Over the past three years, Charles Lowrey, chairman and CEO of Prudential Financial, has led a transformation of the 150-year-old insurance and investment management company, a journey that has also spanned the entire pandemic. In this episode of the Inside the Strategy Room podcast, Lowrey talks with Dame Vivian Hunt, a senior partner in our London office, about how he grounded Prudential’s transformation in the firm’s purpose. They were joined by McKinsey’s Sean Brown, our Strategy & Corporate Finance communications director. This is an edited transcript of the discussion. For more conversations on the strategy issues that matter, follow the series on your preferred podcast platform.
Dame Vivian Hunt: When you became chairman and CEO of Prudential, did it feel that linear or obvious to you?
Charles Lowrey: Not at all. I started my career as an architect. I started my own firm when I graduated, naively enough, which is a whole other story from which I learned a lot. I decided to go back to business school to get some business experience before returning to architecture, but ended up in real estate investment banking at JPMorgan for 13 years. And Prudential was a client of mine for ten years, so when they were looking for a new head of real estate investment management, they thought of me as a potential candidate.
I was lucky enough to get the job. But my career has been anything but linear. And if you asked my 20-year-old self, “What are you going to be when you grow up,” it would not have been the chairman and CEO of Prudential.
Vivian, your career progression was also not that obvious, right? How do you go from being in the Peace Corps in Senegal to being a senior partner in the London office of McKinsey? That’s not what I would think of as a straight line.
Dame Vivian Hunt: It definitely wasn’t straight, and the road was definitely not smooth either. I had the great fortune of a wonderful, wonderful education. My parents placed a huge emphasis on that. I think when I finished college, I just needed something that was very different to what I’d done before. Something that was a bit more hands-on, living and working in a different culture and context, and learning a new language. I also really wanted to work in a culture that was of color as well. In the Peace Corps in Senegal, I was assigned to the healthcare and midwifery program, and that’s when I found healthcare and then worked in that field for the next 15 or 20 years.
Charles Lowrey: What’s interesting about what you just said is what the pandemic has showed, and what you showed in the beginning of your career is the importance of mental health, right? That fatigue and just being stressed can lead to a lack of productivity or a lack of direction. The premium we are all now putting on mental health is so important.
Dame Vivian Hunt: We’ll talk more about that in a bit. First, though, I want to ask you about becoming chairman and CEO—what is the difference between your purpose as a leader now and Prudential’s purpose when you first joined them versus now? Because it’s been three or four years since you’ve taken on this particular role.
Charles Lowrey: Prudential is very much a purpose-driven company. It’s almost been 150 years since our founder started the company to provide burial insurance to working class families that didn’t have access to financial products. That purpose remains the same today. People work at Prudential for a variety of reasons, but the unifying reason for us all is our purpose of making lives better by solving customers’ financial challenges in a changing world. That’s the lens through which we focus on our clients, our customers, and our communities in which we live and work, as well as shareholders.
Now for me personally, how do I connect to that purpose? There are a couple of ways. First, and this may sound trite, but I get up every day and I try and make Prudential a better company for all our stakeholders. Some days you succeed, some days you don’t feel like you succeed. Second, it’s my family history—in the late 1850s, my great-grandfather was orphaned at age 12.
He was the youngest of six kids and came to the US and became a machinist in a factory that was half a mile from where I’m sitting right now in Prudential’s headquarters. And he was typical of the kind of worker that Prudential was created to serve, at a time when the death of a breadwinner could often leave families not just bereft but bankrupt. Fast forward 150 years, and we’re still focused on expanding access to financial services and products for our customers, except we’re doing it on a global scale with 50 million people.
Dame Vivian Hunt: You have been undergoing a strategic renewal and transformation over the last couple of years, so in addition to your heritage informing your purpose at Prudential, you must have seen some areas where a new strategy or new choices were needed.
Charles Lowrey: Absolutely. When I first took the CEO role at the end of 2018, we recognized that Prudential was facing some significant headwinds. The company needed to become more nimble, less market sensitive, and to generate higher growth. To achieve these goals, we set out a three-part strategy. The first was to produce a higher level of consistency of earnings relative to guidance. The second was the actual transformation initiative, which itself had three parts: reviewing and refining product strategy and product mix; creating and executing a cost savings program, because we had to offset some costs of low interest rates; and conducting a strategic review of our businesses. And then the third part of the strategy was to be prudent stewards of capital, balancing investing in the businesses with returning capital to shareholders. For the past two years, we’ve been just executing on that strategy.
The interesting thing is our employees started to ask us, “Okay, that’s what you’re doing to transform the company, but what are you going to become?” Because you can’t shrink your way to greatness. And so we realized, as we talked to employees, that we needed to create a new vision for Prudential in the future, which is completely aligned with our purpose. And that new vision is to become a global leader in expanding access, using those two words again, “expanding access,” to investing, insurance, and retirement security. And as you might guess, we have three parts to that vision. That is to invest in our growth businesses, focus on our customers, and create the next generation of solutions.
Our employees started to ask us, ‘Okay, that’s what you’re doing to transform the company, but what are you going to become?’ Because you can’t shrink your way to greatness.
Dame Vivian Hunt: A lot of strategy is choices about what you do or don’t do. Was it difficult to make some of those choices be big and substantial, particularly since you had worked at Prudential for several years before becoming CEO? Sometimes it’s hard to look at a really familiar, successful and much-loved place and see where you might need to make changes.
Charles Lowrey: Not only is it difficult to do that, but the biggest challenge we faced is that we weren’t doing badly. We didn’t have a burning platform, and yet we needed to change right away. And so we had to think about the catalysts for that change. How do you explain to stakeholders, especially employees, the necessity and in fact the urgency to change? And so there were three catalysts. The first, you always look to your customers. Customers want a seamless experience, with speed and convenience of both tech and human touch. And the industry itself is changing. If you look at our competitors, they are seeing consolidation and activism. So we needed to change.
The second catalyst was low interest rates, which aren’t friendly to insurance companies. And the third was the pandemic and working remotely. The biggest surprise for us was that we could change as quickly as we did. We could operate faster and do more. We joke and say, “If you had asked us pre-pandemic, we would have put together a multidiscipline taskforce, studied it for two years, and said it was impossible.”
The biggest surprise for us was that we could change as quickly as we did. We could operate faster and do more.
And yet we did it in a week. And that was perhaps the greatest proof point to our employees that we could move and move quickly, and we could change and adapt. And that in and of itself was a big factor in creating the urgency and the corroboration that we could and we needed to change.
Dame Vivian Hunt: If you can do those urgent and sometimes even noble things during the pandemic, the other business challenges you face, you probably can accomplish those as well. I think the other interesting thing is this notion that you can move with pace and agility, but also with care. There’s a whole new level of employee and customer well-being that I think is now built in.
Charles Lowrey: Without a doubt. And you hear much more talk about multistakeholder frameworks and multistakeholder commitments. In fact, in 2019 before the pandemic, our board adopted a multistakeholder framework that recognizes the board’s duty to enable positive change for a much broader set of individuals, groups, interests, and the communities in which we live and work, in addition to creating strong value for shareholders, which is obviously a major part of this as well.
Engaging with stakeholders isn’t a monolithic journey. It’s not one size fits all. And each region, at least in which we operate, has different aspects of our businesses that are in different stages of development. We have to take a tailored approach to each country and each region in terms of not only our transformation but also the consideration of all our stakeholders as we go forward.
Sean Brown: You talked about how Prudential moved quickly to operating virtually when the pandemic hit. If maintaining that agility and faster metabolic rate is part of Prudential’s transformation, how do you make that kind of pace sustainable without people burning out?
Charles Lowrey: Any transformation is really two challenges. One, how do you make it permanent? And, two, as you say, how do you prevent burnout from taking place? I think you make it permanent by combining top-down with bottom-up. This can’t be unilateral. You can’t just say, “Thou shalt transform,” and expect the organization to do it. You have to build a certain degree of consensus. There has to be very strong direction. But then you do have to establish buy-in. There may be some personnel changes that have to occur. But at the end of the day, people need to understand the direction in which you’re going.
Also, the transformation again has to be rooted in purpose. There has to be a reason for it, which is why the creation of our vision to be a global leader in expanding access to investing, insurance, and retirement security is so important. That means people are going to be working really hard during a transition and a transformation. They have to know why they’re working hard. They have to know that their jobs and what they are doing are meaningful to the company and linked to the purpose. And if you can do that, two things result: one, people can work through working hard because they know that they’re working hard for a reason; and, two, it will make the transformation more sustainable.
Dame Vivian Hunt: The biggest correlation in agile organization is reconsideration of decisions and improving decisions as you go. Sometimes changing your mind too but improving decisions as you go along. And I think that is quite important because it unlocks people to think bigger thoughts, bring forward their biggest suggestions, be contrarian, challenge their manager, improve things for a customer, be honest about their experiences. Most people are probably at 40 percent or 50 percent of their capacity to contribute, but the opportunity to unlock any one of us to be at 80 percent or 90 percent of our capacity as a steady state for working, I mean, that’s a huge impact on engagement and relevance. “I know why I’m here and what I’m doing.” But also it improves productivity. And so organizations that do that well also perform better.
Charles Lowrey: It can be liberating. That’s a word that comes to mind when you’re talking about working in an agile framework or similar, because if you can work faster, if you can work with colleagues, if you can innovate, if you can see the success of your efforts, then as I always say, success begets success, right? So if you can have some quick wins along the way, that will be very liberating and energizing for employees.
Dame Vivian Hunt: This is probably an unfair question, but are you seeing what they call “the great resignation”? How is that impacting your organization and your talent?
Charles Lowrey: First of all, I’d change the way we refer to it from the “great resignation” to the “great rotation.” A lot of people thought about whether they wanted to be in business in the beginning of the pandemic. But now it just seems like rotation. I think that in any company that says they’re not experiencing this to some degree, boy, I’d like to meet them. We’re certainly experiencing it, and it is really putting a premium on talent. And we are an absolutely talent-based organization. Three aspects of it, the attraction, development, and retention of talent go absolutely hand in hand. We’re expanding where and how we look for talent, creating stronger relationships with schools and organizations, and using our business resource groups as a source of referrals. Then you go on to the retention of talent. That’s incredibly important. We’re increasing the number of regular conversations we have between employees and managers to strengthen the relationships and develop trust.
We also provide employees with career opportunities, which include new positions, but also development opportunities, meaning a chance to develop skills and gain experience by which to attain those new positions so they don’t have to go outside the firm to look for them. And we created something called the “talent marketplace,” which links up the skills of an employee with the skills needed for the open positions and puts them together. And if they don’t have all those skills, we provide access to free courses and reskilling programs that are made available to all employees.
And then we measure that. As an example, we have increased materially the number of positions we fill from within Prudential relative to a couple of years ago. And last year, our employees logged about 140,000 hours of learning. That’s a big part of the retention program, saying, “Look, you don’t have to look outside of Prudential to have a great career and really interesting and diverse opportunities.”
Just look at my career. I joke that I couldn’t keep a job within Prudential. I kept moving from job to job. And that made it interesting and lively. At times it made it scary—you’re plunked into a new position you don’t know a lot about. And you’re, thinking, “How am I going to figure this out,” but you do, with the support of your colleagues. And it means that you can have a really robust and interesting career.
Dame Vivian Hunt: Charlie, you and I have both had linear, hierarchical progression in our careers, moving up on org charts, so to speak. Today, I don’t think people necessarily join a company wanting to move up in that same way though. They want to develop, and maybe have a bigger territory, a bigger purpose, reskill, try different things, rotate—they do not necessarily want to just get promoted and replace their manager. If you combine those ideas of technology enhancement and needing to reskill, combined with longer, broader, career journeys, there’s actually a lot that you could do within an organization as big and diverse in terms of skill sets as Prudential is.
Charles Lowrey: Absolutely. And you link that back to the purpose. If you believe in the purpose, that becomes your overriding factor, and then you want a really interesting career within that to serve the purpose. And as you said, it doesn’t just mean linearly moving up within a certain function or business. We’re encouraging people to go from functions to business and business to functions and back and forth without necessarily taking the traditional route.
Sean Brown: Charlie, could you share some examples of where Prudential staff are becoming more purpose driven in the ways they work?
Charles Lowrey: If you think about our different businesses, providing life insurance or retirement security, there are countless examples of people who take immense pride in providing financial security and peace of mind to people. I look at our Japan business as an example. They live that every single day. They cite examples of families where the breadwinner has died, and the reason the family can continue to live their lives is because of the life insurance we provide. The other part I would say is, if you look at the work we do on a social basis, take the S of ESG. We’ve invested over a billion dollars in Newark [New Jersey], where our headquarters are, through the buildings, through the support of educational institutions and cultural institutions. We have one of the largest impact investing portfolios I think of any company in the world. It’s over a billion dollars as well. So we live this every day, and it’s just a really important part of why people work here.
Dame Vivian Hunt: I love the idea of asking yourself or having your managers work with their teams to say, “How do you define purpose? How does it link to your role? How can this be made more the case?” Challenging each other when you might not be living up to it. And that’s an active dialogue, in addition to the hard work of delivering great products and services. How do you handle it when you have been challenged on the purpose—how have you pressure-tested that this is real?
Charles Lowrey: I think it’s pressure-tested every day. It’s the choices you make. We live in a multi-stakeholder framework—which stakeholder are you going to prioritize at which time? In order to become the sustainable company we are, you can’t prioritize one specific constituency over everyone else, if you want to survive for 150 years.
You can’t stay the same. You have to change. Companies don’t exist for 150 years without reinventing themselves. As you reinvent yourself, in some ways you’re pressure-testing yourself as to your beliefs, your purpose, and how you’re going to act going forward.
You can’t stay the same. Companies don’t exist for 150 years without reinventing themselves. As you reinvent yourself, in some ways you’re pressure-testing yourself as to your beliefs, your purpose, and how you’re going to act going forward.
Dame Vivian Hunt: Yes, and further to the ideas of framework and choices, the pandemic is a really good example. At the beginning of the pandemic, the clear priority on the health and wellness of your employees and continuing to provide the important needed services in a reliable way to your customers was clearly a priority. You have an explicit framework. Not every company has a framework that is explicitly multistakeholder and that is quantified in terms of its long-term impact. That gives you the opportunity to explain to people–sometimes for really obvious reasons like a pandemic or an urgent situation, others more linked to your strategic choices in the operational roles–“Why is my job changing, and why is it necessary?” And that framework is what allows you to manage it going forward.
I think a lot of companies need to be explicit about their choices, even when it means some things won’t be resourced at this time, or something’s not a priority. Even when the answer’s no, you can explain it much more credibly to your stakeholders when you have to make those tough choices.
Charles Lowrey: Having a very strong context by which to make those choices and set the priorities and, as a result, the resource allocation is critical as a company thinks about moving into the future. Absolutely.
Dame Vivian Hunt: I’m really encouraged that the data clearly correlates companies that make holistic, longer-term decisions with higher performance. You’re not trading the financial performance and our fiduciary responsibilities. That’s not a negative trade or a false choice between your stakeholder needs and financial performance. But it does mean prioritization, sequencing, living within your means, just like a household budget, and all the other things that I know Prudential also has to do.
Charles Lowrey: I think they’re mutually reinforcing. And I think if you think about all the stakeholders over time, you will have a stronger company that performs better for all stakeholders, including shareholders.
Dame Vivian Hunt: Have you seen different challenges of the strategy in different parts of your business? Or how has the global nature of Prudential impacted your choices?
Charles Lowrey: I would say they’re more opportunities than challenges. We live in a world with global competitors, and we need to understand what they’re doing and what we can learn from them because emerging markets are so far ahead of us in so many ways.
I remember ten years ago when we were first considering going into Africa, I went to Nairobi. And I took some folks out to dinner. I went to pay for dinner, and I pulled out my wallet and a credit card, and they all started laughing at me. “You still have a wallet? You still have plastic? We use M-Pesa [the digital payment platform]; we’ve used it for years. You guys are so far behind.” Or in Ghana, the digital distribution of micro-insurance by deducting minutes off your prepaid card—these are fascinating advances that we could learn from as we go. So what I would say is the international experience that I have had has shaped my perspective by giving me perspective. And I think that’s true for many colleagues at Prudential. Because I think you need to understand what’s happening globally if you want to succeed domestically.
In many of the emerging markets, they’ve absolutely leapfrogged over an entire generation of technology. Just think about land lines and mobile phones, going back to Africa. They just don’t have a lot of land lines, so they’re all mobile literate.
Sean Brown: When people are mostly working remotely, creating opportunities for mentorship and apprenticeship can become more challenging. How do you ensure that your corporate culture and purpose are effectively conveyed to your new joiners, and sustained with your current colleagues? How do you help your people all align around your purpose even in a remote or hybrid environment?
Charles Lowrey: The remote environment has been difficult to work in for a number of reasons. There’s culture, there’s innovation, and there’s learning. And if you look at those three, rather than asking ourselves the question, why should you work remotely, we’ve turned that around to ask, “Why do you need to come back to work?” And those are the three reasons because culture atrophies over time. And for those people who haven’t been in the hallways of Prudential, they don’t really have a good appreciation of the culture. So you need to bring people back. There’s no question about it to get inculcated into the culture, to meet their colleagues in person. The second is innovation, where we can innovate and we’ve proved to ourselves we can innovate remotely.
But you don’t get the spontaneous combustion. You don’t get this spontaneous discussion around the water cooler of “Gosh, Sean or Vivian, what about this idea?” And so that’s something that you need as well, because the spontaneity of thought is a critical part to innovation. You don’t need to be there every day for that, but you need to be there part of the time.
And then the third is learning. And especially for younger folks who are joining the firm, how do they learn? Well, they learn a lot through osmosis. They learn by sitting next to Vivian and watching her as she thinks through problems, as she talks to clients. And so it’s going to be really important to bring our younger folks back who have just joined the firm to understand the way in which we work, and to learn from others who have more experience. Again, you don’t need to do that full-time.
It gets to what we were talking about earlier regarding retention. If employees feel cared for, if they feel heard, if they feel like people are looking out for them, and—I love the word advocate—advocating for them, then they are much more likely to stay at the firm. Because they say, “Aha, I feel welcome, I feel valued, and I feel like I can have a career here.” I think these things go hand in hand. But it’s going to be very important, whether remote, hybrid, or fully in person, to embrace many of the things we talked about today.