While slugglish agency salary growth has employees singing the blues, some agency management consultants believe employee satisfaction can be kept up even in tough times.
One way agency owners can keep their employees happy in today’s challenging climate is by making their compensation more accountable to agency growth. Al Diamond, president of the Cherry Hill, N.J.-based Agency Consulting Group, says in agencies where owners have decided to tie employee workload and responsibility directly to compensation, morale tends to be higher and so is productivity.
Of the agencies Diamond counsels on an incentive compensation programs like this, the agency’s average growth was in the double digits last year, and average profitability is around 14 percent.
“These are agencies who have tied compensation for every person in the agency, from the owner down to the receptionist, into that part of the workload for which they have responsibility,” he says. Tying compensation to workload works in small agencies too.
For producers, incentives are easy — just grow the book of business. But Diamond advises agencies to develop incentive-based programs for every position in the agency. Such incentives give the employee more control over their own destiny, he says, and that is what they’re counting on.
Madelyn Flannagan, vice president at the Independent Insurance Agents and Brokers of America, advises agencies to always look at service staff as a way to help with sales. “But don’t expect them to do it for nothing,” she said. “Understand that they might bring very profitable business to your agency, and everybody that’s bringing in business should be compensated in some way.”
Flannagan also advises agency owners to examine new ways to incent producers, such as ownership of the book of business at an earlier time. “A lot of agencies spread ownership over a long period of time before the agent would own their book of business.”
Also, talk about perpetuation with younger producers. “Make them feel like they’re going to be a part of the future of that agency,” she says. “Those are the things that I think will keep people on, keep them happy and keep them producing.”
In today’s climate, agencies can’t afford to pay producers for not doing anything, says Chris Burand, owner of Pueblo, Colo.-based Burand & Associates LLC. This is one of the most critical areas agencies can generate savings without damaging future growth and profitability.
“It may upset the producers, but it’s a real key issue, and it’s one of the reasons some agencies are having such a hard time,” Burand says. “For years and years and years, they’ve been paying producers on accounts for which the producers did zero amount of work.” And that’s a lot of money.
“When agencies pay producers for work on accounts on which the producers do absolutely no work and haven’t done any work in years, they’re also creating an environment in which the producers make enough money that they aren’t incentivized adequately to go out and write new accounts,” Burand says.
In this market, the only way to grow an agency is to write new business.
“You can’t count on exposure growth,” Burand says. “You can’t count on rate growth. You can’t count on anything but getting out there and selling new accounts. If an agency can make that adjustment, it’s going to be in much better shape, and it’ll do well when the market finally changes as well.”
Diamond advises an agency review of each position in the agency. “Figure out how they respond to the customer. What is their measure of productivity? Include them into the concept, and identify the productivity factors, the increase of which can compensate them as well as the agency,” he says.
“If we subscribe to that we can increase our productivity by a factor of 20 percent to 40 percent within every agency in the United States, making plenty of money for the owners, but leaving enough to continue to grow the compensation of our employees,” Diamond adds. But every person in the agency has to participate.
“It can’t be the owner’s decision. It has to be a combined effort, a team effort, of the owners and their employees to increase productivity of the agency.”
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