Agency Management Challenges

How Money, Motivation and Morale Connect

Pop quiz: Agency owners, please write down a short list of the management challenges constantly facing your company. The catch – you cannot list increasing new business revenue or retaining current clients. Portfolio development, while a very real issue, does not do enough to separate your identity from other firms. Every company lists business development as a goal. The real issue is, “What makes the challenges of an independent agency different?”

It is no secret the insurance industry has some unique ownership and staffing challenges. The 2010-2011 Bureau of Labor and Statistics Occupational Outlook Handbook projects a 14 percent shortage of insurance agents over the next six years. This tops nearly all other deficits projected for prominent insurance positions (adjusters, underwriters, actuaries, etc.).

The industry hasn’t done itself any favors in reversing that course. Sales training and compensation design are extremely inconsistent. And where insurance companies used to be a breeding ground for future producers, most sales managers don’t consider this a sourcing option. Very few independents see value in a producer’s technical foundation, and they question a person’s true sales abilities if they’ve worked at a carrier for too long.

Issues of recruiting and talent development most greatly affect regional brokers. If you’re self-described as “a local agency writing national business” then you fit into this category. The staffing choices and employee development techniques you employ over the next six years is about changing the entire insurance industry’s shortfall by keying in on three critical challenges – money, motivation and morale.

Producer Compensation

Developing a competitive producer compensation plan is an important tool in attracting top sales talent. This doesn’t mean you are reckless with commissions or guarantee ownership from day one. Your goal should be to design a plan that minimizes the agency’s financial risk but still invests in the producer. While the end goal is for producers to live on 100 percent commission, regional agencies usually offer a guaranteed income plus variables up to the first 36 months of validation. This plan has been largely undersold to prospective producers. Be cognizant of this misconception especially when recruiting college graduates and out of industry sales executives.

If you want to attract producers with another agency, make sure they know your pocketbook runs deep enough to compete with the earnings from their current book. Descending bases and contribution-based plans are incredibly effective when wooing an experienced producer, yet these are commonly overlooked by sales managers. The key with compensation design, especially overlaid on existing contracts, is to personalize elements for each producer. Homogenizing sales goals is ineffective in the same way unilateral compensation plans are.

Employee Motivation and Morale

You might think morale is just an issue for non-sales divisions. You may assume that successful producers sell because they are highly engaged. A 2009-2010 U.S. Strategic Rewards Survey challenged that thought when it highlighted declining workplace morale. In fact, the survey showed drops in employee-engagement were highest with top performers. Agencies must address motivation and morale because it’s the lifeblood of talent retention. Employees want to grow deeper and wider in their craft. They choose to work for regional brokers because this is the environment with enough room for growth without becoming a number. They need agency owners who recognize this desire and put personalized plans in place to achieve their goals.

Whether it’s a producer, sales manager or CSR, every employee desires career progression. This isn’t about climbing the ladder to obtain a meaningless title. It’s about finding ways within your agency to create structure and definition in each position. For example, you’ll have a hard time motivating account managers if everyone’s duties are the same and all the titles are CSR. You’ll struggle to retain successful producers if the management structure is flat and there is no room for player/coaches. You won’t have perpetuation options if you don’t separate out the sales-only employees from the leaders.

I would venture to guess most of your lists had at least one if not all three of these items – compensation, producer development and agency morale. In fact, if I felt like a gambler, I would say these challenges were among the first you wrote down. The good news is your struggle as a regional agency to define culture and attract talent is not unique. What’s critical is that you understand these challenges, take measures to implement solutions and brand your opportunities to create separation.

Although the actions of any agency, big or small, can affect recruiting and employee development, don’t expect alpha brokers or small independents to come to your rescue. Perhaps through these efforts we can turn the staffing shortfall into a surplus!

Topics Agencies Talent Training Development