STRATEGIC HR MANAGEMENT

CASE STUDY

Case

Aetna: Investing in Diversity Case

By Wayne Cascio, Ph.D.

PROJECT TEAM
Author:

Wayne Cascio, Ph.D.

SHRM project contributor:

Nancy A. Woolever, SPHR

Copy editing:

Katya Scanlan, copy editor

Design:

Blair Wright, senior graphic designer

2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

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Aetna: Investing in Diversity

INTRODUCTION
Raymond Marcos, chief diversity officer at Aetna, is preparing to make a presentation
to the companys board of directors at its mid-December meeting. In a deteriorating
economic environment that seems to be global in its reach, the board is looking to
cut expenses in any way possible. To do that, it is reviewing every major company
business initiative. Diversity is one such initiative, and the board wants to understand
the business case for it. It also wants to see a clear plan to measure outcomes,
including systems and data. Raymond knows that some of the board members are
relatively new, that almost all of them are independent directors from outside the
company and that they may not have a deep understanding of the historical roots
of Aetnas diversity efforts or the objectives of those efforts. At the same time, he is
eager to showcase the companys diversity initiatives and their results, both direct
and indirect.
The board has allocated 35 minutes for Raymonds presentation and another 15
minutes for questions. In preparing his remarks, Raymond has assembled a wide
range of information and has to decide what to include and what to exclude. Time
constraints simply do not allow him to present everything he would like. Bottom
line: he has to make logical arguments and a compelling case to the board to support
the companys continued investments in diversity.
He has information relevant to the following issues:
1. Company background.
2. Current economic environment.
3. The business case for diversity.
4. Aetnas 2009-2011 HR strategy.
5. Aetnas values-based approach to running its business and its broad-based
approach to diversity.
6. Direct and indirect payoffs from Aetnas diversity efforts.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 1

As Raymond surveys the information, he is feeling a bit overwhelmed. He asks

himself, How am I ever going to be able to condense all of this into a 35-minute
presentation? While he is unsure of all of the details of his presentation, Raymond
has a deep appreciation and understanding of diversity at Aetna. He wants to build
his presentation on a long-standing belief that broadening the definition of diversity
is actually an opportunity. In the past, diversity was an employee relations issue,
largely around race and gender. This was the traditional first-order view of diversity,
born out of compliance and human resources. We have learned that diversity comes
in many different shapes and flavors, and we have an obligation to recognize the
many different ways people present to us. The beauty of diversity is the differing
perspectives everybody brings to the table. Those perspectives enrich the dialog,
and that, in turn, promotes better decision-making.1 As he ponders the best way to
proceed, Raymond considers the information he has collected.
COMPANY BACKGROUND
Aetna is one of the nations leading diversified health care benefits companies
serving approximately 37.2 million people (17.5 million medical members, 14.2
million dental members and 10.9 million pharmacy members, some of whom
fall into more than one category).2 Aetna offers a broad range of traditional and
consumer-directed health insurance products and related services, including medical,
pharmacy, dental, behavioral health, group life and disability plans, and medicalmanagement capabilities and health care management services for Medicaid plans.
Aetna customers include employer groups, individuals, college students, part-time
and hourly workers, health plans, governmental units, government-sponsored plans,
labor groups and expatriates.
Aetnas health care network includes 4,919 hospitals, more than 843,000 health
care professionals, and more than 490,000 primary care doctors and specialists.
It subsumes five member companies: ActiveHealth Management, Aetna Student
Health, Goodhealth Worldwide, Schaller Anderson and Strategic Resource
Company.
More than 35,000 employees work for the company. Of those, 31 percent are people
of color and 76 percent are women. People of color hold 16 percent of management/
supervisory positions, and 11 percent of senior leaders are people of color. Women
hold 64 percent of management/supervisory positions, and 30 percent of senior
leaders are women. Aetnas 2007 revenue was $27.6 billion. Exhibit 1 (located in the
appendix) is a snapshot of the companys 2007 financial highlights.

2 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Founded in 1853, Aetna has a long history of community involvement and leadership
on employment and diversity issues. For example, 2009 is the Year of the Woman
at Aetna, where it will celebrate 100 years of employment of women.
Aetnas diversity activities have a long history. Since 1982, Aetna has published an
African-American History calendar, profiling 12 well-known and lesser-known
African-Americans in a variety of fields and professions each year. In that same year,
Arthur Ashe, famed tennis player and world citizen, was voted to the Aetna board
of directors. Ashe was not the first African American on Aetnas board, however;
Hobart Taylor, Jr., was named to the Aetna board of directors in 1973.
Aetnas current mature vision of diversity is a broad view that includes a wide
variety of attributes that make all of us uniquely diverse from one another in some
way. Exhibit 2 presents some key milestones in the companys history.
CURRENT ECONOMIC ENVIRONMENT
While examining each major business initiative at Aetna, the board is well aware of
global and domestic economic conditions. In 2008, widespread defaults on subprime mortgages triggered a global crisis in capital markets. Many of the worlds
leading investment banks collapsed, credit markets tightened considerably around the
globe, and governments and the private sector battled to shore up the global financial
system. Following the demise of Lehman Brothers, Bear Sterns and Merrill Lynch as
independent entities, the U. S. government undertook a massive bailout of troubled
lenders Fannie Mae and Freddie Mac, insurance giant AIG and major banks.
All 15 European countries that use the euro currency (the euro zone) have been
in a recession following two straight quarters of declines in their gross domestic
products. Governments across the worldincluding the UK, Belgium, France, the
Netherlands, Germany, Ireland, Italy, Spain, Portugal, Iceland, Norway, Sweden,
Austria, Hungary, Ukraine, Russia, China, Saudi Arabia, the UAE, South Korea,
Japan and Indonesiastepped up interventions to stem the worst financial crisis in
decades. Those interventions took the form of interest rate cuts, capital injections
and lending guarantees to restore liquidity, revive the ailing banking system and
rebuild investors confidence.3
Against this backdrop, Aetna reported its financial results for the third quarter of
2008.4 Exhibit 3 presents more detailed information for the total company, and
Exhibit 4 shows the performance of Aetnas common stock from December 2000
through November 14, 2008. In summary form, third quarter 2008 results were as
follows:
n

Operating earnings were $1.12 per share, a 15 percent increase over the prior-year
quarter, in line with the Thomson/First Call mean of $1.12 per share.
Net income was $0.58 per share, a 39 percent decrease over the prior-year quarter,
primarily as a result of net realized capital losses.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 3

n
n

Net realized capital losses totaled $232 million after tax; capital adequacy and
holding company liquidity remain strong.
Medical membership increased by 169,000 to 17.7 million.
Guidance: Full-year 2008 operating earnings per share were projected to be $3.90
to $3.95, a decrease from prior guidance due primarily to lower fourth quarter net
investment income.
Preliminary 2009 guidance: Operating earnings per share were projected to
increase 3 to 5 percent over full-year 2008 operating earnings-per-share guidance.
This includes a projected $0.30 to $0.40 per share increase in the companys 2009
pension expense, driven by 2008 equity-market performance.

Commenting on these results, Aetnas chairman and CEO said, Despite the
significant weakening of the U.S. economy as well as the unprecedented turmoil
in the financial markets around the world, our core business performance remains
solid. We continue to win in the marketplace by offering a broad range of products
and providing excellent customer service. Aetna also continues to be proactive at the
national and state levels in promoting the important issues of increased accessibility
and affordability of health care and improved quality for more Americans. Our
national presence, strong competitive position and well-conceived strategy have
continued to produce solid results even in this difficult economy.
In a related comment, Aetnas executive vice president and CFO said, While we did
incur investment losses this quarter due to the turmoil in the capital markets, Aetna
is well-capitalized, with a strong balance sheet and excellent cash flows and liquidity.
We expect to generate over $1 billion of excess capital in 2008 and currently have no
need to raise additional capital. Our underwriting results were strong, demonstrating
our continued ability to manage costs and price with discipline.5
THE BUSINESS CASE FOR DIVERSITY
At Aetna, celebrating diversity means appreciating and valuing individual
differences. In general, managing diversity means establishing a heterogeneous
workforce (including white men) that can perform to its potential in an equitable
work environment where no member or group of members has an advantage or a
disadvantage.6 This is a pragmatic business strategy that focuses on maximizing
productivity, creativity and commitment of the workforce while meeting the needs
of diverse consumer groups. Aetna pursues a more nuanced definition of diversity,
namely, that it is more than just gender and racial or ethnic diversity. It is also
diversity of background, training, functional experience, generational identity, etc.
To be sure, a mature view of diversity in corporate America requires a legitimate
and sellable business case of diversity for the organization and its bottom line. An
internal business case for diversity must extend beyond compliance (and the pain of
fines and bad PR that non-compliance can bring) to a true strategic contribution to
business growth and bottom-line results, employing the resources and market view
of a diverse employee population.

4 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Aetnas Employee Resource Groups (ERGs) are good examples of such

contributions. Here are just a few of them:
n

Aetnas African American ERG served on focus groups to contribute ideas for
greater penetration of urban markets, from product design to distribution and
advertising.
The Telework, Caregivers and Aetnabilities ERGs serve as invaluable resources to
Aetna and strong contributors to creating a work environment that is welcoming to
their particular segment while identifying external business opportunities.
The Hispanic and Asian ERGs provide translation support. Documents translated
by firms that specialize in that work may get the literal word-for-word match
from English, but that translation may not have the same overall message as was
intended. The Hispanic and Asian ERGs know Aetnas terms and the messages it
wants to convey, so they help develop high-quality translations of the English text
into similar-meaning texts in non-English languages.
Gen Y ERG is helping Aetna develop a recruitment and retention strategy that
resonates with this employee segment. The Gen Y ERG also assists with marketing
efforts to this younger population.

Broadly speaking, there are two key drivers of Aetnas corporate strategy to pursue
diversity: (1) growth opportunities in non-traditional and other targeted growth
markets (e.g., gay/lesbian/bisexual/transgender (GLBT), Asian-American business
owners); and (2) the need for an organization that reflects and understands the
customer base it serves. To accomplish these objectives, Aetna is taking the following
steps:
Creating innovative and tailored product and service solutions that will meet

customers unique needs.

Developing a diverse supplier base that reflects the companys multicultural

marketplace.
Building a workforce that understands the communities where Aetna does

business.
Fostering a culture of inclusion that attracts a diverse talent pool and recognizes

and rewards the contributions of every employee while allowing employees to do

their best work.
According to Aetnas mission and values statement (www.aetna.com/about/aetna
/ms/), Aetna appreciates effort but recognizes and rewards employees for achieving
business results. Toward this end, Aetna uses the following metrics to assess the
business impact of its diversity initiatives.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 5

Initiative

Metric

Business Impact

Area Affected

Local Market Initiative

and Targeted Growth
Markets

s.UMBEROFNEWMARKETS
s-EMBERSHIPGROWTH

s0ROlTABLEGROWTHINLOCAL
MARKETS

s,OCALMARKETS
s3MALLANDMIDDLE
MARKETS

3UPPLIER$IVERSITY

s.UMBEROFSUPPLIERSAND
AMOUNTINEXPENDITURES

s0ROMOTESTRONGCOMPANY
BRAND
s0ROlTABLEGROWTH

s3MALLANDMIDDLE
MARKETS
s)NDIVIDUALMARKETS

!!20

s.UMBEROFNEW
MEMBERSYEARSOF
age and older

s0ROlTABLEGROWTH

s%NTERPRISE WIDE
sDEMOGRAPHICS

-ULTICULTURAL
)NVESTMENTS

s-ONEYINVESTEDWITH
MINORITY ANDWOMAN
OWNEDFUNDS

s0ROMOTESTRONGCOMPANY
BRAND
s# OMPETITIVERETURNS

s%NTERPRISE WIDE

#ULTURAL#OMPETENCY
Training

s0ERCENTAGEOF
EMPLOYEESWHOHAVE
COMPLETEDTRAINING

s0ROMOTESTRONGCOMPANY
BRANDBYUNDERSTANDING
DIFFERENTPOPULATION
SEGMENTS

s%NTERPRISE WIDE

-ULTILINGUAL#APABILITY

s0ERCENTAGEOF
EMPLOYEESWHOSPEAK
LANGUAGESINADDITIONTO
%NGLISH
s0ERCENTAGEOFMATERIALS
AVAILABLEINLANGUAGES
OTHERTHAN%NGLISH

s0ROMOTESTRONGCOMPANY
BRANDBYUNDERSTANDING
DIFFERENTPOPULATION
SEGMENTS
s)NCREASEDMARKETSHARE

s%NTERPRISE WIDE

-ULTICULTURAL#USTOMER
3ATISFACTION)NDEX

s0ERCENTAGEOF
CUSTOMERSSATISlED
WITHOURPRODUCTSAND
services

s0ROMOTESTRONGCOMPANY
BRAND
s)NCREASEDMARKETSHARE
FROMTHEMULTICULTURAL
MARKET

s%NTERPRISE WIDE

$IVERSITY)NDEX'APS

s$IFFERENCESAMONG
EMPLOYEEDEMOGRAPHIC
SEGMENTS

s)NCREASEDEMPLOYEE
ENGAGEMENTAND
PRODUCTIVITY

s%NTERPRISE WIDE

(22ECRUITING
Retention

s$IFFERENCESAMONG
EMPLOYEEDEMOGRAPHIC
SEGMENTS

s(IRINGANDTURNOVER
savings
s%MPLOYEESATISFACTION
s%MPLOYERREPUTATIONAND
BRAND

s%NTERPRISE WIDE

-IAMI!DVISORY#OUNCIL

s-IAMIMARKETSHARE

s)NCREASEDMARKETSHARE
ANDBRANDRECOGNITION

s-IAMI $ADE#OUNTY

$IVERSITY!NNUAL2EPORT

s2EPORTSPRINTEDAND
DISTRIBUTED
s, ANGUAGESUSED

s0ROMOTESTRONGCOMPANY
BRANDASANINDUSTRY
leader
s)NCREASEDMARKETSHARE

s%NTERPRISE WIDE

6 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Aetnas diversity strategy is closely related to its broader HR strategy, as reflected in the
overall statement of that strategy: HR will be accountable for the advancement of a
diverse, high-performing workforce to sustain industry leadership. To operationalize
that strategy from 2009 through 2011, HR at Aetna identified three key initiatives
linked to business priorities and goals and tied to measurable outcomes that reflect
success. An executive summary of the overall HR strategy is shown below.

Executive Summary: 20092011 Human Resources Strategy

Enterprise Strategy Statement

20092011 Human Resources Strategy

Statement

Aetna will lead the industry in providing highquality, cost-effective health and related solutions
that leverage information to meet the needs of
targeted customers.

HR will be accountable for the advancement of

a diverse, high-performing workforce to sustain
industry leadership.

Aetnas Integrated Workforce-Management Strategy

Business Priorities and Goals
s&ORECASTANDPLANFORASUPERIOR
WORKFORCETOMEETCHANGING
BUSINESSNEEDSINCLUDINGLOCAL
ANDTARGETEDGROWTHMARKETS
s!TTRACTINNOVATIVERESULTS
FOCUSEDDIVERSEWORKFORCE

Key Strategic Goals

Success Measures
s%FFECTIVENESSOFWORKFORCEPLANS
EGTIMELYDELIVERYOFRIGHT
RESOURCESTOMEETBUSINESSNEEDS

Goal #1: Workforce

Management
3UPPLYAQUALIlEDWORKFORCE
TOSUPPORTNEAR ANDLONG TERM
BUSINESSOBJECTIVES

s$IVERSEEMPLOYEEBASETHAT
UNDERSTANDSANDREmECTSOUR
CONSTITUENTS
s!LIGNEDSYSTEMSANDPRACTICES
TOSUPPORTDELIVERYOFSTRATEGY
EGUTILIZATIONOF4ALENT-ANAGER
INFORMATION

s$EVELOPBENCHSTRENGTHAND
CAREERGROWTHINCRITICALJOB
FUNCTIONSSUCCESSIONPLANSAND
ENTERPRISELEADERSHIPTOENSURE
OURABILITYTOMEETCHALLENGESOF
OURGROWTHSTRATEGY

Goal #2: Leadership and Key

Talent Capabilities
)DENTIFYDEVELOPUTILIZEAND
RETAINTALENTWITHLEADERSHIPAND
FUNCTIONALCAPABILITIES

s)NTERNALTALENTPLACEMENTINTONEW
ANDEXPANDEDROLES
s4ALENTRETENTION
s-IDDLEMANAGEMENTANDFUNCTIONAL
TALENTDEVELOPMENT
s$IVERSEPIPELINEOFINTERNALAND
EXTERNALTALENTFORLEADERSHIP
s#AREERPROGRESSION

s2ETAINENGAGEANDOPTIMIZE
PERFORMANCEOFINNOVATIVE
RESULTS FOCUSEDDIVERSE
WORKFORCE
s$RIVEPROlTABLEGROWTH

Goal #3: High-Performance

Organization
$RIVEEMPLOYEETEAMAND
ORGANIZATIONALPERFORMANCE
and advance Aetnas growth
STRATEGY

s0AY FOR PERFORMANCERESULTS

s$IVERSITYSCORECARDRESULTS
s)MPROVEDEMPLOYEESURVEYRESULTS
s%MPLOYEEHEALTHDASHBOARDRESULTS
s# ONTRIBUTIONTOGROWTHSALES

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 7

AETNAS VALUES-BASED APPROACH TO RUNNING ITS BUSINESS AND ITS

BROAD-BASED APPROACH TO DIVERSITY
Aetna employees live by a set of core values, known as the Aetna Way, which put
the people who use the companys services at the core of everything it does. While
business results are important, Aetnas senior managers believe that how the
company achieves those resultshow it makes a difference for the people it serves
is every bit as important. Exhibit 5 (located in the appendix) shows the companys
four core values: integrity, employee engagement, excellence and accountability, and
quality service and value. Raymond focuses on the customer-centric nature of these
valuesthat they all revolve around Aetnas customers. He also notes how each value
is defined operationally in terms of how employees are expected to behave.
n

Integrity: Do the right thing for the right reason, honor commitments and behave
ethically.
Employee engagement: Lead people to success, value diversity, and build
confidence and pride in our company.
Excellence and accountability: Make a fair profit, innovate, anticipate the
futurelook, listen and learn.
Quality service and value: Make it easy. Eliminate hassles; make Aetna the
standard by which others are judged; build trusting, valued relationships with all
constituents.

The ICE Strategy

Aetnas diversity strategy is a unique marriage of values and business strategy
with roots from more than 35 years ago.7 Its core components are integration,
communication and education (ICE). Exhibit 6 is a graphic representation of this
overall diversity strategy.
Integration means that all diversity components are working together across
the enterprise (marketing, HR, Aetnas philanthropic foundation, investments,
procurement, sales, etc.) and that they are fully integrated into the short- and longterm business-planning process. Communication is the creation and dissemination of
information to all employees and customers. Finally, education means deepening the
understanding of what the diversity strategy is, its components, how it is manifested
in Aetnas business strategy, who is included, and the creation of development tools
to increase individual and organizational competencies.
The outcome of this strategy is twofold: (1) to serve customers in current markets
more effectively while (2) identifying opportunities in new markets. It recognizes
that Aetnas future success depends on a deep knowledge of all employee segments;
clear and consistent communication to disseminate information to employees,
customers and other key constituents; and an increased focus on developing the
cultural awareness and competency necessary to sustain its business success. To
be sure, Aetnas ICE strategy extends well beyond diversity awareness to that of a
strategic advantage.

8 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

As he examines Exhibit 6, Raymond notes that under the column heading

Integration, Aetnas diversity strategy supports its business goals. To illustrate this
linkage in greater detail, he consults Exhibit 7, which shows the interplay between
the companys strategic business goals and the diversity implications associated with
them.
As for the ICE components of communication and education (of new hires, current
employees and senior managers), Raymond considers some of Aetnas major
initiatives:
New-hire orientation includes an overview of the diversity strategy.
The internal diversity web site includes information and resources related to

diversity, including Aetnas mission, strategy and other resources.

Aetnas robust performance management process includes diversity-related

behaviors and competencies for all levels of employees.

Aetna regularly publishes articles on different diversity topics on its intranet.
Since 2005, the company has published an annual diversity report.
Aetna sponsors a speaker series through its Diversity in Action Lecture Series,

available to all employees via live webcast.

The Aetna Diversity Board, chaired by the companys chief executive officers, is

comprised of Aetna executives, including its president.

The Aetna Diversity Alliance, a multi-level cross-organizational group that

leverages and integrates each others resources to maximize Aetnas diversityrelated presence and reach, internally and externally.
The Aetna Diversity Scorecard.
An annual report for Aetnas board of directors, which captures the companys

accomplishments related to its diversity strategy.

Aetnas chairman reports the results of diversity initiatives at quarterly managers

meetings and at all-employee meetings.

Reporting results of key external diversity assessments and surveys such as the

DiversityIncs Top 50 Employers for Diversity.

Raymond identifies four diversity focus areas in Exhibit 7namely, workforce
and workplace, suppliers, marketplace, and community and professional alliances.
In thinking about the best way to integrate this material into his presentation,
Raymond considers how the company measures several of these important outcomes.
Workforce
In its 2008 and 2009 workforce, Aetna measured the representation of people of
color in management, noting where it has under-representation relative to its best
practice corporate and industry peers.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 9

Workplace
Through an annual employee survey for all employees, Aetna measures the work
experiences and perceptions among employees of different backgrounds. Specifically,
it measures the difference in responses to two questions on the employee survey,
collectively referred to as the diversity index. Any difference in responses between
groups is referred to as the diversity index gap, and the company works to
understand its drivers and make improvements as necessary. Examples of segments
measured include: employees with and without disabilities; gay/lesbian and
heterosexual employees; men and women; white employees and employees of color;
and employees who work at home or in the office.
These two questions ask employees how strongly they agree or disagree with the
following statements about Aetna:
1. Aetna deals with all employees fairly [an indicator of how a good manager should
behave].
2. Aetna enables people from diverse backgrounds (e.g., ethnicity, race, gender,
religion, age, disability, sexual orientation, gender identity) to contribute to their
fullest.
Suppliers
Through its supplier-diversity program, Aetna actively seeks out minority- and
women-owned businesses and invites them to compete for the companys business.
By tapping into different backgrounds, perspectives and experiences, Aetna enjoys
several advantages. First, it gains access to high-quality goods and services. Second,
it gains valuable insight into multicultural markets. And finally, it serves more
effectively the communities in which its own employees live and work.
Community and Professional Alliances
With respect to community involvement, Aetna works diligently to build
relationships with local community leaders, chambers of commerce and nonprofit
organizations to gain an understanding of the health care needs in the community.
It then works with those same groups to help address the identified needs.
Sometimes that means reaching out to minority brokers and jointly developing
community outreach strategies, as Aetna did in Chicago. Sometimes it means
creating a council of business and community leaders to provide Aetna with insight
and perspectives on the Hispanic community, as it did in Miami. Sometimes it
means working with Chinese health care providers to ensure that Aetnas members
have access to culturally appropriate care, as Aetna did in New York. It always
means working on a local level to develop an understanding of the needs of a range
of communities, including African-Americans, Latinos, Asian Americans, Native
Americans, the GLBT community and women-led businesses.

10 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Incremental Costs
A question that members of Aetnas board of directors might reasonably ask is,
What additional costs does a company incur by pursuing a diversity strategy that
is as aggressive and broad as Aetnas? The honest answer is that Aetnas diversity
initiatives are not all free, but Raymond wants to emphasize that the additional
costs are really investments in the companys long-term sustainability. Aetna has
historically adopted this perspective, but given the current economic conditions,
he can certainly understand why the board might question such expenditures.
Additional costs include:
Investments in training and education, people resources, marketing and

advertising.
Funding of targeted program efforts and initiatives, such as travel budget to allow

company recruiters to visit historically black colleges and universities and Hispanicserving institutions or gay and lesbian chambers of commerce.
Aetna knows that some members of its corporate peer group spend more than it

does on diversity efforts and initiatives, so it tries to leverage its spending in this
arena for maximum potential return to the organization (return on investment, or
ROI), in whatever form that ROI may takerevenue growth, percentage growth
in members, awards/recognition, talent acquisition, etc.
PAYOFFS FROM AETNAS DIVERSITY EFFORTSDIRECT AND INDIRECT
Aetnas business results are impressive. Its market value has zoomed from $3.3
billion when the current CEO took over in 2001 to more than $29 billion in 2008.
Aetnas net income rose from a loss of $291.5 million in 2001 to more than $1.8
billion in 2007.8 Undoubtedly, much of the turnaround in business results can be
traced to a more focused business strategy, but at the same time, the CEO made
diversity a key business imperative. That aspect of Aetnas strategy has also paid off.
To begin to appreciate the broad range of recognition the company has received,
consider some of its recent awards: 9
n
n

n
n

Top 40 Companies for Diversity, Black Enterprise magazine.

Readers Choice, Best Diversity Company, Engineering & Information Technology
magazine, diversity/careers category.
Corporation of the Year Legacy Award, 100 Black Men of Greater Washington, DC.
Top 10 Companies for Executive Women, National Association for Female
Executives.
Chairmans Award, National Newspaper Publishers Association (Black Press of
America), for outstanding advertising to and for African Americans.

Top 50 Companies for Black MBAs to Work, Black MBA magazine.

25 Great Places to Work, Essence magazine.

Top 50 Companies for Latinas, Latina Style magazine.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 11

n
n

Top employer for leadership and accomplishment in hiring and promoting people
with disabilities, State of Connecticut Department of Social Services.
25 Noteworthy Companies, DiversityInc.
5-Star Employer Award, U.S. Department of Defense, Employer Support of the
Guard and Reserve.
Americas Most Admired Companies, Fortune magazine, #1 in the health care
insurance category.
Hispanic Health Leadership Award, Ron Williams, Aetna chairman and CEO,
National Hispanic Health Foundation.
National Diversity Bridge Award, Ron Williams, Aetna chairman and CEO,
Chicago United.
One of the 50 best places to launch a career, Business Week.10

WHERE TO GO FROM HERE?

To provide a more logical and compelling case for Aetnas diversity initiatives,
Raymond wants to frame his presentation in the context of a broad organizing
framework. He has read about one such framework in Investing in People (2008).11
The key point he took from that book was that metrics alone are not enough to
convince skeptical decision makers about the worth of any HR initiative such as
diversity. To have an effect, metrics must create a true strategic difference in the
organization. They are valuable to the extent that they improve decisions about
talent and how it is organized. That means it is important to embed the metrics in a
broader framework for creating organizational change through enhanced decisions.
Exhibit 8 describes such a framework in greater detail.
As he ponders the depth and breadth of the information he has assembled, Raymond
keeps asking himself several questions: Is there other relevant information that I
should collect? How do I order, prioritize and integrate the information I have
collected to make the most compelling case in the 35 minutes Ive been allotted by
the board?

12 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Appendix
Exhibit 1
Financial Highlights

(Millions, except per common share data)

2007

2006

% CHANGE







/PERATING%ARNINGS







.ET)NCOME







/PERATING%XPENSE2ATIO2







!FTER TAX/PERATING-ARGIN













3HAREHOLDERS%QUITY







-ARKET#APITALIZATION

























For the year

2EVENUE

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Assets

#OMMON3HARES/UTSTANDING

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/PERATING%ARNINGS
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4HEOPERATINGEXPENSE'!!0BASIS WASINANDIN4HEOPERATINGEXPENSERATIOEXCLUDESNETREALIZEDCAPITALLOSSES GAINSFROMTOTALREVENUEAS

DISCUSSEDIN.OTEABOVEANDALSOEXCLUDESTHEPRIOR YEARCLASSACTIONSETTLEMENTINSURANCE RELATEDCHARGEDEBTRElNANCINGCHARGEANDACQUISITION RELATEDSOFTWARECHARGE
FROMOPERATINGEXPENSESASDISCUSSEDIN.OTEABOVE

4HEFOREGOINGlNANCIALINFORMATIONSHOULDBEREADINCONJUNCTIONWITHTHElNANCIALSTATEMENTSANDRELATEDNOTESASPRESENTEDIN!ETNAS!NNUAL2EPORT&INANCIAL2EPORT
TO3HAREHOLDERS

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 13

Exhibit 2: Key Milestones in Aetnas History

1850
n

In 1850, Aetna Insurance Company organizes an annuity fund to sell life

insurance. Aetna Insurance Company turns to a Hartford, Conn., judge, Eliphalet
A. Bulkeley, who is a general counsel to the company and also on its board of
directors. Judge Bulkeley had been the president of the Connecticut Mutual Life
Insurance Company, which was, when founded in 1846, the first life insurance
company in Connecticut. He is chosen to head the annuity fund operation, and in
the summer of 1850, the department commences business.

1853
n

The annuity department separates from Aetna Insurance and is incorporated as

Aetna Life Insurance Company. The companys first president is Eliphalet A.
Bulkeley. The name Aetna is retained to take advantage of the good reputation
of the original Aetna and because three years of life insurance policies already had
been issued under that name. The name was inspired by Mt. Etna, an 11,000-foot
volcano on the eastern shores of Sicily, then the most active volcano in Europe.
Awed by the strength of the mountain, they named their fledgling venture Aetna
Insurance Company.

1865
n

Annual income tops $1 million. By 1864, Aetna has increased its business volume
by 600 percent over 1861 levels and has increased annual premium income
nine times. This rapid growth gives Aetna the financial stability and resources
needed to meet the stringent requirements placed on life insurance companies in
Massachusetts and New York, and by 1865 the company is authorized to solicit
business in both states for the first time. In the eyes of the industry, Aetna has
arrived. Also in 1865, the company pays a large cash dividendthe first since
1857and its size eclipses the combined total of all previous dividends.

1899
n

Aetna enters the health insurance field. It wasnt until the turn of the century that
larger insurance companies, with the statistical bases to set adequate pricing levels
and the sales forces capable of spreading risk, entered the field and health insurance
became a part of the industry. In 1899, Aetna becomes one of the first stock
insurance companies to enter the health insurance business. The new product is
offered only to people holding or purchasing an Aetna life or accident policy and is
not intended to be anything more than a spur to the sales of the other two lines.

14 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

1902
n

Aetna begins offering liability coverage. As the nations industrial base grows more
complex and the Progressive social reform movement gains political momentum,
Aetna responds by organizing an accident and liability department in 1902 to
handle employers liability and workmens collective insurance. This department
becomes the cornerstone of the Aetna Accident and Liability Company in 1907,
which in rapid order moves into more lines of property and casualty insurance,
including protection against damage to horse teams, flywheel breakage, auto
collision coverage, plate glass and burglary insurance, and surety bonds.

1907
n

The company begins offering automobile coverage. In 1907, Aetna creates a

casualty subsidiarythe forerunner of Aetna Casualty and Suretyto handle
(among other things) automobile property coverage. Soon after, Aetna begins
aggressively developing related lines such as collision and damage.

1913
n

Aetna forms a group department to sell group life insurance, becoming one of
the first insurers to write group coverages for businesses. The line became the
foundation upon which Aetna built its current health care business. The 1900s
bring into the public consciousness the notion that employers are responsible
for the safety of their workers. As a consequence, the emergence of a market for
employer liability insurance prompts Aetna to enter the fray. Over the years, the
company adds group accident (1914), group disability (1919) and group medical
(1936) to its original group life portfolio.

1926
n

Aetna appoints its first female officer, Dr. Marion Bills. Dr. Bills completely
revamps the companys personnel policies within two years. She also introduces
the Bonus Plan, a piecework sliding-pay scale that is primarily applied to dataprocessing departments.

1929
n

The stock market crash kicks off the Great Depression. Aetnas fortunes are not
as devastated as one might have expected from a company so heavily involved
in investments. Only about 12 percent of the companys assets are in common
stock, and almost half of that is in its own companies. The inherent strength of
the Aetna companies enables them to survive the 1930s. Aetna manages the crisis
by withholding dividend payments to shareholders from late 1932 to early 1934,
reducing the workforce through attrition, and cutting salaries by 10 percent. Aetna
employees survive the Depression in relatively good shape; there are no layoffs, and
the company-wide pay cut, already less than the national average of 25 percent, is
more than offset by a deflationary cycle that increased purchasing power.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 15

1940
n

Aetna bonds the construction of seven U.S. Navy aircraft carriersthe Essex,
the Yorktown, the Intrepid, the Hornet, the Franklin, the Ticonderoga and
the Randolph. More than 1,600 Aetna employees served in the military during
World War II. As it did in World War I, Aetna aids the war effort by throwing its
substantial resources behind bond drives, raising millions for the war chest.

1951
n

The group department introduces major medical coverage as a labor shortage

coupled with a wage freeze make employee benefits one way employers can attract
and retain workers. As American society becomes more affluent, it insists on
adequate and accessible medical care. Providing this care in the form of benefits
packages becomes the focus of the department during the years after the war
as it develops plans to cover first routine medical expenses and then, in 1951,
catastrophic illnesses.

1963
n

Aetna insures the lives of the first seven American astronauts. An enterprising
Houston agent convinces Americas original seven astronauts to purchase Aetna
policies. He then convinces Aetna to write the policies, the first individual life
insurance policies for spacemen. When L. Gordon Cooper caps the pioneering
Mercury program with a historic 22-orbit flight, Aetna is there too.
The company formally crafts an equal opportunity employment policy.

1968
n

The company is listed on the New York Stock Exchange. Aetna appears on the Big
Board for the first time on September 24, 1968, four days after the stockholders
approve an increase in stock from 26 million to 40 million shares of common stock
and the creation of 10 million shares of preferred stock.
Aetna expands its international business in 1968 by acquiring a majority interest
in Producers and Citizens Cooperative Assurance Company, a Sydney, Australiabased entity, for a negotiated price of $10 million.

1981
n

Aetna reorganizes along market segments. As part of a companywide

reorganization, Aetna abandons its divisional arrangement in favor of a more
market-focused structure. The personal financial security division is created to
meet the needs of individuals; the commercial insurance division is developed to
cater to small and large businesses; and the group division is renamed the employee
benefits division to better describe its function.

16 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Aetna acquires a 40 percent interest in two Chilean companies, a pension and a life
enterprise. Soon to follow are ventures in England, Spain, Hong Kong, Taiwan,
Indonesia and Korea.

1982
n
n

Aetna introduces its Aetna, Im Glad I Met Ya! advertising campaign.

The company re-enters the managed care industry with the introduction of its first
formal HMO, Choice HMO, in Chicago.

1990
n

Fortune magazine lists Aetna as its fifth most-admired financial services company.

1999
n

Aetna completes its acquisition of Prudential HealthCare for $1 billion, making

Aetna the countrys largest provider of health benefits, with more than 21 million
members.

2000
n

Aetna completes the sale of its financial services and international businesses to
ING for $7.7 billion and spins off the health business to its shareholders. The sale
helps Aetna redefine itself as an independent health and group-benefits company,
on its way to restoring industry leadership in terms of service, reputation and
profitability.

2003
n

Aetna celebrates its 150th anniversary. To mark the milestone, Aetna executives
ring the closing bell at the New York Stock Exchange on June 16.

2004
n

An award for Best Business TurnaroundMore Than 2,500 Employees is

presented to Aetna as part of the 2004 American Business Awards competition.
The awards recognize outstanding leadership, innovation, perseverance, creativity,
teamwork and integrity in business.

2005
n

After achieving a company high of $1.1 billion in earnings during 2004 and a new
high-water mark in stock price, Aetna declares a two-for-one split of the companys
common stock effective March 11, 2005.
Aetna completes a series of strategic acquisitions that allow the company to
strengthen its base of products and services while reaching new customer segments.
These acquisitions include Strategic Resource Company (SRC), an administrator
of group benefit products for part-time and hourly workers; ActiveHealth

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 17

Management, a clinically focused, technology-driven health management and

health care data analytics company; and HMS Healthcare, a regional health care
network operating in Michigan, Colorado and other states.
2006
n

Ronald A. Williams becomes chairman, chief executive officer and president of

Aetna, succeeding John W. Rowe, M.D., who retires.

18 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Exhibit 3: Aetnas Third Quarter 2008 Financial Results

Revenues, excluding net realized capital losses,12 increased 14 percent to $8 billion
for the third quarter of 2008, compared with $7 billion for the third quarter
of 2007. The growth in third-quarter revenue reflects a 16 percent increase in
premiums and an 8 percent increase in fees and other revenue. This revenue growth
reflects a higher level of membership and premium rate increases.
Total Operating Expenses, excluding the $42.2 million allowance recorded against
the reinsurance recoverable,13 were $1.4 billion for the third quarter of 2008, $121.1
million higher than the third quarter of 2007. Operating expenses as a percentage
of revenue14 were 17.4 percent for the third quarter of 2008 and 18.2 percent for the
third quarter of 2007. Including net realized capital losses and the allowance against
the reinsurance recoverable, this percentage was 18.8 percent for the third quarter of
2008 and 18.3 percent for the third quarter of 2007.
Corporate Interest Expense was $39.3 million after tax for the third quarter of
2008, compared with $28.6 million for the third quarter of 2007. The increase for
the third quarter 2008 was due to higher average debt levels in 2008.
Net Income was $277.3 million for the third quarter of 2008, compared with
$496.7 million for the third quarter of 2007. The decrease in net income for the
third quarter 2008 was primarily due to net realized capital losses in the third
quarter of 2008 of $232 million after tax. Approximately $120 million of these
losses were due to other-than-temporary impairments of certain fixed income
investments, which decreased in market value due to the widening of credit
spreads in the marketplace in the third quarter of 2008. These losses also include
approximately $70 million for the impairment of Aetnas investments in debt
securities of Lehman Brothers Holdings Inc., Washington Mutual, Inc. and other
investments, as well as $42 million from sales of investment securities.
Operating Margin was 11.4 percent for the third quarter of 2008, compared with
12.1 percent for the third quarter of 2007, pre-tax.15 The after-tax net income
margin, which represents net income divided by total revenue, was 3.6 percent for
the third quarter of 2008, compared with 7.1 percent for the third quarter of 2007.
Share Repurchases totaled 11.1 million shares at a cost of $472.8 million in the
third quarter of 2008.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 19

Exhibit 4: Monthly Performance of Aetnas Common Stock

(December 2000November 14, 2008)
AET Monthly

11/14/08














Volume

















20 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.









Millions



Exhibit 5: The Aetna Way

Honor commitments

Lead people to success

Do the right
thing for the
right reason

Value diversity

In

te

gr
it y

e e nt
oy e
pl em
Em gag
En

Behave
ethically

People who use

our services

e
ic
rv
S e lu e
y
lit Va
u a nd
a

Make Aetna
the standard by
which others are
judged

Build trusting,
value added
relationships with
all constituents

Ex
Ac c el
c o len
un c e
ta a
bi nd
lit
y

Make a
fair profit

Make it
easy
eliminate
hassels

Build
confidence
and pride in
our company

Innovate

Anticipate the
futurelook,
listen, learn

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 21

Exhibit 6: Aetnas Diversity Strategy and Focus Areas

Aetnas Diversity Strategy

Integration

Communication

s)NCLUDESALLDIVERSITY
DIMENSIONSRACESEXUAL
ORIENTATIONAGETELEWORK
ANDCAREGIVERSTATUSETC

s$ISSEMINATEINFORMATIONTO
EMPLOYEEANDCUSTOMERS
ANDOTHERKEYCONSTITUENTS

s)TSCOMPONENTSWORK
together across the
ENTERPRISE-ARKETING(2
&OUNDATION0ROCUREMENT
3ALES)NVESTMENTSETC
s 3UPPORTS!ETNASBUSINESS
goals

s# OMMUNICATEABOUT
DIVERSITYININTERNALAND
EXTERNALFORUMSPOSITIONING
!ETNAASABEST IN CLASS
COMPANY
s 3HAREPROGRESSAND
challenges

22 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Education
s7HATISTHESTRATEGYAND
ITSCOMPONENTS
s(OWISITMANIFESTEDINTHE
BUSINESSSTRATEGY
s 7HOISINCLUDED
s 7HATTOOLSARENEEDEDTO
INCREASECOMPETENCIES
ANDMEETMARKETPLACE
NEEDS

Exhibit 7: Linking Aetnas Strategic Business Goals to Diversity Outcomes

Context for Aetnas Diversity Strategy

Aetnas Strategic Focus
0ROlTABLYGROWMARKETSHAREAND

earnings
$ELIVERSUPERIORMEDICALQUALITYAND

TOTALCOSTMANAGEMENT
!CHIEVEOPTIMALEXPENSESTRUCTURE

THROUGHIMPROVEDPRODUCTIVITYTO
SUPPORTGROWTH
#REATECUSTOMERVALUETHROUGH

INNOVATIONANDTECHNOLOGY
!PPLYTECHNOLOGYTOCREATECUSTOMER

VALUE
$ELIVERBEST IN CLASSCUSTOMER

EXPERIENCE
&OSTERCOMPLIANCEASACORE

COMPETENCY
%NHANCEOURDIVERSEHIGH

PERFORMANCECULTUREANDWORKFORCE

Diversity Implications
"UILDAWORKFORCETHATUNDERSTANDS

THERACIALETHNICGENDERSEXUAL

ORIENTATIONANDGENERATIONALDIVERSITY
OFTHEMARKETPLACE
#REATEANINCLUSIVEWORKENVIRONMENT

THATMAXIMIZESEACHEMPLOYEES
CONTRIBUTIONSANDPRODUCTIVITY
!TTRACTPOTENTIALCANDIDATESTO!ETNA

CHOOSEFROMABROADERANDDEEPER
POOLOFCANDIDATES
!CHIEVECRITERIATOBIDONGOVERNMENT

ANDPUBLIC SECTORBUSINESSES
%NHANCEWORKFORCECAPABILITIES

TOADDRESSTHENEEDSOFOUR
MULTICULTURALMULTILINGUALCONSTITUENTS
0ROVIDECULTURALLYAPPROPRIATE

CONSUMEREXPERIENCEDESIGN
PRODUCTSANDSERVICESTOMEETTHEIR
needs
%STABLISHBUSINESSRELATIONSHIPSWITH

ORGANIZATIONSANDLOCALCOMMUNITIES
TOSUPPORTCOMMUNITY BASED
MARKETINGANDSALES
%STABLISHANINFRASTRUCTURETHAT

SUPPORTSSALESANDRENEWALEFFORTSOF
EMPLOYERS
)NCREASESUPPLIERDIVERSITY

SPENDINGTOFULLYLEVERAGEBUSINESS
OPPORTUNITIESATTHELOCALLEVELS
,INKDIVERSITYMETRICSDIRECTLYTO

ENTERPRISESCORECARD

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 23

Exhibit 8: The LAMP Framework

The acronym LAMP refers to the four components of the model: logic, analytics,
measures and process. Here is a brief description of each of these.
Logic provides the story behind the connections between the numbers and
outcomes. Well-grounded logic helps leaders outside the HR profession understand
and use measurement systems to enhance their decisions. In other words, Raymond
thought, the most fundamental question is, How does Aetna create value from
its emphasis on diversity? He wants to develop a logic diagram for the effects of
investments in workforce diversitya figure that is similar to those he saw in the
book Investing in People. One such diagram, shown below, illustrates the logic of
employee health and wellness.

The Logic of Employee Health and Wellness

%MPLOYER)NVESTMENTSTO)MPROVE
%MPLOYEE,IFESTYLE(EALTH
SOURCEDEVELOPMOTIVATE

%MPLOYER)NVESTMENTSIN%MPLOYEE
!SSISTANCEWITH3PECIlC)SSUES
DRUGORALCOHOLABUSE

%MPLOYEESADOPTHEALTHIERBEHAVIORSBOTHATANDAWAYFROMWORK

%MPLOYEESACHIEVEGREATERMENTALANDPHYSICALHEALTH

(EALTHIEREMPLOYEES
REQUIRELESSHEALTHCARE
TREATMENT

(EALTHIEREMPLOYEESARE
AVAILABLEATWORKMORE
ABSENTLESS

(EALTHIEREMPLOYEES
LEAVELESSOFTEN
TURNOVERLESS

(EALTHIEREMPLOYEES
PERFORMBETTER
at work

2EDUCEDCOSTSOF
MEDICALSERVICESOR
INSURANCEPREMIUMS

2EDUCED
ABSENTEEISM

2EDUCED
TURNOVERCOSTS

Increased
PERFORMANCEVALUE

Source: Adapted from Cascio, W. F., & Boudreau, J. W. (2008). Investing in people: The financial
impact of human resource initiatives (p. 103). Upper Saddle River, NJ: Pearson Education/
Financial Times Publishing

24 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

Analytics is about drawing the right conclusions from data. It transforms logic and
measures into rigorous, relevant insights. It includes statistics and research design
relevant to key diversity issues that have been identified, for example, between
Aetnas diversity initiatives, metrics and business impact. The ultimate objective
would be to establish cause-and-effect relationships between specific diversity
initiatives and business outcomes.
Measures of the effect of diversity initiatives have received considerable attention
at Aetna, as described earlier. The company pays considerable time and attention
to enhancing the quality of these measures, based on criteria such as timeliness,
completeness, reliability and consistency. Raymond knows that such standards are
important, but lacking a context, namely the value-creation logic in the LAMP
model, it is easy to pursue them well beyond their optimum levels.
Process is about making the insights gained from effective measurement motivating
and actionable. To do that, the measures must fit within a larger change management
system that includes learning, education and knowledge transfer. For example,
suppose board members question the additional costs that Aetna incurs to support
its diversity initiatives. Raymonds strategy is to discuss the various measures that
Aetna uses to assess the business outcomes of such initiatives in a broader valuecreation framework. By adopting this approach, Raymond believes that he and
other HR leaders can gain credibility and extend the discussion to include additional
logical connections between diversity initiatives and other organizational outcomes,
such as learning, trust, performance and profits. What began as a focus on costs can
be shifted to a more nuanced discussion about the optimal investments in workforce
and marketplace diversity and how those investments pay off.

2009 Society for Human Resource Management. Wayne Cascio, Ph.D. 25

Endnotes


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 'OVERNMENTINTERVENTIONS/CT 53DOWNTURN.OV 



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!ETNA#ORPORATION Aetna Corporation annual report(ARTFORD#4!UTHOR3EEALSO

'ROSSMAN2*!PRIL 3TEERINGABUSINESSTURNAROUNDHR MagazinePP 



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'ERDES,3EPT 4HEBESTPLACESTOLAUNCHACAREERBusinessWeekPP 



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TOOTHERSINTHEINDUSTRYWITHOUTREGARDTOlNANCINGDECISIONSINCOMETAXESOR
AMORTIZATIONOFOTHERACQUIREDINTANGIBLEASSETSEACHOFWHICHMAYVARYFORREASONSNOT
DIRECTLYRELATEDTOTHEPERFORMANCEOFTHEUNDERLYINGBUSINESS !ETNASPRETAXOPERATING
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26 2009 Society for Human Resource Management. Wayne Cascio, Ph.D.

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www.shrm.org/education/hreducation/pages/cases.aspx.
If you are not a SHRM member and would like to become one, please visit www.shrm.org/join.

$UKE3TREET
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