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Loss Adjustment Expense
The expenses incurred to investigate and settle losses. Such expenses may be termed "allocated loss adjustment expenses (ALAE)" or unallocated loss adjustment expenses.
Insurance Industry News from ProgramBusiness.comWho's In Charge Here?
In a Catch-22 for today’s executive, the less you control your workers, the more you — and they — can accomplish.
Consider this analysis by futurist Harland Cleveland:
"We live in a society where nobody’s completely in charge of anything. In a high-tech age, if all information comes from the top, it’s probably ineffective and too late. No grandpa at the helm possesses enough knowledge to make the organization run efficiently. Increased complexity requires freeing people at all levels to think for themselves — not just obey orders. Executive leadership means consulting the group before pointing the way.
"If nobody’s in charge, the executive must minimize and define what everyone needs to agree on and maximize individual choice and ingenuity. The best executives lead by constantly asking questions and listening to the answers. They delegate work, while controlling the incentive to imagine.
"As the opportunity for individuals to make choices drives every aspect of work, we’re seeing more entrepreneurs on the job. Although this decentralization encourages individual creativity, to maximize employee morale, executives will have to enjoy complexity and constant change. For some, this will seem a burden. But for those who have what it takes to be CEOs, the excitement will build on itself."
Here are some suggestions to help "let go" of control and "turn ‘em loose":
Make sure you hire employees you can trust — and then allow them to make mistakes. Delegate tasks that aren’t in your "highest and best use." For example, if a $20/hr. employee can do a job 75% as well as a $40 employee, delegate it. Reduce the risk of mistakes through continuous training and communication. Have regular meetings to capture "best practices" generated by employees. Then put them in writing so they can be easily communicated and improved upon. Require employees to come up with a new suggestion every month. Use the Employee Suggestion Form, which is the Form of the Month. Don’t trust blindly. Make sure to have checks and balances in place.
Empowering your workers to make responsible financial decisions makes sense. For example, one executive ran a construction firm that specializes in repair and restoration billed on a time and material basis. When job overruns were the fault of the company and not the customer — for example, if the workers didn’t have the materials they needed — the executive had to adjust labor rates accordingly. He trained his employees on calculating such adjustments and then let them make these decisions for up to a three-hour period in any workday. His workers took on this responsibility, freeing the executive to do what he did best.
Another executive realized his workers knew better than anyone else what they needed to do their jobs more effectively. He authorized employees to spend up to $1,000 per year for outside training without prior approval, as long as they completed a report showing how the knowledge they gained would benefit their job and the company directly. The results were outstanding.
Although delegating control is essential, don’t trust employees blindly. All too many financial officers have embezzled megabucks simply because there were no checks and balances monitoring their behavior. To keep tabs on your workers:
Provide continuing education in the skills and character they need to do their jobs Create a system of checks and balances Set up and announce a spot-check policy for consistency and quality.
The only employees who might complain about these controls are those you shouldn’t be trusting anyway.
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