Pestle Analysis of Savva Company

Aviva was established in 2000 through the merger of two British insurance firms with heritage of over 300 years, however the name Aviva wasn’t implemented until 2002. Aviva operates globally and is the UKs largest insurer employing 30,021 people, with 14,600 of those being in the UK (Aviva, 2018a).

They provide platforms for protection through life insurance, general insurance (including motor, home and travel), asset management businesses, savings - such as retirement schemes, as well as investment products.

Aviva serves 33 million customers worldwide, both domestic and commercial and recognise their customers come from all demographics each with different priorities and concerns. ‘Some just want to get off the telephone whilst others really need a phone hug and somebody to reassure them’ (Aviva, 2018b).

Aviva’s finance executive team, composed of senior officers/directors of departments such as investor relations and international communication, reports to the chief financial officer (CFO), Tom Stoddard. The CFO is accountable for financial decisions, however he delegates financial responsibility to the group executives who will oversee the finances in their business area.

Despite £m5,639 total loss of consolidated income due to net investments Aviva still profited £m1,646 for the year and lowered expenses by £m6,180, although spending more on fees and commission.

Target higher than 5% increase in operating earnings per share.

Achieve a 55-60% dividend pay-out ratio by 2020.

Repay £900 million of hybrid debt, saving £60 million in annual pre-tax interest expenses.

PESTLE Analysis.

Factor

Reason for impact Importance

Legal

Changes in the General Data Protection Regulation (GDPR). High

Political Uncertainty surrounding Brexit and its aftermath. Low

Environmental Increase in CO2 emissions. High

Economical Uncertain interest rate environment. Medium

As Aviva operates in Europe they must comply with the new GDPR regulation that has replaced the Data Protection Act. Failure to comply can result in a maximum fine of either ‘2% or 4% of group global turnover depending on the type of breach’ as well as individuals pursuing damages and bring claims directly against businesses (Aviva, 2018). As a result, Aviva must retrain all staff to ensure these requirements are met.

There is uncertainty surrounding Brexits full implications on economic growth and productivity, regulations and the status of EU employees working in the UK. To minimise disruption Aviva have reviewed their data arrangements to ensure that adequate measures are in place to allow continued uninterrupted flow of personal data as well as creating a ‘Financial Event Response Plan’ ensuring a swift and effective response to any severe adverse financial event. (Aviva, 2018, page 26)

Co2 emissions are expected to increase, subsequently resulting in more weather-related claims (including business continuity claims), inaccurate pricing of general insurance risk and adversely impacting economic growth and investment markets. Aviva must incorporate climate change, as well as other environmental and social issues into their investment decisions. Aviva have adapted flood mapping analytics to help recognise properties most at risk and improve risk selection.

Rapid growth in interest rates could collapse bond prices thus widening spreads and reducing asset prices. Low interest rates could affect the returns from investments and diminish the attractiveness of the returns Aviva can offer new customers. Aviva should invest in ‘fixed interest securities which closely match the interest rate sensitivity of their liabilities’ through acts such as ‘close asset liability matching and shifting sales towards protection and unit-linked products’ (Aviva,2018, p.26).

Organizational structure is ‘the formal configuration between individuals and groups regarding the allocation of tasks, responsibilities, and authority within the organization’ (Lunenburg, 2012, p.1). Common types of structures include; functional, matrix, customer-based, project based and network (CIPD, 2018).

(Aviva organisational chart, Aviva, 2018, p.216)

We can see a divisional structure in which Aviva groups together employees responsible for a certain product/service and location. An advantage of this structure is through flexibility Aviva can recognise the needs of their customers and form stronger relationships with them. This structure requires a lot of coordination, failure to do so could result in poor communication between departments, possibly inter-departmental conflict. Thus, potentially leading to customer dissatisfaction through lack of cooperation if they have to deal with more than one department.

(Aviva board chart, TOB, 2018)

We can see there are 10 key functions overseen by senior officers who report directly to the CEO. The finance departments responsibilities include ‘planning, organizing, auditing, accounting for and controlling’ Aviva’s finances (BusinessDictionary, 2018). The operations and IT department focus on the administration and production of efficient products and services, whereas the digital departments role is to transform the company through product innovation, development and improving and the way customers engage with our products and services. The role of the legal and secretary department is to ensure Aviva’s products, services and the way the business is governed are in accordance with legal and regulatory requirements.

Communication across all departments is pivotal for sustaining Avivas objectives, all must know what they’re aiming towards. This can be illustrated through the introduction of a new product, for example pet insurance. The finance department establishes how much it will cost to launch, they then inform each department on their set spending budget. The legal department will draft the contract for the pet insurance and will handle any potential court cases that may arise through negligence caused by other departments. The digital department aims to discover advanced technology for improving production of the service as well as ensuring the digital platform for customers is easily accessible. The operations department will produce and distribute the pet insurance through its customer service function, the employee’s knowledge, and thus ability to sell, on the product is shaped on the communication between each department.

Organisational culture provides a framework for how employees think and behave through ‘pattern of values, norms, beliefs, attitudes and assumptions that may not have been articulated” (Armstrong, 2006, p.303). It is the ‘normative glue’ binding the company together and shapes the outcome of business goals (Tichy,1982).

Ways in which organisational culture affect operations are:

Positive.

An organisations culture can improve employee’s self-confidence, commitment and job stress which subsequently enhances their engagement and thus productivity (Saffold,1998). Aviva’s employee engagement is currently 75%, with 85% of colleagues understanding how their team’s work aligns to Aviva’s strategy (Aviva, 2018).

Negative

Culture can also be detrimental, if employees cannot align with elements of their organisations culture, for example values, it can lead to unethical behaviour and serve as a blocker for an organisations goals. Dissatisfaction amongst employees, and subsequently weak customer service, resulted in Aviva’s CEO losing £370,000 in 2014 (Gray,2004).

Senior level

Recruitment

When generating the organisations goals HR must consider if, and how many, new team members are needed, and if certain expertise/experience is required? They must also plan how to attract such employees, rather than simply advertise would it better suited to build relationships with local colleges or job centres and what are our competitors offering candidates for this role? HR should also take into consideration when candidates are most active if they choose to advertise the job, Young (2018) claimed organisations receive higher response rates when job openings are posted Sunday evenings or Monday.

Training

HR add value to the organisation through planning what they need of their employees and designing appropriate learning opportunities to fulfil this. It is HRs role to evaluate the success of these activities and improve them to ensure they align with the overall business goals. HR pinpoint those employees most critical in executing the organisations growth strategies and thus invest learning and talent development resources to them. They must ensure there is an appropriate balance of resource to meet shifting needs, satisfying the short and long-term aspirations of the organisation strategy.

Performance

It is required of HR to strategize the best ways to generate and sustain a high-achieving organisation culture through delivering programmes that reward and identify ‘key employee capabilities, skills, behaviours, experience and performance, and ensure that reward systems are market-relevant, fair and cost-effective’ (CIPD 2018). They design the components of reward incentives and illustrate how they combine to entice, engage and retain employees and thus help achieve the organisations goals.

Recruitment

HR assist line managers and staff through overseeing the recruitment process. This involves tasks such as sourcing applicants through advertisements, conducting open days or contacting recruitment agencies. Also reviewing applications, hand-picking the best candidates to interview, challenging candidates through various tests to determine their skills/personality/knowledge. Then deciding which candidates are best suited for the role and performing various pre-employment tests and background/health checks if necessary.

Training

In practice the training process involves HR consulting the organisational needs of employee development to senior/line management and seeking their input. HR provide the training through either in-house, experienced talent or an outside professional training source, conducting role-play ensuring the organisation and its purpose are clear to employees. They evaluate such development through structured regular assessments, for example personal development plans, as well as liaising with managers and employees who can observe the ongoing effectiveness and results. Thus, allowing HR to implement changes to the training structure and research new strategies to ensure it is fulfilling its purpose.

Performance Management

HR delivers training to managers, so they are equipped in observing performance and ways to stimulate it. HR form incentives/activities as a means of binding management and employees together to form relationships based on empowerment and trust. Relationships can improve performance and evaluation, for example during KPI meetings employees may feel more comfortable in discussing their concerns and recommendations whilst HR can give appropriate appraisal and constructive criticism. HRs role is to evaluate employee’s responses to competences, set individual targets whilst identifying barriers and ways to overcome these, observing employee performance and attitudes and deciding whether the current system needs improvements for achieving organisational goal.