Prudential’s CFO exceeds $750 million in cost savings one year ahead of schedule. Here’s how

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As every CFO knows, saving $1 million is hard. $25 million very difficult. But $750 million? Near impossible. But that’s just what Prudential Financial EVP and CFO Ken Tanji has done.

Prudential Financial, in business now for more than 100 years, began an enterprise-wide transformation before the onset of the pandemic. This included a plan for cost savings. The insurance company reached $765 million of annual run rate cost savings in Q3 of 2022, exceeding a target of $750 million, one year ahead of schedule. 

“Our cost savings program has allowed us to simplify, automate, and change the way we do business and enhance the customer and employee experience,” Tanji tells me. 

Workforce composition is one of many components that figure into Prudential’s program. Along with that, implementing a hybrid work model and reducing office space footprint in the U.S. by approximately 50%.

The use of artificial intelligence accelerated many individual life underwriting processes from 22 days to 22 seconds, according to Prudential. And digital claims processing capability can now deliver funds to most customers in six hours as opposed to six days. Automation reduced the timing of fund verification and processing on about one-third of new annuity sales from two to three weeks to now two to three days. Group insurance claims processing is now three times faster, due to the data systems installed. For finance employees, forecasting and analytics and scenario planning have had a tech upgrade.

Tanji discussed what the cost-savings initiative entailed.

Fortune: When setting out on this journey, was the initial target of $750 million in cost savings by 2023 considered an achievable goal for the company? Or was it a goal that would be a challenge? 

Tanji: We initiated our cost savings program in June 2019, aiming to achieve $500 million in run-rate savings by 2022. In November 2020, we increased our target to $750 million by 2023 based on our progress. We were able to meet this goal 15 months ahead of schedule because we continued to take learnings from our experience and improve the process. Equally important has been a cultural shift in which employees embraced change and took the initiative to lead new transformation projects. 

The cost savings include $180 million realized in Q3, at a time when inflation reached its highest point in 40 years and uncertainty persisted. Was that a result of following the initial plan? Or were there some adjustments during the quarter? 

By Q3 in 2022, we had three years of experience driving the cost savings program and established a robust system. While we monitored economic conditions closely and adjusted our course as needed, we could stay on track for our cost savings target.

Can you explain how the finance team determined the viable areas for cost savings? And how did you devise the plan of action? 

When we set our cost savings goal, we looked at all aspects of our business and operations and worked with internal business partners to identify areas of opportunity. Our efforts have focused on four key areas: improving the cost structure, adopting new ways of working, building a highly skilled talent pool, and delivering a seamless customer experience. To keep us accountable, we introduced 12 metrics and tracked our progress against them. 

What are some of the metrics you’re using?

We’re measuring our success against a mix of strategic metrics such as the business mix generating Prudential’s annual operating income and operating metrics such as Net Promoter Scores and Return on Equity.

What are some of the highlights of the cost-savings initiative? 

By embracing a hybrid model, we reduced our real estate footprint in the United States by approximately 50%, resulting in an annual run-rate savings of about $50 million. In addition to cost benefits, a hybrid model provides flexibility to our employees and greatly enhances their productivity. By bringing the best of both in-person and remote work models together, we strive to achieve valuable benefits of efficiency and in-office collaboration and connection. 

What do you attribute to the momentum of reaching and exceeding the goal a year early? 

Our enterprise-level transformation strategy provided a solid foundation by simplifying decision-making, clarifying accountabilities, and streamlining reporting. Strong cross-functional collaboration has also been critical to accelerating our progress. For example, the finance team partners across the company to find opportunities, build business cases for investments, prioritize resources, and track progress.  

With any transformation, there are challenges. Can you explain a challenge you faced and how you overcame it? 

We focused on communicating to our stakeholders the necessity and urgency to change, as well as empowering our employees to discover and implement improvements and process changes. We also provided a clear direction of where the company was headed and why. We did this by setting a vision to be a global leader in expanding access to investing, insurance, and retirement security. Aligned with this vision, we continue to support our employees in driving the change because we believe the people doing the work have the best ideas on how to get better.  

What will be your approach to cost savings in the year ahead as we continue to face uncertainty? 

Our experience with the transformation program has set the stage for a culture of continuous improvement. We will keep making progress with this mindset, capabilities, and discipline as we kick off the new year.

See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

In 2022, strike threats, geopolitical conflicts, and weather-related disruptions challenged supply chains. Container xChange, an online container logistics platform, released its “23 Shipping Trends in 2023” report that finds many challenges will continue. Eighty-eight percent of supply chain leaders surveyed fear inflation and recession will be the biggest factors that will impact businesses in 2023. The respondents also predicted that the U.S. will emphasize “friendshoring” in 2023, and the unresolved worker strikes of 2022 will spill over into this year. Forty-eight percent predict the strikes won’t “disrupt the supply chain all that much.” Meanwhile, 35% predict the strikes will “continue and cause congestion.” The chances of new strikes coming up are due to inflation-related rises in prices putting pressure on workers’ disposable incomes, according to the report. And labor dissatisfaction might grow in European and North American economies. The predictions were gathered through an industry survey, personal interviews, and social media polls.

Going deeper

CompTIA, the nonprofit association for information technology professionals, released a new analysis of the latest U.S. Bureau of Labor Statistics job report. In December, the highest volume of tech job listings was in the traditional tech job category of professional, scientific, and technical services (38,654). The finance and insurance sector came in second with 33,538 tech job listings, and manufacturing in third (26,763). Employers throughout the economy added an estimated 130,000 tech workers in December, driving down the tech occupations unemployment rate to 1.8%, compared to the overall national rate of 3.5%, according to CompTIA. 

Leaderboard

Jamie Miller, CFO at Cargill, a global food corporation that provides agricultural and financial services, will step down from her role to accept an opportunity outside the company, effective Jan. 13. She joined Cargill as CFO in 2021. Joanne Knight will serve as Cargill’s acting CFO. Knight currently serves as VP of finance for Cargill’s agriculture supply chain enterprise, which includes Ocean Transportation and the World Trading Group. Before Cargill, Knight spent 10 years in finance, marketing, and business leadership roles at General Mills. She also held finance leadership roles at Wachovia.

Jason Meggs, CFO at Syneos Health (Nasdaq: SYNH), a biopharmaceutical solutions organization, is stepping down from his position to pursue other career opportunities, effective March 31. Meggs has agreed to serve as a consultant and support the company’s ongoing transformation initiatives through the end of 2023. Syneos Health has retained an executive search firm and commenced a search for its next CFO.

Overheard

“First day as CEO of The Honest Company checklist: Studied the numbers; immersed myself in the team background and structure; prepped intro slides; morning prayers; morning stretches; morning tea…put on a touch of face; cleaned the kicks; and laid out the drip. All systems go. CEO mode in effect!”

—Carla Vernón, the new chief executive at The Honest Company, posted on LinkedIn about starting her first day in the role on Jan. 9. Vernón is a former Amazon and General Mills executive.