“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you will do things differently.” —Warren Buffett
This statement is particularly poignant at this stage of USAA’s history. More than any company I know, USAA prides itself on its mission and its core values of honesty, integrity, loyalty, and service. For decades, the mission and core values have led the association to undeniable success. USAA recently reached its centennial birthday, a feat that exceedingly few companies can boast. A large reason for this has been USAA’s unwavering adherence to these principles. And for good reason: Principles transcend market conditions. Principles guide a company through times of feast and famine, through bull markets and recessions, through profits and losses. Companies that remain committed to the principles that led them to success can weather all storms, even if specific business practices change over time.
The purpose of this letter is to express serious concerns about the current state of USAA and its trajectory for the future — and to do so in a way that is objective, in good faith, and free from hyperbole. I fear that senior executives within the company are withholding information from the Board to give the impression that the company is in a better position than it actually is. Worse, I fear that the CEO and his recently-hired executives are eroding USAA’s culture and instilling myopic, quarterly profit-driven business practices from the publicly traded companies from which they were hired. With these changes, USAA’s senior leaders have strayed from the company’s guiding principles and have tarnished USAA’s once-impeccable reputation in the eyes of members and the industries that USAA operates in.
USAA was once a cut above the competition because they went above and beyond for members and employees alike. USAA was the gold standard for service. It was prestigious to be a USAA member; people envied those who were able to do business with USAA because it was a well-known fact that USAA would do everything in its power to do what was right for their members. That starts with employees. It was hard to get hired at USAA because the benefits were second-to-none. Employees were treated exceptionally well both in terms of the benefits they received and the culture in which they operated.
Employees who are treated well stick around.
Employees who stick around become excellent at their job.
Employees who are excellent at their job provide an excellent experience to members.
The member experience can be no better than the employee experience. As of writing this, only 55% of employees would recommend USAA as an employer according to Glassdoor. Only 49% approve of the way the CEO is running the company. According to recent data, employee sentiment is at a disastrous 46%. This is a deeply concerning trend, especially considering that USAA was once regarded as one of the best places to work in the country. And this trend has only gotten worse recently. Benefits have been cut. People who work off-hours had their pay cut by up to 15% with the reduction of shift differential. The former Chief Human Resources Officer, when asked about why these changes were made, stated that USAA had “over-invested” in employees and that they aimed to be at the 50th percentile for pay and benefits. When a company aims to be in the 50th percentile for pay and benefits, they will naturally only attract the 50th percentile of talent, who will then provide member service in the 50th percentile. The employee experience has also worsened from the perspective of overall company culture.
For years, USAA employees were told to “do the right thing because it’s the right thing to do.” They were encouraged to “create conditions for people to succeed” and to “assume positive intent.” This mindset was fundamental to USAA’s success and helped to instill a culture of integrity and comradery at all levels of the company. Employees knew that if they acted in good faith, did what was right for each other and for members, everyone could share in the company’s inevitable success. Over the years, these cultural tenets were deliberately changed by senior leaders. Employees now find themselves working in an environment that discourages speaking up lest they be subject to indirect retaliation by being placed on a performance improvement plan, managed out of the company, or laid off. Over the last few years, some of USAA’s best and brightest employees — those who lived and breathed USAA’s culture — were let go by leaders who have no understanding of that culture.
While it is important to recognize that difficult decisions sometimes need to be made to right-size a company’s headcount, there are often alternatives to letting someone go entirely such as reassigning them to a different area. Rather than doing the right thing because it’s the right thing to do, newly-hired senior executives with less than one year with the company chose to push these people out of the company altogether. As those employees left the building, so did a piece of USAA’s culture. Decades of USAA experience have been let go over the last few years, leaving those who remain struggling to pick up the pieces and fill in the gaps that their absence has left.
It is also important to recognize that what made a company successful in the past is not necessarily what will make them successful in the future. New regulations are introduced, industries evolve, and consumer demands change. With these changes come a need to adapt. USAA has been hyper-focused on complying with regulatory requirements for the last several years and, despite some challenges along the way, has done an admirable job modernizing business practices to accommodate those regulations. With that focus on regulation, though, USAA lost sight of innovation and providing outstanding products and services to members.
Member sentiment of USAA has deteriorated significantly in recent years. While it is crucial to acknowledge that online sentiment for companies is usually negative — after all, few go out of their way to write about a company online when things go right — even internal measures of member satisfaction show that members are unhappy. USAA used to regularly have member satisfaction in the high 80s or low 90s. Now, as of the latest scorecard numbers, member satisfaction is struggling to stay above 70%. Part of this is due to the aforementioned decline in the employee experience, but more than this, members are unhappy because of one important fact: USAA no longer offers any products or services that are better than the competition.
Consider USAA’s banking products: checking accounts, savings accounts, credit cards, loans, and CDs. Checking accounts are average, paying 0.01% APY. This is common for checking accounts, so is largely unremarkable. CDs and loan rates are also average for the industry. Savings accounts, however, leave much to be desired. Banks are increasingly offering online high-yield savings accounts that pay north of 4% APY. USAA’s “Performance First” savings accounts pay 0.10% APY for balances less than $50,000. A member would have to deposit over $500,000 just to have the “opportunity” to earn 1.60% APY. These rates provide no incentive for members to deposit cash with the bank when dozens of banks offer significantly higher rates. In terms of credit cards, after USAA discontinued its unlimited 2.5% cash back credit card, none of the USAA’s credit card offerings are noteworthy.
USAA’s insurance offerings are also lackluster and are no longer differentiated by service. Adjusters are overwhelmed by claims volumes. Members are regularly complaining online that they cannot reach their assigned adjuster despite numerous phone calls, voicemails, and messages. Employees have voiced these concerns to leadership for years, and have consistently been told that “help is on the way” and that processes were going to be improved. Yet, years later, adjusters continue to struggle to keep their heads above water and manage their workload. As USAA continues to raise rates (along with all insurance companies), members are becoming disillusioned with USAA. Many members have been willing to pay more for USAA than they would for competitors because “the service is better,” but are now questioning if it’s worthwhile to pay hundreds or thousands of dollars more per year to maybe receive better service when or if they put in a claim.
Internally, USAA employees are suffering from a morale crisis. Employees have watched the company let go many of their coworkers at random over the last few years, and are left wondering if they will be next. They see the CEO receive a 157% pay increase the same year the company posts its first loss in a century. Meanwhile, employee wages are being eaten away by the highest inflation in decades. They find financial relief and peace of mind from the fact that they can work from home and avoid paying for day care, eating out, and fuel costs, only to be told that they must now commute to an office three (soon to be four) days per week so they can sit on the same Zoom calls that they were at home. Many of these employees were hired during the pandemic and were promised noncontingent remote work, only for the company to break its own core values of honesty and integrity by unilaterally reneging on that promise.
USAA is at a crossroads. For decades, the company was the prime example of what a company can be when a noble mission, principled leadership, and genuine care for members and employees align. Now, leaders appear to be making a deliberate effort to turn USAA into just another insurance company, just another bank, and just another employer. I believe that there is still time to right this ship, but it will require a complete shift in leadership. If USAA does not change, it will go the way of Sears and Blockbuster: companies that were the best of the best in their prime, but failed to innovate for the future. USAA needs leaders who will innovate for members, who will revitalize employee morale, and who will restore USAA’s rightful place as the provider of choice for the military community and their families.