ACG - Agency Consulting Group

The PIPELINE

A national monthly newsletter for agency principals dedicated to agency management topic

'BUT I TAUGHT HIM EVERYTHING HE KNOWS!'

That’s the echo I hear often from hurt agency owners who bring on new producers, train them, coach them and counsel them from deficits to productivity only to lose them within ten years when they ‘feel their oats’ and break away because they feel they can do for themselves what the agency has done for them.

Producers tend to over-estimate their knowledge and value and under-estimate the value of the support system that is provided in some agencies. However, we have noticed that many agents have shared far more of the agency’s inner workings than necessary with producers who are not being groomed to become owners. If producers are part of the team, their roles are in relationship building with prospects and relationship management with clients. They should not be servicers, marketers and should certainly not be using their time on carrier relationships – that is the role of the agency’s other staff members.

The key to keeping productive producers for long careers is to a) pay them fairly (compared to what they could get elsewhere) keyed on their productivity, not on them simply being there, b) actually provide them agency support in terms of lead generation and service support, and c) teaching them everything that they need to know (but not everything that you know) about carrier relationships and about administration of customer relationships.

The Primary Reason Producers Leave;

1. Lack of management and leadership – every agency owner “wants” producers but most are not willing to provide the management and leadership to make the producer a part of the team. The producer quickly learns that the agency expects him to be a relatively independent entity that either rises or falls based only on his/her own initiative.

2. Lack of marketing and service/administrative support – Here’s a challenge for you gardeners out there – plant a full garden but separate it into two equal sections. Feed, water, weed and prune of the garden and leave the other half to its ‘natural’ state. What do you think the results will yield?

Producers are like plants in a garden. Some of them will not yield fruit regardless of what you do for and to them. Others will thrive if planted properly, fed, watered, fertilized and weeded to maximize their chances for production. A very rare few will thrive regardless of what you do or don’t do for them. Producers will leave if given other opportunities when they are not supported properly by the agency.

3. Lack of TLC and respect – As producers grow beyond the fragile ‘starter’ stage and become competent in creating and enhancing relationships with prospects to turn them into clients, they need to be treated as members of the team and respected for what they have done and for what they are expected to do in the future. Too many of our producers are still treated like the “kids” even after five or ten years of service. More producers leave agencies for lack of respect and credit than for money.

The Mistakes We Make

Laissez-Faire Agency Owners –First we find either experienced or fresh producers who find enough reasons to join our agencies. The reasons are very different for experienced vs. inexperience producers. The experienced producers are looking for a home for their existing relationships with sufficient carriers, appropriate compensation and levels of support to allow them to earn a living. The inexperienced producer is wide-eyed and willing and expects you to teach him/her.

In either case, if we do not continuously mentor the producer, the situation will eventually sour. Hiring a producer is much like adopting a child. If the child is young you have to teach him everything and make sure he’s safe. If the child is older, you must assure yourself that his previous training is proper and sufficient and guide him further toward his and your goals for him. Many agencies hire producers and expect them to find their own prospects, know how to sell and figure out agency procedures. It often doesn’t work well that way.

Producers as Prospectors – If you don’t know how to attract customers to your agency, how do you expect the new producers to do so? Before you hire new producers, make sure have a system in place for identifying and building prospects into clients. Learn how to do this first and your producers are much more likely to be successful for you and for themselves. The agency knows its carriers, products, and competencies. Use those competencies and the strengths of your carriers to identify the most likely candidates for your services. Create a marketing program to introduce your agency to these potential clients and to provide value to them ahead of the sale as a way of differentiating yourself from your competitors (including your prospects’ incumbent insurance provider). The simple fact is that, for most prospects, your being there and “touching” them often is usually the key aspect of provider differentiation. Most of the incumbent agents don’t pay much attention to their clients. Do you?

The job of the producer is to create, build and convert a prospect relationship into a client relationship. The job of the agency is to create those opportunities for the producers frequently enough to make the producer profitable for the agency and for themselves.

THE SOLUTIONS

Pay Them Fairly – We have provided much information about Compensation Programs for experienced producers vs. new producers, Base & Growth Model compensation instead of New/Renewal Compensation, Tiered Compensation to reward more productive producers, Self-Terminating Producer Agreements that penalize producers who shrink instead of grow, and Activity Based Validation Schedules. Please call us for a consultation if you need us to help you create the tools for producer management.

But the key to fair compensation is to pay producers at least what they would get at competitor agencies.

The Agency as Prospector – Most of us would love to give leads to every producer. But we don’t know how! There has been much written (by us and others) about the agency defining its target markets and creating marketing programs in favor of the producers. Remember, the producers are a part of US, not independent entities working for us, for others, and for themselves. Not providing leads is like not feeding our children because they are expected to ‘fend for themselves’. Nurture your producers as if they were your offspring. Yes you will be “feeding” them and helping them to maximize their earnings. But if you feed them, you also feed the agency and if your pay scale is not wrong, the agency will be using the producers’ production to support itself, throw off profit and earnings, and enhance its value to its carriers and to its owners. If you don’t know how to market because you’ve never done so before, call us (800 779 2430) and we’ll teach you.

Manage Your Producers – Even the most experienced producers need some level of management. Certainly the new producers need management to learn the ropes (sales, insurance, and how to deal with people) and to assure them and you that they are doing the right things to become successful. But new experienced producers and long-term existing producers for your agency also need touch points to keep them grounded and part of the team. It is far too easy for successful producers to become their own support system out of simple necessity – if the agency doesn’t provide that support they either figure out how to do it themselves or they fail. Once they create independent means of support they are on the slippery slope to asking the common question, ‘Why do I need the agency any longer?’

Make validation of compensation the opportunity to the expression of gratitude for the good work producers do and the opportunity for coaching and counseling to get them over the rough spots. If everyone has validation schedules that justify their time through customer and prospect contacts, no one will feel themselves ‘above’ those measuring points and will continue to feel part of the agency instead of the agency serving their needs.

Maintain a Relationship With the Agency’s Customers to Protect the Agency – It is a foolish agent who has producers who generate clients whose only contact point with the clients is that self-same producer. Whether a service employee, an Account Manager or one of the agency owners (for key commercial accounts), the client should always know at least one other staff member and be assured that he is insured with the agency, not just with the producer. This must be done positively and pro-actively to avoid interfering with the relationship and to use the other contact points to strengthen the relationship between customer and agency. This action also avoids the producer believing that the customers are “his” – act like a team if you wish to be a team.

The producers should acknowledge the ownership of all clients with the agency when the producer is hired. We strongly recommend against equity sharing in books of business. If you create equity sharing potential, the producer is actually incented toward the best interest of his own book of business and against protecting the entire agency’s book of business. This action promotes segregation of books of business instead of integration. Have you ever had a producer who “insists” on having his/her own clients handled on a priority basis by service staff regardless of other agency priorities the staff may have on their desks?

Equity sharing in a book of business also creates the impression legally that parts of an agency’s book of business could be separated from the whole when, in fact, with the exception of brokered business, the clients of an agency have historically been owned by the agency. We spend much time in court each year protecting an agency’s asset base as owned by the agency.

Teach Them All They Need To Know, Not All You Know – Many agencies still act as if their agencies were simply another pocket in their personal financial bag. They share nothing and the staff, including producers, is unaware of anything having to do with agency performance.

Other agents have realized that sharing information is a sign of respect for employees and gives them a better handle on how to function in the agency. However, the pendulum swings from extreme to extreme. Many of these “enlightened” agents become too free with information. Sharing too much information with producers could lead them to conclude that they can operate without the agency. They are usually wrong but sharing information is a balancing act. We aren’t implying that you should have secrets or withhold information from your staff or from your producers. But, unless you are grooming your successors (in which case they must be taught all of the relationship and processes needed to assume your role) the producers have a specific role to play in the agency. They are a critical cog in the wheel of success. Their focus should remain on the relationship-building that is the key to their success.

To maximize the effectiveness of each producer, they should be freed from all functions that don’t relate to their building relationships with folks we don’t insure and maintaining strong relationships with agency clients. Key functions like marketing to insurance companies is most effective when done by staff members skilled in negotiating and fully acquainted with the underwriters and marketers of each carrier. Using producers to market is often counter-productive because they are too personally involved with each and every prospect and client they bring to the agency. They will ask for exceptions, and rarely accept the fact that some client hurdles are beyond the tolerance of their markets.

If you purify the roles of producers who are not going to become your successors to the tasks that will return the greatest benefit to them and to the agency (sales) you avoid many of the pitfalls that result in producers breaking away from an agency because they feel they can ‘do it themselves’.

Nurturing producers will maximize their effectiveness. Over-indulging them will have the same results as over-indulging children. They could become petulant, ungrateful and could turn on you. Many agents want their producers to become their successors. That’s fine, but don’t give them the keys to the castle before they have proven their loyalty, their value, and their intentions. First, they must prove success in production. Then they must become more concerned for the entire agency than for their own pocketbook or their own clients. Then they must be able to deal with your employees in a fair and equitable manner. Only then should you enlighten them by bringing them into relationships with the carriers. Those relationships open up the agency’s most valuable assets. Those connections should only come to those few who are identified as the next owners of the business.