Because I lead the annual "Best Practices Study" researcheffort, people often ask me to describe the best way to set up andoperate the typical independent agency. But I have learned that toomany variables exist within the agency community--ownershipstructure, business focus, geographic location, available markets,etc.--for a single operational model to be truly effective.

A "one-size-fits-all model" for insurance agencies won't yieldthe success that the McDonald's model provides its franchisees.

However, common attributes can be found in the most successfulagency models, and these characteristics provide the engine andfuel by which agencies drive optimal growth, productivity andprofit margin.

As listed on the accompanying graphic, these attributes includegood leadership, quality people, superior carriers, a profitablebook of business, a well-defined value proposition, and highlyefficient and effective operations.

Must they all be present? And if not, which is mostimportant?

Many would argue that the precursor to any successful businessmodel is good agency leadership that fosters an environment inwhich any chosen model can be implemented and sustained.

Good leadership will successfully communicate a shared vision,encourage and lead the agency through change, and expect excellencefrom itself and all those associated with the agency. Withouteffective leadership, an agency will probably struggle regardlessof the operational model.

Undoubtedly, quality people can give an agency a competitiveadvantage. That is why the better models include performance-basedoperations, where the agencies are willing to spend significantresources to provide career development opportunities, competitivecompensation, flexible work environments and equity opportunitiesfor high performers.

The inability to attract and retain dedicated employees who areknowledgeable and experienced will stress any operation and couldbe fatal.

Although superior carriers will naturally gravitate to superioragencies, in the most successful operations, the agencies carefullyselect their company partners based on the agency's business focusand needs, as well as the carrier's reputation for stability andease of doing business.

The key relationships are monitored through joint planning toassure the agency remains focused, is submitting business thatmeets the carrier's underwriting appetite, and that commitments arebeing kept by both parties. Carriers that provide competitiveproducts, pricing and compensation are essential to any model.Without them, an agency can't exist.

It seems reasonable then to conclude that in the long run,growing and maintaining a profitable book of business is thecritical component of any model. The book must generate anunderwriting profit for the agency/carrier relationships to endureand provide an operating profit for the agency to function. Longterm, an agency must achieve both to prosper.

However, in a world where the consumer wants everything better,faster and at an exceptional value for the dollar, achieving areasonable operating profit--especially in a soft market--is achallenge. The best operations meet the challenge with a clearlydefined value proposition rather than the vague proposal ofoffering better service, products or pricing.

The best agencies understand exactly (and can articulateprecisely) their value proposition, be it their professionalexperience, value-added services, unique and quality products,array of carriers, and/or the ability to deliver the lowest cost tomanage the clients' loss exposures.

A standing joke is that the really great producers have an"elevator pitch." They are able to articulate their agency's valueproposition to a prospect in the time it takes to go in an elevatorfrom the first floor to the 30th floor of a building.

But all joking aside, an agency that can pinpoint where it candeliver value can more easily identify and focus on the types ofaccounts to which it brings particular knowledge, expertise,products or services.

It can build on that niche or segment by soliciting new businessthrough referrals, write it more cost effectively, and keep it onthe books longer. And it will continuously purge itself of thoseaccounts that are a drain on the agency's profits, as well asproactively adjust its proposition to changes in its marketplaceenvironment.

As you can see, all of these attributes are important andclosely intertwined. One cannot succeed isolated from theothers.

Nevertheless, from my perspective, highly efficient andeffective systems, processes and procedures should be ranked nearthe top of important attributes. They provide a strong foundationfor all of the other aspects of a successful business model to beleveraged to the maximum.

The underpinning for the best operational models is the heavyuse of available technology. The agency management system has arobust database with full client and policy detail, accessiblelocally and remotely. Workstations are equipped with dual monitorsand other tools to allow service staff easy access to electronicinformation, real-time interface, online services and otherautomated tools that allow the processing of transactions to be asautomated as possible so employees have more time to do what theydo better, faster and more proactively.

Technologies that help the agency become less paper intensive(such as scanning and document management systems) are especiallyimportant, so work can be delegated effectively to the lowestlevel.

For example, one of the larger Best Practices agencies is ableto outsource the task of policy checking to a team in China. Eachnight the Chinese team logs into the agency system, downloads thepolicies and checks them against the application, binder, proposaland other documents--which are all maintained electronically.

This overseas "nightshift" has freed up many of the agency'smore highly skilled and compensated employees to concentrate onrelationship building, to develop and deliver value-added services,and to support new growth initiatives.

Time is now available to proactively offer cost-saving options,claims counseling and disaster planning advice to personal linesclients, as well as to assist commercial lines clients with theaudit process, provide human resource counseling and offerinformative seminars while actively soliciting referrals andcross-selling existing accounts.

Enhanced agency Web sites also help to create efficiencies andoffer additional service choices when the client is provided withthe ability to self-serve. As Web-based services become moreimportant to consumers who increasingly demand 24/7 service andInternet access for all their business transactions andcommunications, agency operations are adapting to meet those needsin a cost-effective manner.

Regardless of the size of the firm or business model employed,the heavy use of technology results in tremendous efficiencies andeffective operations that enable the agency to push lessvalue-adding work downward for lower costs while pullingproductivity, growth and profitability upward.

And that is the mark of the optimal operational model for anyagency.