COMPENSATION PROGRAMS THAT ATTRACT, RETAIN, AND MOTIVATE TOP PERFORMERS
by Suzy Hammet
Don’t jump to the conclusion that you have to offer top-dollar salaries to attract the most talented employees. In this document, Suzy Hammet describes how today’s candidates seek a more rounded benefits package — allowing you to exercise creativity and flexibility to nourish more than just their wallets.
Even with the downturn in the economy, the competition for talent will continue for at least another decade. Agencies and brokerage firms must understand compensation trends to design and implement programs that will retain and attract the best employees. With the average expense for replacing an employee running 100%-150% of the individual’s salary, it’s simply too expensive to rehire and train employees as a result of turnover that you could’ve avoided.
Agents and brokers reported spending more for salaries and benefits, while employers nationwide indicated that their compensation costs increased 4% from March 2000 to March 2001 according to the Business Management Group (BMG) 2001 Non-Producer Compensation and Benefits Survey.
BMG conducts these annual surveys of independent insurance agencies and brokerage firms to provide principals and managers with up-to-date information about salaries, incentive programs, and benefits that can help them control costs and make informed decisions.
After selecting survey participants based on the distribution of agencies and brokerage firms nationwide, BMG provided questionnaires that asked them to give salary data for 32 non-owner, non-producer positions, together with information about bonus, incentive, and benefit plans. The study encompasses salary by position, revenue range, and location, as well as paid-time-off policies and the number of respondents offering various employee benefits, including telecommuting and other innovative types of benefits.
The trend in compensation has shifted back to the basics of reward for performance. Agencies are linking their business strategy and incentive plans to connect non-producer performance with rewards for achieving specific sales and tasks objectives. Agency principals realize that they must align effective award programs with their employees’ expectations, as well as the needs of the business.
Shifts in benefits packages reflect changes in lifestyles, the faster pace of today’s work, and intensified competition for talent. Baby Boomers and GenXers are highly concerned about having benefits relevant to their lifestyle that will allow them to balance work and personal/family life. Surveys have found that these benefits consistently rank higher than the nature of an employee’s work, job security, and salary.
The study found that agencies and brokerage firms are offering more flexible benefits, as well as work schedules. Designated leave benefits such as paid sick and vacation days are giving way to Paid Time Off Plans. The percentage of respondents offering flexible work hours has grown steadily from 39% in 1999 to 53% in 2001.
This year’s survey found Sales Manager, Marketing Manager, and Marketer/Placer positions appearing more frequently than in the past. Agencies and brokers are restructuring to provide producers with more sales management and training, allowing them more time to focus on new business development. The position of Network/Systems Administrator is appearing more frequently, as automation becomes increasingly technical and agencies need to network with branch offices or carriers.
Most participants indicated that their planned compensation increases for 2001 would be between 3.6% and 4.9%, with the Southeast and Pacific Regions averaging 4.8% and 4.9%, respectively. The higher increases in these regions might result from higher economic growth. Increases for 2001 are equal to or slightly lower than actual growth in 2000, indicating agent and broker concern about the economy, together with the need to control costs and shift compensation dollars to incentive plans.
The 1999 BMG survey found that 47% of agencies offered incentive plans to managers and 74% provided incentives to non-managers. A year later more than 80% of participants offered incentives to managers and 75% offered incentives to non-manager staff. More than 50% of participants rewarded Managers based on specific performance objectives, and more than 28% offered them Long Term Incentive Plans. This increase in incentive plan participation reflects agencies’ desire to align individuals with growth and profitability goals and reward individuals for their contribution to overall success.
Incentives tied to performance goals, individual sales results, and growth in the book of business are the usual criteria for awarding bonuses to non-managers. Because the need to grow is paramount in today’s environment, sales incentives are the most common. Incentive methods will continue to evolve as agencies seek new methods to increase revenue and improve productivity. A well-conceived bonus plan can help focus your staff and managers on what’s important to the agency, allowing you to reward those performers who help achieve its goals.
As you review your total compensation package, be aware of how important insurance, retirement, and educational benefits are to most employees. You might well profit by controlling base compensation costs while providing more generous benefits.
If your agency is having difficulty attracting, retaining, or motivating talented performers, it’s time to review your compensation and benefits programs to gain a powerful competitive advantage.
Suzy Hammett, Vice President of Business Management Group, is responsible for assisting agents and brokers with performance management and incentive plan design, management recruiting, employee and customer satisfaction surveys, and management and operational analysis. She may be reached at (800) 772-0208 or e-mail [email protected].