Bank M&As Can Breed Culture Clashes

Over 300 insurance agencies can now attest to life after being acquired by a financial institution. Despite varying goals, many agencies and their financial institution partners are achieving a successful integration, particularly in those transactions where the relationship is founded on realistic expectations and honest communication.

Failed bank-agency combinations, on the other hand, are often a byproduct of poor communication, unrealistic expectations and broken promises, which almost always lead to dissatisfaction and turnover.

In most deals to acquire existing insurance agencies, financial institutions grade success by a set of criteria that include return on investment, growth rate, pre-tax margin, bank-agency integration, and amount of cross-selling.

The agency, on the other hand, has its own grading system that often includes:

Degree of autonomy allowed.

Number of cross-selling opportunities available.

Amount of formality added to their job.

Number of meetings and other new activities not related to sales and service.

Opportunity and level of incentive-related compensation.

The opportunity for cross-selling is thus the only goal shared by both parties.

For banks, formal in their organization and driven by a responsibility to outside shareholders, advancement is determined by a combination of factors–not just performance, technical proficiency and hard work, but also the ability to adapt to a well-established cultural mold. Individuals have strict roles and areas of responsibility but rely heavily on information drawn from committees and meetings.

The culture of a successful insurance agency, by contrast, is quite different. Typically, insurance agencies are owned by the leading rainmakers of the organization (the producers), who are not necessarily the best managers. Producers often choose an insurance career to capitalize on a sales-oriented personality and a desire to achieve high personal income goals.

Agency sales positions attract creative individuals who want flexibility in their work life and a desire to be compensated according to their efforts. High-quality producers seek agencies that afford an opportunity for ownership. Most insurance agents do not have formal general business training or education, but succeed through a combination of sales drive and entrepreneurial skills.

High-performing agencies combine an aggressive sales culture with a desire to meet the needs of their customers through responsive service and prompt payment of claims. The sales and service focus in the finer insurance organizations breeds a problem-solving, personal and loyal relationship with their clients, who are typically growth-oriented middle-market businesses and their entrepreneurial owners.

The consultative approach taken by the peak-performing agencies enables these agents to enjoy flexibility in their schedules. This allows them to spend quality time with their families as well as to strengthen relationships with customers on the golf course or through other informal contacts.

At the same time, higher-performing agencies are sophisticated about continuing education, financial performance and employee retention.

Convergence of banking and insurance is a wonderful opportunity for financial institutions and agencies. By approaching the transaction with their eyes open, doing a good job of communicating and agreeing to expectations before closing, both sides can grow profitably together.

For a list of the 10 ways to bridge an agency-bank cultural gap, see the accompanying article.

Wayne A. Walkotten is a vice president and senior consultant at Marsh, Berry & Company in Concord, Ohio, a consultant to independent agency owners and brokers. His e-mail address is wayne@marshberry.com.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 19, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Bank M&As Can Breed Culture Clashes

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