Keynote address by SAFECO Corporation’s President & CEO Mike McGavick to Greater Seattle Chamber’s 120th annual meeting

I have in mind, as I stand here looking out at this tremendous audience, a picture. It's a picture that put in perspective for me of what I wanted to talk about today. And in this picture, there's a young boy and he's dressed like parents will do in one of those 'full on' sailor outfits, you know, with the hat and the bow - the whole deal! And there's a girl in a striped dress with a headband, very reminiscent of the early 60's. Now, I am embarrassed to tell you that I am the boy in the picture. I would only be more embarrassed to tell I was in the dress! (laughter) But, of course, it's not the point. The point is where the picture was taken. It was taken at the 1962 Seattle World's Fair! We all, if we were born here or have been around a long time, know where we were and probably have a silly picture just like it. And we know because it was a signal event. We were 110 years into our history then, and we had just been pushed onto the world stage. That was the objective and it was achieved!

It's now 40 years later; two generations have passed. And the question I wish to explore with this audience is this: Are we fulfilling our obligation to stand on the shoulders of those who went before and make our region's contribution still greater to the world? I think that is the question we face collectively.

To explore that question of whether we're meeting our obligation, a quick four areas are necessary. 1) First of all, we should explore: Is it important at all? Who cares? 2) Second, where do we stand? And I think we've heard a fair amount about that already! Where do we stand as a region? Are we going forward or backward? Because we know nothing ever stays the same, right? Forward or backward is the choice! 3) Third, I want to offer some thoughts based on what's been going on at SAFECO because I think it illustrates some important things about how things turn around. 4) And then fourth and finally, I want to illustrate how those simple ideas of how turnarounds happen apply as well to the region and how we can assure ourselves of fulfilling our obligation to take our region forward. So, pretty simple ideas: Why is it important? Where do we stand? How do we turn it around? And how does that apply to the region?

So, let's start with the simple one: Why does it matter? Well, I've already, you're either going back or you're going forward. There's no other way to go! You cannot stand still; it is against nature's laws. Why is this true? Well, we should all remember two things about human nature: We're driven either, I think, by what is selfish or what is generous. What is selfish? Well, we seek for our children a better life, isn't that true? The Governor always speaks of this so eloquently. And we know it's important to compete because regions, like companies and like nations, compete and they compete for scarce things - principally, human and financial capital! Or put more ugly, talent and money. You either get more of it or you're losing it to somebody else. It is that simple! And then to the generous side: Communities that are successful help others. Communities that are not, require help! We are a successful and generous people and we must continue to be so, if we're to fulfill our obligation. But in order to fulfill that generous side, we must move forward! That's why it matters. It is literally the question of what contribution will be to humankind.

If that's why it matters, then where do we stand? That's the second thing I said I'd talk about. Well, you've heard a good accounting already. It's not going real well. When I was running around in that sailor suit, this region was known for some things. We were known for Boeing, having just introduced the world's first commercial jet airliner. We were known for our natural beauty and our willingness to share the bounty of our region with others - our salmon, our trees, our agricultural products, our timber. We shared then. We share less now. But those were the things we were known for - cheap power, abundant water, a pioneering spirit! Now, we've made some other progress since, too. There's no denying it and it's really wonderful to come back to Seattle and see that ball field - I can't remember what it is called - but the ball field down and that's Seahawks Stadium. It's nice to see that! It's nice to see city hall. These are good things. These are re-investments in our community - the Opera House coming along! These are good things! It's nice to see what Microsoft has done - so much to contribute to the world. These are good things and we will be known as 'latte land' whether we like it or not. It's like a cappuccino on a white carpet, isn't it? We are 'latte land' - get over it! (laughter) Now, having said all of that, that's kind of the good side of the ledger. But what is the dark side of the ledger? Well, we're still known for Boeing - because they left! We're not known for sharing our natural bounty. We're known for our unwillingness to deal with the fact that it's re-generable and the fact that we're locked in a death struggle to use it or lose it! A false struggle if ever there was one!

We no longer have the cheapest energy in the country. We have the most expensive! They don't cover our water now. They cover our water problem! It's not what we'd really like this accounting to be, is it? It isn't suggesting a region going forward and the telltales are all around us - The nation's highest unemployment rate! We will be longer in the recession than the rest of the country. That's kind of traditional for us, but it doesn't make you feel any better, huh? We have gone from one of the best places to live - Every time they did those lists of the best places to live, we were right up there, right? Which list do we talk about now? Worse traffic! 51 has got to pass, huh? Worse traffic!

And 40 years ago, we put on this remarkable, peaceful party for the world. 40 years later, we invited the WTO to town, and they were greeted with shameless riots. This is not an accounting that we can take and say we're satisfied with. It is, in fact, a region that clearly needs to turn itself around if we are to fulfill that generational obligation I know we all collectively and individually share.

So if that's why it's important and that's where we stand as Judy said, "Enough already!" Let's get on with it, and I want to share a little bit about what's going on at SAFECO because I think it might be helpful to the notion of how to turn around the region. Now, I want to emphasize something emphatically! We have invented nothing new at SAFECO in the ideas I'm about to share. They are old ideas! You've all read them before, but the good news from my perspective is: These old ideas are proven by us again to still work! You have to go back a couple of years ago - SAFECO was in real trouble - historic and consistently historic losses. We weren't just losing money, we were losing respect. We had gone from one of the top-performing stocks in our entire sector for decades to one of its worse performing stocks because investors knew the act wasn't together. What'd we do? Well, we focused on five things. The same five things I'll talk about for the region, we focused on there! 1) First of all, get your business focused around what you're really good at. 2) Second, articulate a vision that draws people forward - that is aspirational for them. 3) Third, if you've got to deal with pain, step up and take your medicine! Deal with it quick and decisively, and move on. 4) Fourth, invest in people. People are the core asset of all that we do. And then, 5) fifth and finally, communicate and communicate and communicate some more! Those are the simple ideas. Focus, vision, take your pain, invest in people, and communicate.

So, how did we apply those at SAFECO? Well, we had been known for something. In fact, you all know what it is! We were really best known for white shirts. (laughter) I didn't get the memo but, you know, the white shirt thing - it bespoke something about us, about our true identity. You know what it is? We're a very disciplined company! We do lots of little things repeatedly well. That's what we're good at. That's the essence of this company! But we had wandered into businesses during the course of the 90's and late 80's that really require kind of a cowboy spirit in the insurance world. Well, guess what happened? For a while there, our good businesses obscured the losses but by the late 90's, it exploded to prominence and SAFECO was in deep trouble!

We've exited fully 15 separate lines of business and we're focused on only three areas - the ones that match that discipline: Insuring people's homes and autos, insuring small businesses, and providing life and investment products. That's all we do. All the other stuff - 15 separate lines of business - is gone because those businesses have something in common, and that brings us to the vision we articulate. So the first thing: We just plain focused in what we're really different and good at and the second thing, we articulated a vision that pulled people forward. Now, what is that important? Well, believe me, there was plenty of motivation because people were plenty scared, but fear is not the most powerful motivator. We all know that! Dreams are more powerful motivators than nightmares. And what we were able to come to common view was that these three businesses - not only were they the businesses we were good at, but they work together in a powerful way to create a very interesting company - that we could go back to excellent results again and people got jazzed up by that! That we're going somewhere again that's worth going! Vision does matter!

Third, I mentioned, take your pain and take it quick. Well, we've taken a lot of pain. In fact, some in this room have shared that pain with us as our customers. I apologize but your insurance isn't cheaper since I've been there. We've even reviewed who we would insure. There are really four groups of people we care very profoundly about - our customers, our agents who sell our products, our co-workers and our shareholders. Pain went to each group - higher prices for customers, much like the rest of the industry but still painful, no doubt! Our agents - we had 8,000 of them when we got there; we've got 7,000 now. That's more than 15% of them - long-time relationships! We said, we can't do business the way you do business. Most painfully, our people - 10% of SAFECO was let go; 1,200 people - because when we were chasing those other businesses, we'd become bloated in the way we did our work and couldn't compete from there. You all know how that goes! No fun! Awful! But we did it. And our shareholders shared in the pain as well. We cut the dividend we pay those who hold our stock in half to conserve capital for the company! And we did all the things I just described and all the things I'll talk about in the turnaround - all of them were largely completed or totally complete within 11 months - so that we could concentrate on growing a business again and not just our internal travails. Do it quick! Step up and deal!

Fourth, invest in people! They are the difference in companies, in regions, in any collective you can name! That's the difference! What'd we do with people? Well, we found that spending - even though expenses were going up - spending on training had been going down. Today, the reverse is true! We are spending less as a company on expenses and we are spending more on training our people.

Where we had to, we changed leadership because leadership matters, too. When you've got great front-line people, they'd better be led well and we recruited, from outside of SAFECO, some of the best insurance minds in the world to come here to Seattle.

We changed the way people were compensated so they could share in the success we were creating, and we began a multi-year and multi-decade investment in diversifying our workforce and product offerings because we all have to get our head around the fact that the America we sell to decades from now will be completely different from the one we sell to today. And we had better reflect that change! Again, all of this work was started last year. Most of it, in fact, was completed and ready to go this year.

And then, fifth and finally - communicate, communicate, communicate! The items I just talked about were laid out within two weeks of the team's arrival - within two weeks! We laid out the whole game plan, put it on the web, so that the whole employee base could comment and could hold our staff to account for delivering what we said we'd do. It created inclusion. It enabled people to participate and it didn't slow us down because we were decisive along the way.

That brings us to the last topic. How do these five ideas for turning around - focus, vision, taking your pain, investing in people, and communicating - how to they apply to specific suggestions for how we might get our region turned around as well. Now, I'm not going to offer a comprehensive program for reform; that's not my . . . (possible break in taping - fade out and fade back in) . . . but we argue they must be left for steam. This is a mistake! We have each camp entrenched apart. There is a third way to renew and share and in my opinion, to not do so is literally a denial of where we came from, a denial of who we are, a denial of potential for our own citizens and better paying jobs, and last, it is a denial in our obligation to share with the world what is bounteous about us. We must find that third way forward. But I have a specific suggestion that isn't just about those advantages. It's about a way to bring them out, and that is this - and we all know it! We tend to love people included in making decisions, right? We are the 'inclusion capitol' of the free world. (laughter) We have a problem. We're so focused on inclusion, we don't come to conclusion. (hearty applause)

So, a couple of specific examples: I would suggest the State not just take on the challenge of streamlining the process. I think they have heard that before. I suggest we take on this challenge: Every process we should audit. Every process by which government decision is made - every process, including legal review. We've got to do all that stuff! We've got to make good decisions still. I would argue every one of them can be cut in half and lose no affect whatsoever - every one of them! (hearty applause) And I would cut the money available for running the process in half at the same time! Constrain the time and constrain the money, and you take away the fuel that has us locked together and you move the region forward.

Second area: Vision! Now, I warn you immediately I don't want to lower some expectation. I'm not going to suddenly articulate forth a vision - we'll grab the State flag and run around the room but I would suggest that there is something interesting to observe about who we are. I mentioned a couple of companies earlier - great companies, but I'm still mad at one of them - Boeing and Microsoft! (laughter) You know, we carried a lot of water with Gorton, I'm telling you! Anyway, with those two companies, I think there's a central idea in there that can help us if we focus on it - tease out what our vision for ourselves should be - and that is this: I don't think those two companies are so profoundly powerful just because we were accidentally host to the two Bills. I don't think that was it. I think it's because we live in this outpost of the country and as a result, it is genetically ingrained in us to need connection to others. We're different because of it and that's why a business that brings people together like Boeing and a business that brings people and shares like Microsoft is in our very DNA to be the sponsor of. We understand the need for connection better than just about anybody. We need to focus on how that creates for us a vision to pull us forward to contribute that more to the world. If we aspire, we'll overcome these little debates that pin us down. So, we've talked about focus, talked about vision.

Next thing: Take your medicine. Step up and deal with it. Well, the State's budget is about $2-billion out of whack - $2-billion! We've got to step up to it and here's what I would suggest: You know something? Until the citizens of this State are convinced that money is being efficiently used, you're going to keep seeing initiatives and referendums passed. It's a simple truth! They're ticked off! They know money is going to waste. I'll give you an interesting statistic. Did you know that population trend and the state employment trend have been in lock step over the last decade? Now, you all are business people. Is anybody else surprised by the idea that in one of the greatest decades for productivity improvement in human history, we found no way to do more way with less in government? Isn't that odd? We shouldn't just freeze the level of people who are employed by the State so that we can employ more in the private sector. We should literally set a goal of reducing the number of people year by year by year as a way to force efficiency into the government. Our citizens aren't cheap but they will not be fooled and they won't give more where they think is waste. We've got to step up to the pain.

Fourth, invest in people! A couple of ideas here: We've made some progress. We're finally starting to try to hold people to account but you all saw our dismal performance on that Wassel(sp?) Test, right? Three out of ten kids are ready. Three out of ten! Now, there are a lot reasons why it might not be a perfect measure yet, but we're moving toward holding people to account for that. That's exciting! But I think there's one piece of accountability we haven't stepped up to yet. 60% of the State's budget is committed to K-12 education. Isn't it about the time that we got rid of the Office of Superintendent of Public Instruction and made the Governor fully accountable for education in this State? (applause) Now, Judy Billings is a wonderful - Jeez, Judy Billings! I'm going back in my time! You know, Terry Berguson is a wonderful person - really capable! But they did this in Chicago while I was living there. You know, they had the worse schools in the Nation in Chicago. They got rid of all the Intermediary Boards and they made the schools accountable to the Mayor. Guess what? Every year since, achievement in that school district has gone up because it's now focused around who's accountable and shouldn't the biggest election we have every four years be about education and shouldn't it be embodied by the Governor? (applause)

A second idea: Now, I'm a loyal Dog from way back. I even love my Cougar friends when they lose but you know what? (laughter) Actually, I didn't know the score of the Ohio State game because I lost count at 12. (oh's and laughter) No, that's on both of us. You know that. Anyway, here's the thing - higher end. I just want to give you a way to think about it that's a little different. We know they are economic engines, and we know they are equally important as keepers of our civilization. We know that! We know it in our hearts every day, but here's the problem. We know State revenues are in decline and we know we're in a recession. There's another thing we know. We know that the way the State budget process is structured, 60% is already dedicated to K-12. We know then, there is a big fight over prisons and public safety, the social service net, and then, higher education. With dwindling resources, that is a fight that our institutions of higher education will repeatedly lose. They are the last lamb to be fed and usually, slaughtered. We can't afford it. We have to invest in our people. And here's the suggestion: It is time to explore seriously whether over the next decade, we should either string the string or cut the cord and let the University of Washington and Washington State University operate more privately. Get them out of the budget fight and let them move on. And here's a key factor. I know many of you are thinking, "Now, wait a minute! There's a big public mission at the universities. No doubt, but here's the sad truth. Study after study around this country has shown that the private schools are doing a better job of diversifying the background and color of their student bodies than our public schools because public schools as State agencies are prohibited by law for making programs work that would diversity their student bodies. The sad truth is our institutions are becoming more elite even as they face budget crisis. We need to explore independence for those institutions.

And then, finally, communicate, communicate, communicate! I would observe a couple of things: First of all, we all gave ourselves a round of applause for passing the housing initiative and it is a wonderful thing. But, you know what's interesting? Doesn't that tell us that we're willing to pay for things when they are well articulated and there's a good solution. We'll pay! But doesn't the various Immen(sp?) initiatives tell us also that if people feel fooled, they won't pay and they won't pay in an angry way? That's because when people are communicated with like adults about true crisis, they make the right choice. And when monies are kind of secreted away or raised for one purpose and used for another, they say, "Nonsense," and they say, "No more!" We have to articulate choices in honest and adult ways to one another, and the people will come through. And I think that extends even to revisions in our tax system if the choices are made clear and if there's true confidence that the government is efficient.

And then, one last idea for communication: We clearly need to raise the level of civil discourse in our community. If I see one more of those negative 30-second ads, I'm going to throw up - and I use to make them! (laughter) But don't we look to our public officials to have that highest level of public debate? Why is it we think that the maximum possible was done 150 years ago when Abe Lincoln squared off. Why do we think that is the best we can do? Why don't we expect more? I have a simple idea that I think would raise the level of public discourse. Ever since Watergate, we've been trying to tell people how they can give money to the political process - rule after rule after rule after rule! And the special interests keep finding ways around the rules. It's not surprising. They have an interest and they're going to get it. The affect now is the candidate's voice is diminished and many of the ads you see are sponsored by special interest groups. This is a perversion of our political process. I would offer candidates a choice: You may receive - so long as you immediately disclose them - any amount of money from anybody you want because I think the public is smart enough to figure out if you're bought! But here's the hitch: If you don't play the current game of limited contributions from special interests - If you don't do that, every ad, every publication, everything you do for your campaign has to be in your own voice featuring you saying it. You can't hide behind those dirty little ads because those dirty little ads enable good people to do indecent things. If they had to speak for themselves and be held to account for the way they talk, human to human, we'd raise the level of discourse and we desperately need to do so.

Political assassins need to lose! And civilized talk needs to win!

That was a lot on a full stomach! I'll close with this. (laughter) I'm very grateful to the Chamber for being here. I think it is marvelous we're so deeply in support of collective action together and I would ask only this: When you go back to your office or home tonight, look in your wallet or your purse and you've got a picture of a child. If you're a nice parent, they're not wearing one of those silly sailor suits, but you have a picture of a child and that literally is the obligation that calls us forward and the obligation, that we know right now, we're not fulfilling! We know we can turn it around. We've done it before and we'll do it again. Thank you very much! (hearty applause)

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