This article has nothing to do with morals. I'm not in the business of saving souls but of helping others save their business. If you are committing the sins I describe, you might not go to hell personally, but your business life will sure seem like it!
1. FAILURE TO LEAD EFFECTIVELY
This is the deadliest of the seven sins because to one extent or another it is entwined in the roots of the other six. I don't know whether effective leaders are born or made, but too many agency managers with executive titles confuse their authority with the ability to lead.
By virtue of their position of authority, managers set the standards for their agencies through their words, deeds, and actions. Those who hypocritically speak of the virtues of honesty, integrity, and fair dealings while behaving otherwise do great damage to their agencies.
In addition to setting high standards, effective leaders are the drummers who set the cadence for their agencies' march toward prosperity by proactively seeking ways to improve their agencies' market share, methods of doing business, and profitability. They know where they want to go and how to get there.
2. FAILURE TO MANAGE PEOPLE EFFECTIVELY
This sin eats at the fabric of a business like a disease. If allowed to go untreated, it can cause irreparable damage.
Astute agency managers understand that they can't make people perform in a given manner. Rather, they create an environment where others can achieve their goals and carefully select people whose personal goals align with those of their agencies.
They not only provide a pleasant physical atmosphere and efficient tools, but attempt to satisfy their employees' psychological needs. For most people, these include the need for a sense of belonging, appreciation, and respect. Effective managers do more than mouth platitudes such as, 'People are our most valuable asset.' They let their staff members know they're valuable by inviting them to participate in decisions that affect them. They coach rather than kick their employees in the flanks like stubborn mules. In short, they earn the respect of their subordinates by respecting them.
3. FAILURE TO PLAN
Operating a business, any business, without a plan is like driving from Los Angeles to New York without a road map. Without a well-defined plan to guide them, agency managers squander their personal time and their agencies' financial, human, and other resources by aimlessly meandering through a maze of daily distractions in pursuit of growth, profit, and perpetuation.
The reason most agencies don't have a formal business plan is that their owners and managers are unwilling to commit personally to the achievement of specific goals and be held accountable for results. They'd rather be buffeted by distractions than face themselves in the mirror and admit they've failed to accomplished their goals.
Many managers justify their failure to plan by professing that the process is too complicated and that their time can be spent more productively. At best, this is a lame excuse; at worst, it's a veiled acknowledgment that they don't know how to plan.
The process is fundamentally simple. It starts with a few questions: What do the owners expect the agency to accomplish? How much do they want to grow? How much money do they want to make as owners? How much wealth do they want to accumulate? Do they want to perpetuate the agency or liquidate their wealth? Are they willing to commit the financial resources necessary to achieve their objectives? The answers to these and other questions set forth the agency's objectives, which are formalized in its Mission Statement.
Next, management determines what must be completed to ensure that the goals set forth in the Mission Statement are achieved; who will be responsible for completing each task; and when each task should be completed. The what, who, and when of each task becomes an Action Plan, which in turn becomes a part of the agency's formal business plan.
4. LETTING EGO GET IN THE WAY
Managers who are unable to control their egos probably cause more damage to an agency's productive health and financial well-being than any other factor. They not only damage agency morale, but often destroy the relationships that bind an agency together. 'Snobbish, arrogant, superior ass' is how a dominating, noncompromising manager responsible for destroying otherwise harmonious relationships might be described. The struggle for power and recognition often masks a deep sense of insecurity.
It's not that managers should leave their egos at home when they come to the office; they should just learn how to control and use their egos productively. They can start by admitting what they don't know-if not to others, at least to themselves. I found that this gets easier as we grow older. At 30, I didn't know what I didn't know. At 40, I knew what I didn't know but wouldn't admit it. At 50, I knew what I didn't know and would reluctantly admit it. Now that I'm over 60, it doesn't matter! By admitting our weaknesses, we're more likely to recognize the strengths of others and invite those who can help us into our personal sphere.
Here's a true experience that illustrates my point: I recently brought the owner-presidents of three large regional agencies together. All three told me they were concerned that their agencies wouldn't be able to survive unless they increased their income to more than $5 million, and asked for my help in finding new producers and agencies wanting to sell. Combined, their income exceeded $9 million. Although each was the CEO of his agency, they had significantly different strengths. One has exceptional administrative skills but is weak in sales and overall underwriting; one has outstanding niche marketing and sales skills, but poor administrative and limited technical skills; and the third is among the best general insurance technicians I know, but lacks the people skills needed to be an effective administrator. I felt they would complement each other and brought them together to talk about consolidating their agencies.
After several enthusiastic conceptualizing sessions, they agreed to start the consolidation process. The first item on the agenda was their titles. The strong administrator dropped out when the others would not agree that he should have the president's title. The merger of the other two lasted less than a year because of conflicts between the principals over the scope of their authority and responsibilities. Simply put, they were unable to recognize their personal weaknesses and acknowledge the other's strengths.
5. LACK OF ACCOUNTABILITY
Managers of closely held agencies who own a share of the agency's equity have a great advantage over those who don't: They have little fear of being fired. Sole owners are fundamentally accountable only to themselves, and don't face the loss of their jobs until their agencies are on the brink of failure. When nonowner managers don't perform, they're terminated. Nonperformers who own a share of the agency, regardless of how small, are tolerated.
Being a co-owner of a closely held company is a bit like being married. Our level of tolerance directly correlates to the amount of pain a divorce would incur. Based on my experience, agency owners are considerably more lenient with their partners than their spouses-probably due to the fear that a partnership breakup will be more disruptive than a divorce.
This is a shortsighted perspective. If you accept the truism that mediocrity breeds mediocrity, it follows that owners who tolerate nonperformance at any level will themselves become mediocre. Effective managers will not allow themselves to be brought down to the level of their indifferent associates. They use their leadership skills to bring others' performance levels up to their own. And they do whatever's necessary to get rid of those who can't or won't measure up.
Accountability starts with a clear division of responsibilities and defined performance standards. Management responsibilities should be allocated based on the functions that require supervision. The size and complexity of the agency determines the division. General administration, accounting, sales, customer services, and office services are the common broad categories. The most qualified individuals available should fill each management position. Unfortunately, all too many owners can't accept that someone else may be able to do their job better. Being the top producer in an agency doesn't necessarily mean that you're qualified to be president.
I have yet to find an agency successfully managed by majority rule. It's one thing to build consensus. It quite another to let a committee make the tough decisions. Someone has to be held ultimately accountable for results, and they shouldn't be allowed to hide behind a committee. Nor should managers be allowed to cross functional lines and make others' decisions.
The best way to make certain your agency will prosper is to think teamwork. Let the quarterback do his job. If you're the quarterback, expect the linemen, running backs, receivers, and other teammates to do their jobs. If you don't do yours, the coach should find someone who can.
6. CONFUSING SELLING WITH MARKETING
Managers need to understand the difference between selling and marketing. Marketing involves letting a large number of people know that they can satisfy their needs for a sense of security by purchasing insurance from your agency. Selling is the one-on-one process of convincing the prospective customers who respond to your marketing effort to buy from you. Marketing opens the doors; selling rings the cash register.
One of the clues to deciding if an agency understands this difference is seeing whether someone is primarily responsible for its sales activities. If not, it's safe to assume that the agency relies heavily on social contacts and has below-average growth. If a manager has been designated, the title used provides another clue. If the title is 'Sales Manager,' the manager probably concentrates on stimulating the sales force to 'get out there and sell more' any way it can. Marketing Managers, on the other hand, formulate strategies to develop prospects for the sales reps, and maximize the reps' close rates by helping them hone their selling skills and use their time efficiently.
I've always liked the 'Ready, Aim, Fire' marketing strategy. You get ready by identifying specific segments of the marketplace you want to capture and making certain you have an inventory of carriers willing to compete aggressively. You must also make certain that you have the financial and human resources needed to support the sales activity. Next, you take aim on your targeted market by developing the message you want to communicate and selecting the media most likely to attract the attention of prospective buyers. Consideration should be given to a blend of television, radio, trade magazines, billboards, trade shows, direct mail, and telemarketing.
After you've taken aim, fire by implementing your campaign. This is when effective sales management and strong personal selling skills make the difference. If you don't get the expected response, determine why. Every response received should be assigned to a specific sales rep and tracked to conclusion. If a sale was made, find out what convinced the prospect to say yes. After the close, did the sales rep ask for referrals? If the sale was lost, why? The best way to ensure the success of your marketing effort is to monitor the sales activity carefully and use the information gathered to eliminate the weaknesses in your campaign and capitalize on your strengths.
7. WORSHIPPING AT THE ALTAR OF PRICE
Let's face it: You can be the greatest technician in the business, pitch value-added services all day long, and still lose an account on price. The reason: Independent agents and brokers are unwilling to separate the value they bring to the table from the cost of the insurance purchased by their clients. A vast majority of local and regional agents and brokers still think of themselves as agents for the companies they represent rather than advocates for their clients. And this will continue as long as brokers are willing to accept the commissions paid by insurance carriers for selling their policies as compensation for the services they promise their customers.
The main reason brokers don't want to tell their clients how much of the premium they get is that they can't justify the amount by the services they provide. The reason for this is rooted in how they sell. Instead of offering to analyze their prospects' needs, they ask for copies of their policies and ask, 'If I can save you money, will you give me an order?' This explains why buyers think that all policies are the same and place no value on the sales rep.
What's wrong with telling prospects that it's your job to help them identify their needs, design a program that will satisfy them, and find carriers willing to provide the required coverages at the lowest price? If you do this, you'll be able to separate the value of your services from the premiums charged by the carriers. If there's any sacrifice to be made at the altar of price, it will be the carriers'-not yours. And as long as you deliver on your promises, your clients will show their appreciation by refusing to let hucksters get their foot in the door.
If mere survival is your ultimate objective, here's some free advice: Get out of the business before your competition runs you out! If you're willing to examine your management conscience and make a sincere effort to overcome your management sins, prosperity (not just survival) will be your reward.