If an Agency Were a Person

By | January 9, 2012

Most agencies are managed from the perspective of the shareholders and executives. But what would an agency want if it were a shareholder?

1. Good health. The foundation of agency health is the balance sheet. The most important measure on the balance sheet is the agency’s trust ratio. Many agencies would dearly appreciate a cash infusion that restores its trust monies. Trust monies are like hearts. Quite often a person with severe heart problems will not know they have heart damage until they wake up in a hospital, if they are lucky. I find few agency owners recognize the damage they’re doing to their agencies by spending money that does not belong to them.

When trust monies are short, an agency can still operate and may not feel any health problems on a daily basis, until the day they effectively have a heart attack. That day will present itself as the day it cannot pay its companies or its employees. It may present itself at the time of a valuation or sale, when the owners learn their agency has diminished value because the heart of the agency is damaged. It may present itself, especially if insurance companies come to their senses, when they cannot get a new company contract or even lose a contract.

2. Positive harmony. If an agency were human, it would differentiate between positive and negative harmony and recognize harmony is a physical, not an emotional, phenomenon. Negative harmony occurs when waves are created at a frequency that can collapse a bridge. In an agency, negative harmony occurs when agency executives acquiesce to poor performance. They attempt to create harmony by avoiding conflict. This may seem positive on the surface, but it can destroy an agency because the underlying issues are not being addressed.

Positive harmony involves addressing the tough issues. In the counseling world, these are called critical conversations. If agencies were people, they would have these critical conversations because when all producers produce and when all producers, including the executives, are held accountable for their results, the best kind of harmony is created. Great harmony is when everyone is truly doing their jobs and working as a team.

3. Work ethic. Everywhere I go I hear people lamenting the loss of a work ethic. Beyond the fact that older generations have lamented the poor work ethic of younger generations since at least the time of Socrates, an agency would dearly appreciate it if some agency owners jumped off the band wagon and got back to work. Agency owners have had to work hard to get where they are. Unfortunately, all that counts to your agency is what you have done for it recently. The agency’s companies, producers, employees, and partners are appreciative of what owners have done in the past, but they are mostly interested in what you are doing for the agency today.

4. Focus the business. Many agencies have lost focus on what they are. This is clear when they have three times more company/broker appointments than they need, when they have multiple producers who are failing, and when they dabble in health insurance. With so many balls in the air, they cannot focus on true success. They can only survive from one day to the next. Spreading resources and relationships too thin is not good strategy. True business success is not achieved by trying to be all things to all people.

5. Focus sales. An agency would also want its producers to stop trying to sell to anyone and everyone. This strategy may still work in really small towns. However, due to today’s cost structure and coverage complexity (i.e., E&O exposures and customer needs), it is no longer possible to sell to anyone and be great. It may not even be possible to be good. It does not matter if the agency is large or small. Large agencies are going to have difficulty selling to small clients and small agencies are going to have difficulty selling to large clients. The waste involved in trying to sell to anyone is phenomenal. Agencies know, even if their humans do not, the way to greatness is focusing on the customers that fit the agency’s strengths best.

6. Focus the owner(s). If an agency were human, it would also want the agency owner to stop trying to wear all the hats in the agency. Many agency owners try to be a producer, CEO, CFO, COO, head of marketing, carrier relationships and HR, and chief cook. Sometimes this is due to necessity. However, more often it is because the agency owner is a control freak.

An agency knows that humans need to get past these emotions, focus on their strengths, and hire people with complementary strengths to fill the gaps. For example, if the agency owner is a great sales leader, it often makes great sense to hire a person to manage operations. It is extremely difficult for one manager or leader to be a good cop and a bad cop. Simultaneously, it is not realistic to expect everyone to always get along and for everyone to always do their job without oversight or to make all the sales calls necessary without prodding.

7. Choose sales or marketing, not both. Too many agencies waste resources dabbling in marketing and selling, but most are too small to spend valuable resources in both areas. Many agencies lose money because they are spending so much marketing money to accentuate sales but they are not cutting producers’ compensation to help pay for it. With margins so thin, this cannot last. Similarly, it is extremely expensive to employ producers to sell if they cannot or will not sell. An agency knows the best path is to focus on its strengths.

8. Procedures. An agency would want procedures for both processing business and for sales. An agency would also make sure everyone followed the procedures. Of course, this would get rid of any cowboy cultures, but it would be a great place to work for those who want to develop their personal skills, are not afraid of accountability, and want to make serious money.

9. Hire a great professional advisor. An agency would not assume its attorney knows enough about accounting or insurance agencies to write contracts without additional expert opinion. Many agencies would greatly appreciate having a CPA and an industry consultant cross check all agency contracts.

10. Expiration lists based on the competition’s best accounts. An agency knows this is an efficient and effective way to develop business. With good systems and good producers spending all their time focusing on only writing 20 really good accounts, the agency will eventually write some great accounts. Producers would not be stuck calling on hundreds of prospects, many of which are not prequalified. Instead, producers could spend more quality time developing relationships and competitive advantages.

Agencies see their peers becoming great and they do not want to be left behind. If you listen carefully to your agency, you will hear its message. Agency owners desiring greatness will listen.

About Chris Burand

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: chris@burand-associates.com. More from Chris Burand

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Insurance Journal West January 9, 2012
January 9, 2012
Insurance Journal West Magazine

Contractors / Subcontractors; Employment Practices Liability Insurance; 2012 Insurance Agents & Brokers Meetings / Conventions Directory

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