We have a small Middle-Eastern restaurant in our neighborhood that is family operated, serves delicious food, and is reasonably priced. Its creed has been to cater to the customer from its opening day. The owner was proud of that creed and moved from table to table to make certain all his customers' needs and desires were met. Every so often, he surprised us with an extra glass of wine or a free desert.
Obviously, we returned frequently - and so did many others. Within a year, he expanded. Although one waiter (a relative) sufficed before, he now needed three. The restaurant began getting crowded at lunch and dinner, so he started offering take-out.
We rarely go to the restaurant now because it's always so crowded. Recently, after again waiting an inordinate amount of time for a called-in order, we told him that as much as we liked him and the food, we would have to go elsewhere in the future.
Change 'restaurant' to 'insurance agency' in this story. Does it ring any bells?
Our restaurant owner, like many agents, hit the service ceiling. The service ceiling is the point at which your customers' needs and desires exceed your ability to perform to your own level of satisfaction or to theirs.
The restaurateur, like most agents who have hit the service ceiling, knew that things were changing even as he became more successful. First, as his staff grew, he felt he was losing some control. Management was easy when it was all family, and communications, while sometimes volatile, were always open. But because he trusted his intuition, he hired people too casually and they sometimes took advantage of him. Furthermore, he was too nice, so he delayed firing employees who didn't meet expectations. All this caused the service he was so proud of to deteriorate. As the kitchen (the equivalent of an agency's back office) became busier with the increased traffic, his wife, the cook, became uncomfortable relinquishing control or changing procedure, so the product's delivery slowed. Finally, the menu rarely changed, so the choices available to customers grew limited.
By the time we spoke to the restaurant owner, he confessed feeling guilty because things were not the way he wanted them and he didn't know how to change. The money was still good so, although he was sorry to lose us, his remarks took the form of reasons and excuses for the deterioration instead of speculation about the consequences of maintaining this course.
All insurance agencies face service ceilings as they grow. Agencies hitting this ceiling find their growth slowing, complaints growing, or long-term customers leaving (often because insurance is cheaper elsewhere). Most agency owners get an uncomfortable feeling that they're losing control and service levels are slipping. But they continue the course because they're still making money. These agents do not yet realize that financial success is not necessarily equivalent to being a successful businessperson. In fact, most of the truly successful agents we've encountered admit that they know how to make more sales. However, if they pursue their business in a way that makes them proud, their financial condition continues to improve anyway.
Many agents experience the service ceiling by the time they reach the $500,000 revenue level, when staffing beyond family members occurs. The traditional management ceilings occur at revenue levels of $1 million, $2 million, and $3 million. At those levels, management styles must change to accommodate the business size and foster growth.
What Causes the Service Ceiling?
Service ceilings stem from the owner's inability to evolve from the principal implementer of great service to the manager of great service. Insurance knowledge, combined with empathy and sales skills, enables most agents to become successful. Gaining the technical, sales, and social skills to be recognized as an excellent agent takes years. While most understand that attention paid to the customer-more than the price or even the product-made them successful, few take any time to learn management techniques when they realize that the sheer volume of business requires more service staff. So staff is hired, usually based on experience or recommendations. Sometimes, employees are hired in desperation-because they're 'better than nothing.'
Unfortunately, you often don't get what you pay for when staffing service positions. Sometimes the new employee has less knowledge than the job requires. Once identified, that problem can be easily solved through retraining or replacement. More insidious are the myriad of employees who lack the people skills to represent your company the way you desire. These problems often go unrecognized for years, with only a few negative remarks made by other employees or customers. The customers might not approach you regarding tactless employees or those who change your service creed from 'We'll take care of it right away' to 'I'll do it as soon as I can' or 'We can't do that.' Your customers may be reluctant to get someone in trouble or too embarrassed to complain. The eventual result is the departure of the customers, usually citing cost as their excuse. If long-term customers leave you simply for price, they're sending you a message: You have little, if any, added value in your organization. If any program with a comparable or lower price is acceptable to your customers, they're seeing no added value to your services.
If a loss of customers is indicating that you've reached your service ceiling, and a lack of management skills is the cause, what can be done to break through this artificial barrier to growth?
- A major attitude adjustment must be made from the top of the organization down. The owners must reiterate and recommit-in writing-to the service philosophies that made them successful in the first place. Write a Service Pledge. Avoid terms such as 'best,' 'high quality' or 'fast' unless you're prepared to define them in measurable terms.
- Develop written service goals-with your staff-that will move you toward your Service Pledge. These goals must be realistic, objective, measurable, and achievable within one year. Including your staff in this process allows them to buy into the goals. It also gives the reprobates on your staff fair warning either to change their attitudes or prepare their resumes.
- Initially, some staff members won't believe that the Service Plan will be implemented. To show them you mean business, let them know that you plan to measure results against objectives. This implements the management phase of the service change. Measurements include productivity reports (if speed is one of your goals) -- that is, measuring transaction time from customer contact to completion. Another measurement is customer interviews and surveys in which you ask questions such as, 'How has our service changed in the last X months?' Use scores such as 1 (gotten worse) to 5 (much better).
The results of this change will shock the organization into activity-and any activity is better than none when you've hit the service ceiling.
If you're breaking the $1 million, $2 million, or $3 million revenue ceilings, add education and professional management to your agenda. At the $1 million level, you need different people managing sales, service, and finance, so begin strategic planning. At the $2 million level, you must become (or find) a professional manager (Chief Operating Officer) who manages the company and implements the plan while the owners sell insurance. At the $3 million level, a working Board of Directors is appropriate, along with divisional profit centers.