In a recent project Redington worked with Ford Motor company to develop the first, world-wide pensions data analytics tool.
Ford had a clear objective for the project. In seeking to deliver world class pensions to its employees it wanted to hold itself to account and introduce a clear and objective way of comparing the impact of its schemes across multiple areas. With more than 200,000 employees globally, it wanted to make sure everything possible was being done to secure great outcomes for members and make their futures financially secure. But there was a core challenge in delivering this objective and one which plagues many multi-national companies across the globe: data.
As soon as you start to understand the scale and complexity of Ford’s global pension arrangements (over 120 schemes across 36 countries; DB, DC and hybrid arrangements; around $1 billion spent annually by the company on employee pension benefits), you begin to appreciate the scale of the challenge. It is not a simple matter of comparing investment returns across the various pension schemes and countries.
For the project to really deliver against the objectives, it needed to do far more than that, including providing the Ford team with a view of what a “typical pension outcome” is across all the in-scope countries, in order to then create an objective benchmark. In the pensions industry, data availability and quality can be incredibly variable. It resulted in a lot of head-scratching moments.
We delivered the solution using ADA, our proprietary software platform, and in conjunction with our DC consulting team. One of the key initial challenges was to agree a common way of talking about pensions. Of course, the asset classes used, currencies and norms, vary country to country, but so do to the concepts of what constitutes a pension. After combining and cleansing data from a range of internal Ford sources, with external data from OECD, UN and other third parties, we built up a consistent view of the world from which to work.
Once we had our core dataset, we worked through a process of prototyping and ideation, rapidly moving through different views of what could be delivered in order to design a solution which would be able to answer Ford’s killer questions: what aspects characterised Ford’s ‘best’ pension scheme globally; what level of returns do members in each scheme get; how do member outcomes vary compared to local norms; and how does the global spend for pensions break down across different locations.
Prior to the project, the attempt to answer any of these questions would have required a huge number of human hours of effort, pulling together data and information from HR teams around the world and using analysts to calculate key factors. As a result of the work we have done though, Ford can now use ADA to get a holistic view of all the values they need to, whenever they need it. Everything from the aggregate score for a pension scheme in their world ranking, down to core accounting data and investment value analysis, all is available at the click of a button.
Being able to calculate pension outcomes for straw-people, aka typical member scenarios across all the schemes, was a fundamental requirement. The ability to deliver this functionality added considerable value to the analysis which Ford could access. This feature of Redington’s ADA platform includes an interactive investment modeller that allows for comparisons of member outcomes based on varied asset mixes, investment criteria and local market idiosyncrasies (for example, pension income conversion factors). In using this modeller, it has also allowed Ford to see how it is performing compared with other employers enabling to pinpoint potential areas for improvement, with the ability to look at this region by region.
Top Trumps
One of the more interesting ideas that came from our discussions with Ford, was the concept of Top Trumps for pensions: you could compile a key facts card for any pension around the world, with a consistent set of comparable statistics. Much more than a fun nod to the auto industry we were operating in, the pensions data cards are an incredibly valuable quick reference tool.
As mentioned, Ford isn’t alone in the challenges it faced. Many multinationals have a rich and complex corporate history which contributes to a mesh of data and information which needs deciphering. To date, many technology approaches have failed as they have tried to eat the elephant whole, throwing every requirement they have at a project and then wondering why it hasn’t delivered value. Instead, we worked collaboratively with Ford using our in-house agile framework and focused on value first, allowing us to deliver a new version of the software each week so Ford was always able to provide feedback and shape the product they were receiving.
In terms of advice for other firms approaching similar problems, the honest conversations about what the objectives are, what killer questions they have to answer, and what success will look like are incredibly important to agree up front. Once this is agreed, use an agile approach to take small steps towards your goals, and always be willing to change course in light of new information.
Adam Jones is chief technology officer and managing director of technology at Redington.
