Here is a brief excerpt from an interview of Mark Bertolini by Jon Katzenbach, Gretchen Anderson, and Art Kleiner for strategy+ business magazine, published by PwC strategy& LLC (formerly Booz & Company). To read the complete interview, check out other resources, sign up for email alerts, and obtain subscription information, please click here.
Photograph © 2015 Derek Dudek
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Since January 12, 2015, Aetna chairman and CEO Mark Bertolini has been applauded by the likes of the New Yorker and the Wall Street Journal as an uncommonly forward-thinking and compassionate chief executive — or perhaps just a quixotic one. On that day, he announced a raise in Aetna’s minimum wage to US$16 per hour. For the 5,700 employees who stood to benefit, this meant an average pay increase of 11 percent; some saw an increase of 33 percent. It was arguably the most visible wage hike by a chief executive since 1914, when Henry Ford doubled his assembly line workers’ pay to $5 a day.
The Aetna pay hike was a multifaceted and strategic move — and one that stemmed from personal motivations as well. It also showed Bertolini to be a culturally astute leader with a real stake in improving the well-being of people who rely on Aetna, be they customers, employees, or long-term shareholders. He is also keenly aware of the changing nature of the healthcare industry in the U.S. and elsewhere. Even without the 2010 Affordable Care Act, health insurance companies would have been forced to revise their business models. Consumers have far more choices now than they had even a few years ago, and they approach them in a more conscious, more participative way.
Aetna, which as of 2014 was the third-largest health insurance company in the United States (after UnitedHealth and WellPoint), has been shifting its strategic focus, and its cultural orientation, for several decades. It has evolved from its role as a primarily financially oriented pay or to a role as a healthcare solutions provider, helping medical organizations, insurance carriers, and consumers operate in harmony at lower cost. This has resulted in significant changes in the company’s prevalent attitudes and behaviors, with more change to come.
Bertolini is the third Aetna chief executive in a row who has moved the company in this direction. The first was Jack Rowe, chairman and CEO from 2000 through 2006, who turned Aetna around from a declining bureaucracy (with a hidebound culture known to employees as “Mother Aetna”) to a profitable enterprise. Rowe’s successor, Ron Williams, CEO and chairman from 2006 to 2010, restructured the company and paved the way for its return to growth at a time of dramatic industry change. Bertolini, a 58-year-old Detroit native who holds an MBA from Cornell University, joined Aetna as head of specialty products in 2003, and became president in 2007. In this post and as CEO, he has overseen Aetna’s business response to the Affordable Care Act, which helped attune him to Aetna’s complex cultural legacy as well as its potential for change.
Interestingly, the wage raise stemmed directly from Bertolini’s efforts to engage the Aetna company culture, through social media and personal interactions. It was also driven by a wish to be considered among the ethical leaders of American companies. Bertolini “explicitly linked the decision to the broader debate about inequality,” wrote New Yorker columnist James Surowiecki. “He said that it was not ‘fair’ for employees of a [Fortune 100] company to be struggling to make ends meet.” Even Mother Aetna found it hard to undermine the emotional appeal of this rationale.
Bertolini is known for his no-nonsense, energetic style; his ability to mix formal and informal leadership; his advocacy of preventive medicine (after using yoga to recover from a debilitating ski accident in 2004, he introduced it to Aetna employees and ultimately to customers); and his penchant for speaking candidly and off the cuff.
In this interview, conducted in two sessions in his Hartford, Conn., offices — the first in August 2014 and the second in January 2015, just after the wage announcement — he spells out the reasons for the pay and benefits change, the reaction it evoked in the company’s culture, and the connection to Aetna’s audacious strategic goal of becoming one of the few payer companies with a profitable and influential leadership position in the emerging healthcare industry.
How did you come to the wage hike decision?
When I took this job as CEO, I had three objectives. One was to set Aetna on a course for the next 160 years. Our purpose should be to become a consumer company. The second was to make healthcare reform actually work. The third was to reestablish the credibility of corporate leadership in the eyes of the American public.
Not just for Aetna, but for every company?
Yes. But at Aetna, this meant having a style of leadership that was approachable, real, and tangible. One of my goals was cultural impact. I told the PR team, “You cannot protect me; you must prepare me. So get ready. I’m going to go out there and speak truthfully, and talk about how to move forward.” That approach has served me well.
“I told the PR team, “You cannot protect me; you must prepare me.”
I became active on social media. We have an internal network called Aetna Connect, and I’m constantly talking to the employees on it. They also talk to each other. More and more often, I saw people online saying, “I can’t afford my benefits. My healthcare coverage is too expensive.”
I heard the same thing in site visits. When I visit an Aetna office, after the town meeting where I speak, I try to go to every cubicle in the building and shake everybody’s hand. I ask them what they’re up to and how they feel about it here. The same message came through.
At the same time, I could see that the economic recovery was unequal. People were suffering, but capital was cheap and corporations were hoarding cash and not investing. Business leaders were saying, “When the government gets its act together, we’ll move forward [with helping low-income wage earners].”
Then Thomas Piketty’s Capital in the Twenty-First Century [Belknap Press, 2014] came out. I know a number of well-known economists, and they all leaned the same way. There is pressure to fix this [income inequality] problem through the law of the land. That was a scary prospect: massive wealth redistribution through the federal government. We needed to prevent that.
Another influence was Clayton Christensen. He and I have been working together since 2011. Clay’s basic idea is that companies should husband scarce resources and put plentiful resources at risk. In our current environment, the scarcest resource is talent: human capital, not financial capital. Companies have cash sitting on balance sheets around the world. It makes more sense to spend the money on people than on acquisitions.
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Here is a direct link to the complete interview.
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