Establish An Organizational Structure

ESTABLISH AN ORGANIZATIONAL STRUCTURE

by Gary Holgate

When analyzing the organizational structure of an independent insurance agency, you will find that there are four different general functions performed:

Before going into a detailed definition of each, let's discuss the types of contact that an agency has with existing and prospective customers.

When I first began analyzing agencies in the late 1960s, I quickly learned that an agency has two basic types of contact with existing and prospective customers:

• Demand Contact
• Public-Relations Contact

'Demand contact' with a customer occurs when an existing customer contacts the agency and, 'upon demand', requires the agency to perform some type of service. Examples could be a policy change for a new vehicle, a change of address, a claim, a billing question, or a coverage question, to name a few.

The important aspect to remember about a demand contact is that the agency does not control when the request will be made, or what the resulting workload will be during the next hour, day, week, month, or year. When the customer requests service, the agency must deliver it in a timely, courteous, and accurate manner.

A 'public-relations contact' takes place when the agency generates a contact with an existing or prospective customer. Examples of public-relations contact include a sales representative calling a new prospect or visiting an exceptional Commercial customer. The important fact to remember about a public-relations contact is that the agency, not the prospect, generates the contact with the customer.

Once these contacts have been identified, demand contacts should be called 'service', and public-relations contacts could be defined as 'sales.'

I often ask, 'How many sales representatives have had a lot of time for public relations contacts in the past year?' The number of people responding is normally very low-fewer then 10%. What sales representatives are saying is that if they don't have time for public-relations contacts, they don't have time for sales.

After personally analyzing more than 450 independent insurance agencies, I could probably write a book about the reasons why sales representatives don't have time for sales. However, there is one predominant reason for this dilemma: The typical sales representative (owner or non-owner) attempts to perform public-relations contacts and demand contacts at the same time. In other words, the sales representative is attempting to sell and service customers simultaneously.

If your job involves demand contacts, this may occur:

You are driving to work and determine that you have three tasks you want to accomplish that day. The time to complete them should take no more than half an hour. Let's say these tasks include calling a customer for a renewal appointment, contacting an underwriter to follow-up on a large risk that is being placed, and making an air-line reservation to attend a seminar.

You arrive at work at 8:30 a.m., get a cup of coffee, sit down at your desk, and find the number of the customer with whom you want to make the renewal appointment. The telephone rings and another customer asks a coverage question (demand contact). You answer the customer's question, begin to call for the renewal appointment, and the telephone rings again. It is another customer with a billing question (demand contact).

This goes on all day long, until it's 5 p.m. The agency is closed to the public. You are tired because you worked hard all day and desk before going home, and then think of the three objectives that you set for yourself that morning. Were they accomplished? Nine out of 10 times the answer is 'No.'

Why does this happen day after day after day? The answer is very simple:

When an employee attempts to perform service functions and sales functions at the same time, the service functions cause the employee to lose control of business life, simply due to the nature of the service function.

This is why it is best to establish an organizational structure for an agency; separate sales and service functions, and ensure that an employee is not assigned to perform both, if at all possible. If these two functions are mixed into one employee's job description, service time will always consume sales time, and the sales objectives of the agency will suffer.

One of the major deficiencies of the average independent insurance agency is the lack of time devoted to management.

Another question I always ask when consulting or conducting seminars is, 'Does your agency have a full-time manager who does not sell or service, and spends 100% of the time managing?' Again, there is a very low positive response-usually fewer than 5% answer that they have such a full-time manager.

If this is a fact, it means that more than 95% of the independent insurance agencies are combining management with sales, service, or both.

The problem is clear: If you combine sales or service, or both, with management in one employee's job description, management will suffer. Sales and/or service duties will always consume any time available for management.

Management is something that can always be put off until tomorrow. And when that happens, problems become crises, and the majority of management time is spent 'putting out fires.'

Paperwork is like management. It can always be put off until tomorrow. That's why, when paperwork and service are combined, service time will always consume paperwork time, and backlogs will occur.

When combining paperwork and sales, one or the other will suffer.

And finally, if you combine paperwork and management, management time will always suffer, as the paperwork will always consume management time.

When establishing an organizational structure for an agency, never combine these functions into one employee's job description:

There are three types of P/C customers. They are:

If an insurance company wants to write the large, exceptional Commercial Lines customers, agency owners should be involved. My studies reveal that more than 95% of exceptional customers are written by the owners in the average agency.

If the company wants to write non-exceptional Commercial Lines customers, it could work with either a sales representative, a small (non-exceptional) Commercial Lines manager, an operations manager, or a Commercial Lines customer service representative (CSR).

If the insurance company wants to write Personal Lines business, it could work with a Personal Lines manager, an in-house Personal Lines salesperson, or a CSR, depending how the agency is organized.

If someone other than the owner is involved in a project, that employee will enjoy working on the project since it's something new and different.

Each situation varies, depending how each agency is organized. The important thing to remember is that owners are the busiest people in the agency and, whenever possible, should delegate to employees.

To help identify different positions in an agency and what each position generally entails, the following charts and description are provided. Remember, these are only general definitions and will have to be adjusted and modified with each agency.

The Personal Lines Manager, in addition to managing the Personal Lines department, often acts as a CSR, and may even serve as the agency Personal Lines Assistant.

The Personal Lines Manager could also be the In-House Sales Representative, who handles new walk-in business, telephone quotes for new business, and follow-up expiration dates on additional coverage for existing accounts.

The Customer Service Representative (CSR) usually handles the demand contacts for Personal Lines customers including claims.

The Personal Lines Assistant usually processes the paperwork regarding policies received from insurance companies.

The Commercial Lines Manager could, in addition to managing the Commercial Lines Department, perform some or all of the duties listed in the other positions below.

The Account Manager (a new position that I have recently created) works with Sales Representative on information gathering, as well as placing and servicing exceptional Commercial Lines customers.

The Placer takes the information gathered by a Sales Representative and placed the business with insurance companies. The Placer mostly works with exceptional Commercial Lines customers.

The CSRs handle demand contact from Commercial Lines customers. Through the years, I have attempted to have exceptional customers and non-exceptional customers and non-exceptional customers assigned to different CSRs.

For example, the Non-Exceptional CSR handles only non-exceptional Commercial Lines customers.

The Commercial Lines Assistant is an employee who performs the paperwork for both exceptional and non-exceptional customers.

The Sales Manager manages all sales activities of the outside sales staff.

This person is usually an owner.

The Commercial Sales Representative is an outside salesperson who is normally responsible for prospecting for new clients and handling all outside work with exceptional customers.

The Life and Health Sales Representative sells Life and Health insurance to existing agency customers and other prospects. Many agencies use an insurance company representative in this position.

The Sales Department Coordinator is a relatively new position in agencies. The coordinator's major functions include coordinating sales objectives, telemarketing for new clients, and narrating management reports. This person sometimes acts as the owner's secretary.

There are many other positions you may find in an agency, such as bookkeepers, word processing operators, receptionists . . . depending of course, on agency size. The point in organizing agency personnel along these lines is to free your staff of distractions to concentrate fully on particular clients. After all, the organizational flow is a key element in the success or failure of the agency.