“Only recently have people begun to recognise that working with suppliers is just as important as listening to customers.” – Barry Nalebuff, Yale School of Management.
The traditional approach to supplier relationships – focused on contracts, performance monitoring, and risk management – has become outdated. In the superannuation sector, this master-servant dynamic limits potential.
The future lies in partnership.
The key to future success lies in transforming supplier relationships into strategic partnerships. By optimising these alliances, funds, and suppliers can unlock significant value and enhance member experience.
Value creation: The paradigm of co-creating value through innovation, efficiency, and exceptional member experiences. Think ecosystems, not just transactions
Strategic engagement: Suppliers are no longer just vendors; they are strategic allies. This demands engagement at the highest levels, where mutual goals and collaborative strategies drive success
Mutual Trust and Transparency: True partnerships thrive on trust and openness. Share insights, challenges, and goals to foster a culture of mutual growth and resilience
Balanced focus on Cost and Value: Shift the focus from short-term cost savings to long-term value creation. Understand each other’s business models and work together to build sustainable, mutually beneficial strategies
AI Integration: Leverage AI to revolutionise vendor management. Automate processes, enhance decision-making and create smarter, more efficient partnerships
In superannuation, members are central to supplier partnerships. Regulatory pressures demand cost reduction, faster processing, and improved services. Partnering with suppliers fosters innovative solutions for members, benefiting both the fund and the supplier. This member-centric approach ensures that the ultimate goal—enhancing member outcomes—is always in focus.
As W. Edwards Deming said, “Let us ask our suppliers to come and help us to solve our problems.” The future lies in strategic partnerships, where everyone benefits.
Successful vendor management now requires a proactive and forward-thinking mindset. Organisations must shift from a transactional approach to a relational one, fostering an environment of collaboration and shared goals. This means investing time and resources into understanding each supplier’s strengths, challenges, and potential for innovation.
The importance of cultural alignment between organisations and their suppliers cannot be overstated. A shared vision and values foster stronger, more resilient partnerships. Open dialogue, regular feedback, and mutual respect are the cornerstones of this relationship.
The future of vendor management is in strategic partnerships.
Written by Leigh Bell and Shane Barnes
For more information please feel free to contact Shane at sbarnes@iqgroup.com.au and Leigh at lbell@iqgroup.com.au
One of the fundamentally flawed assumptions we may be working to is that (as for most of history) People use technology…
We are on the cusp of working in a business reality where we must lead, manage, and make decisions in an environment where Technology uses technology in significant manner and scale.
Consolidation and more complex service architectures are driving FSI organisations to greater automation to cut cost and increase the efficiency of digital channels, and therefore, stand up Centaur Teams (people teams enabled by generative or predictive AI).
Establishing how efficient one application of technology is over another is, or indeed how technology can become inefficient as new connections (e.g. API’s) and features are added, itwill become increasingly difficult.
Moreover, applying traditional Lean Six Sigma efficiency analysis to uncover NOISE/MUDA/WASTE/EXCESS CAPACITY needs to address the nuances of technology service provision, not just taking the total cost of IT and dividing it by FTE/Customer/Volume.
This shift demands an informed approach to analysing operations with technology… Technology is no longer just an extension of human capability; it is an autonomous decision-maker, fundamentally altering the landscape of our operations.
Uncovering and understanding the hidden costs of technology is vital for being able to design, develop and evolve operating models. As we have said before a Modern Operating Model must foster adaptive capabilities, regularly review processes, and shift continuously to stay competitive.
Building modern models in the context of the above we suggest should include:
Prioritising Technology Investments: Technology is a catalyst for efficiency; smart investments today lead to streamlined operations and sustained growth tomorrow. But these strategic investments hinge on evaluating their necessity, ensuring they do not create undue cost, and that they align with our operational goals.
Analysing Resource Costs: Resource costs often exceed 50% of total operating costs, with over 33% lost to non-productive ‘Noise’ activities (Source: XeP3). It is crucial to scrutinise resource costs, understand how they are being allocated, then strategically automating processes that make sense.
Improving Data Quality: As mentioned in our first bulletin, Automation’s potential is only as good as the data it relies on – ensuring quality data is a non-negotiable to understand the true cost of technology, empowering strategic decision-making.
How can cost be measured to best support a modern operating model?
The XeP3 total cost-to-serve model provides deep insights into resource allocation, technology investments, and operational inefficiencies. This robust framework driven by metrics and analytics to optimise costs, aligns seamlessly with regulations such as SPG516 – Business Performance Review, ensuring strategies are aligned with long-term objectives.
Understanding resource costs and technology impacts needs strong strategic oversight. By addressing these areas, we can help you transform operations, reduce costs, and improve service delivery. At IQ Group we understand this, and with XeP3, can provide comprehensive insights into cost to serve, enabling you to optimise resources and deliver exceptional service to your members.
In the evolving landscape of financial services and technology, executives find themselves under growing scrutiny. The Financial Accountability Regime (FAR) calls for transparency, ethical behaviour, and personal responsibility. But with Artificial Intelligence (AI) integration at an all-time high within organisations a key challenge arises: How do we ensure AI integration aligns with FAR obligations?
As AI continues to evolve, its implementation presents both promise and risk, with generative AI and predictive AI at the forefront of these discussions. These technologies can revolutionise financial operations, yet they also introduce complex ethical considerations and privacy concerns. This isn’t just about compliance—it’s about maintaining trust and integrity in an increasingly digital landscape.
Fred Kofman aptly said; “Power is the prize of responsibility; accountability is its price”.
Amidst the buzz surrounding AI, it’s crucial to recognise that rapid adoption and its potential benefits don’t absolve organisations from their duty to uphold ethical standards and accountability. Key risk mitigations to maintain accountability, trust, and integrity in the AI landscape are humans involved and high data quality:
AI is used to accelerate decision-making and the resultant outcomes. Under FAR, the executive remains the accountable person for the outcome no matter the process to get there. Adopting AI solutions ensures that there is a human involved to approve decisions and mitigates the risk of unwanted and potentially catastrophic outcomes.
The speed to decision as a feature of all AI places an even greater emphasis on data quality. Poor-quality data is the enemy of automation. Bad data in the AI era is (Bad data)2 and can lead to catastrophic outcomes. Accountability in the AI era increases the diligence required to ensure high data quality, again mitigating risk.
Enter the role of governance, the supporter of FAR frameworks.
Governance plays the vital role of embedding accountability into the core of all projects, including AI projects. Governance ensures transparency, ethics, fairness, and responsible decision-making are at the foundation of these projects. Governance can navigate the balance between innovation and risk, striving to prevent unintended consequences and optimise processes without compromising members.
At the end of the day, visibility over risk demands governance. At IQ Group we understand this need as well as the shifts AI demands and can provide comprehensive insight over activities, aligning them with FAR obligations.
Written by Angie Perry, John Hogan, and Mal Collins
It’s no secret that organisations are diving headfirst into investing in automation, seeing its potential to make things more efficient through cutting down manual work to focus on more impactful work.
Superannuation funds are seizing this momentum, with 73.2% investing in data transformation, 69.6% in automation, and 21.4% in AI/Machine Learning (1).
But here’s the truth: Automation doesn’t always deliver the efficiency we anticipate.
To truly benefit from it, we need to take a step back and view it holistically. It’s not about quick wins; it’s about making things within an organisation work together smoothly – from customers through to suppliers, considering costs at every step, focusing on delivering customer needs, and being able to adapt to change effectively.
As Bill Gates aptly put it, “Automation applied to inefficient operations magnifies inefficiency”.
So, why doesn’t automation always lead to efficiency?
Data transformation – Automation relies on things on reliable data. But when we automate critical processes, we can compromise the accuracy, availability, and reliability of our data.
Suppliers – You need your suppliers and partners to be successful. It’s not just about cutting costs; it’s about working cohesively with suppliers to make the process efficient at every stage. Your supplier’s process is still your process.
Customer experience – Customers drive success. Automating the customer journey isn’t just about saving money, it’s about making their experience better to create loyalty and lasting relationships.
Employee experience – Employees shape the future. It’s not about saving time with automation, it’s about empowering employees to innovate in an environment that welcomes new ideas and creating centaur teams (2).
Technology costs – Automation may seem straightforward, but carries additional, and hidden costs that we need to consider when automating.
In short, automation isn’t a magic fix for efficiency. It’s a powerful tool that needs careful consideration and planning to produce productivity over disorder.
Remember – automation today is the standard of tomorrow.
In Super we have grown up with closed loop service environments that have provided us with: Resilience, Scale, and Distributed investment in technology.
And as recently as 18 months ago IQ ran a masterclass in Super fund operating models, which for its time was quite relevant …
However, time, the world, and technology has moved on.
Wave 2 mergers, competition, advice reform, consolidation of service providers, and demand for data have all set the idea of a steady target state under pressure.
It also raises legacy product and insurance complexities that somehow seem to defy our best efforts for standardisation.
Our thinking now is that we need to look at operating models not as destinations, but as change engines that enable us to regularly re-evaluate and evolve our approach.
Stanley McChrystal called it, building for Complexity not for Complication.
The new operating model paradigm challenges us to identify the key factors which help us to understand, assess and respond to our changing environment. All within the context of dynamic strategy, competition and a sandy regulatory landscape.
So, what makes a successful and continuously evolving operating model, admin strategy and technology service platform?…
Culture
Not engagement, benefits, or retention, but the unwritten instructions that drive most of our activity. Research demonstrates that when we map a process, it covers less than 50% of the actual activity within a team. Culture guides the rest, and can be the difference between standing still, and evolving.
Culture (supported by key operating intelligence) supports the adaptive organisational business model and direction.
So will AI bridge any culture gaps? Not likely. Centaurs (AI enhanced human teams) still require us to set in place a model for decision and action that is focussed on our goals and reflects our ethical and commercial compass.
Automation for its own sake just takes you to the wrong place, faster.
It wouldn’t be budget night if there weren’t a raft of superannuation announcements, and tonight’s Budget didn’t disappoint. This blog isn’t so much about what was announced as it is about the work that super funds need to do to put the announcements in place.
However, while most of the announcements require new laws to be passed by Federal Parliament and will get lots of media coverage, most require relatively small effort to implement on the part of super funds and administrators.
SG contributions to be increased from 9.5% to 10% from 1 July 2021
The Budget papers don’t mention the legislated increase in the Superannuation Guarantee – meaning that it’s increasing to 10% on 1 July. Legislation, to give effect to the increase, is already in place, and no action means … it’s going ahead.
Employer payroll software already anticipates this (and subsequent) increases and so the increase will occur seamlessly. The level of SG contributions received by super funds will increase but this will not require any system or process changes.
The Government hasn’t announced any moves to stop future SG increases in the Budget, although they may do so in the future. Some on the Coalition backbench are on the record that they want to see the SG frozen at current levels, but they haven’t prevailed tonight.
Current law provides that the SG will increase by 0.5% in each subsequent 1 July until it reaches 12% on 1 July 2025.
Removal of the $450 per month income threshold to receive SG contributions
Many workers in very low paid jobs, or who work in multiple jobs at the same time, will be receiving superannuation contributions, many for the first time.
Hundreds of thousands of new accounts are likely to be created. These new accounts are likely to be subject to the 3% fee cap introduced by the Protecting Your Super laws for accounts with account balances less than $6,000. The large number of new accounts, and the fee cap, may require super funds to review arrangements with their outsourced administrators.
As many of these new members may have short term employment and may be more itinerant than the overall population, it may be more difficult to get and maintain their details. This will also have cost implications and put pressure on administration arrangements. Fund communications about superannuation rules and employer obligations will have to be reviewed and changed.
Overall, however, super funds will welcome this measure as it means that even low-income workers will receive an additional supplement on retirement, and the compulsory superannuation system takes another step towards greater universality.
Increasing the voluntary super that can accessed under the First Home Super Saver Scheme from $30,000 to $50,000
This measure is a small change to the early release of superannuation arrangements. It does not open up access to superannuation for housing on a widespread basis. It is much less of a change than some commentators had predicted.
Although the First Home Super Saver Scheme has been in place since 2017, it has had a very low take-up rate. The Budget announcement increases the amount of superannuation that can be accessed, but this needs to be changed in the applicable law. Our crystal ball is telling us that the level of take up is going to continue to be small and won’t have any impact on housing affordability.
Most of the administration for the scheme will continue to be done by the ATO, and funds will not be stressed implementing this change. SG contributions cannot be accessed under the scheme, only voluntary and salary sacrifice contributions. This change will have very little administrative impact.
Work test abolished for people aged between 67 and 74 years
Super fund rules and processes need to be reviewed to accommodate this change, along with fund letters and communications. Super funds won’t need to ask these older members if they meet the work test. This will simplify the administration arrangements in engaging with older members.
Lowering the access age for the home downsizing age from 65 to 60 years
The home downsizing measure is already in place for people aged 65 years and older. The rules around the treatment of proceeds paid into super are well established (eg. payments are not treated towards either concessional or non-concessional contribution caps). People using this will have to provide the same documentation to support eligibility for it, as for the existing measure.
2 year transition of legacy retirement product members to better products
People in market-linked, life-expectancy and lifetime products (commenced prior to 20 September 2007) will be able to leave these products for more flexible retirement products on a voluntary basis. Legislation is needed to give effect to these changes.
The process of transition is likely to be complicated and potentially tricky. Funds with older retirement products will need to establish significant programs of work and associated member communications to support this reform.
Other superannuation changes scheduled for 1 July 2021
Many superannuation rates and thresholds are reviewed and may change each 1 July. These changes take place independent of the Budget changes.
Here are some of the key rates that change on 1 July 2021:
SG employer contributions increase from 9.5% to 10% of earnings.
Maximum super contribution base increases from $57,090 to $58,920 per quarter.
Concessional contributions cap increases from $25,000 to $27,500.
Non-concessional contributions cap increases from $100,000 to $110,000.
Superannuation co-contribution lower-income threshold increases from $39,837 to $41,112; higher-income threshold increases from $54,837 to $56,112.
Transfer Balance Cap increases from $1.6 to $1.7 million.
IQ is well placed to support super funds through these changes and we look forward to working with clients to navigate the complexity and ensure all stay on track for success.
By Kath Forrest (Head of Strategic Growth and Capability)
Recent Comments