It has been an extraordinary three and a half months for Aon.
First, the firm announced the largest piece of consolidation in the history of P&C broking when it struck an agreement to acquire Willis Towers Watson in an all-share deal, then valued at $30bn.
Then it stunned the market by unveiling a 20 percent salary cut for staff, a defensive Covid-19 move eschewed by its peer companies.
And now it has rapidly reversed course, dismantling a program that started as recently as May 1.
Let's get the simple observation out of the way first: this makes the late April action look hasty, and something of an overreaction.
The company took a sharply contrarian stance, making a pretty dramatic move, and it has now chosen to unwind it in very short order.
Those who did not make the move now look like they kept calm and took a proportionate response to the crisis through measures like halting buybacks, cutting discretionary spend, tapping credit lines etc.
We said early on that the perception of the measure could change sharply depending on the evolution of events.
If the global payments system had collapsed and a cashflow crunch gripped the brokers, Aon's decisive move to a defensive posture would have looked prescient.
And if other competitors had unveiled major headcount reduction programs – bringing Aon's pledge on retaining all staff into sharper focus – the move would have looked compassionate by way of contrast.
The first has not happened and looks an increasingly unlikely outcome.
Perception on the latter is overwhelmingly shaped by Marsh & McLennan Companies and Willis, which have chosen to protect jobs without cutting salaries, although smaller competitor AJ Gallagher indicated it would cut 3 percent of roles via furloughs, attrition and layoffs.
With time elapsing, and the world's economies emerging from lockdown, a job cut program in the third or fourth quarter from MMC or Willis into a more functional labor market would be unlikely to attract the same negative notice as it would have in April or May.
So the April decision – effectively initiated in March given the internal work to make it a reality – has not aged well.
For some weeks now, intelligence from the brokers has suggested that the severe cashflow pressure some were predicting two months ago has not been materializing, with less drop-off in volumes than expected, lower amounts of returned commission and a bigger ratings tailwind.
In this context, it was becoming increasingly apparent that the extreme bear scenario Aon had set out when it introduced the scheme was not coming to pass, rendering it redundant.
The broker could have run the clock a little, but to its credit it has climbed down quickly at the risk of looking slightly foolish. The 5 percent "thank you" to staff is a nice touch, along with the additional day of holiday.
Nevertheless, there is likely to be damage to Aon's status as an employer of choice within insurance – resulting from the order in which it chose to ask for sacrifices from stakeholder groups at a time of crisis as it maintained the dividend.
The distaste for the move from people outside the tent – including executives at carriers Aon trades with and talented broking staff at peers – was real, and is unlikely to disappear overnight.
This negative judgement is also on show from some within the Willis ranks, and will make it harder for Aon's management to win the battle for hearts and minds as it seeks to persuade key talent to remain in place and give the deal a chance.
Going forward, Aon will also find it more difficult to attract outside talent. The extent and, crucially, the duration of that effect are uncertain and will be impossible to measure. But right now – at a crucial moment in the war for broking talent – Aon has made its own job more difficult.
The picture is somewhat different within Aon because doubtless there is an esprit de corps and a bedrock of belief in CEO Greg Case that has carried many staff through this difficult process – something which helped drive the 80 percent opt-in rate for salary sacrifice.
That core of Aon staff have faith in Case and are true believers in his Aon United project.
But there are those who view the initiative in the way that it is commonly talked about by detractors in the market – as a move that asked staff, not investors, to take the pain, and one which put defending the Willis deal before other priorities.
This may be a minority view within Aon, it may well be a slim minority view, but right now Aon's competitors are relentlessly looking for such staff and working to lure them away.
Crucially, Aon was already heading into what was going to be a difficult period when the loyalty and commitment of its staff would be tested, as with any major integration exercise.
Aon has publicly cited $800mn as a target synergies figure for the Willis deal, with these savings tending to be set conservatively to create room for outperformance.
Two jobs do not go into one and there are certain to be substantial redundancies and a huge shakeout of talent post-closing (currently scheduled towards the end of H1 2021).
There are a host of challenger brokers working overtime to sell to Aon staff the benefits of a smaller and more entrepreneurial firm, with an unbelievable amount of energy being deployed to lure away key producers. With its salary cut scheme, Aon has armed the likes of TigerRisk and BMS with another weapon to attack its talent base.
Aon’s management team will be hyperaware of those efforts, and a key challenge over the coming months will be finding ways to move proactively to shore up staff commitment and bolster retention ahead of 2021’s integration of Willis.
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