Brian Duperreault

Brian Duperreault
President and CEO

Marsh & McLennan Companies Inc.

Brian Duperreault has been President and Chief Executive Officer of Marsh & McLennan Companies since January 2008. Prior to joining Marsh & McLennan Companies, Brian served as Chairman and Chief Executive Officer of ACE Limited from 1994 to May 2004 and continued as Chairman through the end of 2007. Prior to ACE, he was with American International Group (AIG) for more than 20 years, holding numerous positions and eventually becoming Executive Vice President of AIG Foreign General Insurance and Chairman and Chief Executive Officer of AIG's American International Underwriters (AIU). In 2011, Brian was appointed to the U.S. Federal Advisory Committee on Insurance. That same year, he was inducted into the International Insurance Society Hall of Fame.

 

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Views from the top

In this short video, Brian Duperreault and Daniel S. Glaser share their views on today's key business issues: risk, volatility, innovation, talent, and growth

Quotes

Brian Duperreault

President and CEO

Marsh & McLennan Companies Inc.

That uncertainty is going to remain with us, yet I also believe that the underlying strength remains. Whether it’s the US, Europe, or the emerging world, there is much more strength than weakness.

Brian Duperreault

President and CEO

Marsh & McLennan Companies Inc.

The balance sheets of companies are very strong. The cash balances are extraordinarily high. Companies are incredibly efficient. Everyone’s poised for activity, and with a little less uncertainty, you’d see the whole world grow economically.

Brian Duperreault

President and CEO

Marsh & McLennan Companies Inc.

The interesting thing about how we’re positioned in the global economy today, particularly in the emerging world, goes back 10 years, when our company was largely positioned in country, working on multinational business coming out of the US and Europe for the most part. Right now the vast bulk of our global business is indigenous, local business. We still do multinational servicing, but the large part of what we do country by country is local.

Brian Duperreault

President and CEO

Marsh & McLennan Companies Inc.

We have more markets that make the cut, with economies that are interesting to us, where there’s demand for our services, where the level of payment they expect to give us for the quality of our service meets our criteria. There are just more of those markets out there.

Brian Duperreault

President and CEO

Marsh & McLennan Companies Inc.

We’ve just appointed a chief innovation officer, who has technology and innovation in a package. Prior to that we were siloed, where each operating company took innovation on as part of its normal process of growth development.

Brian Duperreault

President and CEO

Marsh & McLennan Companies Inc.

To me, one of the interesting things that’s changed globally, particularly in our company, is where innovation takes place and where it migrates to. Classically innovation resided in the developed world. We took ideas and moved them into the emerging world. There’s now an equal chance, and maybe a greater chance, that innovative ideas will come out of the developing world, where the action is, where the need to deliver more for less is even more heightened. Today we’re getting as many ideas out of, say, China and India as we were before out of the US and Europe.

Brian Duperreault

President and CEO

Marsh & McLennan Companies Inc.

We have to manage talent very differently. One phenomenon we have noticed over the last five years – not only for ours, but among many companies – is that voluntary turnover rates in the developed world are quite low, while in the emerging world they’re quite high.

 

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What is your outlook for the global economy?

We’re optimistic as a rule, particularly of our company’s prospects for growth in 2012 and going forward. But this is such a strange time, because one day we’re up and one day we’re down, and the markets are so volatile. That uncertainty is going to remain with us, yet I also believe that the underlying strength remains. Whether it’s the US, Europe, or the emerging world, there is much more strength than weakness. Part of the problem, of course, is the political uncertainty, and with that comes volatility. If politicians could get their act together, get the uncertainty down to a minimum, you’d see tremendous growth. The balance sheets of companies are very strong. The cash balances are extraordinarily high. Companies are incredibly efficient. Everyone’s poised for activity, and with a little less uncertainty, you’d see the whole world grow economically.

Is the political outlook the key factor in global economic growth?

Absolutely. Brian is spot on when he talks about uncertainty. The reality is that we have two different worlds - the developed world and the emerging world. In the developed world, there’s tremendous uncertainty, which impacts the willingness to invest for the future, and discretionary spending comes under pressure. When we look at the developed world in these uncertain times, a slow growth environment is what most companies will have to learn to manage. Now, in the emerging world, it’s important that no one takes a one size fits all strategy. We need to invest where there is growth and not hold the emerging world back because of the uncertainty in the developed world.

Has the last year been particularly volatile for Marsh & McLennan?

It hasn’t been particularly volatile for our core business, which is divided about 50/50 between insurance and consulting. In the insurance world, we have a rhythm and cycle all our own. That business doesn’t match up with economic cyclicality, as a rule. Our volatility has more to do with natural events and catastrophes, events that can create price movements. In the past year, we had an enormous number of significant natural-hazard events—earthquakes, tsunamis, hurricanes…and while you might think those would have created tremendous volatility, they haven’t moved our pricing very much. There’s some degree of stability in that pricing. So that half of our business hasn’t been too volatile.

In the consulting half, we run the rhythm of the economies. Where things are growing, which is the emerging world, business has been quite good for us. Where it’s not so great, it’s been slow but reasonably balanced, and therefore no volatility.

What is the single most important non economic event that affected Marsh & McLennan last year?

Over the last couple of years, the low interest-rate environment is probably the one issue that has had the most impact on our company. We collect between $50 billion and $60 billion in premiums from clients, and then we pay insurance companies. So we manage that money in a very short term way, on a fiduciary basis. In a low interest rate environment, we actually do all the work that we’ve always done before. We just don’t get paid anything for it. For many of our clients, we still have defined-benefit pension plans. Even if they’re closed, they have to manage those plans, and low interest rates create volatility for them in that process.

What is one thing that government could do that would help support Marsh & McLennan?

The US government could certainly do something about corporate taxes. We have the highest corporate taxes in the world.

With all the discussions around fiscal policies, including Congress’s so-called Super Committee formed to deal with our national debt, I understand the push and pull of the debate. But it’s causing issues with respect to the US economy. It’s keeping productive cash in other parts of the world. We have a lot of cash; we’re a cash generating company. We keep it in other countries’ economies, because the tax consequences of moving it into the United States are high. So that cash is working in some other economies. If US tax policies were changed, I think you’d have much more domestic productivity, the economy would rebound, and things would be a lot better. That alone would make a huge difference.

I would also like to see a little more certainty. Uncertainty is a killer from a business-planning point of view. Knowing what was going to happen in a relatively reasonable perspective of time would be enormously helpful to us. I understand the whole process of next year’s US presidential and Congressional elections; that’s the way things have always been in the United States. When times are good, we can handle that uncertainty and rhetoric, but these are not normal times here. The country isn’t as well served by that process, and more integrity and certainty coming out of Washington would really help us.

In what ways, if any, has your strategy changed over the past year?

We refined our strategy at the end of 2010 and implemented it in 2011, focusing on four principles: growth; high cash generation; not using much capital; and lowering our risk. So I’m not sure we changed our strategy this year, but we’ve certainly refined it, particularly growth.

What changes in strategy during the past year would you emphasize?

The most important thing for a company, when it has its strategy well articulated, is to make sure that it does what it’s supposed to do. So when I look at our company and its growth, over the last several quarters, we’ve grown as a firm around 5 percent organically, which under the circumstances seems pretty strong. We’re also very confident that our people, throughout the company can articulate our strategy. We just did an all colleague survey, in which we had 80 percent of the people who work for Marsh & McLennan fill out a comprehensive survey about not only strategic issues, but also about the company’s performance in general, what’s working, what we can do better. We’re going through the results right now, reviewing areas that we can fine-tune next year.

In what ways is the attractiveness of different countries or regions changing for Marsh & McLennan?

We have a great global footprint, operating in almost 90 countries. We make our living by providing financial and operational consulting services. In emerging countries that have a relatively simple economy, their need for us is limited. But as they start to grow economically and their companies become more global, they need us more. So we’re finding that the demands for our services are growing much more rapidly than the actual economies are growing.

What emerging economies in particular look most attractive to you, Dan?

I look at the world and create several buckets around how we view economies. There are regions growing like gangbusters, including Latin America, Asia, some parts of Eastern Europe, and the Middle East. We’re well-positioned in all of those territories. We’re also in the process of finalizing an acquisition in South Africa that will make us the largest broker and advisor in Africa. We now see much more movement south to south trade, where before it was north to south trade and east to west. The interesting thing about how we’re positioned in the global economy today, particularly in the emerging world, goes back 10 years, when our company was largely positioned in country, working on multinational business coming out of the US and Europe for the most part. Right now the vast bulk of our global business is indigenous, local business. We still do multinational servicing, but the large part of what we do country by country is local.

Are the criteria you use for assessing the attractiveness of new markets changing?

I’m not sure that the assessment changes. We have more markets that make the cut, with economies that are interesting to us, where there’s demand for our services, where the level of payment they expect to give us for the quality of our service meets our criteria. There are just more of those markets out there.

How is your approach to managing enterprise risk changing?

It’s something that we pride ourselves on. We’re one of the world’s great advisors on enterprise risk management, so there’s a particular burden on us to make sure we manage our own enterprise risk in a state of the art way. And we’re well on our way in that regard. We have a new chief risk officer, for instance. Nonetheless, the CEO is still the chief risk officer. That doesn’t change. Putting together a structure that pulls in all of our work is probably the most important thing we’ve done. Risk management and management itself are basically the same. You can’t distinguish one from the other. And as long as your process recognizes that management is risk management, you’re well on your way.

Are you doing more scenario planning in your risk management strategy?

Absolutely. It starts with knowing our risks and creating a risk register, where we literally work with our management team to define the largest risks facing the organization. We may start out with 100 risks, and end up with a top 10 list of risks. Then we talk about what the impacts of those risks could be, both from a severity and frequency standpoint. One of the most important things we do around risk is to consider our systems and controls, and then evaluate those to make sure we’re comfortable. Now, the end goal is not to necessarily avoid risk entirely. There’s profit in risks, so it’s an issue more about identification of risk and managing risk, deciding what to avoid, what to mitigate, what to transfer.

How is your approach to innovation changing?

We’ve just appointed a chief innovation officer, responsible for both technology and innovation. Prior to that we were siloed, where each operating company took innovation on as part of its normal process of growth development. But there wasn’t a coordinated, consistent, scientific emphasis on process approach, and we’re now introducing those into the system. We have an enormous number of very creative people, who are in our clients’ offices daily helping them solve problems. So we have a tremendous day to day input within the company. Harnessing that incredible intellectual capital in a more systematic way - bringing great ideas developed in one company over to another client - is the big change that’s taken place here.

Are innovations in a global company of this size coming from different sources, maybe different geographies, different parts of the organization, or even some from outside your own organization?

Absolutely. First of all, I’m very proud of the fact that in a slow-growth period in the world, Marsh & McLennan has focused a great deal of time and effort on innovation. Innovation, defined very broadly, is incrementally doing our existing business better, being more imaginative and creative around delivering value for our clients, our colleagues, and our shareholders. Innovation is also the “big idea.” So we’ve done things internally created around the big idea as a way to generate momentum around change. I often say to people that you need an environment that’s open and transparent, where it’s safe to speak up and give your views, because there will be no innovation without some element of dissent. Innovation really starts with, “Why do we do it that way?”

To me, one of the interesting things that’s changed globally, particularly in our company, is where innovation takes place and where it migrates to. Classically innovation resided in the developed world. We took ideas and moved them into the emerging world. There’s now an equal chance, and maybe a greater chance, that innovative ideas will come out of the developing world, where the action is, where the need to deliver more for less is even more heightened. Today we’re getting as many ideas out of, say, China and India as we were before out of the US and Europe.

In what ways has talent become a strategic issue for Marsh & McLennan?

Talent has been a strategic issue as long as this company’s been around, which is 140 years. It’s always a question of emphasis, and we’re all guilty of looking at our human resources during difficult times as more of an expense than an asset, but you pay the price for that. We haven’t fallen into that trap recently, but it is always a worry.

Today, we’re spending much more time talking to our employees. It’s a different world out there today than when I started in the business. The communication capabilities are enormous. The ability for me to communicate directly with an individual in any part of our organization is so much greater. Therefore the burden is on us to communicate with our employees. Transparency is also a huge issue. Companies that can bring the tremendous global talent they have into a single, cohesive group, win the battle.

Do you find that the talent mentioned before are in fact different in different regions of the world, or do you find the same talent issues wherever you’re located?

We sometimes use a phrase written by John Kotter, a former professor at Harvard Business School: “We’ll give you meaningful work in exchange for passion for that work.” People want to have an impact. They want to be listened to, no matter the size of the company they work for. They want to be part of something bigger and broader, to work for a company that shares their values and their view of their place in the world. Some of those truths are universal. But then those truths start to split, between the developed world, where for several years there’s been slow growth, and the emerging world, where there’s rapid growth and a sense of future. We have to manage talent very differently. One phenomenon we have noticed over the last five years - not only for ours, but among many companies - is that voluntary turnover rates in the developed world are quite low, while in the emerging world they’re quite high.

A key focus of talent is senior management. In what ways have the requirements for senior management changed at Marsh & McLennan over the last year?

I’m not sure there’s more change than there is constancy. The core requirements of senior management don’t change very much over time - or at least they shouldn’t. But recognizing that the world is somewhat split down the middle between slow growth and rapid growth, you’d better be able to operate in both at the same time. You have to manage that difficult slow growth and then completely switch gears and go to high growth. You have to find ways of moving your resources - and for us it’s talent - from where it’s not being utilized to where it can beutilized. You also have to be a good communicator today, because the tools are there. Our employees expect us to communicate to them regardless of where they are, and you’d better be able to do that. You can’t hide in the corporate suite anymore. You have to deliver consistent messages to everybody, and you’d better tell the truth.

Can you give us an example of anything you’re doing to develop a leadership pipeline?

The most important thing we do to develop our leadership pipeline is stretch assignments. We have an extensive leadership development program, as well as an appraisal system based upon performance, and it’s constant. For colleagues who we think have tremendously high potential within the organization, we seek stretch assignments. More so than in the past, we look within all four of our operating companies for colleagues who can possibly get a stretch assignment. We also move high-potential people back and forth seamlessly between corporate and operating environments.