HR insights: Performance management and digitalization

In this podcast, Heidrick & Struggles’ Roger Muys speaks to Michael Hinssen, global head of HR at Munich Re, a global provider of reinsurance, primary insurance and risk, and insurance-related risk solutions. Hinssen shares insights on Munich Re’s digitalization process from an HR perspective, how the company navigated the pandemic, their new performance management strategy, and how he thinks about driving inclusion, as well as offers some advice for HR leaders: understand the business deeply, be a clear communicator, and simplify the strategy into simple actions.

Some questions answered in this episode include the following:

• (3:46) Could you give us one or two examples of how digitalization is changing our day-to-day lives as well as the way you work at Munich Re?
• (7:34) One of the things we are hearing about quite a lot is the wellbeing of the workforce and people becoming isolated. What's your experience?
• (11:46) You worked for an American multinational, you worked for an Italian one, and now you work for a German multinational. Could you share with us your experience of how you handled these changes, moving to a different sector and, let's say, company culture?
• (13:06) Is there still a war for talent or is it changing?
• (21:39) Having been an HR leader and a CHRO for quite a long time, what is your advice for future CHROs and what, based upon your experiences in the job, do you see as the new skill sets and new behaviors that CHROs need to develop in order to be successful? 

Below is a full transcript of the episode, which has been edited for clarity.

Welcome to the Heidrick & Struggles Leadership Podcast. Heidrick is the premier global provider of senior-level executive search and leadership consulting services. Diversity and inclusion, leading through tumultuous times, and building thriving teams and organizations are among the core issues we talk with leaders about every day, including in our podcasts. Thank you for joining the conversation.

Roger Muys: Hello everybody. I'm Roger Muys, a partner at Heidrick & Struggles, based in the Amsterdam office and a member of the Corporate Officers and Industrial practices. In today’s podcast, I'm talking to Michael Hinssen, the global head of HR at Munich Re, a global provider of reinsurance, primary insurance and risk, and insurance-related risk solutions. Michael spent his early days at GE—that's where we know each other from—and later he joined UniCredit as the EDP and global head of Human Resources, Corporates, and Investment Banking. And, as of 2016, he's the global head of HR at Munich Re. Michael, welcome, and thank you for taking the time today to speak with us.

Michael Hinssen: Hi Roger, thanks for having me. I'm really glad to see you again, even if it’s only virtually.

Roger Muys: Hopefully that will change soon, right?

Michael Hinssen: Yes.

Roger Muys: We have a number of topics we will address today. One of them—and it’s one of your key drivers in Munich Re’s strategy—is digitalization. Could you please explain why it’s so important and also what it means in terms of implementing and moving in the right direction?

Michael Hinssen: Munich Re is covering a wide range of risks, from the weather and climate risks to cybersecurity and health risks. The clients of Munich Re are typically other insurance companies, and we ensure part of the risk they are taking. So, if you look at all the reinsurance cover we provide—life, health, casualty insurance, transport, aviation, space, engineering, all of those kinds of things—the impact of digitalization almost becomes obvious. In our view, we are living amid one of the biggest transformations we have seen in our industry, that is, getting into the digital age.

Now, if you translate that to our HR strategy, there are three elements to mention. First of all, digitalization changes the way we work and the way we collaborate and make decisions; it also changes what and how we learn. Think about the good old days when we were sitting in seminars for three days—those days are over and, from an HR point of view, we have to cater to that. And maybe most of all, digitalization changes the expectation of our current and future workforce; that is something many, many employers haven’t fully grasped. And if you look at the level of digitalization of our children, say generations Y and Z, it’s incomparable to what we grew up with.

Roger Muys: The first thing you mentioned was ways of working. Could you give us one or two examples of how digitalization is changing our day-to-day lives as well as the way you work at Munich Re?

Michael Hinssen: Yes. It’s accelerated with the current COVID-19 situation. Remember, a little bit more than a year ago, the entire global workforce of almost any corporation (if it wasn't a manufacturing kind of workforce) went to a totally different state of working than we've ever experienced before. There are three elements impacted. First, the workplace: we don't go to the office anymore and it’s questionable whether we will return in the same way. Second, the processes and tools we are using—look at our conversation right now. We're sitting at home, looking at each other via the screen and recording our conversation—unheard of. Two years ago, we would have had this kind of format probably in a conference or somewhere on a stage. So, it’s totally changing. And the other thing that is changing is our collaboration model. The facts that we don't go into workshops anymore and that our business success depends on our ability to reach out to other people are drivers of digitalization to an extent we’ve never seen.

Roger Muys: Is there a risk of a tendency to over-digitize? And how do you make sure that you have the right balance between digitizing processes and ways of working but also making sure that there still is face-to-face interaction?

Michael Hinssen: Well, this is something that didn't become obvious in the very first days of working-from-home mode, but think about all the people who have joined the professional life or have changed company in the last 15 months or so. They are finding it extremely difficult to get into an organization and to build their networks, and also to convince other people of their performance level. So, it’s becoming much more difficult to shine in a certain way, and this is something we talk about when we talk to our graduate trainees and upcoming leaders. They suffer from that a lot, number one.

Number two, we’ve found that almost all of the recurring processes we work within work fine remotely. But element where you have to create something or be creative or have to build something or come up with something new is extremely hard to do remotely. So, I suppose there is an impact—or there can be an impact—on your capability to innovate if you prolong the current status quo for too long. From a company point of view, we are very, very eager to be able to welcome people back into the office for collaboration, working together, brainstorming, figuring things out, and resolving problems.

Roger Muys: One of the things we are hearing about quite a lot is the wellbeing of the workforce and people becoming isolated. What's your experience?

Michael Hinssen: That is actually an issue. The feeling of being out there and not being fully supported is growing as we move further along in the current situation. What people want these days is to continuously stay in touch with their organization and with their leaders. We have developed a lot of different things we are asking our leaders to do in order to achieve that, and I’ll give you a few examples. We are doing, with all parts of the organization, regular check-in calls, meaning, I call you Monday morning and I ask, “Hey Roger, how’s it going? How are you doing? Are you doing OK?” Then we're doing stand-up meetings, bringing teams or departments together with no agenda so that people can share what they’re up to, what they are working on, or any concerns or things like that. We're having score feeds—one-to-one meetings between team members or a department head and their people, 15 minutes to have a chat. We also have brown bag sessions, which we are using a lot these days in order to share expertise, and I'm talking technical expertise. And, last but not least, we have something we call a feedback walk, (which is of course not a walk because it’s in the home office location) in which we are sharing feedback on certain things that are progressing or not progressing with our people. All these formats are meant to address the concern that people could be left out there without regular conversations and feedback.

Roger Muys: Right. And I assume that you are also measuring these KPIs like employee engagement and percentage of absenteeism. What is the trend you are seeing within, let's say, the current situation of the pandemic?

Michael Hinssen: Yes, we measure a lot actually. We measure the communication approach every four to five months with very quick surveys—three or four questions—to the global workforce, and that measures how the communication style in the company evolves. We also had an almost traditional but very large global engagement survey in which there was a separate section of COVID-related questions, and we found that our employees’ motivation right now is at a peak. Why is that? It’s because—and this is what they told us—they feel very well taken care of in the moment of crisis. The motivation, then, is not necessarily related to the role and the manager and the job, it’s related to the fact that we are taking care of them. They feel that management’s availability works quite well, and they feel that they can be productive. And, by the way, it wasn’t totally that way 13 months ago when we went to working from home. But they feel the collaboration and the support of their leaders and the enhanced communication in our company.

These are all good things, but I also have to say that the workforce has become more demanding. So, the things that I mentioned that they like, are also some things that they now really expect. In almost scientific terms, it’s not necessarily a motivator, but the lack of those elements of communication can easily de-motivate people, so it’s something you have to continuously watch.

Roger Muys: You worked for an American multinational, you worked for an Italian one, and now you work for a German multinational. Could you share with us your experience of how you handled these changes, moving to a different sector and, let's say, company culture?

Michael Hinssen: I started my professional career in the water treatment business. Even being an HR person, I loved water treatment—industrial water treatment. I think it’s totally fascinating. Then I went to the silicon industry, which is a very, very versatile industry, and I really started to love those types of industries and I was fascinated by them. Then I went from equipment finance to investment banking and again, it was so fascinating, and I realized that despite all the stuff that’s said about investment bankers, it’s incredibly important for our society. Not a single bridge will be built if there are no investment bankers in the world. And that’s true for reinsurance as well and all the risks we are covering, whether in climate or cybersecurity. It’s my passion for the industries I'm working in which I think has helped a lot.

Roger Muys: In your view, is there still a war for talent or is it changing?

Michael Hinssen: The war for talent is on the attraction side, on the retention side, and also on the development side. I don't like the term “war” that much, but for sure you have to continuously convince a top performer why you are the perfect employer for that person. A lot of effort has to go into that.

Roger Muys: Correct me if I'm wrong, but is there also a link with inclusiveness and creating the right working environment?

Michael Hinssen: Yes, and I’ll give you an example. If you look at the good old-fashioned performance management systems, it’s typically a process that is SAP- or Workday- or Oracle-driven, where you have to continuously go back and forth to your computer, type something into a system, and the person who you are assessing has to type something back. It's cumbersome, it’s complex, and in our view, it didn't create any value. So, we got rid of that completely. There was an assumption that performance happens every day, every minute you are working, and if we wanted to manage performance, we had to get in tune with this type of effect and not have this once-in-a-year, around Christmas time—and I'm a little bit ironic now—dancing around a computer, typing stuff into the computer and then saying, “Ah, this is now performance management.” We got rid of that altogether (and I think in our industry we were one of the first) and we replaced it with something we call continuous conversation, which basically says that no, there are no formal ratings and there are no formal processes but you need to talk to your people and you need to talk to your people every day. And there are three elements to that.

Number one, we call it commitment: an employee has to understand and be fully aware at all times of what is expected, what they are supposed to do, what they need to do, what their leaders want them to do. You'd be surprised if you ask people whether they know those things. Quite often people say, “Well I'm not totally clear, I think I know,” or they make stuff up. So, number one is commitment. Number two is, once you are clear on what you need to deliver, you need feedback on where you stand, how’s it going, and if you’ve done the things you were supposed to do according to expectation. And then, resulting from the commitment and the feedback pieces, the third element is development. Because, always, always, always, there's probably something you could have done better or different or something you want to do but you're not able to do today in terms of career progression. The development piece allows people to ask themselves, “Where am I going and what do I need to do in order to get there?” Our system of performance management is those three elements—commitment, feedback, and development—in a very, very continuous fashion but without the need to record or go to computers.

Roger Muys: I'm tempted to say that in order to have that ongoing dialogue, you also need to create the right environment. In that regard, and in terms of diversity and inclusiveness, what's your take?

Michael Hinssen: If you have an organization where every opinion is welcome and every viewpoint is seen as at least interesting, diversity shouldn't even come up as an issue. I believe that the diversity challenges we have in almost every industry, in almost every organization, are coming from the fact that there's a lack of inclusion. If you want to address it, there are two ways: One is you try to change the mindset—and in some cases this also means changing the people, by the way—but changing the mindset, communication campaigns, dialogues, role-modelling, those types of things. And you also have to implement rock-solid processes on diversity in particular. Number one is staffing—if you don't build elements of fair attraction or fair selection into your staffing principles, then you have a problem. So, long listing, short listing, and the diagnostic processes all have to be looked at.

The second is talent management. Since I have been CHRO, I have always made sure that in our talent programs—the radio programs, TV programs, whatever you want to call them—are 50/50. In Europe, it’s mostly by gender, so I say 50% women, 50% percent men. And people say, “Ah, but it’s so difficult to recruit!” I don't care. Fifty percent women, 50% men, you do it. It was a was a rock-solid process and there was no deviation allowed. The second thing is self-nomination. I love career programs where you actually can raise your hand and offer yourself to become part of them, because typically many companies nominate you to attend instead. I'm moving as much as I can to self-nomination so that people can raise their hands, and if they raise their hands they will be considered for attendance. If you don't raise your hands, then you don't go. And the third part is sponsorship. We’ve heard it a million times but you've got to have the buy-in of senior management and the CEO, you've got to have a mentor program, a talent identification program, and projects where people can shine. D&I progress should resemble or match the quality of your talent and selection procedures.

Roger Muys: You already touched a little bit on the pandemic. What changes have you seen within the HR function?

Michael Hinssen: It was actually amazing. Let me tell you the little story. It was mid-March last year when in almost all parts of the world the pandemic broke, and it meant something to people that they couldn't come into the office anymore or that some of their relatives became ill, and so on and so forth. That was the moment when, at Munich Re, the HR function really rose to the challenge—and you need to understand that we are operating in 50 countries around the globe. We got on a call every single day in the first few months of the pandemic, first of all to share what was going on and then to discuss how we could respond. Consistency is extremely important and at that moment, especially when it came to dealing with the people, the HR function was the function in our organization that was equipped and able and operating in a way already to make us able to do that. We really took the lead, along with our colleagues from IT—I cannot mention enough that they kind of kept the company afloat. That was one of the big moments in my career.

Roger Muys: Having been an HR leader and a CHRO for quite a long time, what is your advice for future CHROs and what, based upon your experiences in the job, do you see as the new skill sets and new behaviors that CHROs need to develop in order to be successful?

Michael Hinssen: First of all, I don't think that the skill sets and the behaviors of successful CHROs have fundamentally changed, with one exception that I’ll come to later. Successful CHROs always have a very, very solid understanding of the business equation, of the market and the customers and the industry they are working in, and they are able to translate that understanding into their own agendas in a way that simplifies a lot of the inherent complexity. So, understand the business deeply, be a clear communicator, and simplify the strategy into almost simple action. And then there's a third element that CHROs sometimes don't like that much but is important: you have to have a lot of imagination to be able to take an informed risk on people and, even more than on people, on ideas, because otherwise there is no innovation. If you don't take risks on ideas, you continue what you're doing forever.

And of course, any CHRO is not isolated in space—there are always teams working for the same function and those teams typically have a lot of variety, from specialists on talent development to the people who make sure we are getting paid. You've got to be able to energize all those teams by being inclusive, as we said before, and connecting those people on all levels. Don't be a CHRO who only connects with the CEO or with the senior management team. You've got to connect on all levels. I hope I won't get criticism for this, but also let’s not forget the importance of domain expertise, and I find lately that we are kind of underwhelming in this a little bit. If you are CHRO of a large organization, you have to succeed in growth scenarios, downsizing scenarios, restructuring, and changing the talent story. You have to know your stuff and there's a lot of expertise you have to bring to the table if you want to be an impactful, successful CHRO.

And then there is this element that I mentioned before, one I really think has changed—I came to this conclusion in the last few years or so, and this is controversial, but I sincerely believe that the CHRO is a driver of digitalization in the company. It’s not only IT, it’s the CHRO, too, because digitalization has an immediate impact on people, on the quality of the people. Digitalization and people are inseparable, inseparable. Every CHRO has to have digitalization on his or her agenda.

Roger Muys: Digitalization isn’t only digitizing processes and ways of working, it’s also getting into the power of data, data analytics, and the insights coming out of that, right?

Michael Hinssen: Oh yes. Yes, yes, because we are expected to make recommendations and to make decisions based on facts, and facts means data. The HR function shouldn't be the old mom-and-pop function anymore; you have to have a good handle on data analytics, data interpretation, and getting to the right conclusions.

Roger Muys: One final question. What is the most important way your organization is building on the lessons learned from the pandemic?

Michael Hinssen: When the pandemic broke, we found that our organization is much more resilient and much more adaptable and self-directing than we may have thought before. And I hope people don't misunderstand—we have always had a very, very high opinion of our organization, but this experience blew it a bit out of the park. If we are exposed to black swan events, which the pandemic is one, we have learned that our ability to react is actually very high. So, we want to maintain that ability and we want to make use of the fact that our organization and our people are self-directed and intrinsically motivated. And we hope to give more freedom to our people—fewer rules, fewer processes—and be much smarter than we were before. And that means that we have to redefine our model, moving it toward how we work with the employees. It’s a big lesson and it’s not even over yet. It will change our company culture, sustainably.

Roger Muys: And drive and an empowering leadership style on the basis of trust.

Michael Hinssen: It has become obvious that it’s not just a textbook saying, it really creates a huge impact. We need people who are more satisfied, who are more creative, with less, almost, cost, because you don't have to spend that much time anymore figuring out whether everybody's doing what he or she is supposed to be doing. We can safely assume that people know exactly what they should do and we can also safely assume (and the last 15 months have shown it) that people are highly motivated no matter what. So let them do what they need to do and have sufficient trust in them.

Roger Muys: Thank you for making the time available to speak with us today. Michael, thanks and take care.

Michael Hinssen: Thank you Roger, and thanks for giving me the opportunity.

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