The following article was derived from a presentation givenat the ASCnet TENcon meeting, which was held last October inOrlando, Fla.)

Several years ago, we worked in an insurance agency whose ownerbegan every staff meeting by asking, “What kind of organization arewe?” We all learned quickly that it was a sales organization. Thinkthat's a given? Not necessarily so.

Although sales are an agency's lifeblood, not every agency is atotal sales operation. Our company is a boutique consulting,valuation and investment banking firm specializing in the insurancebrokerage industry. We provide sales management training,operational and financial consulting, business planning,perpetuation planning and various other services for our clients.We studied agencies and met with our own sales-management team toidentify the common traits of high-growth sales agencies and learnwhat really drives their new-business sales. We're going to sharewith you what we learned and encourage you to adopt some newpractices to make your agency a total sales operation.

We found that high-quality, high-growth organizations share thefollowing four traits:

1) The prevailing culture or mindset is, “We are a salesorganization, and we want to build a culture that supports sales.We will remove all obstacles that impede new sales.”

2) Each person in the agency has a clearly defined role.Everyone knows what part he or she plays in growing thebusiness.

3) The agency provides a foundation for true teamwork. Itsprincipals understand that it takes the entire team to generate newbusiness and provide outstanding service to clients.

4) The agency establishes teamwork and growth goals, and tracksand rewards achievements in those areas.

A new attitude

Your agency might need to adopt a new mindset. As we mentionedearlier, an agency is like a human body, and new sales are theblood that nourishes it. Service and support are the skin thatkeeps everything intact. To remain healthy, you need to work as ateam instead of pulling against one another. Every position isimportant, and every team member must play his or her position wellfor the team to win. Producers must produce new business, servicepeople must provide outstanding customer service and the supportstaff must do their part to facilitate the process.

The top sales organizations define such roles as producer, CSRand support person, and establish minimum performance standards foreach one. When all understand what is expected of them, they worktogether to drive new and organic growth.

Producers

Producers' primary function is to generate new business. Theyalso must pre-qualify leads and determine if prospects are willingto switch to a new agent who offers greater value-added service, orif they are simply shopping for a better price. Part of thisprocess is identifying prospects' pain and providing a solution forit.

A producer is responsible for understanding the agency'scapabilities, resources and limits, and for targeting only qualityaccounts that meet the agency's standards. For instance, suppose aproducer announced during a sales management meeting, “My wifeknows the controller at Disney, and she thinks we can get thataccount because they're not having success with their currentagent.” The Walt Disney Co. is a huge corporation, with 10 themeparks on three continents and thousands of employees. If the agencyin question is small and has only a few markets whose capacityclearly is not sufficient for such a risk, then pursuing such anaccount as Disney would waste both the agency's time and theprospect's because the agency doesn't have the resources to followthrough.

A producer also must ensure that he or she has adequate time toobtain expiration dates, establish timelines for the completion oftasks and otherwise develop each submission. Collecting loss runsand all other information needed to complete applications preventsthe process from bogging down when the producer hands off theaccount to the service team. Obviously, producers also areresponsible for building relationships, closing deals,cross-selling and account rounding.

One way to define a “producer” is to establish a minimum levelof new-business production and a minimum average account size.Regardless of the agency's size, a sales agent should produce atleast $50,000 in annual revenue (new growth); anyone who producesless should be reclassified. A producer should focus on and servicethe top 20% of his or her accounts. Take the revenue generated bythat top 20%, divide it by the producer's total number ofcustomers, and the result is the minimum account size on which theproducer should work. Anything smaller should be passed off to anaccount executive or service team.

By shedding smaller accounts, producers ultimately grow theirbooks of business. We found that 60% of producers' time is spent onaccounts that generate only 5% of their revenue. You might say,“Those accounts got us started; they built our book!” Weunderstand, but you also must generate new growth. To do so, youneed to focus on the accounts that pay the most–the top 10% to20%–and let someone else service the rest.

A person's pay should reflect his or her role. The personmentioned above received a 35% commission on renewal business, andhis book was $350,000, so he was paid $122,500 per year. He had aCSR helping him, so that person's salary added to the cost ofmaintaining his accounts. If a producer performs more like anaccount executive, then he or she should be paid accordingly. Theproducer in our example should have earned $50,000 to$60,000–roughly half of his actual compensation.

Producers also should be responsible for obtaining referrals,which is one reason they should work on the top 20%, a realmcertain to be ripe with referrals. For instance, the president of amanufacturing firm undoubtedly knows the executives of other firmsin the same industry or related ones. A producer who writes thatfirm and develops a relationship with its president can ask him orher for referrals to those prospects.

Finally, producers are responsible for creating servicetimelines for their clients. A producer can't offer the sameservices to every client, and not all clients want the same type orlevel of service anyway. The top-tier clients should receivecertain proactive services, while the middle and lower tiers shouldreceive more reactive services, or perhaps a combination of thetwo. (Proactive services are those that producers offer, such asquarterly loss analyses or risk-management counseling. A reactiveservice is one that a producer provides at a client's requests,such as certificate issuance.) Also, some clients want to see theiragent only once each year, while others expect a monthly visit ortelephone call. The producer should decide which services to offereach client and when they should be rendered. The CSR is thenresponsible for making or arranging the client contact andfollowing up with the producer. For example, the CSR might send theproducer a note that says, “Call this client; it's time for yourquarterly meeting.” The producer and CSR should meet regularly (atleast quarterly) to discuss the timeline and adjust it asneeded.

On a related note, we recommend preparing a “report card” togive to clients when renewing their policies. A report card notonly solicits feedback from clients; it also reminds them how muchyou do for them and that you're looking out for their bestinterests. For example, “We promised we would give you a quarterlyclaims analysis, and we did so on this date.” List all of the otherservices you provided throughout the year. Give clients a chance tooffer their comments; be sure to read them all and follow up onthem. Obviously, you should address any subjects for which you donot receive passing grades.

CSRs

Just as a producer is most effective when producing, a serviceperson helps an agency most when providing service to clients,thereby freeing producers to generate new business. We define acustomer service person as someone who manages relationships withclients on a day-to-day basis. Key duties include fielding clientcalls, handling change requests and claims, checking policies foraccuracy, solving administrative problems, assisting in themarketing process and keeping producers up-to-date on significantdevelopments related to their accounts. A CSR or account manageralso is responsible for making sure the agency fulfills its servicecommitments to clients. The CSR doesn't necessarily have to deliverevery service personally but should monitor the account to see thatthings get done and deadlines are met.

CSRs consistently should follow established workflows andprocedures to maximize operational efficiency and reduce E&Oexposures, sometimes enlisting the help of support staff. Whendealing with clients, they must follow the agency's written minimumstandards, which are different from workflows and procedures. Astandard is an expectation that an agency's staff must meet. Forinstance, Walt Disney World employees (who are called “castmembers”) can never tell a guest “no.” If a guest requestssomething, the staff must find a way to comply–that's DisneyWorld's standard. Your agency's standards might include returningall telephone calls within 24 hours.

Support staff

Your agency may hire support staff to assist your servicepersonnel. Support people perform such simple, run-of-the-milltasks as processing auto ID cards, checking basic endorsements,helping CSRs maintain client files and issuing certificates ofinsurance. If anything exceeds the support person's level oftraining and expertise, someone with greater knowledge must approveit. For example, some agencies consider certificates of insurance ahuge E&O exposure and don't allow support staff to issue them.However, if an agency creates a template file for certificates, asupport person should be able to safely issue basic ones. Ifspecial wording is requested or used, then an account manager orproducer should approve the language, document doing so and obtainapproval from a company underwriter before the support personfinishes the job. If CSRs check endorse- ments returned bycompanies, they're not using their time effectively. Duties such asthese can–and should–be transferred to a support person.

Do sweat the small stuff

If your agency has a small-business unit, make sure it truly isa profit center. We recommend that all agencies determine theminimum revenue needed to break even on an account. Factor in thesalaries of the service people and support staff; the cost ofutilities, computer equipment and office supplies; and all otherexpenses associated with maintaining that account. When agenciesperform this exercise, they often find they're losing a lot ofmoney on some of their accounts. One agency we dealt with recentlydetermined that it needed to earn $600 in commission on an accountjust to break even–and many of its accounts paid only $100 or $200.That revelation was a real eye-opener.

We also suggest that agencies not pay producers for smallbusiness. We know many people object to this idea, but it makessense to reward only the behavior that you want to see repeated.We're not saying small accounts are unimportant, but if you wantyour high-level producers to bring in mid-size and largeaccounts–the most profitable ones–then pay them commission only onthat business. Let people at a lower pay level take care of smalleraccounts.

Another way to increase efficiency when placing smaller accountsis to use just a few standard markets. Many agencies make themistake of shopping their small-business accounts as much as theydo larger ones. But if someone on your staff goes to 10 or 15markets for an account that yields only a few hundred dollars inrevenue, you lose money just by writing that account and will haveto maintain it for about five years just to break even. Also, avoidplacing smaller accounts with excess and surplus-lines carriers,because it takes longer for CSRs to process renewals with them andsuch markets present more risk than the accounts are worth.Instead, choose only three or four admitted companies adept athandling small accounts and use them as your go-to markets for suchbusiness.

Establish efficient workflows and procedures, then monitor themto ensure that everyone adheres to them. If you still have paperfiles, switch to e-filing or T-filing. If your personnel are keyingin data at a carrier's Web site and then entering it againelsewhere to issue new policies or process endorsements, we suggestthat you discontinue the duplicate data entry. If necessary, take astrong stand with your carriers. Tell them you're happy to dobusiness with them, but you need to be able to work through afacility like the IVANS Transformation Station or at least getdownloads from them.

Carrier service centers work well for some agencies but not sowell for others. Use one (or more) only if your agency trulybenefits from doing so. Before you place an account with a carrierservice center, make sure that all the client's lines are with thesame carrier. For example, a client whose businessowners policy iswith one company and whose workers comp policy is with anothercould find it frustrating and inefficient to contact two differentservice centers–and prefer instead to just call your agencywhenever they have a question or problem. In that case, you aresharing some of your commission with the service centers, yetyou're still servicing the account.

Monitoring procedures will reveal whether you're getting yourmoney's worth from a service center and also uncover any relatedtechnical or training issues you might need to address. If using aservice center saves you time and you're pleased with the results,that's great. But if you encounter problems, or find that you'restill taking many client calls or see your retention begin todecline, don't hesitate to pull the plug.

Marketing panel

Every agency should have a marketing panel that qualifiesprospects and reviews all submissions presented to the agency. Nomatter what your agency's size, and even if you don't have amarketing department, you can increase your hit ratio by creatingand using such a panel. We've seen eager new producers startworking on accounts for which their respective agencies have nomarkets. If an agent lands one of these accounts, a CSR likely willspend many hours trying to find a market for a piece of businessthat the agency doesn't normally write and for which it has nocarrier relationship. A marketing panel, on the other hand, canhelp ensure that new business matches up with your carriers'appetites.

Your marketing panel should consist of the sales manager, theservice manager, an account executive, the head CSR and a producer.The panel's main duty is to meet periodically–once a week or so–tolook at every submission and determine whether it meets theagency's criteria and should continue to be processed. Panelistsshould consider whether the insured has an unmet need for which theagent has offered a solution and ascertain if the prospect islikely to fire his or her current agent. This measure will helpproducers avoid “practice quoting,” wasting your staff's time anddecreasing your efficiency and your profit margin.

The panel also should determine whether the producer has allowedadequate lead time and has gathered complete and accurate data.Producers sometimes fail to understand CSRs' time requirements.I've seen an agent hand a CSR a few bits of information and ask fora quote on an account that's up for renewal in a few days, with noregard for whatever else the CSR might be working on that now mustmove to a back burner. Such last-minute tactics not only annoy andinconvenience CSRs but also can harm company relationships.Likewise, providing complete and accurate data might sound like ano-brainer, but apparently it isn't. Earlier this year, we visitedan agency and found a lot of friction between its producers andservice staff. We learned that several of the agency's producersroutinely put information on applications that they knew was falseto ensure that underwriters would accept the apps and offerfavorable quotes. For example, they might say that a building had asprinkler system when, in fact, it did not. Then an underwriterwould quote the risk as though it had a system, an inspection wouldindicate otherwise, the rate would change or the application wouldbe denied, and the CSRs would have to explain the reason to theclient and deal with the fallout. Much time-consuming drama and illwill could have been eliminated if a marketing panel had acted as agatekeeper for the agency and had the authority to veto asubmission or suggest that a producer build a carrier relationshipor otherwise continuing to work on an account and present it againlater.

Rewards

For motivating sales staff to perform well, we prefer the carrotto the stick. Most of us work better when we know what is expectedof us, respond better to positive feedback than to negative andtend to repeat behavior for which we have been shown appreciation.Still, many agencies do not have any type of bonus pool for theirservice staff. If they do, disbursement typically isarbitrary–”Everybody gets $1,000 this quarter”–rather than tied tomeasurable goals. If you want your producers to bring in largeaccounts, pay them for doing so (and stop paying them for small,unprofitable business). Likewise, if you want to see accountretention increase, reward your staff for retention. We suggestcreating a bonus pool from which you can pay predetermined bonusesto CSRs and support people who reach specific goals for thingsunder their control.

Our sales management team recommends posting producerperformance goals and results where everyone in the office can seethem. At one agency we visited, a huge banner near the copy machinedisplayed all agents' sales goals, quarterly totals andyear-to-date standings. The banner was updated daily, and itprompted everyone in the agency to think about sales every timethey passed it. Don't think you can accomplish the same results byhanding each producer a printed spreadsheet with his or her goalsand progress–it won't work as well. A producer who is having a goodrun will look at the sheet, congratulate himself for hitting hisgoals and put it in his desk drawer. Those who are not doing sowell might feel a bit embarrassed at first, but then will realizethat few people know they're falling behind. Instead, create alarge display and post it prominently so it can serve as a dailyreminder for everyone to work on sales. Another benefit to thistactic is that CSRs can see how their producers are doing and prodthem along, since their compensation is tied to the amount of newbusiness their producers bring in.

Require producers to at least hit 95% of their goals for theirCSRs (and other members of their support team) to receive bonuses,which can be a percentage of their base salary for the pastquarter. For instance, a service person supporting Bob, who peakedat 115% of his goal, would be paid an additional 10% of lastquarter's pay. Thus, a CSR who earns $40,000 annually can qualifyfor a $1,000 bonus every quarter that his or her producer hits thegoal.

Once you've established and posted goals, created the bonus pooland announced how you're going to use it, be sure to use a reliabletracking mechanism to eliminate guesswork and pinpoint breakdownsin the system. If producers' goals are published, and some peoplefail to reach them, then you have some objective basis for holdingthose people accountable.

We've outlined what might be called “The Four Habits of HighlySuccessful Sales Agencies”: 1) create a sales organization culture,2) clearly define the role of each individual within that culture,3) promote teamwork among all team members, and 4) establish andmonitor guidelines, and track and reward sales success. If youadopt these habits within your agency, you will be on your way tobecoming a total sales operation and will enjoy an increase innew-business growth.

Rob Hamilton is a consultant at Marsh, Berry & Co. Hisconsulting activities include valuation of insurance agencies andbrokers, financial and operational management, businessperpetuation and compensation. He can be reached [email protected].