This is the softest market the P/C industry has ever experienced. To thrive, agencies must eliminate waste, work harder, and work smarter.
Producer productivity is the key to thriving in this soft market. Producer productivity is not just producers selling enough - it’s about selling enough efficiently. This means quality accounts. It means giving a work product to the staff that enables them to do their work efficiently or letting the staff collect the data for a cut of producer’s compensation. It means good producer management.
Greater producer productivity begins with a production team that includes only producers. Too many agencies employ people with the title “producer” who don’t really produce.
If you want your agency to thrive in this market, answer this question honestly: Are all of your employees with the title Producer truly producers? Don’t answer based on what you wish your producers did or what they should do. What true value does each producer bring to your agency? The biggest mistake agencies make every day is paying and treating non-producing producers as true producers. The results: excessive payrolls, damaged morale, shattered productivity - and lousy profits.
Although these non-producing producers probably bring some value to the agency, they are not in the job that fits their particular skill set. Athletic teams don’t pay second and third string players the same as starters, so why should an agency pay producer wages to an employee whose title is “producer,” but really isn’t producing?
When agencies were flush, they could get away with this. They could and they did subsidize poor producers. Today, there’s not enough extra revenue to continue subsidizing employees who aren’t pulling their weight. Management can push to get more and more out of them – but they’re in the wrong job. It’s like trying to squeeze blood from a turnip.
These “producers” are often good people with other valuable attributes, so perhaps you can find them a more appropriate job at a more appropriate wage. Agencies expend a considerable amount of time, money, and energy trying to get non-producing producers to produce; so once an agency helps these people find a different position that fits their skill set better, it can focus more resources on people who can sell.
Once the production team consists entirely of true producers, what resources does an agency owe its true producers?
- Good customer service representative (CSR) when the producer’s production is sufficient to earn a CSR, but not before. By “good,” I don’t mean a CSR who will do the producer’s work for him or her.
- A fair wage for honest, good work. What is fair work? A true producer must generate at least $300,000 a year of self-produced commissions.
- An agency with a good reputation.
- An effective IT system.
- Quality training and mentoring. This is not only fair, but it is also smart producer management.
That’s it. Agencies don’t owe their producers anything else. They don’t owe them an expense account, a car or even a lead list. These items can arguably make producers more successful, but that does not mean the agency owes them these perks.
These items are truly perks. What would happen if these perks increased as a producer’s book increased? When an agency increases producers’ perks as their books increase, it’s focusing significant resources on its most important assets, which makes of sense. Agency expenses will decline if managed well because the value of the perks need not increase at the same rate as sales. Limiting these perks to reasonably sized books, minimizes these expenses.
These are all aspects of good producer management, which improves morale for all but the less successful producers because employees see a fair free enterprise system. Eliminating an entitlement environment also improves morale. Managing the agency becomes easier because when producers gripe, the best answer is, “produce more,” which creates a more competitive environment that pushes each producer to greater success.
In visiting dozens agencies, I’ve rarely seen these practices. Those few that do practice good producer management achieve far greater success than those that do not. Many agencies forget that a fair system must eventually be based on results. The effort to be fair to all based on good faith effort is simply misguided. It’s not easy to make hard decisions. However, it’s far easier than having a problem and knowing that you’re not doing anything about.
Doing things right attracts high quality people who thrive in a fair free enterprise system. Doing it right enables your agency to thrive.
NOTE: None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.