The Agency Profitability Audit consists of five stages:
• Analyze the Available Data
• Understand the Agency’s Objectives
• Determine the Agency’s Assets and Course of Action
• Inform All Personnel and Companies of the Course of Action
• Transact the Procedures and Practices Needed To Attain the Established Objectives
Analyze the Available Data
An agency must apply the audit to virtually all aspects of its operation. Areas to audit include: computer data and usage, sales and marketing, agency procedures and policies, communications and Internet usage, customer service, agency image, advertising, financial analysis and forecasting, and the agency business plan. Many of these aspects are interrelated, and some will also lead to auditing other areas of operations.
To analyze your agency data, you must first collect it. Using the agency’s management system will provide much of this information – but by no means all. I’m amazed at the weakness of the reporting features in some agency systems. Apparently, the people who developed them have never owned or managed agencies. Sorry to digress, but this factor is one of most difficult challenges to overcome.
If you can’t retrieve data from the management system, you’ll need to uncover it the old-fashioned way, by manually counting, asking and assembling. Once you’ve collected the data, I suggest that you create a checklist/score card and rate yourself from 1 to 10 (1 being poor and 10 meaning excellent).
You can use this tool to not only identify and score on your present position, but also to set priorities for what needs “fixing, assign responsibilities for these tasks, and set deadlines. This needs to be a highly systematized approach.
Understand the Agency’s Objective
Understanding your agency objectives seems simple enough. Most agency owners have mental pictures of their objectives: growing the value of their business and building their personal income. Although these are laudable goals, few agency owners attain them primarily because they seldom invest in the effort needed to reach their target. Your challenge is to identify the interim steps to accomplish this task.
The next objective is to determine your agency’s assets and course of action. Begin with a realistic assessment of the agency personnel. Grade each person, including the agency owner, on how they currently perform their job on a scale of 1 to 10 (10 being the highest and 1 being the lowest). Then grade each person from 1 to 10 on how they could perform if trained or managed properly. Anyone who falls under a 7 should be guided toward career adjustment. It might benefit both you and the employee, if they were qualified for another job in the agency. However, you must be prepared to replace anon-performer.
Others agency assets include location, relationships, customer base, Internet presence, etc. Consider all of these factors before you determine the agency’s course of action. This determination, when written, will become the agency’s Business Plan. The plan should be a dynamic document, a road map if you will, that requires continual revision. Properly used, it will ultimately lead the agency to success that far surpasses that of other agency owners.
Inform All Personnel and Companies of the Course of Action
Once you’ve determined your Course of Action, it’s time to discuss the changes with all agency personnel and to seek the support of your companies. Put a positive spin on all proposals and let each participant know what part they’ll play in the re-engineering of your business.
According to an old business adage, “If you keep doing what you’ve done, you’ll keep getting what you got.” One definition of insanity is, “Repeating what you’ve done in the past and expecting different results.” Change is difficult for the human psyche, and developing new habits requires continual reinforcement. This means that you’ll need to keep reinforcing changes and get responses from employees and company personnel to determine that everyone remains “on track.”
Transact the Procedures and Practices Needed To Attain the Established Objectives
The final step is to reduce the new procedures and practices to writing and provide for follow-up to make certain that everyone is on the same page all of the time. In other words, you need to audit the audit. Everyone knows that you can’t take one golf lesson and then join the PGA. It takes a lot of lessons, practice and regular coaching to attain this kind of success. The same holds true for agency operational changes. Owners and managers need to provide regular follow-up
Conclusion
By applying these steps, you can not only change direction, but also transform the “culture” of your agency. The audit will also reduce your E&O premium, increase productivity, improve customer relations, and grow the value of your agency.