| DEVELOPING SUCCESSFUL PRODUCERS by Carol Hammes The most serious challenge facing the Independent Agency System today is not the soft Commercial market or the introduction of more alternative distribution methods. Much worse for the long-term prognosis is the fact that we're facing a serious shortage of bright new faces in the industry. Without a steady stream of younger people to staff service positions and produce business, there can be no perpetuation plan. The average age of insurance agency principals around the country is 49.7 years old. And in many agencies, the average age of the employee group is close to 40. The industry needs new blood-and needs it soon. Agency principals might be willing to invest once in an expensive new producer. But experience has shown that it might take as many as four or five attempts before you actually get a producer who is successful and possibly a candidate for agency ownership. It can be very expensive to guarantee a $80,000 annual salary plus benefits to a series of people who end up with a book of only $300,000 in commissions after five years. Even if the owners are willing to put up with such lackluster performance, they can't count on these people to maintain any kind of a viable perpetuation plan effectively. The key to developing successful producers is to make the recruitment, training, and performance-monitoring functions of the sales-management process a top priority for the entire organization. Agency principals need to understand that what worked for them probably won't work for the new generation. The average 50-year-old owner came into the business in the early 1980s, when job opportunities were scarce. Unless they had relatives in an agency, the primary reason for these people entering the insurance business was that it was the only job they could get. That generation was willing to work for straight commissions or perhaps a $40,000 draw to get the opportunity to be a business owner some day. Modest sales success came eventually, through referral selling and social contacts, without too much concerted sales management direction. Of course, it didn't hurt that in three of every seven years, the Commercial market was hard and commissions were on an uphill swing. The situation is dramatically different today. Members of Generation X and Y have much far less patience and want to make a lot of money tomorrow, if not sooner. They want to participate in ownership and management within the next couple of years, not two decades from now. And they need to be monitored and stimulated constantly to stay productively active. The average commercial account now generates only $1600 in commissions, and most new producers will be working on accounts much smaller than that. Using the average producer commission percentage of 32%, the producer would have to have a minimum book of $250,000 at the end of three years to justify a $80,000 salary. This would mean producing $100,000 in new commissions per year and retaining 88% at renewal. If the average account size is $1,900, the producer would have to write 100 new Commercial accounts every year, averaging two per week. If he or she can achieve a hit ratio of 30%, there would have to be six proposals or quotes delivered every week. SETTING THE STAGE The first thing to do before bringing in any new producers is to recognize that the initiation and sales process will have to be far more structured than it used to be. No longer can you simply put a producer in front of a phone and say, 'Sell.' There must be a detailed plan for getting enough leads (at least 12 per week) so that the requisite six proposals can be made. There must be a capable and enthusiastic support staff to help the producer with the marketing and sales effort. Good technical back-up is particularly important if the salesperson has no insurance sales experience. Service personnel who are already dealing with a backlog can't respond appropriately to the heavy flow of new business, and the producer will quickly become discouraged. The back office systems and procedures must be running smoothly before you bring a new producer into the mix. The second absolutely crucial ingredient is to make a conscious shift in emphasis from a service to a sales organization. All the principals and producers must renew their commitment to the sales process. This might mean that they'll have to participate in the sales center lead-generation program, writing some additional new business themselves. Or they'll have to volunteer to be a mentor for the new people, spending a substantial amount of time directing opportunities and assisting with the onsite sales activities of the fledgling salespeople. The entire agency compensation structure might need to be redesigned to reward all who help revitalize the sales effort. Most important, many if not all of the principals and employees might have to adjust their attitudes. You can't expect a new employee to concentrate on sales when the prevailing atmosphere is clearly directed toward maintaining a comfortable lifestyle for the incumbents. Everyone and everything in the agency must convey the importance of a high level of sales consciousness. Inactivity breeds more inactivity. The third step to take before hiring a new producer is to develop a program to hire the right kind of people for your agency. There are 30,000 independent agencies in the nation, and they're all different. What works well for the agency down the street might be disastrous for your firm. Take some time to evaluate your opportunities, your management philosophy, the type of business your companies want to write, and the personal goals of the principals. By bringing in a new producer, you're not just hiring someone to sell insurance -- you're setting out to develop a valuable agency asset that, ideally, will either be part of your perpetuation plan or will add to the value of the agency for its eventual outside sale. A new producer is not just an employee but an investment in the future, and all the agency owners must take an active interest in selecting and developing this asset to its full potential. HIRING CANDIDATES Start by defining the actual job position that you have open, and deciding what type of person would best fill it. This sounds basic, but it's surprising how many agencies rush to hire someone without determining exactly what they want. The object is not to hire a producer, but to hire the right producer. Will this person be selling Personal Lines, small Commercial, large Commercial, specialty accounts, program accounts, or a combination of these? Do you need a door-opening, pavement-pounding prospector or a technically proficient service person? Do you have the resources to provide insurance education or sales training? What technical and clerical backup can the agency provide? Would you like to have a young, entrepreneurial-spirited person who can be part of the perpetuation plan? Or would you rather have someone older, who's interested only in selling and making money over the short term? After defining the role of the new producer, develop a list of selection criteria with educational background, work experience, and personality traits. Target recruitment efforts to places where this type of individual might be found. Hoping to get someone who already knows the business, many agencies traditionally obtain their producers from insurance companies or other agencies. If you're looking for a technical servicing producer, a former company underwriter might be OK. But he or she might not have the personality to find prospects or close the sale. Taking someone from another local agency mightcreate legal problems with piracy restrictions and non-compete agreements, although it can be successful if handled properly. In this situation, it will be imperative to find out what the producer doesn't like about the present environment. One of the best sources can be someone who is currently located in another part of the country and wants to 'come home.' Although this approach might stand a better chance of long-term success, it can also be expensive because the producer might have been making pretty good money and won't be able to bring much business along. The agency might have to support a high salary or draw for a couple of years, so it will be especially important to make sure that a program is in place to support a high level of sales activity. You'll also need a plan to help you cut the cord quickly if it appears that the desired results are not forthcoming. Many agencies are beginning to have success with inexperienced producers and are even setting up recruitment efforts through local colleges. The number of educational programs now available in the industry can provide you with an inexpensive way to get a new person up to speed on insurance matters. If the agency has a good support staff and is willing to commit to the basic training, it can often be better to hire someone simply for a sales-oriented personalit,y rather than to worry about prior insurance experience. The desire to be part of a winning team and the ability to accept defeat are invaluable traits that can often be found in athletes and coaches. Depending on the agency's definition of the 'ideal' producer, other people to consider might include former high school teachers, 'early' retirees from a downsized company who have good business contacts in the community, people who have had successful sales careers in other industries, bank managers, and former stock brokers. Obtain and review resumes and employment applications. In addition to the content of the documents, look for the correct use of grammar, spelling, and neatness. When conducting the initial interview, look for indications of a positive attitude, an ability to listen, good communication skills, persistence, team spirit, energy level, competitive drive, intelligence and problem-solving ability, awareness of appearance, goal orientation, desire to succeed, and evidence of past success in school leadership roles or business opportunities. If they still look good, give them a psychological test. Don't skip the testing process, and don't ignore the results. Even the most simple of tests will be remarkably accurate in assessing sales aptitude. Candidates who seem to have the right personality traits should then pass onto the next level of interviews. All owners, producers, and managers should meet with the person (individually or in groups) to try to determine if he or she will fit into the agency's culture. Take the person through the office and see how he or she interact with other agency personnel. Go out to dinner with the candidate and spouse to see how they relate to each other. This might also be a good opportunity to find out how supportive the family might be for the long hours of work that will be necessary for a new producer to succeed. Before making the final job offer, check references. It's amazing how many people think nothing of fabricating college degrees and embellishing past experience on resumes. If the person has been working in the insurance industry, company underwriters and field reps might be a good source of information on personality traits and technical knowledge. Pay attention to what they don't say as much as what they do volunteer about the candidate. DEVELOPING A PLAN FOR SUCCESS The decision to hire someone as a producer should not be the end of the process, but the beginning. What happens in the first six months of employment will determine whether the venture will succeed or fail. The new employee might have all the qualities that you want in a producer and might even have been successful as a direct writer, but failure is almost guaranteed if the agency sets no initial expectations and implements no plan to monitor progress and results. Good candidates are too hard to find. You can't afford to waste the opportunity by dropping the ball on the management end. Compensation will be at the heart of the offer and should be determined using a careful analysis of what the person is expected to produce and when. But it's also important to spell out in writing what the agency will provide in addition to salary or commissions and what it expects from the producer in return. Poor communication of expectations is one of the major reasons for a producer relationship falling short of its potential. This checklist contains items that should be included in the formal offer, the training plan, or the employment contract. PRODUCER EMPLOYMENT CHECKLIST - Starting salary or draw
- Subsequent commission schedule and timing of implementation
- Validation schedule outlining expected production (measured in commissions) for each quarter of the first three years of employment
- List of employee benefits to be provided
- Responsibility of agency and producer for handling of auto, travel, and entertainment expenses
- Educational requirements such as licensing and related Continuing Education, designations, and company schools (including who's responsible for financing them)
- Vesting schedule for deferred compensation and/or details of ownership interest in produced accounts
- Nonpiracy and/or noncompete restrictions
- Type of marketing, telemarketing, customer service, and loss-control support that the agency provides for producers, and the effect (if any) that they might have on the commission schedule
- Performance expectations other than production goals (attendance, quality of submissions, and so on)
- Frequency of performance reviews and length of probationary period
- Community service requirements
- Details of termination provisions
Before the new producer's first day on the job assign a mentor to guide him or her through the first six months. This might be the sales manager, president, marketing manager, or another producer. Orientation should start with introducing the producer to the other employees (it's surprising how often this is overlooked) and going over the organizational structure. If the producer is totally new to the industry, it will be necessary to spend some time giving a basic overview of the insurance business and how independent agencies fit into the picture. During the first week, the mentor will help develop the training and educational plan, either providing instruction or arranging for others inside or outside the agency to take care of certain portions. Regardless of the the producer's level of insurance experience, the orientation must include a description of the overall workflow procedures, since these vary significantly from agency to agency. Many disappointing experiences can be traced back to an initial misunderstanding of the producer's role in that particular firm. For each type of business written, the producer needs to know what portions of the new, renewal, and servicing process are the responsibility of salespeople and which are handled by CSRs or marketing personnel. Have a written action plan for the mentor and producer to review weekly during the first six months and monthly thereafter. This plan should include the number of calls that must be made every week to stay on the validation schedule, and should also address the anticipated hit ratio. If it becomes apparent that activity and production goals aren't being met or that the producer's work habits are affecting the morale of the rest of the agency, the mentor should work with the producer and possibly agency principals to come up with a solution. The producer might need more training, more coaching, a different kind of motivation, behavioral modification, or time-management skills. Take action as soon as you know that there's a problem. If you wait too long, a positive resolution may be a lot more difficult to come by, and the agency will be that much further in the hole if it becomes necessary to part ways. The direct cost of the compensation that had not yet been offset by production is only one consideration. The longer a producer has been with an agency, the greater the chance that his or her departure will have an adverse effect on other employees, clients, and insurance company relationships. The late Carol Hammes, principal of the Middleton Group, was one of the Independent Agency System’s most widely respected management consultants. She will be sorely missed. Reproduced, with permission, from The Middleton Letter. |