BRIGADIER GENERAL ROBERT F. MCDERMOTT

USAA

Dreamers and doers rarely come in the same package. The historical record is replete with figures who seem to have extraordinary vision, but who are unable to make their dreams come into reality. On the other hand, there are many who have been able to execute the ideas of others, but who do not seem to be able to think in broad terms bout the future. Recent historical scholarship placed John F. Kennedy in the first category and Lyndon Baines Johnson in the second. Robert F. McDermott, Chairman and CEO of USAA is one of the rare individuals who have brilliant conceptual ideas an who have been able to put them into operation.

The First Career

Prior to becoming CEO of USAA, McDermott had already demonstrated these traits while serving on active duty in the Air Force as the first permanent Dean of the newly founded USAF Academy. Upon assuming his position, the new Dean wished to make the Academy a premier undergraduate academic institution, as well as developer of professional military officers and leaders. He wished to attract first-rate applicants chosen without regard to political connections and to challenge them to meet their potential. He introduced sweeping innovations by overcoming opposition from the military establishment, particularly at West Point and Annapolis, political insiders in Washington, and those who wanted no change at all. The changes included introducing over 25 academic majors, setting up cooperative Master’s degree programs with outstanding institutions, building a first class library, faculty and staff, and introducing the “whole man” admission program with little regard to political connections.

All this resulted in McDermott getting the Air Force Academy accredited by the North Central Association prior to its first class graduating. This was an unheard of accomplishment. When he retired in 1968, the other military academies were already changing curriculum and procedures to match the newest of the academies. At a ceremony at West Point in 1989, the Superintendent of the US Air Force Academy, Lt. General Charles Hamm, referred to McDermott as the Sylvanus Thayer of the twentieth century, crediting McDermott with bringing all US service academies “into the twentieth century” [6].

USAA – The McDermott Infrastructure

With his outstanding reputation as an insurance scholar developed through his teaching and two published books, his solid academic preparation including an MBA from Harvard, and his national reputation as a visionary, organizer, leader and manager, he came to USAA as an Executive Vice President in July of 1968. Over the next six months he would observe all facets of USAA’s operation and begin formulating his visions for the future of USAA.

When he assumed the role of President and CEO of USAA on January 1, 1969, the company was in good shape overall. Serving the auto property and casualty insurance needs of active duty officers since 1922, it had a solid reputation and had penetrated 70% of its potential market. It also provided homeowners insurance in some states and had just begun offering a basic life insurance policy. The members (USAA is actually a reciprocal insurance exchange – a member-owned cooperative if you will) were basically happy and contented with their company. On the face of it, it would not seem that a new man could do a great deal better than was already being done, but McDermott had observed much during his six-month orientation.

While the small company was doing well and had assets of $200,000,000, it was doing well with increasing difficulty. Although basically solid financially, the Board had accorded the departing President “special recognition” by raising the annual dividend to all the members to a new high. This put the previous president in a rosy glow, but placed USAA in a hazardous cash position. One of McDermott’s first acts was to cancel the “extra” dividend which created immediate unrest among the members, but which was necessary if the company were to get through a temporary financial crisis. It did.

In the operating levels of USAA, McDermott noted many problems. The approximately 3,000 employees (over 90% women) did not like the work at all, and the annual turnover rate of 43% made this clear. To initiate a new automobile insurance [policy required 55 different steps at 55 different desks. Some of these simple steps were mind deadening, like pulling staples or unsealing envelops. The operation required moving files up and down seven different floors, and claims and underwriting maintained separate records on each member. At each desk were shelves and bins piled high with records requiring some action or awaiting filing. So confusing was the operation and so many records misplaced that a crew of dozens of college students searched for missing records every night in order to return them to where they were needed. Most employees felt that USAA was a good place to start, but few wanted to remain there and a career was unthinkable. The employees had little education and less loyalty to USAA.

It was clear to McDermott that if USAA were to be a truly great company, sweeping changes would have to occur. Gathering with him a small number of those he brought on board and a few incumbents, he held a serious long-range planning meeting at the American Management Association’s Conference Center in Hamilton, New York to set the future course for USAA. At this meeting and, to a lesser extent, those of the next two years, he began to reveal his goals for the future. On the operational side he challenged USAA to become a “paperless” insurance company, which seemed unreachable at the time. He committed USAA fully to use the newest technology to improve the operation and to make employees’ jobs more meaningful. As a result, he was certain productivity would rise. He challenged the company to work through a myriad of state regulations and laws to enable USAA to provide automobile and property insurance to all members in all states.

As far as employees were concerned, McDermott wanted sweeping changes to orient employees to provide better and more ethical service to the members. He proposed to accomplish this by developing a “corporate culture” that would provide an ethical, and service-oriented foundation that would permeate the entire company. He instituted the USAA Creed which charged members and employees to serve “each other with integrity and dependability” [25]. The goal in handling auto claims would be not to pay as little as possible and still satisfy the member, but to exercise “the highest standards of ethical and professional conduct while transacting claims business” [24]. Providing timely and responsive service with integrity and ethical conduct would build member faith and strengthen USAA for future growth. Training on ethical conduct became a staple in new employee orientation and all training courses. He even sought a new logo to give the company a more solid and a more modern look.

McDermott recognized that a corporate culture in itself would not work without building pride among the employees. He challenged USAA to build new employment incentives including pay and other benefits. He pushed the Board of Directors in the direction of building a new facility to house all of USAA to increase efficiency and to give the employees more pride. Perhaps most important of all, he insisted programs be developed to encourage each employee to grow to his or her maximum potential.

During McDermott’s first few years, dozens of changes swept over USAA and its employees. The pattern for the larger changes was similar – first the vision, followed by long and short-range plans to accomplish the task. Then specialists, often outside consultants, would help in the development of operational ideas and selection of equipment. At the same time, intelligent, hard-working individuals were placed in charge of the projects and were given latitude to build teams and develop the operation programs.

At almost the same juncture, plans were made to train affected employees and to prepare them physically and psychologically for the changes. These efforts tended to bring in innovations more quickly than expected with strong acceptance by the employees themselves. The results were more efficiency, productivity, and pride in a job done better than before.

A typical example was the introduction of a computer system designed to produce multi-car policies. Today, all companies issue policies that list all the cars owned by a family. In 1969, each car had its own policy. The administrative work required to produce these policies was labor-intensive and expensive. With the introduction of a multi-car computer software system, all vehicles were listed on one policy. Just this change enabled USAA to increase its productivity enormously, deleting hundreds of manpower spaces in one year. A second benefit of this new system was to spread the auto renewal periods throughout the year. This enabled USAA to level out the workload and make more efficient use of available manpower.

Over time, the development of USAA’s gigantic information systems continually increased productivity and enabled it to provide better service to the members. At the present time, USAA has the largest IBM facility in the United States in terms of the numbers of transactions completed daily. The statistical growth is shown in Appendix 1, but does not really show what it means to the company today. Whereas issuing a policy in 1969 took 55 steps and an inordinate amount of time, today one Policy Service employee handles the entire transaction using his or her computer screen and the policy is on its way to the member in three days or less. This effort was highlighted recently in the February 13, 1989 issue of Fortune magazine [1].

Today, McDermott’s earliest visions of leading-edge technology continue to unfold. Still working toward a “paperless” environment, USAA had been working on the development of imaging techniques. After a short experiment with 3M in 1984, McDermott convinced John Akers, CEO of IBM, to work with USAA in development and execution of the image-processing system. Working as partners, USA and IBM computer specialists and engineers were successful. In late 1988, John Akers came to USAA to cut the ribbon and see the new system in operation. Very simply, a document, such as a police report is given the USAA number and entered into the computer system by a process resembling a data fax to the casual observer. Only in this case the document is stored on an optical disk and is ready for recall at any of USAA’s image computer screens in asplit second. By the spring of 1989 USAA had all policy service documents on optical disks rendering the millions of pieces of paper expendable. After everything is entered on the optical disks, lost documents and misplaced files will become folklore instead of reality.

McDermott’s effort in improving his work force and pushing USAA into leading edge technology have combined into what Ed Yourdon called in the February 1989 issue of American Programmer one of the extremely rare “Exemplary Data Processing Organizations” in the country [26]. He pointed out how much “influence an exemplary CEO can have in the creation and motivation of an exemplary data processing organization.”

Improving the Work Force

One of McDermott’s earliest visions had been to improve working conditions by developing a new facility able to house all USAA employees under one roof. In 1969 he personally looked over properties. He rejected sites convenient to the city center where most employees lived and selected a site in the undeveloped northwest part of the city. He talked the Board of Directors into authorizing the purchase of 286 acres. He wanted good access for the employees and to build a campus-like setting. He wanted room for growth and did not want others encroaching upon USAA itself or its view. Today, the USAA property sits in the center of the fastest-growing area of the city and the value of the property has escalated like the population of San Antonio.

As far as the building itself was concerned, McDermott wanted it to be a place where the employees would be proud and happy to work. He wanted the principal aesthetic costs concentrated on the interior and not the exterior. When completed in 1975, it turned out to be a state-of-the-art building for 1989 and was, and still is, the second largest horizontal office building in the country. All the flooring is “computer flooring” enabling the thousands of miles of computer and telephone wiring to be out of sight and to make internal moves easy and economical. The building has a center spine and on the main floor, three different courtyards where the employees can relax body and mind. Each courtyard has a different theme providing additional aesthetic beauty. The work areas themselves have cubicles including telephones and a computer terminal and are located adjacent to the courtyards for breaks. The building also contains other amenities to increase the comfort of the employees. Included is a company store to purchase sundry items, a ticket counter to purchase discounted tickets to San Antonio attractions, a contract post office, a health clinic, exercise gymnasium and outstanding cafeterias.

Getting good employees to come to USAA was only one step. Retention of good employees was the next. To assist in both these tasks, McDermott introduced programs to improve the physical well being and health of the employees and to help them develop to achieve their individual potential as well.

Building and maintaining the physical well being of the USAA employees has been a multi-faceted program. In 1972, McDermott convinced the USAA Board of Directors to incorporate a physical fitness center into the new building. The resultant 9,700 square foot center houses lockers, saunas, steam rooms, cardiovascular treadmills and exercise bicycles, a Nordic skier and rowing machines. Two professional exercise physiologists monitor the individual exercise programs. Almost 2,000 employees participate in the center’s programs. Outside the building are 35 acres devoted to fitness activity areas which include five miles of jogging trails winding through the trees, a multi-purpose soccer field, softball fields, basketball and volleyball courts, and tennis courts. All are equipped with lights for evening use. This year almost 3,000 employees participated in various intramural sports leagues.

The fitness and athletic program is balanced by a first-class health service staff and program. Its eight registered nurses provide acomplete health-oriented program for employees. Among the programs conducted are brown-bag health seminars, free allergy and flue immunizations, on-site mammograms, free diabetes, hypertension and cholesterol testing and an annual Health Fair. The Health Services staff also provides smoking cessation training which was of significant help when McDermott phased in a “no smoking” policy in all USAA buildings. At the present time, smoking is authorized in only a few lounges and a small section of the cafeterias, with the goal to eliminate all smoking by the end of 1990. Free comprehensive physical examinations are provided to employees over 50 years of age. Confidential employee counseling is also provided. In 1980 alone, the counselors served over 3,000 employees. Part of the counseling service also includes information on area childcare facilities.

Other wellness incentives include low-priced “Treat Yourself Right” menus in the cafeteria which encourage good eating habits and a full-time safety director who insures employees have safe working areas and equipment. One result of the employees perceiving that USAA cares for them and that USAA is actually making things healthier and safer for them, is USAA’s absentee rate which is 45% below the national average.

Helping individuals meet their potential have been the highly successful USAA education and training programs. Soon after McDermott arrived at USAA, he decided to centralize training and education and brought on board a professional educator to do it. McDermott’s programs had two great impacts. First, there was visible improvement in the service USAA could provide to its members because of the improved education and training the employees received. Second, was the great morale factor it proved to be. McDermott began off-duty educational programs offered in USAA facilities and paid 100% tuition reimbursement for employees attending colleges and university courses. It did not stop there. He also paid for professional development courses leading to professional designations such as CLU (Chartered Life Underwriter) and CPCU (Chartered Property and Casualty Underwriter).

McDermott’s centralized training concept has provided USAA with a broad diversity of training from entry-level training for claims and policy service personnel to management development courses to make technical personnel ready to assume supervisory positions. The Management Information Seminar provides senior managers a forum to learn about other divisions of the company and to mingle with other senior USAA executives and senior managers. The result is a free flow of ideas across divisions to help all the diverse elements be of maximum benefit to each other.

USAA Growth and Diversification

In the first long-range planning meeting at Hamilton, New York, McDermott had set out his vision of growth for USAA. The first order of business was to strengthen and expand the Property and Casualty business which was the heart of the company. Developing the ethical and service policy and strengthening the employees were critical parts of the foundation for growth as was development of computer systems to support the growth and improved service.

USAA expansion in the Property and Casualty area had two parts – expanding the geographical area in which USAA could sell insurance and capturing a larger portion of the targeted market. When McDermott arrived, USAA could sell auto insurance in 48 of 50 states, but was able to sell homeowner policies in only 31 of 50 states. As a reciprocal insurance exchange that sold only to military officers this was a problem. When officers were ordered to states where USAA could not sell, membership suffered. McDermott established a corporate legal staff and charged it with getting USAA licensed for both lines in all states. With this underway, he initiated USAA’s first corporate marketing staff and charged it with bringing in more members. The combination of the two initiatives resulted in USAA being licensed for auto and homeowner policies in all states, and as of the end of 1988, the penetration of the active duty officer market had reached 97%. When one eliminates those who can not be insured, such as those stationed in Warsaw Pact countries, and those without cars, USAA has close to 100% of those active-duty officers it is willing to insure. Today USAA is the 6th largest private automobile and homeowners insurer in the United States.

From the beginning, McDermott combined his own sixth sense with those of members’ desires to diversify USAA and add lines he believed could be supported. One of the key innovations was his decision to offer automobile and homeowners insurance to children of members through a new USAA subsidiary. With USAA Board of Directors’ support, the program went into full swing and is now the fastest growing portion of the Property and Casualty business at USAA.

At the end of 1968, USAA had only a small life insurance program in addition to the property and casualty insurance. As result of formal and informal surveys of members, McDermott wished to expand USAA offerings. Under the original bylaws, this was prohibited and so he had to convince the USAA Board of directors to change them to permit diversification. By virtue of his own persuasion and the desires of the membership, the Board reluctantly agreed. Its reluctance stemmed from the tradition-bound mind-set of those wishing to sell property and casualty insurance only.

In 1968, USAA stood 504th among American life insurance companies in terms of life insurance in force, but that was soon to change. At that time, USAA offered only whole life insurance policies. Over the years other products were added to the line, and the life insurance ranking climbed slowly at first and then with increasing intensity. Now the USAA Life Insurance Company offers a full range of life insurance products an has added a number of health insurance products as well. In 1976, a line of annuities was also added. Today USAA stands 55th in national raking based on the dollars of ordinary life insurance in force.

Success in life insurance led to further entries into the financial services area. Under the USAA Investment Management Company (IMCO), begun in 1983, 12 no-load mutual funds were added over time, each tailored to different member desires and needs. Some of them include money market, growth, tax-exempt, international and precious metals funds. Today, USAA stands 34th in national mutual fund group ranking. In addition to the mutual funds, a real estate division has offered Real Estate Limited Partnerships. Among the youngest of the financial services offerings, the Real Estate Division turned a profit in 1988 and has great future promise. USAA also added a Discount Brokerage, which now numbers 38,000 active accounts and handles stock transfers for IMCO, cutting USAA costs.

Almost from his arrival at USAA, McDermott had wanted to open a bank, but various rules and regulations prohibited insurance companies from doing so. In the early 1980s, deregulation of financial institutions and other legal and regulatory provisions made it seem possible for USAA to open a savings and loan institution. In October of 1983, a window of opportunity opened and McDermott moved quickly. On December 30, 1983, USAA capitalized its new savings and loan with $20,000,000 and opened in a renovated trailer building on the USAA property. USAA members joined at a rapid rate. One pundit at the time pointed out that USAA members felt very strongly about the integrity of USAA and its backing of the savings and loan since they sent money to a trailer pointed at the Mexican border. Today, only six years later, the USAA Federal Savings Bank has over $1 billion in assets and has received top marks from independent raters [7].

Another sign of USAA members’ strong faith in USAA and what it backs is the USAA Federal Savings Bank’s experience with the MasterCard. USAA sent 240,000 pre-approved credit card applications to members. Industry experts predicted that 10-12% might be a reasonable return based on USAA reputation. In the first couple of months, USAA members returned applications to establish a return rate of over 50%. Today over 1 million USAA MasterCards are in use, and USAA’s national standing is fifth in sales volume for all institutions issuing a MasterCard. USAA purchased another financial institution in Utah in 1988 and opened the FDIC-insured USAA Federal Savings Association with a gold MasterCard following shortly thereafter.

In 1988, in another McDermott innovation, USAA opened the USAA Towers, a luxury retirement center in San Antonio. The 23-story, $75,000,000 building has won high ratings from the retired community and the retirement industry.

Many of the strides McDermott has made in the financial services area have produced accolades from members and have received praise from a variety of respected financial institutions. In 1987, the Nilson Report and NBC’s Today Show proclaimed the USAA MasterCard as the number one buy in the country. Many of the mutual funds have been praised as excellent investments in national publications such as Fortune and Money. The USAA Federal Savings Bank was given ICD Financial Publishing’s first-ever “perfect” rating for an institution with assets of over $50,000,000[7]. USAA Life Insurance Company has received A.M. Best A+ rating since 1975 and the Property and Casualty Division for much longer [2].

The success of all of these USAA programs has been due to the excellent relationship of mutual trust and confidence built up between USAA and its members based on the ethical conduct and integrity of the customers and the company itself. “Service to the Member” is the watchword continually espoused in USAA and is the clearest expression of USAA’s positive relationship with its members.

That “Service to the Member” philosophy implanted by McDermott has continued during USAA’s rapid growth, and a key element of that service is member contact. As a direct-writer, USAA relies primarily on telephone and postal communication with its members. Over the years, McDermott has guided the staff to a communications status – technologically and from the standpoint of efficiency – that ensures members have fast and direct contact with USAA. In 1969, about 99% of USAA’s member contact was by mail. Today USAA relies more on the immediacy of telephone contact. Its employees receive about 17.8 million calls a year, and average daily phone volume is about 65,000 calls. With over 1,000 lines, USAA is the largest single point of termination for WATS lines in the country.

Still, USAA continues to rely heavily on use of the mail. It is the nation’s largest direct mailer in terms of sales volume and fifth largest internationally. A staff of more than 450, full- and part-time, handle approximately 27 million incoming and 73 million outgoing pieces of mail annually. Technology, combined with employee morale and esprit de corps, ensures USAA members receive the best possible communications service [21].

How well USAA is doing in providing service to its members can be measured in a number of ways. The steady growth of USAA and success of its diversification efforts are surely one measure. Another are surveys USAA administers to members which show great member satisfaction. It would be easy to write off USAA’s surveys of its own members, but the findings have been confirmed in a number of other places by different institutions. For example, the October 1988 issue of Consumer Reports picked USAA as one of the best three companies in the nation in terms of service. The other two were much smaller firms [20]. This was the 4th such judgment by Consumer Reports over the past 20 years [16, 17, 18, 19]. USAA had the best record in the state for both homeowners and private auto insurance in terms of the fewest number of complaints per one thousand policyholders [14]. The Arizona Insurance Department had the same findings for USAA personal lines insurance [23].

In an industry categorized as a “service Industry”, USAA is clearly one of the national leaders due to the leadership of Robert McDermott. In its January 21, 1985 issue, Business Week selected 50 leaders who were representative of the new corporate elite. Of the 9 selected in the “service Gurus” category, McDermott was the only CEO of an insurance firm selected [13]. In the July 25, 1988, Forbes, McDermott said in an interview with Toni Mack that , “if you put service number one, everything else will follow,” and so it has [8]. Most recently USAA was among 101 companies singled out in the 1989 book The Service Edge by Ron Zemke with Dick Schaaf [27]. In his foreword to the book, Tom Peters said that the 101 companies described will hopefully have “good management at the top, and throughout any firm, to appreciate just what an unstinting dedication to service can amount to – and to challenge each and every one of us about making such a commitment in our own outfits” [27]. It is clear that providing great service to its own members, USAA has caught national attention as well.

McDermott’s leadership qualities, within and outside the insurance industry, and his concern for community and country were also reflected in a Best of Business Quarterly interview that appeared in the journal’s Spring 1987 issue [5].

Fiscal Management

Providing great service has not been done without consideration of the bottom line. USAA has consistently maintained the lowest cost/expense ratio in the insurance industry and has paid dividends to members every year.

In the aftermath of the insurance revolt in California in the November 1988 election, consumer advocate Ralph Nader testified before the House Commerce, Consumer Protection, and Competitiveness Subcommittee on December 6, 1988.Although Nader excoriated the insurance industry, he had positive testimony for USAA. He stated:

    But there are many ways insurers’ costs can be reduced through more efficient operation, and through more effective advocacy of health and safety programs. Some companies, like USAA in San Antonio, operate much more efficiently than the industry average. According to NICO (National Insurance Consumer Organization -a Nader group) auto insurance rates would drop by an average of 17% nationally if all companies were as efficient as USAA. And USAA provides a 14% dividend to its cooperative owners [11].

In testimony before the same committee, Harvey Rosenfield, the author of California’s Proposition 103 also had positive words for USAA in contrast to other insurers:

    Moreover, a huge portion of the premium dollar goes to waste and inefficiency on a massive level. For example, according to Best Aggregates and Averages (1988) 23 cents of every dollar of auto insurance Fireman’s Fund wrote in 1987 went to claims adjustments and defense lawyers’ fees and 28.9 cents went to agent’s commissions, executive salaries and other overhead expenses.Contrast that with USAA, a company which itself does exceptionally well in the insurance business and is appreciated by its customers for its excellent service. It paid 12.3 cents per premium dollar to its lawyers, and 6.9 cents per dollar to overhead [15].

USAA has continued to provide service to its members with integrity and distinction, but also has consistently made profits to protect the members’ interests and to keep products at a level as inexpensive as possible. In Appendix 1 is a chart which dramatizes the tremendous growth in USAA under General McDermott from the end of 1968 to 1988. As this article goes into publications, the dramatic growth has continued in all the areas noted. For example, USAA’s owned and managed assets now exceed 16 billion dollars and USAA has almost 13,000 employees.

A National Leader for Automobile Safety

McDermott has long been a proponent of vehicle safety. For over a decade he has worked with automobile manufacturers, insurance institutes, private sector businesses, local and national politicians, and the media to secure improved automobile safety equipment and better safety legislation for the country. To this end, he has also initiated two separate safety campaigns, one in 1982 and one in 1988. These addressed the problem of deaths, injuries and property damage incurred through unsafe driving and inadequate safety technology. General McDermott held a national press conference on safety in Washington, D.C. on January 5, 1982.. He also made an appearance on the McNeil-Lehrer Report on the next night. During the interview, he further touted the use of passive restraints and called for prompt governmental acceptance of more rigid safety standards for automobiles.

During the 1982 safety campaign, McDermott made history by making USAA the first insurance company to publish a comprehensive report on the comparative safety of domestic and foreign automobiles. The report, produced in conjunction with the Insurance Institute for Highway Safety (HHS), showed the statistical results of actual automobile crashes involving injuries and deaths. It listed which automobiles were most “crashworthy,” and which were more likely to cause injury or death in a crash [10].

Another aspect of the first safety campaign was General McDermott’s testimony at the November 28, 1983, Department of Transportation Hearing in Los Angeles, California. The thrust of his testimony was to point out the indecisiveness and ambivalence with which the government has treated auto safety by not mandating better passive restraint technology – air bangs in particular — to automobile manufacturers. As not only an insurance company executive, but also a father and grandfather, he implored haste in implementing improved safety legislation and recommended “a pragmatic, action-oriented approach to get passive restraint technology into existing cars and built into the net generation of automobiles” [9].

An even more extensive and far-reaching safety campaign known as DRIVE SMART was sanctioned by General McDermott in 1988. At the campaign kickoff on Wednesday, March 30, 1988 at a press conference in Washington, D.C., General McDermott announced that USAA would imitate the most extensive package of auto insurance discounts and incentives ever offered [3]. These incentives and discounts were recognized by then-Secretary of Transportation Jim Burnley as bellwether actions in corporate leadership. He stated in a message at the press conference, “I am delighted to say that General Robert F. McDermott, Chairman of the United Services Automobile Association, has accepted the challenge and in turn is setting the standard for the insurance industry. This is not only a fine example of private sector initiative, but of the leadership industry can provide and credibility it can lend in developing public support for new safety technology. ” Ralph Nader also stated that “USAA was setting the pace for Allstate, State Farm, Travelers and others” [12]. Included in USAA’s program were an Air Bag Safety Bonus and Air Bag Replacement Guarantee, an Air Bag Premium Discount, a Child Safety Seat Discount, an Anti-Lock Brake Discount and other incentives as well.

The DRIVE SMART campaign began in San Antonio, Texas, in early April and will continue through 1989 and beyond. In the campaign, USAA spearheads a group of 35 business, community, educational and religious organizations pledging to commit time and resources to reduce traffic injuries and fatalities on American roads.

The purpose of the campaign is multi-dimensional, informing people on the four general topics including responsible driving, the use of restraints, proper vehicle maintenance, and buying “smart cars” – cars with the latest safety features. To this end, General McDermott authorized USAA’s development of a variety of materials and services to support the campaign. These included billboards, bench ads, taxi and bus ad boards, safety-related videotapes, dozens of public service announcements (PSA’S) for radio and television, posters, brochures, bumper stickers, decals and safety displays. Many of the materials were produced in English and Spanish to widen their audience appeal. These materials were also made available without USAA logos so that organizations could use their own logos or message. USAA made these available at no cost to any organization willing to promote the idea of automobile safety.

Soon the campaign took on a statewide and nationwide focus. The Texas Highway Department adopted the theme and expanded it to DRIVE SMART TEXAS, placing DRIVE SMART TEXAS signs near entrances and exits of high-traffic areas in the state. Through the cooperation of some business sector participants (e.g. Taco Bell and 7-Eleven), the campaign entered regional and national markets through television advertising and distribution of USAA-produced DRIVE SMART materials at their locations. Public service ads in magazines were then focused toward both military and civilian communities throughout the country.

McDermott carried the safety message personally to a national audience in September 1988 when he keynoted the second National Injury Control Conference. The conference was sponsored by the U.S. Center for Disease Control, and about 500 physicians, researchers and educators attended.

Additionally, a USAA-sponsored DRIVE SMART AMERICA display appeared at both the National Conference of State Legislatures in Reno, Nevada, and the U.S. Hispanic Chamber of Commerce 1988 National Convention in Washington, D.C. for the purpose of enhancing political interest on safety issues. In all, a total of over 6.5 billion nationwide media impressions for DRIVE SMART were made in 1988.

In January of 1989, Diane Stead, Administrator of the National Highway Traffic Safety Administration wrote a letter to McDermott. In it she said she wished “to personally commend you on the actions taken by USAA throughout the year to increase the safety of our nation’s motoring public” [22].

McDermott’s Contributions to San Antonio

In a tribute to Robert McDermott recently, Mayor Henry Cisneros of San Antonio stated that “when the economic history of San Antonio in the 1980’s is written, the most influential individual will be him (McDermott)” [4]. After his arrival in San Antonio, McDermott was selected as President of the Greater San Antonio Chamber of Commerce. In this position he initiated the San Antonio Economic Development Council which began a drive to bring business development into San Antonio. When the Hispanic population felt they were not being included, McDermott founded United San Antonio which pulled all the disparate community groups together.

In the 1980’s he was responsible for getting an undergraduate engineering program at the University of Texas at San Antonio first and later graduate programs in the sciences. With this groundwork laid, he began moving in a formal sense to make San Antonio a biotechnology center for the future. He founded the Texas Research and Technology Foundation, which was established to develop a Texas Research Park. He also helped arrange for the first major gift of $15,000,000 for the park from H. Ross Perot. Today he is regarded as the key influential business leader in San Antonio.

In addition to his personal contributions, McDermott believes that USAA should be a corporate good citizen, and it has been so. USAA’s Volunteer Corps gave over 30m000 volunteer hours to San Antonio just last year and USA is the city’s largest private-sector United Way contributor. Although USAA employees constitute only 2% of San Antonio’s work force, they contributed 10% of the total monies collected by United Way.

Promulgating Ethical Ideals

In addition to what McDermott has done to instill a system of corporate ethics and to integrate it into normal business activity, he has made two other major contributions as well.

He is the Chairman of the International Leadership Center Foundation in Dallas. This Foundation supports Leadership America, recognized as the premier off-campus leadership training program for college students in the country. The mission of the Foundation has four principal parts:

-Providing ideas, advice and personal involvement to aid the Center in broadening the vision of current and emerging leaders by improving their leadership capabilities;
-Formulating policies that insure excellence in all Center activities;
-Promulgating high traditional American moral and ethical values that underlie successful leadership through all Foundation and Center activities;
-Designing, developing and implementing plans that insure the financial stability and growth of the International Leadership Center.

Participating students have all agreed that the Leadership America Program ahs had a major impact upon them because it shows the importance of ethics and values as a foundation for leadership.

As a second major action, USAA is underwriting a series of four nationally-televised programs under the title “Raising Good Kids in Bad Times.” Produced by Emmy Award-winning producer Arnold Shapiro, the first program, “See Dick and Jane Lie, Cheat and Steal: Teaching Morality to Kids,” will air on U.S. Commercial stations in April. Tom Selleck will host the program. Other films will include “The Truth About Teaching,” hosted by Whoopi Goldberg, “The American Dream Contest,” hosted by Michael Landon, “New & Improved Kids,” with Loni Anderson, and James Garner holding the reins on “Take Me to your Leaders.” The series has already been contracted by over 98% of the national television market.

Robert F. McDermott’s achievements in his chosen careers and his efforts on behalf of the insurance and financial services industry, his community and our society and nation resulted in his selection to the American National Business Hall of Fame in 1989. His achievements underline that personal ethical conduct, integrity and respect for God and country provide a foundation for success when carried into the world of business.


*This article by Paul T. Ringenbach was originally published in The Journal of Business Leadership, Volume 3, Number 2, Summer 1990.


*Copyright 1990. The American National Business Hall of Fame. All rights reserved. No portion of ANBHF may be duplicated, redistributed or manipulated without the expressed permission of the ANBHF.

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