The recent news that Apple CEO Steve Jobs was stepping down from his current position roiled Wall Street, the media and the business community with speculation on whether the tech giant can sustain its competitive and innovative supremacy after the transition.

You may not be Steve Jobs or your agency an Apple, but the topic raises some interesting points about what independent insurance agency principals should know to ensure a graceful exit and the subsequent survival of their businesses–whether it's a planned retirement or an unexpected personal or medical situation like Jobs faces.

We spoke with several agency management experts about the parallels between Jobs's departure and how agency principals can soften the blow for their own imminent transitions. Here are some takeaways:

1. You're more like Steve Jobs than you think. Steve Jobs is a technological innovator who heads up a global corporation that now officially has more money than the U.S. Treasury; you run an independent insurance agency that sells risk management products and services. But just as the idiosyncratic Jobs was synonymous with Apple, many agency principals, especially the small to midsized family-run shops, have similarly forged the agency's image over the years and branded the agency with their personalities.

“Typical agency owners are entrepreneurial, creative, innovative and kind of a contrarian—characters in their own right who create brand recognition in their communities,” said John Wepler, president of MarshBerry. “Individuals like that are a tough act to follow. Even though your business is the byproduct of all your efforts, it won't be sustainable unless you build in a process-driven way to let go over time.”

A typical midsized agency's “persona” usually reflects one or two key principals (usually ego-driven, Type A personalities) who become the business's public face, said Tim Cunningham, president of OPTIS Partners LLC. “Smart agency owners position the agency as an entity to get equal billing as the strong principal. The best-case scenario is when the agency's own identity is stronger than the individual's.”

2. Start planning early. Apple took years to build the bench strength that will assume control after Jobs is gone; agencies should do the same. “Seventy-five percent of agencies sell rather than perpetuate because there is no short-term urgency to plan ahead,” Wepler said. “Steve Jobs didn't kick the can down the road and neither should you.”

Successful agency perpetuation takes a minimum of 5 to 10 years to get into place, and requires use of the PACT plan: people, agency, capital base and time, Cunningham said. “Aside from a tragedy like death or illness, most plans fail because the people are not in place. Also, owners must recognize that the agency's valuation must be realistic—in most cases the internal value will be less than what a third-party buyer will pay.”

Cunningham suggests preparing for your exit by working backward: “If you want to be out in 15 years, start planning now. It's a much stronger plan if you execute it over 15 years than over 5. Succession planning is a process, not an event.”

The worst-case scenario is the agency without a perpetuation plan and the owner who plans to “run it 'til I die,” then plans on handing the business off to a child or a best friend, said Demmie Hicks, president of DBH Consulting. “This may satisfy the agency's financial value, but it doesn't address the future of the organization or the people in it; just that it will eventually be sold.”

The best-case scenario is the agency that makes succession planning part of its overall strategic plan, she said. “Some organizations think about and plan to do it, meaning they have leadership development as part of their strategic plan and know who the future leaders are. But the ideal situation is where the current leaders have identified the potential leadership team. Too many organizations don't do that, which results in an agency that has no choice but to sell or have a different exit strategy.”

3. Put the right people in place. Just as incoming Apple CEO Tim Cook spent years running the company's day-to-day operations as COO, successful agency ownership transitions involve identifying and grooming the business's future leaders.

“Steve Jobs can perpetuate because of the process he went through to determine what unique skill sets he had to transition, then evaluated whether Apple's existing staff had those functions. If they didn't, he hired,” Wepler said.

“Apple had everything in place so that the day Jobs stepped back, the succession plan was already laid out and everyone understood it,” Cunningham said. “This doesn't happen accidentally.” And just as Apple didn't rely on trying to find a Steve Jobs clone to replace the outgoing CEO, agency management transition is usually more successful when the successor doesn't try to emulate his predecessor's management style.

“You'll need other key people to pick up the slack with the public-facing stuff the principal used to do,” Cunningham said. “Warren Buffet says his board knows his successor is one of three people, who are already in place. Just as a public company needs a management succession plan, so should private companies.”

Succession planning starts with scrutinizing the voids in the agency's management and recruiting individuals based on the tasks that are needed, transitioning from an individual focus to a team approach. (At Apple, Cook's supporting team includes Jonathan Ive, who oversees Apple product design; Ron Johnson, who runs Apple's stores; marketing chief Philip Schiller, and Scott Forstall, who supervises the iPhone software.)

“The agency principal needs to expand the leadership circle; instead of one to three trusted advisors, they should have a dozen, even if it's a small firm,” Hicks said. She points to a client firm that started perpetuation planning and employee development 10 years ago. The firm has successfully moved through its second internal perpetuation involving both financial perpetuation and a succession of leaders. “The CEO, a figurehead and larger-than-life visionary, stepped up to chairman and doesn't drive the strategy anymore. The CEO was really groomed along with those around him for the past six years,” she said.

4. Institutionalize the brand. A successful business's future must continue after the departure of even the most visionary of leaders, said Terry Connelly, dean of the Ageno School of Business at Golden Gate University in San Francisco. “A company is dependent on its ability to institutionalize that genius in the corporate DNA.”

Once an agency has the right people in place, the principal can begin to transfer account relationships as the first step to institutionalizing the brand by transitioning to a team approach. Wepler recommends using an “activity inventory” to pinpoint the principal's tasks. At age 45 or 50, the principal commits to making a list of everything he or she does in the organization over a period of 30 days, no matter how minute. Then the principal ranks these activities from the simplest to most difficult to delegate, determining whether or not there is someone currently in the organization who can assume each task.

For example, a retiring CEO who for 25 years had personally handled the agency's largest account ($1 million in annual revenue) knew he wanted to retire in six years, Wepler said. He began transitioning the process by hiring a young producer and loss control expert to move the interpersonal relationship to a team approach. Within two years, the CEO had taken a back seat to the younger team members, transitioning to a “relationship manager” position. “It took service to a higher level than ever,” Wepler said.

5. Communicate the plan. If an agency principal is 63 years old, employees will wonder what will happen when he retires. “They'll take great comfort in knowing things will go on, so keep them in the loop,” Cunningham said. “Start out with very general information, then roll out more specifics as the plans firm up.”

“Steve Jobs had come in and out of Apple so many times that the company must have known there would be a day when he would step out completely,” Hicks said. “Transparency about his plans was important for stability and job retention. It's not common for agents to be transparent about their plans in times of transition, but it's important to share what's happening; it strengthens the organization.”

Customers also need to know there will be continuity after a principal departs. “Most large commercial accounts developed by a strong agency principal are going through the same succession issues as the agency,” Cunningham said. “By bringing in younger leadership, the agency is ensuring that the younger people at the customer's business will have someone of their generation to work with as well.”

Special Reports /

5 Lessons from Steve Jobs on Agency Succession

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