Many agencies view the opening or acquisition of branch officesas a way to grow and expand their market reach. Too often, though,I find that after agencies set up branch offices, they neglect tomanage them. As a result, I inevitably find the branches havemore–and more serious–problems than the main offices do.

Procedures

I often find branch offices' procedures differ from those of themain office, usually without management's knowledge and often inviolation of the agency's official procedures. Sometimes branchoffices must use different automation procedures because of howtheir automation systems are designed, but those are minor problemscompared with ignoring the agency's standard procedures. Besidesreducing efficiency, this creates large E&O exposures for theentire agency.

Branch offices use different procedures for many reasons. Forexample, the main office may forget to tell the branch office aboutprocedural changes. Probably the biggest reason, however, isbecause no one trains the new branch-office staff. The problem iscompounded when the branch-office staff is relatively inexperiencedand made even worse if only inexperienced producers are present.Sometimes the staff has to fulfill the producer's role. When that'sthe case, branch office staff should be of the highest caliber.Also, most agencies never check whether their branch offices arefollowing procedures, so the branch offices will innocently (or notso innocently) begin processing business differently or starttaking shortcuts. Some of these shortcuts create serious E&Oexposures, such as modifying collection procedures, violatingbinding authority regularly, not completing applications and–alltoo common–clearly and blatantly violating privacy regulations.

Underperformance

Branch offices often underperform the main office. Some agencyowners expect and accept this, but many underperform to such anextent that the agency would be better off eliminating them. Suchpoor results are often due to lack of management. With no onsitemanagement, employees may not work as hard. They may cut cornersmore often. Producers may write poorer accounts. I have foundlow-quality work to be common in branches.

Sometimes, though, branches outperform the home office becausethey must– just to keep up. Their workloads are way too high,causing mistakes and increasing the agency's E&O exposures.Most often, the home office will not take their complaintsseriously, so the problem continues to build until a majorincident, usually an E&O claim, occurs.

Producers

Another mistake is staffing a branch with a new producer. Suchproducers will not get the training, mentoring and management theyneed. They will make mistakes; and even if they do not have a clueabout they are doing, the branch-office support staff is unlikelyto challenge them, because they are producers. Putting a newproducer in a branch office without adequate supervision almostalways results in subpar performance and huge E&Oexposures.

The aforementioned problems arise through management negligence.For some reason, agency owners often believe (or at least hope) abranch office will manage itself. After all, there are only two orthree people in many branch offices. How much supervision couldthey need? But no matter how one looks at branch offices, they mustbe competently managed, and a large part of the responsibility mustbe shouldered by an agency owner. It cannot be effectivelydelegated.

Before deciding to open a branch office, an agency shouldconsider whether it really needs it. Branch offices often are toosmall for agencies to dedicate adequate resources to them, butstill too big (in an owner's mind) to shut down or sell. Thisunresolved status is the worst thing for a branch office. Propermanagement requires either making the branch big enough to matteror closing it. If a branch office can produce only $150,000 to$300,000 in commission (maybe as much as $500,000 in somelocations), the agency probably does not need it. Most of thebusiness probably can be rolled into the main office and servicedfrom there. Some good accounts may be lost, but the business keptwill be much more profitable.

Branch offices can offer great growth opportunities, but only ifmanagement dedicates the resources required to make them profitablegrowth opportunities. This entails:

–Giving the branch office incentive to manage itself andincreasing its accountability. Management must be willing toimplement and continuously monitor procedures for measuring thebranch office's performance.

–Placing only experienced, proven producers in branchoffices.

–Giving someone the responsibility to profitably manage theoffice.

–Assigning someone from the main office to check the branchoffice's work.

–Giving the branch office the infrastructure it needs tosucceed–no more second-hand office equipment.

–Providing the same training to staff as that given tomain-office employees.

–Notifying the branch office every time companies change rulesor rates, and whenever the agency changes procedures. In fact, itis best if someone from the branch personally represents the branchat weekly, or at least monthly, staff meetings, to get theinformation first-hand.

–Holding “get to know your fellow workers” office parties, soemployees in all locations can work together more effectively. Manybranch-office people feel isolated, and this is not good formorale.

It takes a lot of work and capital to make a branch office apositive addition to an agency. Before opening one, agency ownersshould ask whether it really could add enough profit to make itworthwhile. Agencies with existing branches should evaluate theirperformance. If a branch is not meeting the mark, dedicate adequateresources to it or shut it down. Either way, you'll have a betteragency.