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Project-Driven Benchmarking
Objectives define the annual...ings and fail more often. Celebrate benchmark victories. It helps keep the pla...

Benchmarking Loss Experience In A Workers Compensation Loss-Control Program
BENCHMARKING LOSS EXPERIENCE IN A WORKERS COM...he loss program, then return to the benchmark pure loss rate of $3.75. The imp...

...l you need are the formulas and benchmarks to convert this data to meaningful...t Assets less Current Liabilities. Benchmark: Take the Average Daily Cash Ex...

... gain understanding and see what is ahead, the changes will become more acceptable and the pace can quicken. Now that you know what is, ask yourself, Is that what we want? ' If not, scrap it and create what you want. First, some thoughts for everyone. Do not try to make the initial plan perfect. Design the best processes and operating systems you can. Try them out, and then go back and see what you can improve as you learn what does and doesn't work. That is the value of the process. Continuous improvement requires continuous effort. It's a never-ending process. Everyone has input. All ideas are important. Everyone involved in doing the work should have some say and some ideas on the best way to get things done. ESTABLISH PERFORMANCE BENCHMARKS Begin by defining the results you want your agency to attain. We call this process Benchmarking desired performance. Performance expectations, in terms of specific, tangible results, are the benchmarks that must be established and met if the company is to attain its long-term goals. Performance expectations are also defined in relation to operating benchmarks for every department, business unit, and position. Starting with a blank sheet of paper, lead your team through a process of establishing performance benchmarks. The result is a complete set of performance criteria for: Customer growth Revenue growth Enforce policy growth Expenses by area of responsibility Profit Service timeliness Quality, Customer satisfaction Productivity:, corporate, departmental, and individual Other areas the team feels should be included Everyone should know what the agency's performance benchmarks are. To be certain ...

... ? The answer? Yes, if there's appropriate due diligence, perfect implementation, and the price meets realistic expectations. When these three conditions come together, as so many players seem to expect, banks can make fantastic returns by acquiring P/C agencies. However, the results to date strongly suggest that these conditions rarely — if ever — occur simultaneously. This first in a four-article series will focus on due diligence issues. DUE DILIGENCE Due diligence includes three elements: financial, legal, and operational. Because most banks are well aware of financial and legal due diligence, I won't discuss them here. However, I'm not suggesting that either should be ignored or minimized. OPERATIONAL DUE DILIGENCE Operational due diligence rarely receives adequate consideration and is frequently ignored. Operational due diligence includes peer review/benchmarking, competition, employees and their skills, and most important, the variations in culture between banks and insurance agencies. PEER REVIEW/BENCHMARKING Peer review/benchmarking helps align expectations with reality. Expectations, such as unrealistic hopes for economies of scale, are often set too high. For example, one large bank asked if I thought they could get an extra percentage point of revenue from insurance companies by bringing their size to bear in negotiations. I replied, Yes, but you'll inevitably lose that point through extra expenses. They didn't hear anything past Yes. If they had, they'd have carefully considered my analysis of large broker results that show an average five-year pretax profit margin of approximately 10% . That average then decreased to 8% before the hardening Commercial Lines market started to add some points ...

...executives enough information to benchmark their organization's current level ... identifies both the current level (benchmark value) of customer loyalty and t...

... done. ESTABLISH PERFORMANCE BENCHMARKS Begin by defining the result...ns and benefits for the Performance Benchmarks in terms of their impact on cus...

...e diligence includes peer review/benchmarking, competition, employees and thei...ther reason to focus on peer review/benchmarking in due diligence is to enable...

... achieve these Objectives 6. Set Benchmarks. Each Objective needs a series of monthly Benchmarks that tell agency principals and ma...o compare actual results with their Benchmarks. Don’t allow any changes to Benchmarks, Action Plans, or Objectives du...

... leaders — the need to offer certain products or services to be competitive in your marketplace. But this should be a conscious decision; one made with all the right information. Looking at departmental profitability doesn't need to be just for the obvious lines of business. Any product set or service can be designated a profit center. Most agency management systems provide for departmental allocation of income and expenses. However, be sure to include indirect expenses: Such items as rent and utilities, telephone, office supplies, and data processing expenses. You should also allocate a proportionate share of general support expenses, such as the salary and related expenses for receptionists, accounting staff, and others. It might also be appropriate to allocate some owner/manager compensation expense to each department. Because there are no industry benchmarks published for departmental profitability, you'll have to look at results from the perspective of what's reasonable based on your goals and objectives and track your performance over time. Departments that show a loss year after year should be viewed critically. Remember, expense reductions alone generally won't deliver profitability over time. Is this department a core business for your agency? Can it be brought to profitability by growing revenues? Do you have, or can you acquire the resources needed to make it happen? Would you be better off to discontinue this product, phase it out, or sell the book? However, if you're considering getting out of a line of business, be sure to take the long view. Agencies that got out of Personal Lines a few years ago because it was so unprofitable might now ...