Do we need a new system?

”
A Case of Halflah Insurance Company Pvt. Ltd.
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It was 11 O’ clock in the morning and Mr. Khalid Salman, CEO of Halflah Insurance
Company Pvt. Ltd. (HIC) was looking outside the window of his office with a cup of
coffee in his hand. “What a bright sunny day it is!” he said to himself. He was
reevaluating his recent decision of implementing a new information system in his
organization and seemed little worried about the aftermath. A while ago he had received
a telephone call from Manager Services & Support of his company. The manager
informed him about telephone calls that he had received in last one hour from different
clients of the company. The subject of all the calls was the same. The clients were having
great problems in filing insurance claims through their newly installed web based claim
processing system. The reasons for these problems were little computer literacy and
unavailability of computer for each employee of client organization.

It was not only the clients who were the victims of the new system but the employees were
also very much disturbed by this system. He recalled the words of Claim Processing
Officer of his company who said, “After all why do we need this new system? It has made
our life a great misery. I don’t see any benefits out of it till now and it’s already one and
a half month since its implementation. Not only are we suffering from it but more
importantly our clients are loosing confidence on us”.

Background
Halflah Insurance Company Pvt. Ltd. is a local insurance company which provides
medical insurance services to employees of its client organizations. Its major clients
include local companies and multinationals operating in the country. The company was
incorporated in 1995, with offices in three different locations in the country and head

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office in federal capital. It has about 100 employees. The company has good financial
health because of little competition in its target market.

In the middle of 2006, the CEO announced to change the claim filing and claim
processing systems. The existing manual systems were replaced by a highly automated
solution.

The employees were used to working manually since start of the company. There was
little involvement of computers in company operations. The operations of the company
were divided in two categories; first receiving claims from its clients and second
processing claims and making payments against these claims. On company prescribed
manual claim form the employees of client organization used to file claims at the end of
every month. These claim forms were available to them at Accounts Office of their
organizations. These claims were then sent to HIC for reimbursement. The claims were
then processed by claim processing officers of HIC under the terms of agreement with the
client organization. Then these claims were sent to head office for approval and cheques
were issued to the client. The movement of claims from client to company and then to
head office and back to company and client was through traditional postal system. The
entire process normally took 20 to 25 days and payments were made to client at the end
of next month.

The Decision
Khalid took charge of the company as CEO in December 2005. He was previously
working with a reputable local company which was a Hi-Tech organization. He was very
surprised to see every thing being done manually. He could not find reasons for not
carrying out all the company operations through a sophisticated information system. So
he decided to automate the entire process of claim filing on client’s end and claim
processing on company’s end. He went for an Off-The-Shelf solution which was pretty
good and could easily have catered all the needs of the company on client’s as well as
employee’s end. The new information system was a web based solution and could be
accessed by clients through internet.

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The decision was purely based on Khalid’s personal experiences of success with
information technologies. He did not involve neither employees nor clients in his this
decision. He believed that this new system could give substantial benefits to the company
and clients equally.

Khalid called a meeting before the implementation of the new system. All the employees
of claim processing department and representatives of all the clients were present there.
He said, “Under the new system our clients will be required to log on to company’s web
site to access electronic claim filing form. They will fill and file claims online. The
employees will also process the claims online. The head office people will also have
online access to the processed claims. This will not only help us in doing our work more
efficiently and effectively but will also reduce the client payment time from 25 to just 5
days, thus increasing customer satisfaction.”

The Problem
In July 2006 when new system went online and clients and employees were asked to give
away the manual processes, it created a cry all around. Every one was having great
difficulty in working with new system. Employees were not given formal training but the
implementation team helped them in using this new system on day to day basis for first
15 days. This although greatly helped in reducing errors done by employees but still
employees were having few problems. Another reason for employee resistance towards
new system was expected future job slashing. Under new system a claim could be
processed in 10 minutes while it took 30 minutes under old system, so organization will
be requiring less number of claim processing officers in future. On this apprehension
employees resisted the change.

The real issues lied on client’s end. Because when they started filing claims through this
new system, there was no one who could guide them. The error rate was extremely high
and queries for guidance and support were beyond the processing capability of services
and support officers. They asked for a person who could actually go with them to their

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organization at the end of every month to file claims on their behalf. This was simply out
of question for the company.

Khalid was still in his office thinking what could have been done when the door of his
office opened. Manager Services & Support along with Manager Operations entered his
office to report the current situation. As Khalid had expected situation was the same
rather had been getting worse. “What should we do now”, asked Manager Services &
Support.

Discussion Questions
1. How do you analyze Khalid’s decision of computerization when every thing was being
done smoothly in manual form?

2. Do you think Khalid had implemented too much change at once?

3. How Khalid’s change initiative can be mapped with Levin’s change management
model of unfreezing, changing and refreezing the situation?

4. What are the real reasons of problems faced by employees and clients?

5. What could have been done differently to better implement the change?

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“Do we need a new system?”
A Case of Halflah Insurance Company Pvt. Ltd.

Teaching Notes

Synopsis

Halflah Insurance Company Pvt. Ltd. is a local organization with its offices in three
different cities. It provides medical insurance services to employees of different
companies though their organizations. Because of few competitors it has good market
share and financial performance is good.

The existing processes of receiving and processing medical insurance claims were
manual since the start of company. The employees and clients were satisfactorily
working in this system. Each client organization on the behalf of its employees filed
claims at the end of every month which were processed by the company in 50 to 60 days.

When Mr. Khalid Salman joined the company as CEO, he decided to replace the manual
processes with a highly automated solution. This was something highly unexpected and
sudden for employees as well as clients. In new system clients were required to file
claims online and employees were required to process claims online without any
involvement of paper work. For people who were used to manual work only and had little
proficiency in computers, working on such a highly automated solution was big ask. So a
fuss was created on both ends (employees and clients).

Teaching Objectives

This case focuses mainly upon the implementation of change initiative and managerial
decision making. This case may be helpful for students to comprehend the following:
 Importance of unfreezing the situation before implementing change.
 Importance of employee involvement in change management process.

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  Role of leadership in successful change management program.
 Importance of employee training in changing work environments.
 Reasons of failure in change management initiatives.
 Understand the dynamics of managerial decision making.

Discussion Questions

1. How do you analyze CEO’s decision of computerization when every thing was
being done smoothly in manual form?
CEO’s decision of computerization may be analyzed under the light of efficiency and
effectiveness of new system. Specially the benefits towards clients that they will receive
their claimed amount within 5 days instead of 25 days.

2. Do you think CEO had implemented too much change at once?

The change could be carried out in a different way. Firstly only internal processes could
have been changed and then in next phase clients should have been involved. This means
that to start with, only claim processing system could have been automated and then in
next phase claim filing system could be changed.

3. How CEO’s change initiative can be mapped with Levin’s change management
model of unfreezing, changing and refreezing the situation?
Lewin’s change management model consists of three steps; unfreezing, changing and
refreezing the situation. Khalid did not make any substantial effort to create awareness
for change amongst employees and clients. He did not properly unfreeze the situation. He
had no clear change management plan.

4. What are the real reasons of problems faced by employees and clients?
Student responses may vary but following could be the reasons:
For Employees:
 No understanding why change was required.
 Poor commitment towards the change initiative.

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  Lack of formal training to use the system
For Clients
 Increased work on their part.
 No proper know how of system

5. What could have been done differently to better implement the change?
First employees and clients should be realized that why change is required and what
benefits it could give to the organization and clients. Then they should be given formal
training to work on the new system. It would be much better if system had been
implemented in phases.

Tips for Case Analysis

The instructor should encourage the students for discussion and brainstorming on
following aspects of the case:
 Identify the issue presented in the case.
 Discus different courses of action that could have been taken to solve the
problem.
 Students can be asked to thoroughly analyze the decision taken by CEO of
company from the perspective of organization, employees and clients.
 Students can also be asked to take up the role of CEO and how they would
proceed to solve the issue.