Establish an Outside Board of Advisors

By | July 18, 2005

An agency cannot grow effectively when its lead executive is surrounded by yes-men. Some people view these junior manager-types as loyal team players, while others consider them to be ingratiating sycophants. Their actual description probably falls somewhere in between.

Regardless, these people make poor sounding boards for new ideas and for investigating the root causes of agency problems. Their overriding concern for self-preservation and social acceptability too often blurs their vision of the future and clouds their responsibilities in the present.

These impulsively-positive individuals tend to misdirect the principal with rationalizations that hold the agency executive blameless for his own firm’s failures. To them, these problematic issues are the fault of the current insurance market conditions, the actions of unimaginative underwriters, evil auditors, by-the-book claims adjusters, etc. In other words, the agency’s tribulations, whatever they are–are due to external conditions and outside individuals. This ‘not you/not me’ viewpoint masks the real concerns that are facing the business rather than resolves them.

One way to overcome this self-defeating internal struggle is to bring in respected people from outside of the agency. Entreat them to serve on a semi-formal board of agency advisors. Members openly share their take on the agency’s operations, sales efforts, future plans, etc., and proffer advice.

These boards are not unique to the insurance business. They currently help many small businesses within multiple areas of commerce. They help management to sit back and listen to the sage experiences of others, to obtain objective second opinions, and to benefit from an overall fresh viewpoint.

This advisory board is not a “legally” authorized board of directors, like the one that’s elected by a corporation’s shareholders. Accordingly, the opinions and ideas expressed by its members are usually broad overviews and not heavy in details. These specifics are the responsibility of agency management and not the function of board members. And that’s good. It’s this lack of direct connection to agency operations that gives a board member the freedom to be brutally honest.

To help decide if the establishment of an advisory board is right for your agency, consider each of the following questions and issues carefully.

What type of issues will the board face? Some difficulties are so damaging that no one from the outside is willing to associate themselves with the agency until these concerns are fully corrected. This is particularly the case when some level of criminality is alleged such as when there’s a non-accidental shortage in the premium trust account, fake binders or policies are “issued,” etc. However, for the most part, these boards encounter typical business issues such as personnel, marketing, sales, real estate, perpetuation, and supplier relations.

What type of advice do you seek? Do you simply want second opinions on routine agency decisions? Do you prefer advisors who have talents in special areas such as personnel management or marketing? Or do you just want a few business executives to push you along in meeting your agency’s goals? Let the type of assistance that you seek guide you in finding the best people to serve.

What is the intended function and authority of the advisory board? Will you encourage board members to openly challenge the agency’s present actions and future plans, making you explain and justify yourself as needed? Or do you prefer it to serve as a polite and formal rubber stamp, encouraging your every move? If you opt for the latter, forget the whole idea. You will gain nothing from the effort. This advisory board is meaningless without the freedom to honestly confront perceived agency missteps and its vision for the future.

Carefully select your individual advisors.Based on the above considerations, put together a board of no more than four people. Include one P/C insurance agency expert along with experienced business executives from other fields. Consider your needs as you select potential board members. And don’t automatically invite your lawyer and CPA. They may think that you are trying to get “low-cost” advice from them. Also, if these professionals work closely with any of your competitors, there may be a conflict of interest.

Who from the agency will be invited to attend the board meetings? Include all agency principals who are active decision makers. Plus, if you have formal departments, invite the heads of each, on an as needed basis. Don’t automatically assume that every person with managerial authority should sit in. Sometimes you will want to discuss confidential matters that you don’t want to reveal to a particular manager. It’s insulting to ask a regular attendee to leave the board meeting. Instead, bring in people for portions of the agenda that impact them. Then when discussions are over, thank them for participating and politely send them back to their office.

Establish a regular meeting schedule.Annual meetings are not enough. So, meet two to four times a year, depending on your plans and activities. Monthly get-togethers are too often and dilute the overall impact. Tip: Always set the next meeting date when everyone is together. This minimizes calendar conflicts and eliminates endless coordinating phone calls and e-mails.

Who should be asked to join the board? One ready source of names is your commercial lines client list. Consider asking business managers who have successfully overcome the same growth or survival problems you are facing. Tip: Be very careful when it comes to inviting a full-time consultant who derives the core of his income from consulting services. He could be tempted to use his position on the board as a way to exaggerate agency problems that only he can solve. The last thing you need is a consultant who came on board only to drum up additional business, at your expense. Another questionable addition is inviting managers from the insurance companies that you represent. These individuals freely provide their advice to the agency anyway, so they don’t need to take up a valuable board seat.

Long or short-term? Is the board intended to function as a permanent fixture or as a short-term fix? This is a vital consideration and impacts the make up and influence of the advisors. Some agencies consider the board to be eternal and reward it with space atop their organizational chart. However, this is pure fiction because the advisors have no real power, only the ability to suggest. If you set up an advisory board only to get the agency out of a current difficulty, inform the people you invite to join of this key fact. They need to know, upfront, if their advice has an expiration date and whether their services are centered on a single impermanent problem.

Pay all advisors.Don’t expect busy business people to give up two to four mornings a year for a free cup of coffee and a nice new legal pad. Provide them with a reasonable honorarium ranging from $25 to $1,500 per meeting, depending on your size and the advisor’s services. And cover any travel-related expenses in full, if any out-of-towners serve on your board. This is a small investment for helpful, tailored advice.

The decision to appoint and install a board of advisors is not one to be taken lightly. “Tough love” board member inquiries can adversely impact agency egos, drive hard changes in operational procedures, and demand real answers to documented failures. However on the upside, they can help an agency to grow, to take true stock of itself, and to enact authentic corrective actions, unimpaired by the disingenuous whispers of self-serving yes-men.

Alan Shulman, CPCU, is the publisher of Agency Ideas, a subscription-only sales and marketing newsletter. He is also the author of the 1001 Agency Ideas book series and other popular P/C sales resources. He may be reached at (800) 724-1435 or by e-mail at: His Web site is

About Alan L. Shulman

Alan Shulman, CPCU, is the publisher of Agency Ideas® sales and marketing newsletter (free basic subscription at He is also the author of “500 Sales Ideas for Commercial Lines Producers” among many other P&C sales resources. Email: Website: More from Alan L. Shulman

From This Issue

Insurance Journal West July 18, 2005
July 18, 2005
Insurance Journal West Magazine

2005 Excess, Surplus and Specialty Markets Directory, Vol. I

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