Whether or not the pursuit of new revenue is killingyour potential for profitable growth is, in some form or another, aquestion that business leaders are (or should be) asking on anongoing basis.

It's no secret that new revenue doesn't necessarily translateinto profits or profitable growth. But often times the reasons forthis and the response to addressing this challenge areoverlooked.

The acquisition strategy

In the insurance industry, using an acquisition strategy todrive the growth of business and produce new revenue is commonpractice. Whether that strategy includes acquiring new salespeople,books of business, other agencies or all of the above, manyinsurance organizations look externally to increase revenue. Buthow profitable is that revenue? 

In addition to the actual cost of acquisition — nomatter what is being acquired — there are hidden and oftenunidentified costs that end up eating into profitability. Forexample, when an agency acquires another, most likely they willhave different systems and processes. This creates a serious drainon resources and a lot of waste.

In turn, customer service levels may drop for both existingclients and the newly acquired, resulting in the loss of accountsand renewals. Moreover, employee morale can take a hit due to theadditional stress and workload, leading to costly churn. Additionalinvestments may be necessary to handle the new business. All ofthis impacts the profitability of an acquisition and profitablegrowth in general.

Rethink ops to drive profit growth

That's not to say acquisitions can't lead to growth, of coursethey can and do. It's how that acquisition is "digested" by theorganization that makes a difference. And that's when operationscome into play. Operations are the foundation of any insuranceorganization and a key success factor in almost every aspect ofbusiness — including the profitability of all revenue.

Here's how you can start to rethink operations to driveprofitable growth:  

1. Aligning operations tobusiness strategy

While aligning operations to a business's strategy may seemobvious, often times businesses don't maintain this alignment overtime. Here's an example: let's say an agency has identified theneed to increase renewal retention. In order to effectively achievethis goal, operations must be aligned. This may mean automatingcertain tasks, infusing best practices into the process, orensuring that there are sufficient resources in place during thiscyclical activity. In short, the achievement of that goal iscontingent on operations having the ability support it.

Insurance organizations need to find the best processes to servetheir business strategy.

High-performing organizations understand that operations are thefoundation of their business and a critical success factor inalmost every activity related to growth.  

2. Optimizingprocesses

Optimizing processes involves removing any sources of "waste" inoperations to improve productivity. When we talk about waste we'rereferring to "any activity that doesn't provide value to thecustomer." This notion and the need to eliminate waste inoperations can be attributed to Toyota's research in the 1950s,which spurred on the development of Lean processes and Six Sigmamethodology. Removing waste and optimizing processes increases theprofitability of each piece of business and creates the capacity toearn new business.

Once you are clear on sources of waste and drains onproductivity, you can implement advanced solutions. This may meannew agency management software, or it may mean delegating routineand repetitive tasks to a business process management firm. Theseactions will free up your producers to achieve their coremission—generating new business and, thus, new sources of revenuefor the organization.

3. Talentmanagement

The next step is to ensure the right people are performing theright tasks and that everyone is executing processes in a way thataligns with company goals, rather than cycling through unproductivework that fails to generate revenue.

From front-line customer service to C-suite leadership,developing and managing your talent for success is essential toimproving productivity, performance and profitability. Allemployees, from the bottom up, should have access to learningopportunities and skills development to arm them for success.Effective talent management is critical to achieving growth,employee satisfaction and reducing costly employee churn.

4. Managing by metrics: Thepower of analytics 

An organization's business operations need measurable goals asmuch as employees do. That's why measurement is an integral part ofthe operations excellence process. After all, in order to manage toa goal, you need to be able to measure it.

Today's analytics capabilities allow us to measure key performance indicators (KPIs) andkeep up-to-date on them in order to make improvements as needed.Analytics also provide the ability to extract insights and maximizecontractual relationships.

What you measure will depend on what KPIs you are interested inmanaging to. Today's analytics allow companies to gain real insightinto everything from productivity and performance — through tomonitoring and tracking incentive programs — allowing organizationsto proactively manage and improve in near real time. Analytics helpcreate a continually improving environment.  

It's time to rethink operations

Achieving operations excellence is a dynamic pursuit; there isno "finish line," but a focus on continual improvement. Thisoperations-first approach gives your business the necessaryfoundation to not only support but enable profitable growth — be itthrough acquisitions or organic — and respond to today's evolvingmarket demands.

Related: Insurers can't afford to wait for rising interestrates to shift gears

Dan Epstein is the CEO of New YorkCity-based ReSource Pro LLC,a provider of insurance process efficiencysolutions. Contact him at [email protected].