What do you make of the fact that fewer of your peer CEOs are willing to speak about this stuff at the moment?
Well, I'm disappointed. There should be more voices. Do I think any individual company needs to speak up on every issue? No, I wouldn't do that. But I think people need to stand up and CEOs need to stand up and decide what's important to them, what's important to their customers, and take a stand.
Tom Wilson has led Allstate for nearly two decades. He's running a business where trust is everything, at a moment when trust is low, and he spent years figuring out how to turn what he believes into how the company operates. From Semel, this is the CEO Signal.
So Penny, our guest today is Tom Wilson, CEO of Allstate. Why did you invite him on?
Well, I'm really excited to have Tom here. He's been a longtime friend of mine. I've gotten to see him evolve as a CEO. I've gotten to know him as an individual. I've been to his children's wedding. So, I really think there's a lot we can learn from Tom.
All right. I interviewed him earlier this year, and so I know some of this story, but there's a lot I don't.
I think we're going to talk about purpose. He's very committed to the purpose for his company, but also the purpose of his employees. Well, what interests me is he's now one of the very few CEOs who's still speaking up on big societal questions. He's had some blowback for some of his weighing in on subjects of negativity in America and division. And so I'm fascinated to hear how he thinks about that.
We're going to learn a lot. All right, let's bring in Tom.
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So Tom, first of all, welcome. We're thrilled to have you here. And you and I have known each other for decades professionally, civically, family, friends, and I've watched you shape and reshape Allstate over a couple of decades. I've also watched you apply yourself with real seriousness and purpose. The other thing I know about you is you're always calm, very calm. How do you do that?
Well, thank you. You know, I try to stay calm because I find it helps me just be a better me. And so instead of making everything personal, I just think things happen to you and you just kind of go with the flow. I'm pretty high on the risk tolerance side. So, I'm comfortable taking risk, but to do that, you have to just be okay with things not going right. And so I think maybe the net of all of it is believing in yourself and when stuff doesn't go right, you're just like, okay, we'll try it again.
So Tom, you've chosen a focus on trust and specifically on the decline of trust in the US in your home market between all of us, between individuals and institutions, within communities. You've talked about polarization. How did you end up deciding that this was a risk you needed to focus on and that you need to talk about?
Well, let me go way up first and then I'll come down. So, first, we think that businesses have four roles: serve your customers, make money for your shareholders, opportunity for your team, and improve communities. And so it really started in the improved communities and we're like, man, people are not feeling good. Low trust is crazy low. Like 41% of people don't trust other people in America. And so that's just a bad place to be. And then it obviously links to Allstate. So, but I would say we backed into it linking to Allstate. Like we sell trust. Like you give us your money and then you trust that when something happens, we're going to be there. So, we're like, okay, lowering tide lowers all boats. So, if trust is going down in America, it's bad for communities, bad for our team, bad for our business proposition. So, we said, you know, let's work on trying to improve it. So, we got hooked up with the Aspen Institute and were on a three-year charge to get it done.
Were you feeling that impact already that trust was starting to affect the business?
Oh, for sure. If you look at the customer shopping rates, like if you don't trust your insurance company, you shop around and maybe they're cheating me somehow. If you look at claims and you make somebody an offer and they don't trust you, then they push back on you. So, but I would say that's kind of the gradual thing. It's one of these things. There's a great line in a Fitzgerald book, 'How'd you go bankrupt? Gradually then suddenly.' And you think about that and you're like, oh yeah, like how are we losing trust? How are we getting to a place we do not need to be and cannot be as a society? It's gradually and suddenly. So, it wasn't like we had this big problem in the business where we weren't succeeding. We just said we got to stop this train.
But why did you decide it was your responsibility to step in to help society? It's not just your business. I feel like it's bigger than that.
Because I can, you know, and you have an obligation. And so my parents were always like, look, you got to respect other people, meet them where they're at. Like if they have a different point of view, they have a different point of view. But they also said you have an obligation to make a difference. And so I said, you know, I have this platform, it's related to what Allstate's doing, we're close to the Aspen Institute, they seem to have a lot of interest in this, let's just go do this and see what happens. And I think it'll work, but if it doesn't work, I will at least feel good that we tried.
Given the diagnosis in your study of trust that there is this kind of widespread distrust between individuals and institutions, when you decided to raise this subject, did you know you were going to get pushback over it? That there was going to be a segment of your customer base or other stakeholders that were going to say, 'Why is Allstate lecturing us on trust?'
Um, no. And I would say the people who don't like the approach we're taking to trust. So, nobody's really after us for going trying to help trust, like nobody has gone there. There are some people who don't like the approach we have, which is to rebalance the positivity and negativity. But I'm trying not to be judgmental about them. I'm like, hey, you know what? We're way too negative these days. We should rebalance it. And I'm not talking about being Pollyannish and believe everything people tell you. But like, you know, we're just way too negative today in this world. We're surrounded by it. It's bad for our health. It's bad for freedom. Like, if you don't trust anybody, you wouldn't get on a plane. You'd be like, yeah, you'd live in your house and not go out at all. So, I feel like those people who are purveyors of negativity are the people who are unhappy with it. And I'm like, okay, well, that's your point of view.
Do you have an overarching framing on what your company can weigh in on, you know, what's appropriate for you to make public statements on, to have a point of view on when there's so many things you could be dragged into?
Yes, we have something called a societal engagement framework. And it came up when, you know, as a CEO people ask you to write letters all the time. Sign this letter, sign this letter. And they want to sign letters on bathrooms in North Carolina or something. And I'm like, you know, I'm just getting tired. I don't want to just be another name on a letter because it's like who cares? Then you're just talking too much. So we came up with this framework that starts with does it help us do a better job for our customers? Yes or no question. Do we know anything about it? That's also kind of a yes or no question. Can we actually effectuate any change? Like if we say something will it make a difference? And once it gets through there then we say well okay what's the risk and return of doing this? And so we took over a hundred issues through that and we came up with two issues that we cared a lot about. One was resilience from climate change and the other is personal privacy. And so we try to put everything in that construct. So it has been helpful to me to help me sort out when's the right way to win because then I went out to our shareholders and other stakeholders and I said here's the stuff you can expect us to be involved in. Here's the stuff don't call me.
Right? So be proactive about that. Set expectations.
If you want to talk about these things, that's not us because it doesn't help us with our customers. It doesn't help us effectuate what we're trying to get done. So no, it doesn't, and we don't know anything about it, so we're not doing anything on it.
You're quite unusual in being a CEO who's willing to weigh in on these big thematic subjects of trust in society, these social issues. What do you make of the fact that fewer of your peer CEOs are willing to speak about this stuff at the moment?
Well, I'm disappointed. I can't tell other people what they do and they've got their own business objectives. But if you just said pattern recognition, in total there should be more voices. Do I think any individual company needs to speak up on every issue? No, I wouldn't do that. But I think people need to stand up and CEOs need to stand up and decide what's important to them, what's important to their customers, and take a stand.
Do you think that some of your fellow CEOs are overestimating the risks of speaking up where they might have that license to speak? And do you have any advice for them on how to navigate those decisions?
You know, I couldn't judge anybody whether they're overreacting or underreacting. What I could say from my perspective anyway, what's worked for me for almost 20 years is a good defense is a good offense. So, I think being thoughtful about what you do and then go out and tell people, and you know, as long as you tell people, they'll be fine with the change. It's when you surprise them or they do something they think is off message. And if it's off message, you have to convince them why it's on message or listen to them and say, 'It's off message. I'm not going to do that one.'
But you've talked about things like wages and other things. How does that fit in the framework?
That fits into the framework of we think it's about opportunity for our team and improving communities. And so, yes, I think, you know, I think five or six years ago, I was like, we need to save capitalism by paying people more. And I still believe that. And we started because I went down to Dallas. I'm at one of our things and I'm like, how come people aren't complaining about the higher cost of medical insurance? And I said, well, because they're on the state plan. I'm like, what? And they're like, 'Yeah, they only make like 12 bucks an hour so they can be on the state plan.' I'm like, 'That's ridiculous. We only pay them $12 an hour. We should pay them $15 an hour.' I just made it up. And how much does that cost? And it was some millions of dollars. But I just realized we had this plan where we were trying to pay as little as possible for work as opposed to designing a job that they could make as much as they were capable of making because they were adding value. So, we had to redesign jobs. So, you know, paying somebody $18 an hour for a $12 an hour job is not a way to run a company. Creating an $18 job that you pay $18 for is a way to run a company.
Right? What response did you get from your fellow capitalists to that piece?
Pretty much crickets. Didn't hear much anything, you know. It was like, yeah, okay. But I would say to be fair, we were just one of the people in the parade. Okay. Jamie at JP Morgan raised his wages. There were a whole bunch of other people who maybe they didn't write an op-ed, but they were doing the same thing, which is, you know, I think businesses understand we have an obligation to society. And most of us try to live into it every day. I think it's at discontinuous points like today that we have to sort of ask ourselves, are we doing enough?
Do you think we're doing enough on good jobs?
No. No. I think we... And it's sort of the tragedy of the commons, right? Like for me to teach somebody how to do another good job that doesn't work in the insurance space, like my shareholders are not happy about that. And my customers wouldn't be happy about paying for that. So, I think we have to figure out how to do it. And right now I'm just working on if we do enough things for enough people, we ought to be able to create more good jobs. So, what's an example? One of the things I believe that business needs to do is create opportunity for the people that work at the business. And but I thought a lot about that. But once you get to that, then it's really pretty easy when you're thinking about, okay, you know, AI is coming, and it's going to wipe out a bunch of jobs. I feel like, no, wait a minute, I still have an opportunity to try to create some new jobs, right? Whatever those are. And so that enables me to move quickly on little things.
How are you taking that insight and putting it into practice right now?
Poorly. Right now, we tried. There's a woman at MIT, Zanpan, who works on creating new jobs and has done good work and we tried to do some work with her about five years ago and it completely failed. Like the new jobs were, you know, letting people pick their schedule or something and I was like that wasn't what I was really thinking about. Because you know the computer is going to do a whole bunch of work for us. And so we could just cut costs and move on. But that's not what people want. Like people don't want that from business. What they want from business, they want good meaningful work. And so we're actually right now again trying on all of our AI work there's somebody assigned to each team to create good jobs, like how can you use this to create new jobs and something different.
So this seems like a classic example of the perennial tension in businesses between the short-term profit motive and the long-term growth imperative and sustainability imperative. But do you feel there's a particular tension that AI has injected where possibly the most rational thing for you to do right now would be to hand a bunch of jobs off to algorithms. But you're saying actually no, you need to create something that has more popular buy-in.
Yeah. Well, you see more companies than I do, but I think it really starts with what businesses expect of themselves and what the boards expect of businesses. And we expect businesses to serve customers well. Like that's what you get paid to do. And generally that means lower cost, better products. Like that's what people want. And that means fewer jobs. I've been in and around boardrooms my whole life and I've never been in a boardroom where somebody said how many good jobs did you create? You know, how are your revenues, how are you doing with customers, what's your cost structure? And if you said, and I think this is a problem because businesses have the skills, the capabilities to create new jobs, but we're not focused on it. We're not measured on it. So, I feel like that's a place where we have to hold ourselves accountable. I'm trying to hold us accountable, but you're kind of working against the winds of commerce, which you know, shareholders are not asking you how many good jobs you created. They're like, you know, what's the share price and how much money you make? So, you just have to be resilient and say, 'Yep, I know you're one of the stakeholders, but I have an obligation to our employees and so I'm going to try to do it.'
And do you think we ought to change those measurements at all? Or is that just something that really needs to be part of the ethics of the human being who's the CEO or the leadership of a company?
I think it's the latter really. I mean you would do it, like you think about people all the time. You'd be thinking about it and I think other people do. I think the big challenge for CEOs is they get risk averse. You know, they get the job, they do all the hard work, they take the risk, and they get in the job. And then I see a bunch of them like, huh, like they don't want to lose it. And I'm like, these are hard jobs to get. They are hard jobs to keep, but they come with an obligation to do hard things. And I think too many people just go to the, you know, cut your expenses and it will happen. Like AI is going to cut it. We're going to cut a bunch of expenses. Our customers are going to be happy for it. On the other hand, that's not the only reason we exist. Like we exist, you know, serve our shareholders as well, but opportunity and then improve our community. So, we've kind of established that with our board 20 years ago. And so, they're all in on it. So, when I say, 'Look, I might hire 500 extra people just to try something out.' They're like, 'Okay, do it.'
On this show, we try to surface major inflection points in your leadership, and I think one of those has been around purpose and values and how you make decisions. Tell us more about that.
Well, it's been a 20-year journey. And it started with something you did actually. You might not even remember this. It was part of YPO, Young President's Organization, and you had the people who were running the corporate athlete, Jack Groppel, come in and talk about purpose. And their focus on your personal purpose and how it gives you more energy. So as a result of that day session, I took my team down to their place in Florida which was focused on your own personal energy and that became a 20-year journey that is still changing today.
Wow. I had forgotten about that but the minute you mentioned it I remember precisely. So tell us about that journey 20 years, where did it start, how is it effective today?
So I had just become CEO and I decided, and I've been president so we're working on what I wanted to, and I thought we needed more energy and I had gone to this thing with you and I thought oh let's go down there and I took 11 people down there, one was excited, that was me, the other 10 kind of went. Everybody came back really excited because it was all about them and it was a two and a half day session to help you figure out what your personal purpose was. And so we went down there and everybody came back more energized. And so we started there and then we said, well, if we have our own purpose, we should like do the same thing for Allstate. Like what's the Allstate purpose? And that led to the first creation of our shared purpose.
So this is really interesting because I've been walked into a lot of offices where I've seen a purpose statement on the wall. I've read a lot of annual reports which have that on the cover and it often feels like it's a sort of top down, you know, the CEO wants this to happen but maybe they're repeating it and putting it up on the wall and stuff. But you're saying you need a kind of a buy-in at a much more personal level where the people working in your organization feel that sense of purpose. Beyond those first 10 people, what's been critical to getting the whole of Allstate to feel that shift?
Yeah. Well, I wish I knew it at the time, but I've learned it, you know, kind of like a person in a dark room bumping in looking for the door. And I found some doors. And one of the doors was strategic. We call it strategic middleware because you're right and they're like, you know, you could drive a Mac truck through our shared purpose. And we've made it more specific over the 20 years, but it's still pretty broad. You know, we're trying to protect people from life's uncertainties. That could be a whole bunch of stuff other than auto and home insurance. And so what we did was we built out a series of steps below that we call strategic middleware to get to the day-to-day activity.
Tell us what middleware, what does that mean?
Okay, so you do this shared purpose and it like the whole world could be in there, right? Like we could sell health insurance, we could do just about anything. And what I figured out over there was probably like seven or eight years was people would look at you and they would hear the words but they would interpret them differently. And so we then said okay well we need to do something below that. So first what's our strategy? So we have a visual, you know, set of ovals that's our strategy and we said okay that's the first piece of middleware. Then we said well like we got to talk about opportunity for our team. What does that mean? So we created something called an employee value proposition. It's got five components in it to make the strategy happen. We came up with a plan called Transform to Grow which has got five components and five phases. So when you're communicating to people, you can then take them from that purpose down to here's our strategy, here's Transform to Grow, here's employee value proposition. And so then that gets into okay like how does that mean we deal with distributed work and which is the day-to-day stuff. So, I didn't realize at the beginning to go from purpose to day-to-day activity, I was going to have to build out this mental construct that I could use to communicate to people to get them to come with me because I can't obviously make all the decisions. That's one thing we did. The second thing we did, which I didn't know at the time, if you want to be a purpose-driven company, you have to be powered by purpose-driven people. So, we've helped over 75,000 people figure out what their personal purpose is. And I will say that's helped the company, but it's also the thing I'm most proud of.
Talk us through that. What's happening on a daily basis? If I'm working for you, how are you helping me figure out my personal purpose?
