop policies to move from traditional methods of appraisal to modern methods (Noe et al., 2020). Conventional methods make use of checklists or rating scales to assess performance, such as the modern techniques that make use of automatic technological advancement. Modern methods should also incorporate behavioral rating, assessment center method, and critical incidents methods under a single assessment. Improving HRM boosts the entire HRM process as appraisal results are used in training, career development, and succession planning.

Career Development Process Recommendations

Managers should develop policies to eliminate the barriers that prevent women, people with disabilities, and the marginalized from developing their skills and talents. The company should encourage skills development and provide an alternative career development plan that is friendly to women (Noe et al., 2020). Young employees also have unique career needs, and thus the company should develop strategies for part-time and online training to grow their careers. To avoid the frustrations of women employees by the family responsibilities, State Farm should develop guidelines for integrating maternity policies that are favorable. Transfers of dual-career families should also be limited to avoid frustrations. Young dual family transfers lead to maladjustments that lead to reduced employees’ performance. The company should integrate the needs of career couples in career development policies.

Succession Planning Process Recommendations

Succession planning is a practice that State Farm can use to get a competitive advantage, especially in the insurance service industry where labor competition is high. The approach is cheaper but efficient than other skills development programs such as training and developments, which are expensive and time-consuming (Ballaro & Polk, 2017). Succession should be conducted in both managerial and technical fields (Noe et al., 2020). State Farm should also view the process as a responsibility of the senior management staff but not an operational process. Leadership competencies should be the basis of identifying, selecting and developing the succession plan. The organization should also create a culture of identifying talents across the diverse labor base.

Conclusion

The development of human resources requires the integration of technology by use of HRM software. State Farm Insurance Company can maintain its leading position based on a US insurance industry market analysis. However, the company should realize the current development of leveraging competitiveness based on the area of HRM. Like any other service industry, the insurance industry requires heavy investments in developing and maintaining human capital. In its retargeting of the young adult generations, State Farm should seek to recruit a relatively young labor force that is tech-savvy. State Farm is a service organization with 68,000 employees, and its management requires an excellent HRM system. Automated HRM systems integrate the activities and processes of the organization to improve efficiency and eliminate unnecessary costs.

In managing Human resources, proper placement promotes the free flow of work, eliminates errors, and encourages employee morale. Training updates the skills of the selected candidates, while performance management helps to determine the best employees for promotion or for rewarding. On the other hand, career development is a program that supports the growth of talents and skills of the employee for the benefit of the company or employees’ benefits. Succession planning ensures that essential skills are retained in the organization. HRM processes do not work in isolation but under integration among themselves. State Farm and other service organizations should invest in HRM as a tool to obtain a competitive advantage.

References

Ahammad, T. (2017). Personnel management to human resource management (HRM): How HRM functions. Journal of Modern Accounting and Auditing, 13(9), 412-420. Web.

Ballaro, J. M., & Polk, L. (2017). Developing an organization for future growth using succession planning. Organization Development Journal, 35(4), 41-59. Web.

Christopher, N. (2019). The effectiveness of HRM policies and practices. International Journal of Social Sciences, 2(1), 24-32. Web.

Jali, M. N., Abas, Z., & Ariffin, A. S. (2017). Social innovation in the context of strategic knowledge management processes for supply chain performance enhancement. International Journal of Supply Chain Management, 6(1), 233-237. Web.

Nagarathanam, R., Venkitasamy, S., & Attiah, E. M. (2018). The Impact Of Career Development Practices On Employees’ retention In Qatar Aviation Industry. In Ascent International Conference Proceeding. Web.

Noe, R. A., Hollenbeck, J. R., Gerhart, B. H. and Wright, P. M. (2020) Fundamentals of Human Resource Management, 8th ed., New York: McGraw Hill Education. Web.

State Farm (n.d.). Company overview. State Farm. Web.

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