How RLI’s CEO Builds Agile Culture in a Conservative Industry
Employees at specialty insurer RLI thrive in a culture built on transparency and employee ownership. CEO Craig Kliethermes shares insights on how to support autonomy and innovation at your company.
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Culture Champions
Aleksandar Savic
When disposable contact lenses killed demand for RLI’s original lens insurance product, the company could have suffered Blockbuster-like oblivion. Instead, RLI became a top specialty insurance provider with dozens of innovative products. CEO Craig Kliethermes credits its agility to the team’s “different works” culture, built on three principles: Structure incentives to create ownership, push transparency to empower decision-making, and normalize learning from failure.
RLI could have suffered the fate of Polaroid, Blockbuster, or BlackBerry, slipping into oblivion when market changes eroded demand for their core product. Founded 60 years ago as Replacement Lens Inc., the company insured the cost of replacing lost or damaged contact lenses — then an expensive purchase. As disposable lenses became the norm, demand for RLI’s lens insurance evaporated. Its underwriters responded by identifying gaps in the market and designing innovative products to meet emerging customer needs.
Today, RLI offers dozens of specialized insurance products across multiple niche markets, including insurance for homeowners in Hawaii, policies for private equity executives, and liability coverage for private investigators. The steady stream of new products has placed RLI at the top of the specialty insurance industry in terms of revenue growth, profitability, and shareholder returns.
RLI’s agility would be impressive for any company but is remarkable in the insurance industry, which is heavily regulated and often viewed as slow-moving and risk averse. RLI executives attribute the company’s success, in large part, to its distinctive culture, captured in the tagline “different works.” CEO Craig Kliethermes shared three key insights for other leaders on building and nurturing a culture of agility.
1. Structure Incentives to Build a Sense of Ownership
RLI’s products are run like stand-alone businesses with a high degree of leadership autonomy to identify and seize market opportunities. When it comes to the leaders running the products, “we try to tie their compensation plan as closely as possible to decisions they make. So within certain businesses, their bonus plan is almost exclusively focused on the results within the business that they’re operating in,” Kliethermes said.
In a decentralized organization with incentives linked to local performance, there is always the risk that employees will focus exclusively on their own performance at the expense of what’s best for the company as a whole. RLI mitigates this risk with a companywide employee stock ownership program. “I’ve worked at a lot of places in my career, and I know every place will ask you or request of their employees to act like owners, be like owners,” Kliethermes said. “But this is the one place where every employee, after they’ve been here one year, actually is an owner.
“Once you create an environment that everybody has a vested interest in the outcome, it’s a lot easier to push the decisions closer to where the problem exists, closer to where the customer is, closer to where the process owner is,” he continued. “And honestly, those are the people that have to live the problem every day that are trying to fix things and make it better.”
2. Push for Transparency From All Leaders
“If you’re pushing decisions down to employees to make,” Kliethermes said, “[they] need to have as much information and context, situational awareness, to solve problems as [effectively as] possible.” Transparency starts at the top but needs to extend to leaders at every level in the organization. A crucial part of his job as CEO, Kliethermes believes, is to “reinforce with the management team that part of their job is to connect dots for these employees. … I could share information at a high level about the financial performance and what we want to do, but that’s pretty high level. You’ve got to keep moving it farther, push it down.”
Transparency starts at the top but needs to extend to leaders at every level in the organization.
As owners, employees are motivated to understand what is happening throughout the company. When they have a significant financial stake in the company, Kliethermes noted, “they feel like they want to contribute. They want to ask questions. They want to understand their investment in the company. They want to understand things that are outside of their area of expertise because it may have an impact on their net worth. It just reinforces that environment [where] you get people to ask questions. They feel committed to trying to make the place better. They feel committed to trying to make the best decisions for the long term of the company.”
Widespread stock ownership can also make leaders more open to employee feedback, he said. According to Kliethermes, Stock ownership in RLI “is much more correlated to their tenure with the company than it is with the seniority [in terms of job title], … which creates a completely different environment because it’s not ‘What title does that person have?’ It’s more of ‘This person has a significant portion of their wealth tied up in this company, so we should probably listen to their questions, and we should feel obligated to answer their questions and obligated to listen to their perspective [on] things.’”
3. Normalize Learning From Failure
When trying new things, the right answer is rarely clear-cut, Kliethermes explained. “It’s usually ‘I have this much information. It’s a 70% chance this is the right answer, 30% chance it’s not right.’ And so you don’t really want to punish people for the decision unless it’s an obvious [thing] that is against our values. … As soon as you beat somebody up for the failure, they’re never going to take another risk — because nobody wants to be called out for failing.”
RLI has a culture, Kliethermes said, where “it’s OK to fail, but you don’t want to fail without learning something.” The company focuses on “successful failures, where you learn something that you’re going to do better the next time and you’re not going to make the same mistakes again. So that’s the kind of behavior you have to model for people as well and make sure that they know it’s OK to fail as long as you’re learning.”
The philosophy of learning from failure is baked into RLI’s processes. “We have a regular process around lessons learned,” Kliethermes explained. “Even when we think it’s a success, what could we do better? So we want to focus more on what we can improve than whose fault is it. Then, once we figure that out, we also try to leverage and communicate. We want to be very, very transparent.”
Want to hear more advice from Kliethermes? Watch this conversation and the entire series on the CultureX YouTube channel, on Spotify, or on Apple Podcasts.