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Their conversation explores how Ken’s background as a treasurer and the skillsets needed for that role played a significant factor in setting him up for success as a CFO.
Prudential needs to be prepared for potential scenarios that may arise during their customers’ lifetime, which made them well-positioned to respond to major disruptions like the COVID-19 pandemic. They have taken steps to model for other potential disruptions and their likely impact on the economy and financial markets.
They also discuss the important role that Finance plays in supporting organizational transformation, and how Prudential supports increased transparency and consistency in environmental, social and governance, or ESG, disclosures.
Key takeaways:
CFOs should communicate as clearly and simply as possible, simplifying complex issues to the main points for all stakeholders.
Technology investments can enable both a better customer experience and a more efficient way to operate, leading to cost savings by simplifying, automating and changing the way companies do business.
Take time to get your hybrid working arrangement right. There’s a lot to be gained in terms of productivity and employee satisfaction when employees feel empowered to design a hybrid model that works for them.
For your convenience, full text transcript of this podcast is also available.
“What I found to be very important as CFO is to communicate as clearly and simply as possible. Many of the things that we do are complex, but the CFO really needs to simplify these complexities to the main points for all stakeholders, whether that be the board, investors, regulators and employees.”
Myles Corson
That was Ken Tanji, executive vice president and chief financial officer of Prudential, sharing his views on the CFO’s role. I’m Myles Corson from Ernst & Young, host of the Better Finance podcast, a series that explores the changing dynamics of the business world and what it means to the finance leaders of today and tomorrow.
During my conversation with Ken, we explored how his background as a treasurer and the skillsets needed for that role played a significant factor in setting him up for success as a CFO.
Ken identifies Prudential’s purpose as being a company that makes people’s lives better by providing financial security and helping them navigate through uncertainty. In order to fulfill that purpose, they need to be prepared for potential scenarios that may arise during their customers’ lifetime which means that Prudential is well-positioned to respond to major disruptions like the recent COVID-19 pandemic. Our discussion included how Prudential has taken steps to model for other potential disruptions and their likely impact on the economy and financial markets.
In addition, we discussed the important role that Finance plays in supporting Prudential’s transformation to become a higher growth and more agile and resilient organization as well as how Prudential supports increased transparency and consistency in environmental, social and governance, or ESG, disclosures. I hope you enjoy our conversation.
Corson
Ken, welcome and thanks for joining us on the Better Finance podcast.
Ken Tanji
Great to be here, Myles. Thanks for having me.
Corson
Maybe in starting you could share some information on yourself and your career journey so far.
Tanji
I’ve been with Prudential for the length of my career and over 30 years, and during that time Prudential has a variety of businesses, and that’s really benefited my career, because I worked in virtually all those businesses, and it’s given me a good understanding of how our businesses work and how they compete in the market, how they provide value to the customers. For me as CFO now, that’s been really helpful. Just prior to being CFO, though, I was also treasurer for six years, and since financial strength is core to the value we provide our customers, the treasurer’s role is very strategic for Prudential.
Corson
We’re seeing increasingly treasurer as a steppingstone role to CFOs, and more treasurers moving up to that CFO role. Are there particular skillsets or experiences you think the treasurer role provides in helping prepare to become a CFO?
Tanji
As an insurance company or having a lot of insurance operations, the treasurer is responsible for all aspects of capital and liquidity management, but also the treasurer handles the relationship with all of our rating agencies, our debt investors, our banks and regulators. So, it gave me experience in representing Prudential and communicating our story to key stakeholders, and that was a good background to have before being CFO.
Corson
That’s really helpful, and you get a sense of that strategic nature of the role. As you’ve sort of stepped into the CFO role, were there other particular experiences during your career that you felt were particularly significant in preparing you and getting you ready to be successful in the role?
Tanji
In addition to helping businesses create strategies, create capabilities and then guiding execution, we also did a number of M&A transactions, and I was very involved in those, and those were great experiences to have to see how acquisitions can fit into strategy, how you then identify opportunities and then execute and negotiate deals, and then integrate businesses. So, I found that very helpful as well.
Corson
Having been in the CFO role for a while now, what about the role has been most different from your expectations going into it?
Tanji
I had worked very closely with the CFOs before me. So I had a pretty good idea of what to expect. What I found to be very important as CFO is to communicate as clearly and simply as possible. Many of the things that we do are complex, but the CFO really needs to simplify these complexities to the main points for all stakeholders, whether that be the board, investors, regulators and employees. So it’s a big part of the role, and it’s been an area of focus for me.
Corson
That clarification and simplification of messaging to the organization must have been really important through the pandemic and the disruption we’ve been through. You talked a little bit about Prudential’s business, and not many organizations plan for that sort of disruption that the pandemic has inflicted on us, but the nature of your business is all about preparing for the unexpected. Can you maybe share some examples of how you as an organization prepared, and how that actually played out during the course of the pandemic?
Tanji
Sure. The purpose of our company is to make people’s lives better by providing financial security, and that’s amidst all the uncertainties in life. So, to make sure we can fulfill our purpose, we prepare for potential extreme but plausible scenarios, and that included a pandemic. As a result, we had modeled what a pandemic may mean in terms of elevated mortality but also its impact on the economy and financial markets.
So we had plans to be sure we would be able to operate and serve our customers at a time that they needed us the most. An example of our preparedness at the outbreak of the pandemic, masks were in very high demand and short supply, but because of our plans, we actually had hundreds of thousands of N95 masks in storage, and we had them so our employees would be able to use them in the office. Well, instead, we shifted to fully remote work, and we didn’t need that large supply of masks, so we donated them to the medical community since they needed them the most. So as a result of our scenario planning, we knew what to expect from a pandemic.
Corson
That’s a great example of giving back and the impact as an organization you have more broadly in the communities you serve. As you think about the disruption we’re facing, what were previously considered to be black swan events seem to be almost increasing in frequency. Are there lessons that you’ve learned about planning and how you’re going to plan in the future to address those kinds of issues given the magnitude that we seem to be experiencing?
Tanji
Our business is managing risk and uncertainty. So, it’s our business to plan for it. The way we do that is through all kinds of scenario analysis. One of the things that we learned, and I think a lot of people learned, is we were far more effective with people working remotely than we ever would have expected. So we, like many, are broadly adopting hybrid work arrangements, that people really value the flexibility in their life while we’re still operating with high effectiveness and productivity.
Corson
You mentioned a couple of times making that pivot to remote working and then to hybrid working more recently. Are there things within your Finance organization or more broadly within Prudential’s organization that you think helped you successfully navigate those changes and transformations and how you navigated through that change?
Tanji
First of all, it was great to have an organization going into it that was quite stable and a culture where teamwork was really fostered, and trust and relationships were highly valued and established, because when you then went to working fully remotely, it became much easier to convert that to a remote situation, but also communication was really important. It would have been easy to just go remote and let communication slacken. Quite the opposite; we kind of stepped it up and made sure we were communicating more frequently than ever.
Corson
As you think about the return to physical work, the hybrid work that you mentioned, how has your organization responded to that? What are sort of the guidelines you’re providing? How is that starting to play out in practice?
Tanji
Since the beginning, our philosophy was put the safety and wellbeing of our employees first, because if our employees were safe and well, they’d be able to serve our customers with the high level of quality that they deserve, and that philosophy continues. A few months ago, we opened our offices back up, and we invited people back into the office. It’s been great to interact with colleagues again in person, and we continue to be adjusting to the hybrid working arrangement.
To get hybrid work right, it takes more planning, more coordination of schedules. We’re finding people need time to figure out what works best for them individually but also how that fits with their teams. So we’re making progress, but it’ll take time to get right, but there’s a lot to be gained in terms of productivity and employee satisfaction if we get it right, so we’re taking time and putting in the effort to do just that.
Corson
You mentioned the word trust. How important has trust been as part of that culture shift that everyone is working together to design? What do the optimum models look like going forward?
Tanji
I think it’s essential. To get these models to work right, they have to work right for each person but also each person within teams, and we have to give people empowerment and trust to figure that out in the best way and, in return, we’ll get a lot of engagement and get to the best outcomes.
Corson
You mentioned that communication and doubling down on that is part of that trust building. Is there anything else that you’ve been doing, especially any examples you can give of how you’ve been maintaining and building that culture of trust and any other cultural attributes you’re seeking to nurture whilst having to work in this very different environment?
Tanji
We’re listening to people. When you’re going through change like this, it’s important to listen to what people’s experiences are, what their concerns are, what’s working, what’s not working. We do that in pulse surveys and other methods to get that input, but we’re also just letting people know that they can speak up and raise their concerns. That way we can then figure out the path forward that makes sense. So, I think that’s how you bring out trust is by listening then actually taking that input and creating solutions that reflect that.
Corson
Changing gears a little bit now, Ken, as a life insurance company, Prudential has obviously got a very long and storied history, but as we’ve started to talk about, disruption is everywhere. So, organizations need to reinvent themselves to stay relevant to meet different customer needs and expectations and adjust to all of the disruption that we face. Can you talk more broadly around some of the transformation journey that Prudential has been on in the recent years beyond obviously the immediate pandemic impact?
Tanji
Prudential does have a long history, over 140 years, and we’ve changed a lot, but our purpose has remained the same which is to make people’s lives better by solving the financial challenges of our changing world. Having said that, we are constantly evolving to adopt new capabilities and create new solutions because our customer needs are changing every day.
Recently we’ve accelerated adoption of our digital capabilities and, in fact, with the pandemic and social distancing, we actually saw a big increase in consumers’ use of electronic capabilities. Our industry had been trying to make those a bigger part of our operating platforms, but it really took an acceleration with the pandemic out of necessity of how you could interact with customers. So, we’re continuing to make big investments in our digital capabilities. We’re essentially focused in engaging customers basically how and when and where they want, to deliver efficient and high-quality service the way they want it.
Corson
You talked there about how the pandemic had really accelerated the customer adoption of digital technologies. I’m interested also in the role that you as a Finance organization played in supporting the enterprise transformation becoming high-growth, more agile, resilient and also how digital has helped enable that transformation. Can you share some examples?
Tanji
Our Finance team plays a critical role in the transformation of our company. We partner across the company to identify and size opportunities. We build business cases for spending and investments. We organize the prioritization then of our resources and then monitor and track the progress. We have a dedicated team which we call the Finance Transformation Team that oversees all these efforts.
We found that technology in many senses pays for itself. Technology enables both a better customer experience but also a more efficient way to operate and also a better employee experience as well. We have a target to achieve 750 million of annual cost savings by simplifying, automating and changing the way we do business, but also, probably more importantly, improving the way we serve our customers and also improving the employee experience.
Corson
(Inaudible) some examples specifically of that automation and how that’s driven some of the cost savings but also the ability to drive that better customer end experience.
Tanji
Part of issuing a life policy is the underwriting process where someone who applies for life insurance gives us the information, and it gets reviewed and then approved for a policy. We had capabilities to automate that but, before the pandemic, it was only about a 20 percent adoption rate in straight-through processing. Now at about 80 percent of our policies or more are being approved completely automatically, taking the process that would have taken a couple weeks down to minutes. So, it’s been a game changer.
Corson
Right now, we’re seeing macroeconomic uncertainty globally, the return of inflation, rising interest rates, the supply chain issues I think we’re experiencing day to day. This theme of disruption being a constant is recurring. Anything else you can share on how you see your role and the role of the Finance organization in helping Prudential to navigate through that uncertainty?
Tanji
So again, we’re in the business of providing financial security, so managing risk, understanding risk, and all the uncertainty is fundamental to what we do and instinctually to what we do. If you look at the volatility in the markets, it’s certainly been elevated and reflects a number of factors. The war in Ukraine has certainly shifted the world’s geopolitical landscape, and it comes at a time when the world was emerging from the economic disruption of the pandemic. So one implication of all that is clearly the rise in inflation which has many unhealthy impacts on the economy, and the Fed has taken steps to cool it down and hopefully result in a soft landing, but we need to look at all that and make sure we're well-positioned no matter which direction it goes.
In the near term, investment yields have risen, and that's after decades of decline in rates, so actually a rise in investment yields is quite welcomed and as we have the opportunity to invest in our insurance reserves at higher yields. Having said that, we've not seen inflation at these levels in over 40 years. Although our stress testing takes a look at a variety of economic scenarios, including rising rates, we feel very prepared for a spike in inflation. We have our Finance teams paying very close attention. This is a very new environment and one that we haven't seen in a while. So, we think we’re well-prepared but, having said that, we always stay on top of it.
Corson
In terms of staying on top of it, Ken, the role Finance is playing alongside other functions within the business to help create that agility to be able to respond much more dynamically to these changes, can you talk a little bit about have you seen that change, and how are you encouraging your teams to engage differently with your functional peers to again bring this agility to respond?
Tanji
It’s really not a new phenomenon for us. This is core to what we do. So, it’s important to understand and have a playbook in advance. That’s the best way to manage risk is to be prepared before it happens, and so we do that. But having said that, we make sure we’re well-coordinated as we’re working through it, and we do it every day.
Corson
One of the areas of change or disruption I think most Finance organizations are facing right now is the increasing interest in sustainability and ESG. Could you share a little bit about your role and the role of your team in helping Prudential to prepare particularly to meet some of these emerging, nonfinancial reporting requirements as well as what you’re seeing in terms of the expectations of your stakeholders?
Tanji
Sustainability, is just fundamental to providing financial security. Overall, we very much support the steps for greater transparency and consistency in ESG disclosures. It’s very much needed. We publish our own ESG report with a variety of nonfinancial information in there, including the climate change disclosures.
We’ve made commitments to reduce greenhouse gas emissions over time and to be carbon neutral by 2040. To do that, we have a team of people that spans across the company to advance our ESG profile and our objectives. Again, a very important evolving area. We’re working hard on it. The new standards are actually quite onerous, and our Finance team is the big part of the team that works on this. We provide the reporting and controls and standards that we gained from our experience with financial reporting.
We also continually look for opportunities to align our capital and liquidity framework with Prudential’s ESG commitments. In recent years, we’ve executed a couple sustainable finance transactions. We issued a $500 million green bond, and we also put sustainability-linked terms in our revolving credit facility. So, we’re very involved in reporting, and there are a couple of examples of how we put that into our liquidity framework as well.
Corson
Great. Are there some particular examples of how you’re seeing the expectations of your stakeholders? Maybe even think about your board and your investor community and what they’re expecting of you in this area.
Tanji
It is certainly getting a lot of attention from all of our stakeholders and from our board to investors and our regulators. We think we’re well-positioned in this regard. We score high on most of the ESG report cards. Having said that, it’s evolving quite rapidly, and it takes a lot of resources and coordination to keep up with it but, again, we highly support it. We think it’s fundamental to providing financial security, so we put a lot of focus on it.
Corson
You mentioned earlier the donation you made of the N95 masks to the medical professionals locally. That’s a great example of the impact you’re having on the communities you work in, and I know social inclusion is an important topic for you at Prudential and the financial services sector more broadly. Could you talk about some of the other initiatives that you’ve been driving in that area?
Tanji
Prudential was founded on the belief that financial security should be in reach for everyone, and so we have efforts to better understand the challenges that financially underserved communities face and to help them overcome the barriers that are in their way. We’re working on inclusive economic growth for low-income communities, particularly in Newark which is our headquarters. We reached a milestone by having a billion dollars invested in our impact investing portfolio, and our Prudential Foundation surpassed a billion dollars in giving. It is core to what we believe in.
Corson
Fantastic while very impactful. Thank you for sharing that. Just in wrapping up, we touched, Ken, a little bit on some of the culture change and some of the people aspects you’ve been dealing with. Could we just reflect finally on what you're seeing in terms of the need for changing skillsets and mindsets to be successful in this changing environment that we’re all facing?
Tanji
We think it’s vitally important to keep people prepared, and the skills people need to do the things that they need to do is changing. I’ll give you an example in Finance. This year we launched a program we call Level Up. What it is, is it brings together in one platform the tools that people need to gain critical skills, that Finance people need now and in the future. The platform is built around three categories, one being personal effectiveness, the second being leveraging technology, and then the last being people leadership.
What we like about the platform is often there’s a lot of choice out there, but there’s almost so much choice that it leads to inaction. So, what our platform does is it gives guided learning pathways, but it balances that with the flexibility to be personalized and tailored for everyone. A one-size-fits-all approach to training doesn’t work. So, our people are empowered to choose the skills they’d like to build, and then they can work with their manager on a personalized path. Ultimately, our goal is to have people be continuous learners, to keep pace with the business needs and expectations. So, this is a new program for us, and we’re excited about it.
Corson
That’s really interesting, the three areas. You talk about the personal leadership, technology and people leadership. Nothing in there around the technical skills which tend to be where all the training provided was previously focused. So, can you give some examples of the kind of things you’re encouraging people to learn under each of those areas, maybe particularly on the people leadership one which is so important to success for Finance organizations going forward?
Tanji
I should say we do have an array of technical training and learning as well. So this is a complement to what we have there.
Corson
Sure. No, (Laughs) that doesn’t go away, absolutely.
Tanji
No. No doubt, but on the people leadership side, I’ll bring up one key area for us and focus area for us is inclusion. It has training in there to learn about other people’s preferences, other people’s cultures and how you can better understand that in order to draw out the best in them. It has all different types of aspects, but I think that’s a pretty important one and one we featured.
Corson
One good example, and I do think this increasing need for EQ as well as IQ in Finance is so important. So again, this is how we achieve the goal of becoming better business partners because we can engage with different stakeholders within the organization. So that’s a really great example. Thank you. Ken, we covered an awful lot of ground. Really appreciate the insights you’ve shared. Any final recommendations or words of advice you’d share with our listeners as to what they should be thinking about as they prepare for the future of Finance?
Tanji
Actually, we probably just touched on it a little bit, so I don’t have any big words of wisdom here, but I’d say that the technical skills are very important, but the interpersonal skills make the biggest difference. Finance, if you think about it, is all about sharing information and insights but in ways that motivate, inspire and lead them to take action. That’s about it, Myles. I really appreciate the opportunity to be a part of your podcast.
Corson
It’s been wonderful talking to you, and thank you for sharing some great insights. I know our listeners will appreciate that. Thank you.
Corson
Many thanks again to Ken for taking the time to share his experiences as a CFO and how Finance plays a critical role in executing organizational transformation.
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