Among all the things that an insurance agency owner or manager needs to pay attention to, employee productivity is often considered, but not properly addressed. This is curious because maximizing employee productivity has a direct impact on the bottom line.
Most owners and managers do provide lip service to employee productivity. Managing workloads is something most owners try to do. However, this usually results in shifting accounts from one CSR to another. Perhaps there might be some changes to the work flow. The end result is that the dust is kicked up for a few weeks and then it settles back down in a new location.
Keep in mind that the biggest single agency expense is for all agency personnel, typically costing 52 percent to 73 percent of revenue. In general, owner and producer compensation is between 25 percent and 35 percent of revenue, office staff compensation ranges from 20 percent to 28 percent of revenue and benefits and taxes costs 7 percent to 10 percent of revenue.
This means if a firm can get more work done with less employees then the savings drop to the bottom line. For example, if a firm can increase revenues by 10 percent without increasing staff then that 10 percent is mostly profit.
The secret to employee productivity
The secret to improving employee productivity is … there is no secret. Every agency has its own personality. Owners and managers need to use a blend of art and science to arrive at the formula that works best for their specific firm.
This does not mean to give up and be satisfied with the status quo. It means that owners and managers need to get into action and do what it takes to find that proper mix of ingredients that will work for the agency. After all, managing the employees is what owners and managers get paid to do!
The place to start is with the people doing the work. This is easier said then done, but management needs to hire the right people. Let go of those that do not work out as soon as possible. One bad employee can spoil the whole work environment.
Manage by walking around and asking questions. Employees know what works and what does not work. Management’s role is to determine which ideas are the most cost effective solutions, if any. So, management should ask the employees the following question: “What three things can be done to make your job more efficient? Or make you more productive?”
Bring the staff together to discuss the suggestions. Brainstorm on the issues. Delegate some of the problem solving to the staff and have follow-up meetings. The best suggestion should win a reward, perhaps $100 or more depending upon the savings. This process should be repeated annually.
Owner and managers should perform their own analysis. The following are some basic areas to explore.
Is the agency overstaffed? Compare the agency productivity to peer groups using one of the published benchmark studies. If overstaffing exists, why and what can be done? Get rid of under-performing employees and reward the high performers.
Is the layout of the office efficient? Does the staff have to go long distances or are they impeded when retrieving commonly used files, copy or fax machines, etc. Is the office too small? Is the staff working on top of each other? Is there extra space and is the rent too high?
How is the employee morale? Any number of things can cause poor morale. Often it is related to perceived unequal treatment. Make sure all employees are expected to meet the same high standards. Be consistent with your relationship. The annual performance review is the time to clearly communicate performance expectations and past results.
Is the staff properly trained? On-the-job training is good to make sure the staff follows agency procedures. Unfortunately, it will perpetuate the same old inefficient ways of working. It is better to send the employees outside the agency for new ideas when possible. Make sure the staff is kept up to date with insurance coverages and procedures. Have the employee inform the rest of the staff on what they learned after they return from the training.
Communication is imperative. Does management have a clear direction for the agency and is it communicated to the staff? Employees need to be pointed in the right direction and told what their purpose is. Having a purpose will prevent the employees from getting bogged down in the minutia.
Automation—the silver bullet
For the last 20 years, agents have been bombarded with the notion that the firm must be automated or it will be run over by the agencies that are fully automated. This has not been proven to be true, until maybe now. In the recent past we have seen firms that are highly automated have mediocre results, while some firms that have little or no automaton do quite well.
The key with agency automation is not to buy the most expensive and sophisticated system. The key is to maximize the usage of any effective agency management system. Some small firms spend lots of money buying a name brand system, but they only use it as a glorified Rolodex. They would be better served buying a less expensive system and utilizing most of its functions.
The first step is to take an inventory. Does the agency have enough properly functioning and up to date office equipment? Sometimes one extra fax machine or printer can make a big difference in productivity. Is the telephone system efficient?
When it comes to the computer system, is the staff double entering data? This can occur when one person writes down information from a phone call on a piece of paper rather than bringing up the computer screen to complete the transaction, and thus the work is done twice. Or, this can occur when one person takes only some of the information rather than transferring the call to the appropriate person (e.g. claims, personal lines CSR or the producer).
Is the agency using transactional filing or is it paperless? New software, scanning machines and larger disk space as well as company uploading and downloading makes being paperless the way to go on personal lines and perhaps other lines as well.
Agencies with a small commercial accounts department have “T filed” with success and many are now paperless. Unfortunately, many medium to large commercial lines producers still like to carry the client’s file so old habits are hard to break. The jump to being paperless requires a leap of faith. Almost all agencies that have made the move have been happy and have eventually seen a jump in service staff productivity.
There is one glitch in the automation silver bullet—maintenance. When the computer system is down, most of the work in the agency is close to a standstill. Medium to large firms now have to add an IT (information technology) person to the staff. This is necessary for many larger agencies, but the addition of personnel and more expensive automation adds to the firm’s expenses and lowers profits.
The book of business
Despite all the valiant efforts one might make, it is still impossible to make a brick wall fly. In other words, the type of insurance one sells limits the productivity of employees. For example, firms that sell employee benefits tend to have very high productivity. One producer and two staff can easily handle $500,000 or more in commissions. In contrast, a non-standard auto agency might need four or five employees to service $200,000 in commissions. Commercial lines usually falls between personal lines and employee benefits when it comes to productivity.
Even within each line of business, certain classes of business are more labor intensive than others. Contractors and truckers will require a lot of service work, such as certificates. The good news is that there are some tricks to change the agency’s mix of business to improve productivity.
Does the agency cross sell its accounts? Relationships are strengthened when an agency sells more than one coverage to its clients. Efficiencies are gained by earning more commission per account and spending less time generating the sale since they are already familiar with the firm and employees/producers with the account.
Does the agency have any program business? Selling a unique product that is slot rated can be an incredible income generator. Usually these sales require less work to sell and service. The similarity of the book of business can create high productivity.
Do the producers pre-screen their prospects? Pre-screening will help eliminate business that the firm cannot write or should not write. Know the price, product and politics needed to close the sale as soon as possible. It is best to find out the quality of the prospect in the phone call before the visit, than to find out during the marketing process.
Does the producer or marketing staff selectively approach the firm’s markets or are applications sent out to everyone? The latter is called the “shot-gunning” or “blocking” of the markets. Sending quotes out to all or many of the markets is a waste of agency time and that of the underwriters. Make sure everyone is aware of which markets will provide the best chance to write the business and limit the amount of quoting. The underwriters will be very grateful and take future business seriously.
If increasing employee productivity were simple, everyone would do it. Owners and managers need to make a commitment and then handle one small chunk at a time. Sometimes it helps to bring in an outside party to get the process started by performing a management and organizational study to make appropriate recommendations for management to follow.
Small gains when compounded over time result in enormous savings. To be cliché one last time, the goal is to work smarter not harder. Implementing the ideas that are laid out in this article will take some time, but will change the way you do business forever.
Bill Schoeffler and Catherine Oak are partners in the international consulting firm, Oak & Associates, based in Northern California. The
firm specializes in financial and management consulting for independent insurance agents and brokers, including valuations, mergers, acquisitions, clusters, sales and marketing planning as well as perpetuation planning. They can be reached at (707) 936-6565 or by e-mail at email@example.com. Visit the Web site at www.oakandassociates.com.
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