An incentive or bonus program requires many variables to be successful. Such programs too often reward work that would’ve been done anyway. How do you avoid this? Jack Fries gives you the answers in a two-part series on bonus compensation.
Many years ago I asked my mentor, Gary Holgate, to help me to create an employee bonus plan. He resisted at first, telling me, 'I have a problem with most bonus plans. They usually aren’t tied to salary or job standards and in most cases, you end up paying a bonus to employees to do the job they were hired to do.'
As we began to develop an Incentive/Compensation program we determined that the success of any independent insurance agency relates to growth. An agency that wants to grow must achieve these objectives:
- Provide superior service to its existing customers. This will ensure that the customers stay with the agency. Renewal income generates in excess of 90% of the average agency’s P/C Income.
- Write every coverage possible for each customer. It’s extremely important that employees advise customers constantly of additional coverages available when contacting them. When account development occurs, the more coverages a customer has with an agency, the better the renewal retention ratio with the agency.
- Write new customers. Employees must make every effort to write the insurance for every prospect they come in contact with, as long as they observe underwriting guidelines of the insurance companies.
A successful Incentive/Compensation should:
- Create a financial reward for all employees based on growth.
- Create an incentive/compensation program that’s fair for all employees.
- Create an incentive/compensation program that’s fair to ownership.
If an employee — full-time or part-time — begins the year in the employ of the agency and leaves before December 31, whether voluntarily or at management’s request, the employee isn’t eligible for their portion of the annual income growth bonus. An employee must be employed by the agency on the last day of the year to be eligible.
For this Incentive/Compensation program to work effectively, management must periodically communicate the results throughout the year. Management should conduct monthly meetings with employees to show the status of the agency’s growth and a comparison to the previous year’s results for the same period. This will show employees how they’re doing and motivate them to perform their sales and service functions at optimum levels.