Agency Pains and What to Do About Them

10 Common Agency Woes and How to Fix Them

The typical agency has at least a few persistent problem areas that never quite go away. At best these issues are addressed but not completely fixed. At worst, they are not even noticed and then fester until something bad happens.

Top performing firms will regularly take an inventory of what is working and what needs improvement. Successful business owners love the challenge and tackle those perennial problem areas.

In our experience, most independent agencies have several of the same problems, no matter their size or location. The following are 10 common areas in many agencies today, that if addressed will make a significant impact on the firm’s overall performance.

1. No Sounding Board – Most agencies under a certain size usually only have one or two key owners. They are often the top producers and are trying to do management of the agency in their spare time.

The best thing for them to do is to be a member of a group of other business owners that can be a sounding board for their problems. This can help them keep focused on their goals. Oak & Associates has created a new program for agencies that want to be a part of this type of sounding board with monthly meetings and other consulting assistance provided.

2. Producer Issues – It is difficult to find good producers, properly compensate and train them, set-up goals and provide overall management. How can owners get the growth they need for the agency? Most agencies have a hard time in this arena. There are numerous sales management tools available from consultants and training organizations to help owners with producer and sales issues.

3. Poor staff productivity – Many agencies have a hard time getting good revenue per employee standards above $100,000. They should be striving for the $150,000 to $200,000 level. Accurate records need to be kept so owners and managers know when workloads are out of line. Also, they need to pay attention to when to hire, especially assistants to delegate the clerical work. These things will all help improve productivity.

4. Poor Use of Automation – Most agencies could greatly improve their use of automation. Do you have the right software system? Are people well-trained and are you striving to become paperless or paperlight? Agency personnel need to know how to use the computer to eliminate duplicate steps, to get rid of the hard files and drop files.

5. Low Return on Investment – Most owners’ compensation and their return are both affected when expenses are high or there is a decrease in revenues, such as with the soft market. Owners get frustrated about how they can increase their return on equity and also fund growth, such as hiring new producers, when times are tough. Improving on a number of the other pains mentioned in this article will improve their return.

6. Poor Marketing or Advertising – Very few agencies do a good job of marketing or advertising for their firm. Unless they have a niche program, with assistance from a carrier in providing brochures or leads, few firms spend much on advertising. Most don’t even know how to do this or how to make an effective Web site for marketing to prospects. An advertising consulting firm may need to be hired to give the agency this assistance.

7. Poor Communication Within the Firm – Communication is usually not good in most independent agencies. Good communication should extend between employees and management, between departments, within departments and between partners. There are lots of tools that can assist in this regard, such as effective meetings with agendas, agency newsletters, employee recognition, company luncheons, off-site parties and in-house sales campaigns.

8. Lack of Training – Most owners and managers just do not spend any time training. If a formal program is not established in-house, then employees should be sent to coverage and technical schools. Trainers can be brought in in-house and this can be very cost effective. It is important to also assign a mentor to new personnel to acclimate to the agency’s way of doing business.

9. Lack of Management – Most firms do not have formalized management. If department managers are hired, then they usually also have too much of a workload to also do a good job at managing day-to-day activities. If the middle managers were given the appropriate time, this would give owners the assistance they need to properly run the firm’s main functions of sales, marketing, service, accounting and administration. Occasionally, we have seen agency managers hired to oversee all management of all departments, but it is difficult to find good hires.

10. Lack of Perpetuation Plan – It is rare to find an agency that has a plan established much before the owners are in their mid to late 60s. They often just cannot see how existing staff, producers or family members could ever be trusted to pay them for their stock. It appears that the problem is not understanding how most outside party deals are done, which is usually a down payment with additional monies coming from the firm’s own cash flow. Once the retiring owners are confident how the transaction will occur and how payments will be made, coupled with life insurance, good employees can often be used for perpetuation if they have good management skills, an ability to guide producers and a transition period with owners “letting go” over time.

Summary

Most firms have at least several of these agency problems, often at the same time. It’s nice to know everyone has the same problems. However, it is even better to know how to fix these problems.

Problems are often best solved by working with a team. Find a team of trusted advisors that have separate experiences and skills to help with issues as they arise.

Topics Agencies Training Development