A new study by Reagan & Assocs. finds that only 56% ofproducer hires in the insurance distribution system in the pastfive years are successful.

In a baseline survey of 562 agents and brokers, the surveydetermined that while success rates were significantly moresuccessful for top-performing firms (84%), most agencies andbrokerages are still struggling with hiring, typically identifyingit as the biggest challenge they face in their businessesoverall.

While the overall success rate was 56%, employee benefitssuccess rate was 53%, commercial lines success rate was 56%, andpersonal lines success rate was 59%.

Most firms hired new producers from inside the industry:55% hired experienced producers and 10% hired people who worked inthe industry, but not in a sales role. For the 35% of hires comingfrom outside the industry, only 6% were college hires.

Not surprisingly, producer success rate varied dramaticallybased on the success level of the firm, according to theReagan Value Index. Firms in the bottom 25% saw producer successrates of only 22%, compared with the 56% average and 84% successrate for the top 25% of firms.

In drilling down with a supplemental survey and subsequentfollow-up interviews with the firms most successful in recruiting,Reagan identified six critical factors for firms that weresuccessful in producer hiring.

Read on to learn their recommendations.

1. Defining hiring needs

The Reagan study found that 55% to 60% of agents and brokers areunder-hiring.

“The top 25 of these firms will hire 10 producers to end up witheight successful hires," the survey notes. "To end up with eightsuccessful hires, the bottom 25% will have to hire more than fourtimes as many producers.”

Reagan identified three key measurements firms can useto establish an appropriate level of hiring: sales velocity,generational capacity, and producer investment.

Sales velocity is calculated by dividing this year’stotal new business by the prior year’s total commissions and fees.For example, an agency with $10 million in total commissions andfees in the prior year that generates $1 million in new commissionsand fees has a sales velocity of 10%. Agencies can use salesvelocity and its relationship to growth to calculate the number ofproducers they need to hire.

Generational capacity relates to the number ofproducers in each age band (up to age 35, 36-45, 46-55, and over55), and the contribution to new business by each age band.

Producer investment centers on the Net UnvalidatedProducer Payroll (NUPP) metric, which is a mesure of an agency'sinvestment in developing producers. NUPP is the difference betweenwhat an agency pays its developing producers in direct payrollversus what the producers would earn under the agency's normalcommission schedule. A NUPP of 1.5% to 2.5% for net revenuerepresents a healthy level of producer hiring.

2. Determining who to hire

The most successful firms are strategic in who they target andare willing to make necessary investments in their recruiting,hiring and development efforts to ensure the success of thosehired.

Although hiring experienced producers is preferred because theyneed little training and frequently come with their own books ofbusiness, the long-term success of an agency -- and the industry --lies with attracting new people.

The Reagan study found that most producer hiring is stillprimarily male: 79% of all producers, 85% of personal lines, 74% ofemployee benefits, and 45% of personal lines producer new hireswere men.

However, hiring varies widely by age, with most new producers intheir 20s or 30s; more than 60% of producers in the supplementalsurvey were hired before their 40th birthday. The survey found thatthe success rate increases with the age of the producer hired;approximately three-quarters of all producers hired with a book ofbusiness were 40 or older.

3. Building the candidate pool

Building a recruiting pipeline begins with identifying how manynew producers need to be hired. Top firms begin with a targetnumber of hires and then develop smaller steps that support theachievement of the target. For example, most firms typicallyinterview five to 10 candidates for each producer they ultimatelyhire. To ensure a quality pool of candidates, they build a pipelineat least five to 10 times their hiring target. Firms reported thatexpaning their pool of candidates has allowed them to be moreselective in their hiring decisions, leading to higher levels ofsuccess.

Successful firms report looking for leads in as many places aspossible, including a strong internal referral pipeline, workingthrough "centers of influence" such as carriers, local tradepartners, etc.. Additionally, 41% of firms use social media asa recruiting rool.

4. Elevating the ability to selectwinners

Top-performing agencies have a systematic producer selectionprocess, typically focused on interviews, testing, referencechecks, internships and other tactics, and finally, sellingthe opportunity to the candidate.

As with all elements of producer recruiting and development,it's good practice to designate one person to be responsible forthe selection process. This is typically a human resourcesemployee, which ensures timely and consistent communicationwith the candidate.

5. Maximizing success for those hired

Once a promising candidate is hired, the firm is responsible forproviding them with the necessary training anddevelopment. Specialization is a growing trend; producers with aspecialty have a higher success rate than those who do not. Themost successful firms in the study require a higher percentage oftheir producers to specialize; nearly half of their commercialproducers and more than a third of benefits producers are requiredto specialize.

Team selling is a move away from the old-school technique ofselling by individual producers. Team selling helps disseminateknowledge and provides for smoother succession of clientrelationships when the current generation retires.

Mentoring is another key element, with more than half (55%) ofall producers in the supplemental survey mentored, and 57% ofproducers in commercial lines being mentored. Mentoring istypically provided by senior producers and sales leaders, with 40%of firms providing compensation for mentoring. Technical training,sales training and other resources such as lead generationassistance can also be helpful.

6. Owning and leading the strategy

Reagan identified four key business practices to elevating andowning the recruiting and hiring process:

• Elevating and promoting producer recruiting anddevelopment
• Ensuring real leadership for producer recruiting anddevelopment
• Investing the necessary time, capital and resources
• Practicing accoutability

A solid first step in this process is to identify and visiblysupport one person as the producer recruiting and developmentleader. This doesn't have to be the agency president or CEO; itcould be an HR leader, branch leader, sales manager, COO, or anyonewith the authority to oversee and execute the plan.

When it comes to capital investment in recruiting, leading firmsmust be willing to have 1.5% to 2.5% of revenues tied up inunvalidated producer payroll alone at any given point.

Finally, creating accountability around recruitment involvesdocumenting key tasks and responsibilities, meeting regularly todiscuss the strategy, tying compensation to success, sharing thestrategy across the organization and refining the process asneeded.

For a copy of the report, contact Reagan Consultingat [email protected].