Incentive Structure in Joint Venture - Mercer Marsh Benefits

OB2 Essay Assignment – Henry Sheng (A8)

Organization Name: Mercer Marsh Benefits

Description of Business

Marsh is a global leader in insurance broking and risk management. It serves corporate clients to define, design, and deliver industry-specific insurance solutions that help them protect their physical and intangible assets. It has approximately 26,000 colleagues who collaborate to provide advice and transactional capabilities to clients in over 100 countries. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies.

Mercer is a global human resource and human capital related financial services consulting firm. Mercer is one of the largest consulting firms in the world, based in more than 40 countries, and operating internationally in more than 130 countries with more than 20,500 employees. Similar to Marsh, Mercer is a subsidiary of Marsh & McLennan Companies.

Mercer-Marsh-Benefits (MMB) is a joint venture between the 2 operating companies (Marsh and Mercer) as one “benefits organization” that provides corporate clients with a single source solution for managing HR costs, people risks, insurance and complexities of employee benefits. The MMB network is a combination of Mercer and Marsh offices around the world, covering countries where either Marsh, Mercer or both have significant presence in the local market. Together as one entity, Mercer-Marsh-Benefits professionals provide end-to-end employee benefits consulting, employee insurance brokerage, HR outsourcing and benefits administration business to organizations of all sizes.

Problems and Issues

Weak Resource Efficiency / Duplication of Resource

While MMB represents a single, end-to-end solutions provider to clients, Marsh and Mercer maintain their own client facing personnel and operational resources with huge overlap in terms of roles and responsibilities. Resources in MMB usually come in pair (one in Mercer, one in Marsh) but are addressed by different titles. For example, a benefits administrator is called “Associate” in Mercer (which follows the convention of a consulting firm) but “Business Analyst” in Marsh (which follows the convention of a financial institution). At senior level, a Vice President at Marsh and a Principal at Mercer could both be managing similar client portfolios. Employees are encouraged to collaborate with their “twin” in Marsh or Mercer but at the same time told to follow the guidelines given by their superiors in the same operating company. It is clear that the divisional boundary between the two operating companies still strongly exist in the joint venture, and differentiation (division of labour) is not effective. In addition, there is no consistency across scope of services rendered to customers. A Development Executive from Marsh usually handles sales as well as post-sales account management (typical behaviour of a broker), while a similar person from Mercer focuses only on providing client advisory up to closing of a deal (typical of a consultant). This is a clear example of how the culture of the operating company influences employees’ behaviour in the joint MMB organization.    

Poor Coordination

As of today, there is no organization chart in MMB and employees depend on experience and unspoken rules to figure out the many dotted line relationships between individuals and teams across Marsh and Mercer. Often, employees from both operating companies are put together to service clients or form a project team led by a project manager assigned by either Marsh or Mercer management. The project manager is fully responsible to stakeholders in both Marsh and Mercer but does not have the right to control all people or resources in the project team due to separate cost centres and delegation rights. Such situation creates many “special” headcounts. For example, a developer could be “0.5 FTE in Marsh and 0.5 FTE in Mercer”, increasing unnecessary administration hassles and coordination efforts to execute simple tasks.    

Analysis

Leadership and Formal Organizational Structure

Owing to the joint venture arrangement, MMB lacks clear organizational structure that spans top senior management and ground level employees. The global “co-leaders” of MMB are both Dave Rahill, President of Mercer's Employee Health & Benefits Business and Greg Arms, Global Head of Marsh's Employee Health & Benefits Practice. Rounding out the senior management team are shared regional senior leaders from either Mercer or Marsh who are responsible for developing and overseeing all of the MMB Employee Health & Benefits activities in their respective geographies. This shared regional leadership structure is supposed to enhance the synergies between the two operating companies and provide superior customer responsiveness and agility to create tailor-made services by leveraging the strengths of both companies. With such philosophy, top management aims to make MMB a matrix organization, but apparently the strong divisional culture and lack of natural collaboration between senior and mid managers bring huge difficulty to implementation. There is lack of clear reporting line and functional responsibility among employees. The solid lines and vague dotted lines crossing between the two operating companies make it impossible to publish an easy-to-understand organization chart. The inadequate functional focus is the main reason for MMB’s resource duplication and low efficiency.