The more things change, the more they stay the same. After all the trouble, turmoil and tumult at SAIF in the wake of John Plotkin's termination, could that possibly be true once again?
The agenda for the March 18, 2015 SAIF Board of Directors meeting shows that the Board, in a closed Executive Session scheduled for around 6 hours, will be conducting interviews of the finalists for the CEO position. At 3:30 that afternoon (or earlier, depending on how quickly the interviews go), in a General Business Session, the Board will select the CEO Finalists. The two burning questions on everyone's mind are; What Oregon government agency will they have worked for, and from what part of Oregon do they hail?
Ok, I am the one actually predicting another attorney retread from some government agency. That element may have changed, since a rumored fav for the job seems to have recently imploded in yet another unrelated Oregon scandal (Yaaaawwwnnnn).
However, not to be undeterred, the minutes of the January 28th Board meeting leave little doubt that the new Board may be on the tried and true path of corporate mediocrity once again. The telling line is on page 6 of the document, and reads, “Chair [Jennifer] Ulum informed [CEO Recruiting firm] Karras that the board would prefer CEO candidates who are from Oregon and who are familiar with the Oregon legislature”.
And there ye be. Oregonians only need apply. Seems a bit shortsighted in my book. I would've thought they would want a candidate who had a proven record of accomplishments and executive expertise. Someone who knows how to lead and motivate. Someone with passion; who perhaps knows workers' comp, or something about risk management.
No, they just need to be from Oregon.
Perhaps they need to know the right people. Or have cut their teeth in a state agency like the DOJ. Perhaps in Oregon we can expect nothing but more of the same, from a liberal, diversity loving jurisdiction that is anything but.
I am certainly not implying that Oregon lacks qualified people to guide and rejuvenate SAIF. I'm simply asserting that such a restriction is foolish, and fails to look at the bigger industry picture while severely limiting the talent pool for a search that already has tremendous challenges (like, “What happened to the last guy who had this job?”).
The statement by Ms. Ulum was brought to my attention by one candidate, a seasoned CEO who believed the people, the employees of SAIF, deserved better than what they have been given in the way of leadership the past decade or two. I do not know this person, other than a few emails and a brief phone conversation. I cannot speak personally to his direct qualifications for SAIF, but I can attest that he has a tremendously successful background at corporate governance and operations. We also know that he lacks the one overriding qualification for the job, in that he is not from Oregon.
In our conversations he forwarded some thoughts on SAIF, including what he thought were several significant misunderstandings about the company. I thought they were salient, and republish them here with permission (although some points have been edited to protect anonymity):
- SAIF is a state agency? NO!
Per Oregon statute and the auditor's statement, it is a component unit of Oregon or owned by the state (people) of OR, but it is further declared an independent, discrete (separate and apart from Oregon state) public corporation that can sue and be sued as an entity in itself. The Oregon state web site lists all the state agencies. You will not find SAIF on the list. One SAIF board member refers to SAIF as a state agency in the Board Meeting Minutes. Ownership does not dictate state agency status and the charter expressly states this about SAIF.
- SAIF is a non-profit insurance company? YES!
SAIF is a non-profit entity but still must over time generate a positive “net position” (surplus) income statement and positive cash flow just like a for-profit company. SAIF does not pay income taxes and does not have to provide a return on investment to shareholders because the shareholders are the people of Oregon who feel they benefit from the entity structure just like it is; as was affirmed by Measure 38 in 2004. All stakeholders must understand the business model.
- Non-profit entities, like SAIF, do not offer growth and expansion opportunities for employees? NO!
With only about 49-50% of the current market share, a company with SAIF's business model advantages should have a much higher market share providing more positive “net position” (formerly surplus) and cash flow to reward employees, if they are in fact a national leader in state severity, frequency, lost time accidents, response to initial claim time etc. SAIF should benchmark itself so that comparisons with competitors could be made. Once the higher market share is achieved along with nation leading performance (per third party opinion), then other growth (privatization) strategies can be considered by the team. This is not an area for just the CEO's musings; without a team's strategic plan and organized participation by all Vice Presidents and fellow team members assuring growth based on universal input opinions.
- Most employees and outside commentators suggest there is some kind of “cancer” at SAIF? YES!
The common “cancer” denominator is a misunderstanding of the defined business model. Therefore top leadership is selected based upon the wrong criteria and misunderstanding of the business model which dictates that SAIF operates in the private sector. It competes for revenues and positive cash flow with privately owned or publicly owned, stock exchange listed companies. A public company can be defined as an entity created by state legislative act or by SEC filing and becoming a member of a stock exchange upon which its stock is traded freely. A company that by its stated purpose is to compete in private sector arenas for market share of its products/services and human resource talent is defining that leadership traits developed in government will not be compatible with the private sector in which the state chartered public corporation will operate. This is the “cancer” that must be cured.
- SAIF is a government agency and must have government experienced leadership? NO!
Government employees do not compete for revenue. They have allocated tax receipts as a source of revenue. Government employees concentrate on programs, and the outcomes of those programs, for assessment of effectiveness and justification of continued employment by the state. To hire a CEO search firm that (on its web site) claims to concentrate only on government searches, combined with a board who thinks that SAIF is a state agency is a formula for continued leadership turmoil. History substantiates this statement. The CEO should have experience interfacing with external government officials who are in regulatory relationships with SAIF. That is required of any CEO who manages a public SEC reporting company or privately owned company in the private sector also. Any company is subject to state or federal law that applies to the venue or operating circumstances that arise in the normal course of business. All the SAIF governmental relations with the Secretary of State, Department of Justice, and State Worker's Comp agencies are provided in the state charter just as a private sector company's normal course of business relations with OSHA, EPA, SEC, and state Workers' Comp agencies, etc. are provided by state or federal law. SAIF is not unlike private entities in that it has relationships with external state or federal regulatory agencies, but differs slightly because of the form of business model and nature of ownership. CEO's of companies that have strong ties to governmental agencies because of the nature of their products do not hire CEO's lacking private sector, competitive experience and still expect them to succeed in private, competitive enterprise.
- The SAIF CEO must be from Oregon because we are “different” here? NO!
Regions of the country have some cultural differences which make our country great. Having served as a CEO involving management of multiple facilities in many states, I can tell you that all employee team members understand when they are respected, appreciated, compensated and treated fairly. All stakeholders understand the level of performance of an entity when compared with third party, benchmarked, key performance indicators relevant to a particular industry. All stakeholders understand that generating a cash flow positive financial result is required to maintain an entity's existence. All stakeholders understand that complying with state and federal law is required to insure sustainability. Diversity also means that human resources from other geographical areas or countries have a positive contribution to make for any enterprise. Limiting the next CEO of SAIF to local, government oriented candidates is not diversity, and will perpetuate the “cancer” all bloggers talk about but do not specially identify. Letting the employees select or have a “greater” voice in selecting from a pre-determined pool of board screened candidates is not providing the employees with real input to the selection process. Employee involvement like this is a sham and the best and brightest employee team members will see through this effort to perpetuate the “cancer.” A new face with a strong policyholder orientation, employee mentor/collaborator with no connection to a specific OR agency, but has government interface experience, would provide hope. The employees should let the Governor, who will eventually stand for re-election in her own right in 2016, know their feelings on this. Hope is the first phase of curing the “cancer.” Another government “lifer” is not a source of hope.
- It is SAIF's Board which is responsible for morale and employee satisfaction? NO!
The Board is responsible for setting policy, governance (documented meetings, budgets, strategic decisions, transparency, etc.) and hiring/evaluating/firing the CEO. If the CEO does not perform as expected, the Board has the authority to terminate the CEO with or without notice and with or without cause at any time in an “employment at will relationship.” Common courtesy would be to address any complaints that surface to the board with the CEO before taking disciplinary action, but it is not required. A CEO with many years in private sector, competitive environments; directing several hundred team members through a professional team of Vice Presidents, selling products and services in either for-profit or non-profit entities is less likely to be terminated as occurred recently at SAIF in 2014.
And finally this contributor strongly questions how two board members, Ulum and Jeff Stone, both who fought for the dissolution of SAIF 10 years ago with what is known as Measure 38, can easily walk away from previous positions and comments they once made. He calls it a direct conflict of interest, outlines a number of strong anti-SAIF statements attributed to Mr. Stone, and simply asks, “How does a SAIF Director back up from those positions?”
I would say the answer is simple. He can tell everyone he is from Oregon, and we all know that is what really matters.
So, the 18th of March is the big day where we see the potential direction of Oregon workers' compensation insurer SAIF. I sincerely hope I am wrong – I hope that they did indeed look for the best and brightest versus the one with the shortest commute. I hope they select seasoned corporate professionals who are the best for the job, rather than ones who worked for the Oregon DOJ or walked former Governor Kitzhabers dog.
The nation is watching, Oregon. Will it be the start of a brand new day, or a well worn path towards more of the same? Which will it be?
For a list of Bob’s other SAIF/Plotkin articles (as well as a couple old AASCIF articles that get picked up in the search), Click here.