How to Do More With Less in Your Agency

Recently, I shared lessons learned from the Best Practices Study that stressed, “It’s all about the people.” Yet, the consensus among my private client agencies is the same: It’s extremely difficult to find people!

In my column, I challenged agency owners concerning the development of their people. I mentioned that the average agency spends just 0.3% of their revenue on the training and development of their people, and 0.5% on miscellaneous expenses. Which one’s more important?

It has been predicted that half the industry’s workforce will retire between now and 2036, leaving 400,000 positions to be filled. Trends show fewer and fewer young people being attracted to the business.

As baby boomers continue to leave the workforce, there are not enough younger workers to replace them. This has had an especially negative impact on other industries, too, that are losing their appeal among millennials.

That’s not to say all is lost. Many universities have great insurance/risk management programs. Leaders of two of them, Florida State University and the University of Mississippi, have told me that 100% of graduates with insurance degrees get jobs immediately. Those odds are certainly more favorable than most graduates enjoy when they enter the workforce.

But even with a ready source of new hires, many agencies are challenged to attract employees in sufficient numbers to replace those who have left the business or who plan to retire soon. This is especially true among smaller agencies that don’t have ongoing recruitment programs.

Also, many post-pandemic workers have gotten used to working remotely, which requires adjustments that some agencies can’t (or won’t) make. Increasingly, I’m hearing about high-level personnel being lifted out by other agencies that offer significantly higher pay and the opportunity to work 100% remotely. This is ideal for any number of workers, including those with young children at home.

Should these trends continue, I believe you’re going to have to do a lot more with either the same number of people or fewer. Further, being in the risk management business, how are you going to manage this risk?

The primary purpose of all the programs and coaching we do with independent insurance agencies is to produce industry-leading results. If people are our greatest asset, if there are going to be 400,000 job openings in our industry, and if agency valuation is top of mind for agency owners (another takeaway from the Best Practices Study), it’s time for agencies to focus on increasing capacity and accelerating results in the areas of sales and service.

Sales capacity

I can think of a couple of adages that apply here: “Nothing happens until something is sold” and “Net new revenue doesn’t solve all of your problems, just most of them!” The ability to increase sales capacity starts with your producers spending more time selling.

We say The World’s Greatest Producer Recruitment Program is getting your current producers to produce. It’s about getting them in the Green Zone (where they take part in sales, relationship management, continuation—not renewal—and pipeline development activities) and maximizing their Time Spent Selling (TSS).

The reality is that most producers are part-time producers, because most of their workday is not spent on sales and sales-related activities. They are stuck in the Service Trap/Red Zone and spend less than one-third of their time in the Green Zone (the money-making area). Increased sales capacity starts with the marriage of sales and service into High-Performance Teams (HPTs) that have the same goal, with an appreciation, respect and trust concerning the different roles each team member plays. The goal is retaining and obtaining ideal clients.

Our objective is to get the producers in their Green Zone activities 80% of the time. Tough to do? Absolutely! If it were easy, every one of your competitors would be doing it. What if we got your producers in the Green Zone just 60% of the time?

This may sound like basic simple stuff—and it is. However, it’s not easy. It requires unwavering discipline tied to a culture of accountability to make this happen.

Here are some of the other foundational actions or strategies that agencies should implement if they want to increase their sales capacity. And yes, you’ve probably seen these before, but are they part of your agency’s overall business model?

• Targeted account size. Once your producers accelerate their TSS, take a look at what they are selling. Are they pursuing commodity-based sales? Do they have a minimum and targeted account size, which is all they pursue?
  Any producer can be a million-dollar producer, but not by writing $1,000 accounts. Here’s a question we ask the producers who participate in our training and development programs: Would you rather have 100 pennies or four quarters?
• Selling process. What’s your unique and repeatable selling process? Is the story that you’re selling in the marketplace unlike your competitors’ and is it repeatable? Most producers cannot clearly define their process and how it’s unique.

One main reason producers struggle with capacity and actual results is their pathetic pipelines. Unless yours are overflowing with Future Ideal Clients vs. random prospects, you’re going to have a capacity problem. We all know that a referral or introduction is the best prospect to work on, especially when you control the specific prospects you want to pursue.

One of our newer strategies is “every new client from a referral and a referral from every new client.” What if 80% of your producers accomplished this 80% of the time? You couldn’t handle the new business opportunities—what a great problem to have!

Service capacity

The service team’s ability to handle day-to-day service-related activities plays a critical role in enabling producers to be in the Green Zone 80% of the time. We see a huge disparity between account managers in this area.

I get extremely concerned when I see one commercial lines service person handling $500,000 and another handling $350,000. It’s the same in personal lines, when one handles $250,000 and another handles $400,000.

Why the disparity? Usually, it comes down to their processes. How effective and productive are they in the way they work? Are they operating under the same playbook of processes? For example, do they have established processes for handling new business, continuation, claims, and more?

An agency’s management system should drive how processes should be followed. Unfortunately, way too many don’t operate that way. Their employees have different processes for doing similar tasks. Consequently, they’re decreasing service capacity and the amount of revenue handled by 20% or more.

Typically, agencies invest a considerable sum in technology and automation that they never fully utilize. According to Angela Adams Consulting, the average agency uses less than 50% of its agency management system, which dramatically and negatively impacts its teams’ capacity.

That would be like paying $100,000 to an employee who shows up for work half the time. Not acceptable!

Service capacity is also heavily influenced by low-revenue clients. We have found that in the average agency, the bottom 50% of clients generate less than 10% of their revenue and yet comprise a high percent of transactions.

Although some may disagree, we believe those transactions need to go elsewhere. However, when we challenge our clients to consider service centers or outsource that bottom 50%, they freak out because they equate those accounts with 50% of their revenue when it’s not—it’s 50% of their clients and usually less than 10% of revenue.

Our goal is to outsource the transaction but keep the majority of the revenue.

Besides retaining revenue, shedding your bottom 50% of accounts will help increase capacity. If you can boost producer productivity by 25-plus percent and get the service people focused on becoming relationship managers and servicing clients, the benefits are two-fold: (1) producers can focus on Green Zone activities 80% of the time; and (2) service capacity grows dramatically.

As a result, you won’t need to hire more people to boost capacity.

Measuring agency capacity

So how do you know if your agency is working at capacity? Of the many key performance indicators (KPIs) we could use to measure capacity, I believe these are the top drivers:

• Revenue per Employee. Let’s say it’s $200,000. An increase of 25% = $250,000 of revenue per employee.
• Spread per Employee. Most agencies don’t consider this, although it’s an even more important number than revenue per employee.
• Revenue per Validated Producer
• Revenue per Service Rep
• Revenue per Relationship (average account size)

As you increase these KPIs, you’ll be driving agency profit. In turn, you’ll also be dramatically improving agency valuation, which is top of mind among agency owners.

For most, their agency is their largest personal asset and, therefore, the best place in which they can invest. If they can increase revenue per employee and spread per employee, they can significantly increase their agency’s profitability and, subsequently, its value.

Previously, we’ve noted that the average agency spends more on miscellaneous expenses than they do on the development of people. But the only way people are going to be able to do more is if we develop them more.

So, if we want the capacity, we must invest in, and commit to, training and development. What are the skills, processes and attitudes that must be developed, trained and constantly reinforced in the organization?

Keep in mind that every $100,000 of additional profit is worth about
$1.5 million of valuation today. Imagine how much greater your agency’s value would be with an increased profit of $200,000, $300,000 or more.

With $400,000 of increased profit, valuation would jump by $6 million. That’s a pretty good return.

The bottom line

Based upon the data from the Best Practices Study, agencies really don’t have a choice when it comes to increasing sales and service capacity.

Just saying that you want more capacity doesn’t give it to you. What gets you capacity is setting goals and objectives for it, and then training and developing your people, skills processes, and attitudes that make it a reality. Remember, if you can’t find the people, you’d better maximize the people you’ve got! In doing so, every employee will make more money (an excellent exit barrier), and so will you and your agency.

What’s more important? Miscellaneous expenses or training and developing your HPTs? As always, it’s your choice. 

The author

Roger Sitkins is the CEO of Sitkins Group, Inc. After over 40 years he has truly become an icon in the insurance industry having trained and mentored thousands of insurance professionals.

Roger was inducted into the Michigan Insurance Hall of Fame in 2017 and in that same year also received the Dr. Henry C. Martin Award from Rough Notes magazine. Roger is among only six people to have the honor of receiving this prestigious award. Visit sitkins.com.