https://completemarkets.com/Article/article-post/2058/WHAT-MAKES-A-GREAT-FIRM/
What Makes A Great Firmr> ...5-6565, Fax (707) 935-6515, e-mail catherine@oakandassociates.com, or visit www.oakandassociates.com. ...
https://completemarkets.com/Article/article-post/2061/HOW-TO-BE-A-HIGH-PERFORMING-FIRM/
How To Be A High-Performing Firmr> HOW TO BE A HIGH-PERFORMING FIRM by Catherine Oak, CIC, AAI The more effectively you sell, market, and service, the more valuable your agency. The secret to peak performance is employing the right people, in the right positions, based on their talents and the needs of the firm. Every firm must perform four major functions regardless of revenue size or number of employees. These functions are sales, marketing/placement, service, and accounting/administration. Any firm that wants to achieve its growth and profitability objectives needs to manage these functions properly to operate at a high-performance level, which in turn leads to high value. Let's explore how a successful firm should manage these four key functions. MANAGING SALES New sales, which are the key to growth, are measured by new customers, not additional commissions that materialize from renewals. New customers are necessary to replace business that's lost through circumstances both within and outside of the firm's control. People die, move, or go out of business every day. This natural attrition is inherent in the book of business and, for the most part, is outside its control. The rate of attrition in any firm usually ranges from 8% - 20% annually. On the other hand, attrition can come from factors within the firm's control, such as dissatisfied customers, uncompetitive pricing, and lack of technical expertise in meeting the client's needs. Do high-performing firms use different sources than anybody else for new business? Not really. They simply go after new business more aggressively. Often, they don't even depend on the source of new business favored by most independent insurance agents/brokers: referrals. Instead of waiting for new business to knock on their doors, producers and CSRs in high-performing firms vigorously seek out prospects. Everyone working in the firm has a sales personality and is motivated to bring in new business. The producers in these firms are not being paid 'out of sight' commission splits (such as 40% or more for new and renewal business). A producer compensation plan is established that is reasonable for the services performed and affordable so a profit can be realized. Generally, a well-run firm can't afford to pay an average Commercial commission of more than 30% if it hopes to generate a 15% - 20% profit. Some firms pay more than 30% for new business to motivate producers to bring in new accounts. Top producers are carefully coached and given the tools they ...counts, it should be decided who will service the medium to large Commercial accounts and how best to organize this. There are two common options to servicing these accounts in a firm: an alphabet split or the producer/unit concept. Smaller firms generally use the alphabet split concept, especially if there are few producers and if the CSRs are equally competent. In managing an alphabet split for Personal and Commercial lines, it is essential to keep the workloads for the CSRs as evenly balanced as possible, especially if the CSRs are equally experienced. Assistants handling clerical activities should be shared among the CSRs. The producer/unit concept, (in which CSRs are assigned to service and market the accounts of certain producers), is more common in larger firms and very common in national and public brokerage firms. There can be a problem, however, with the producer/unit concept. Often, 'firms within a firm' can develop, resulting in a lack of team spirit. CSRs might be reluctant to help producers in other units if there is turnover or someone is out due to illness or vacation. Producer/units can work quite effectively if either an office manager or Commercial lines service manager is involved in the managing, training, hiring, and firing of all CSRs employed by the firm. PERSONAL LINES ACCOUNTS In Personal lines, we often see the supervisor or manager also handling the firm's VIP Personal lines accounts. The only organizational structure that works effectively in Personal lines is an alphabet split. PERFORMANCE STANDARDS What are acceptable standards of performance of CSRs in the average (versus high-performing) firm? The average commission per account in both Personal and Commercial lines greatly affects the amount of commissions a CSR can handle. In Personal lines, there isn't as wide a spread in average account size as there is in Commercial lines. In Personal lines, it is more common to judge performance based on the number of accounts as opposed to commissions handled. The employee productivity table (at the end of this article) shows the commission and number of Personal and Commercial accounts handled by a CSR employed in the average firm. The table also shows overall revenue per employee, per producer, and per CSR. Our definition of CSR includes managers, assistants, claims people, and marketing personnel, since their number varies greatly from one firm to the next. The key determinant of who is a CSR is whether that person deals directly with the firm's clients. Servicing costs in a firm can be analyzed best by looking at the CSR payroll and operating expenses relative to commission. Typically, firms have servicing costs ranging from $ .30 - $ .45 per dollar of commission. Obviously, the lower the servicing cost the better, leaving more dollars available for selling and administrative expense, as well as compensation to owners and non-owner producers. <
https://completemarkets.com/Article/article-post/873/Pulling-New-Clients-To-The-Professional-Services-Firm/
Pulling New Clients To The Professional Services Firmr>
PULLING NEW CLIENTS TO THE
PROFESSIONAL SERVICES FIRM
by John Graham
It's taken long enough, but the professional services field has discovered marketing or, perhaps more nearly accurately, the value of marketing. So if you're waiting for word-of-mouth to attract new clients, you have a long wait ahead of you.
Take a look around at who's marketing what.
Business consultants are marketing mavens. In fact, some of the largest advertisers in the Wall Street Journal are consulting firms. The number of business books authored by consultants keeps climbing. For example, a popular book on the value of chief executive officers is a thinly-veiled promotional piece for a major financial-services firm. A book-length quarterly journal published by a big management consulting company presents an intriguing and attractive mix of fact and opinion to position the company as the expert.
Several of Boston's largest law firms have gone to casual dress codes. Rather than hide this not-so-subtle change, the firms made sure they got national news coverage to recruit eager young lawyers and attract laid-back technology clients. Some more aggressive personal injury lawyers are abandoning their high-priced high-rise offices for shopping malls to be more approachable and accessible to prospective clients.
The walls of restraint are tumbling down. To be sure, stodgy tombstone ads still announce the appointment of partners in law and accounting firms. The debates over 'the ethics of marketing' are mostly irrelevant and marginalized, though.
Some professionals of all types - accountants, lawyers, financial planners, dentists, doctors - believe they're a little above everyone else in business. Some believe the quality of their work is the only marketing that matters.
Actually, marketing is perfect for professional services. That sponsored book has one goal: to make believers out of readers, some of whom will recommend hiring the financial-services firm it touts. The title of the book names the targeted reader - the CEO, the decision-maker who says, 'Let's get this company in here.'
By definition, that's good marketing: creating customers who want to do business with their company and no one else. Effective marketing harnesses the customer creation process.
Successful professional services marketing can be summarized this way: Be perceived as the solution to the problem when the customer has a need. The principles of marketing professional services are all the same for the international firm and the small local company alike. Here are the objectives:
Marketing lets a professional services firm pre-establish a relationship with a client. For example, referrals are rarely based on detailed inquiries into a particular firm's competence. Usually the selection of a lawyer, doctor, or accountant is a low-involvement decision. Someone says, 'I know a great CPA firm,' and that's recommendation enough. Whether the firm has the necessary expertise fails to become an issue.
How many times do people engage a law firm to handle a particular problem without even asking if it has expertise in that field? This process is inefficient and often brings in less-than-optimum clients.
The basic marketing task is to pre-establish a relationship with a prospect to become their professional of choice. Without recognizing it, the prospect has made a buying decision, often long before they have a specific need.
Marketing builds the perception that a professional services firm is the leader in its field. Marketing can be extremely powerful in this area. Clients gravitate to successful professionals. For example, a dentist specializing in implants has impeccable credentials but is less than successful. Another dentist who lacks the experience and credentials of the first one has an extensive implant practice. Why the difference? The second dentist, who has made a commitment to marketing their services, is perceived as the leader in the field.
In professional services, it's essential to be recognized as the expert, the cutting-edge leader.
Marketing pulls clients into the professional firm's orbit. The goal is to be perceived as the professional of choice by client and prospect both. Clients like to act as if they have a close relationship with a professional services provider, regardless of whether they actually do: They refer to 'my' doctor, lawyer, accountant, insurance broker, and so forth.
Marketing helps cement the client relationship. This is essential because professional relationships are more vulnerable now than they were in the past. Accounting firms can't depend on keeping the same client companies for decades, and other professionals have the same problem. To retain your clients' business, you must keep making them feel that engaging your services was the right decision.
The quality of your work is important, of course. But competence alone doesn't build relationships. Client relationships must be reinforced continually, or the client will eventually make a change. Marketing lets you communicate the reasons that selecting your firm was wise.
These techniques can help a professional services firm best utilize a marketing strategy:
Marketing helps create the right identity.Many professional services firms cling to a dull, stodgy identity. Massachusetts attorney Thomas Montminy, whose firm specializes in collections, wanted to ...ic and doesn't get updated often. One firm received an e-mail asking why the usual rotation of articles on its Web site had stopped. The person who wrote the message said they looked forward to the articles and was disappointed not to find them. Of course, the firm began a proper rotation schedule.
An effective Web site carries helpful information, tells visitors about a company, and encourages interchange and requests for information.
The most pressing marketing issue when it comes to Web sites is promotion. A major source of advertising revenue for The Wall Street Journal, for example, is from companies spending millions of dollars attempting to attract customers to their Web sites. Any cost of a Web site must include an adequate promotional budget.
These are just a few of the effective marketing techniques that professional service firms can use successfully. As part of a consistent, unified marketing effort, they attract prospects to you.
Today marketing isn't a luxury for professional services - nor is it an option. It's a necessary element for building a stronger professional practice.
More importantly, an effective marketing program frees professionals to do what they do best - give clients top-quality service instead of squandering time looking for new business.
https://completemarkets.com/Article/article-post/975/AGENCY-COMPENSATION-SURVEY-2/
Agency Compensation Survey 2r> AGENCY COMPENSATION SURVEY by Carol Hammes As of this writing, the government has determined that the insurance industry as a whole has 2.2 million workers who earn an average of $37,864. The Property/Casualty industry employs 1,340,500 people at an average salary of $37,844. The various P/C insurance companies have a total of 634,800 people earning an average of $41,273 per year. Agents and brokers employ 705,700 people and pay an average of $35,000 per year, which includes the return on ownership generally taken out by principals of privately held firms. Although the rate of increase in employment for insurance agencies has been comparable to the nation as a whole in the past decade (3.7%), the Alliance of American Insurers believes that the increase in available agency jobs will steadily decrease until 2005, when it will be only 0....s, the people who hold these positions are also agency principals, so it makes sense that the bonus amounts would be higher. Almost 80% of independent agencies nationwide give both owner and non-owner managers a bonus, with most of them paying on a discretionary basis. Of firms that use some kind of tangible criteria for determining the bonus dollars, a percentage of agency profits is by far the most common, distantly followed by a percentage of agency revenues. More agencies are now treating the agency principals as employees first and owners second when it comes to compensation issues. But the vast majority still uses some combination of performance measurement and ownership percentage to come up with salaries and bonuses. The two major factors cited in determining salaries are the size of the existing book and the ownership percentage, with rural agencies favoring the latter and urban agencies more oriented toward rewarding for sales performance. Management contribution is also taken into account in a large number of firms. Regardless of location, the primary criteria for determining bonuses was percentage of ownership, followed by the size of the book handled and management contribution. For both salaries and bonuses, each group indicated that longevity is no longer a major component for determining an agency principal's compensation. When a commission percentage is used to determine the owner's salary, 33% of the rural firms use the same rate used for non-owner producers, 50% have a higher rate, and 17% have a lower rate. The situation is quite different in the urban agencies, where 68% pay owner-producers the same percentage of commissions as they pay the non-owners, while only 11% have a higher rate, and 21% pay a lower commission percentage. It's hard to understand why any agency principal would want to make less money for handling the same job as a non-owner employee, but it might relate to the need to bring new people along for perpetuation purposes. Unfortunately, not enough agencies have perpetuation plans to help them make such a determination. Only 54% of rural firms said they have such a plan, down from 61% two years ago. And 67% of the urban agencies report having taken care of this most important element of planning, down from 71% in the previous survey. 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.
https://completemarkets.com/Article/article-post/2067/ASSESSING-YOUR-FIRMS-RESOURCES/
Assessing Your Firm's Resourcesr>ASSESSING YOUR FIRM'S RESOURCES by Bill Schoeffler and Catherine Oak Today, it is critical for insurance agents and brokers to plan their own destiny. One can never be quite certain what the future may bring. You can’t control the market cycles, legislative activities, or the strategies of your competitors. But you can control your own firm’s activities. As consultants,...motivated to sell. It must be a key characteristic of any good producer. Don’t hire anyone into production (or into the firm in any position for that matter) who does not have a sales personality and sales skills already developed. The firm can only create an atmosphere that is motivating to both producers and CSRs. CSRs should also receive incentives for their production efforts. The key to the producer compensation issues is to base pay on who is doing the work. When experienced commercial producers receive renewal commissions on direct bill personal lines accounts or small commercial accounts, profitability can suffer. This is true if the CSRs actually handle the majority of the work. When you determine what the firm can afford to pay producers, you need to take into account: who is doing the work; is marketing/placement assistance provided; is service support adequate; what is the local competition paying; what benefits and perks are paid to producers; and most important, what amount of profit is budgeted (before owner bonuses) for both new and renewal business. Some firms forgo some profits for new versus renewal business to encourage producers to write new business to reach the firm’s new business growth objectives. Your marketing strategy plan is essential to your firm’s ability to grow and prosper. The steps outlined in this article are the starting point for the development of an effective marketing plan. Your marketing resources need to be assessed before you can plan for the future. In this time of increased legislative activity and carrier pressure to meet volume commitments and obtain “preferred” status, you can’t afford not to plan your firm’s marketing strategy. Reprinted with permission from Oak & Associates, Glen El...
https://completemarkets.com/Article/article-post/674/The-Five-Ways-Agents-Get-Fired/
The Five Ways Agents Get Fired!r>Independent agencies and brokerages are facing a growing threat to their middle market Commercial clients. These firms are being squeezed from below by the commodity sellers and from above by the resource providers. Previously, the competition for these larger accounts has been based mainly on price, coverage, and a single relationship. But now, the determining factors in the selection process have shifted with the awareness that price does not differentiate brokerage firms except in the commodity environment -- and this shift is having some dire consequences.
Changing distribution systems have caused our clients to be more selective in the brokerage firms with whom they chose to do business. ...CONCLUSION
As competition intensifies for larger accounts, the successful agent/broker will learn how to match capabilities to buyers' expectations. Hopefully they will not experience the bitter lessons of Why Agents Get Fired!
https://completemarkets.com/Article/article-post/2079/FINDING-A-COMPATIBLE-BUSINESS-COMBINATION/
https://completemarkets.com/Article/article-post/2074/PRODUCTIVE-EMPLOYEES/
Productive Employeesr>PRODUCTIVE EMPLOYEES by Catherine Oak, CIC, AAI The productivity of employees has a great effect on the profitability of a firm. In an insurance agency, personnel costs are in the 50 percent to 70 percent range of each revenue dollar, depending on the firm. Setting standards of performance, delegating work to the next level down whenever possible and recognizing and rewarding good efforts will all lead to achieving a well-run operation and much happier, more productive workforce. The number of accounts and commission volume that need to be handled in order for the agency to be average or well-run should be understood by support personnel, CSRs and producers. Having standards should also alert management to the need for additional staff or realignment of workloads. If expected levels of performance are exceeded, then above-average performance contributions to the firm should be recognized by management and rewarded to encourage employees to achieve higher levels of performance. Two concerns of many employees are: 1. They don't know what is expected of them. 2. They feel that their efforts are not properly recognized and rewarded. PERFORMANCE STANDARDS What are acceptable standards of performance for CSRs in the average versus the well-run firm? The average commission per account in both personal and commercial lines greatly affects the amount of commissions and accounts a CSR can handle. In personal lines, there is not as wide a spread in average account size as there is in commercial lines. Therefore, it is more common to judge performance in personal lines based on the number of accounts as opposed to commissions handled. The employee productivity table below gives an overview as determined by the Oak & Associates database. EMPLOYEE PRODUCTIVITY Avg. Firm Well-Run Firm Revenue per Employee ... a good job. They will also know when performance falls below management's expectations. When productivity standards are established, management will also know additional staff is needed for the workload, or when workloads need to be realigned using existing personnel. Management should also strive to ensure that work is delegated down to the least costly qualified employee whenever possible. This is called staff stratification and can lead to increased employee productivity. Employees should make a list of clerical, but time-consuming things they could delegate to non-insurance personnel, so management can determine if hiring part-time or full-time clerical support would be cost-effective. Examples include having a CSR assistant, a sales assistant to producers, a marketing or claims assistant or data entry personnel. However, the more automated a firm is today, the less need there is for other personnel, as the computer can easily handle the repetitive tasks in a firm when computer account profiling is complete and when interface with carriers is achieved. RECOGNITION OF EFFORTS AND REWARDS Many employees are concerned about the lack of recognition and reward for their efforts. Today most good employees will not stay with a firm for more than a few years when they don't see a good opportunity to grow and expand in a firm. Employees can feel dead-ended in firms that do not promote people from within, especially to management and sales-type positions. In these firms, morale is adversely affected when open positions are filled from outside the firm without looking to promote employees. Everyone wants to be recognized, to have people admire and acknowledge them. Money is only one form of recognition. Besides expressing appreciation verbally, other rewards of importance to individuals are time off, more authority, a new title, a parking place, a private office and an employee-of-the-month award. PERCEPTION VS. REALITY Morale can be negatively affected when personnel are not reprimanded for being unproductive, being continually late or absent from work, making an excessive number of personal phone calls and/or not completing tasks on time. The high performers will begin to slow down in those firms where the poor performers are allowed to get away with this lack of respect for fellow employees, clients and with the adverse effect on productivity. Nepotism is also a problem in many firms. Perception is more important than reality. Even when management does not know what is going on or when the employees perceive that management is indifferent toward recognizing efforts or reprimanding poor performance, morale can also be affected. The perception is just as destructive as if it were reality. Lack of proper communication is the cause. Annual performance reviews are extremely important. A standard review form should be used. The reviews should be held on anniversary date of hire, and both the employee and the reviewer should complete the form regarding past performance. The evaluation should be discussed by the two parties, and goals for the next review should be set in writing, including any additional training needed. A mid-anniversary-year performance review should also be held to discuss performance only, without any pressure on management to give a raise. Performance that is unacceptable should be documented in the personnel file, with copies given to the employee. Reprinted with permission from Insurance Journal, May 30, 1994.
https://completemarkets.com/Article/article-post/2075/PRODUCTIVE-EMPLOYEES/
Productive Employeesr> PRODUCTIVE EMPLOYEES by Catherine Oak, CIC, AAI The productivity of employees has a great effect on the profitability of a firm. In an insurance agency, personnel costs are in the 50 percent to 70 percent range of each revenue dollar, depending on the firm. Setting standards of performance, delegating work to the next level down whenever possible and recognizing and rewarding good efforts will all lead to achieving a well-run operation and much happier, more productive workforce. The number of accounts and commission volume that need to be handled in order for the agency to be average or well-run should be understood by support personnel, CSRs and producers. Having standards should also alert management to the need for additional staff or realignment of workloads. If expected levels of performance are exceeded, then above-average performance contributions to the firm should be recognized by management and rewarded to encourage employees to achieve higher levels of performance. Two concerns of many employees are: 1. They don't know what is expected of them. 2. They feel that their efforts are not properly recognized and rewarded. PERFORMANCE STANDARDS What are acceptable standards of performance for CSRs in the average versus the well-run firm? The average commission per account in both personal and commercial lines greatly affects the amount of commissions and accounts a CSR can handle. In personal lines, there is not as wide a spread in average account size as there is in commercial lines. Therefore, it is more common to judge performance in personal lines based on the number of accounts as opposed to commissions handled. The employee productivity table below gives an overview as determined by the Oak & Associates database. EMPLOYEE PRODUCTIVITY ... a good job. They will also know when performance falls below management's expectations. When productivity standards are established, management will also know additional staff is needed for the workload, or when workloads need to be realigned using existing personnel. Management should also strive to ensure that work is delegated down to the least costly qualified employee whenever possible. This is called staff stratification and can lead to increased employee productivity. Employees should make a list of clerical, but time-consuming things they could delegate to non-insurance personnel, so management can determine if hiring part-time or full-time clerical support would be cost-effective. Examples include having a CSR assistant, a sales assistant to producers, a marketing or claims assistant or data entry personnel. However, the more automated a firm is today, the less need there is for other personnel, as the computer can easily handle the repetitive tasks in a firm when computer account profiling is complete and when interface with carriers is achieved. RECOGNITION OF EFFORTS AND REWARDS Many employees are concerned about the lack of recognition and reward for their efforts. Today most good employees will not stay with a firm for more than a few years when they don't see a good opportunity to grow and expand in a firm. Employees can feel dead-ended in firms that do not promote people from within, especially to management and sales-type positions. In these firms, morale is adversely affected when open positions are filled from outside the firm without looking to promote employees. Everyone wants to be recognized, to have people admire and acknowledge them. Money is only one form of recognition. Besides expressing appreciation verbally, other rewards of importance to individuals are time off, more authority, a new title, a parking place, a private office and an employee-of-the-month award. PERCEPTION VS. REALITY Morale can be negatively affected when personnel are not reprimanded for being unproductive, being continually late or absent from work, making an excessive number of personal phone calls and/or not completing tasks on time. The high performers will begin to slow down in those firms where the poor performers are allowed to get away with this lack of respect for fellow employees, clients and with the adverse effect on productivity. Nepotism is also a problem in many firms. Perception is more important than reality. Even when management does not know what is going on or when the employees perceive that management is indifferent toward recognizing efforts or reprimanding poor performance, morale can also be affected. The perception is just as destructive as if it were reality. Lack of proper communication is the cause. Annual performance reviews are extremely important. A standard review form should be used. The reviews should be held on anniversary date of hire, and both the employee and the reviewer should complete the form regarding past performance. The evaluation should be discussed by the two parties, and goals for the next review should be set in writing, including any additional training needed. A mid-anniversary-year performance review should also be held to discuss performance only, without any pressure on management to give a raise. Performance that is unacceptable should be documented in the personnel file, with copies given to the employee. Reprinted with permission from Insurance Journal, May 30, 1994.
https://completemarkets.com/Article/article-post/2631/Successful-Firms-Need-to-Master-These-Techniques/
Successful Firms Need to Master These Techniquesr>In a recent edition of The National Underwriter, Editor Sam Friedman recommended that risk managers begin to explore the capabilities of sophisticated regional and local brokerages. This recommendation was based on recent broker megamergers and the growing lack of choice available to buyers.
For an independent agency or brokerage to take advantage of this opportunity, it should adopt the consultative brokerage style. In particular, its managers must learn the techniques that these sophisticated buyers have come to expect. The stewardship report and the executive summary are two techniques that firms must master to be successful in large accounts.
STEWARDSHIP PROPOSAL
Brokers call it "stewardship"; others call it a mid-year client review. Whatever the name, it's the single most powerful way to protect your renewals against the competition. When executed properly, the mid-year client review provides your firm a tremendous opportunity to:
Cement client relationships for the coming year.
Determine the client's expectations.
Judg...ent will benefit. This could take the form of a simple display. Refer to the body of the proposal for details and an in-depth demonstration of these benefits. After all, the executive summary simply sums up the facts.
Finally, restate what your organization is proposing for the client, the time frames, and your unique qualifications for providing these solutions. Avoid making this closing too sales oriented. As a consultant, you need to be perceived as a partner, not as someone looking for a commission. Use statements such as:
"XYZ recommends this course of action to client."
"XYZ is prepared to implement these actions in the following time frames and with these expected results.
Effective use of stewardship reports and executive summaries is a critical skill that independent agents and brokerages must master. These techniques will allow an organization of any size to improve its perception in the buyer's eyes. The result will be improved success in the large-account marketplace.