Everyone knows a huge staffing shortage exists and that the wages of quality account executives has skyrocketed. I know many agents, and carriers too, who are scrambling to find people to hire.
A better staffing solution does exist and for more than a decade I have been showing clients how (if they are willing to become better leaders or, in the alternative, hire someone with great leadership skills) they can employ fewer people and also maintain and grow their revenues. The main factor affecting growth is wastage in the form of time spent processing.
Please note the following: Many people think I mean "processing unnecessary tasks." This is completely incorrect. I mean wasting time processing because the necessary tasks take too long. This wastage has reached at least 20% in the vast majority of agencies regardless of whether the shop is large or small.
Yet, I have few clients that have made any processing changes whatsoever to capture that lost value. Times have simply been too easy. Since profits have been good enough, agency owners have not viewed positive leadership and process improvement as worthy of the extra emotional energy required. (An interestingly related topic is a conversation I recently had with someone to whom I explained how to increase profits and their response was, succinctly, "I have enough profit and growth. I don't need more of either." No need to improve, is there?)
Now though, perhaps the pain has become bad enough that agency owners will be willing to pay the emotional price. I am currently seeing agencies lose up to 75% of their experienced staff. One might think the current pain threshold would be high enough now, however, for some, possibly masochists, I have my doubts. Those agencies just throw more people at the problem and hope for the best by sitting on the self-serving rationalization that "it is what everyone else is doing!"
If an agency finds it necessary to increase staff wages by 10%, or 20%, which is common, then saving one position and increasing the wages of the other staff is a win-win. The one saved position out of the five eliminated is not likely to involve laying any one off. Turnover will take care of this issue.
That is easy to say and Jack Welch's approach would be to fire 20% of the staff, but as history has shown, Welch's approach was a failure. An abject failure. It is important to be smart about how you negotiate around this issue. What I have developed, including the metrics, shows that productivity can almost always be increased by 10%, and often 20%, simply with leadership improvements. However, I do not always mention the 20% improvement figure because most clients cannot imagine their agency is wasting one hour out of five, just at the account manager level, every single day because everyone seems so busy.
Another reason no one listens to this advice is because the solution is not a shiny silver bullet that increases sales and does not involve expensive but unproven technology that is nonetheless always sexy. I probably should make up some kind of sales fishing lure and fake technology so people will pay more attention to my advice.
The price is simple. Demonstrate leadership that motivates your staff to follow procedures and refine current procedures to increase consistency and quality. Unfortunately, this answer is so boring that anyone with a short attention span should quit reading this article at once.
I have been performing E&O audits for almost 30 years and consistency in agency procedures has not improved. Some of the big shops that I have seen now consider E&O claims as just another cost of doing business. They have given up, but what they are not taking into account are the other costs too. When every producer processes their work differently, much less when they do not even follow marginal procedures correctly, the result is that someone else must do extra work to fix the inevitable errors.
When staff does not consistently follow procedures and new employees are on-boarded, which set of procedures should they learn? What happens when the procedures they learn are different from the procedures used by their predecessor. The extra time needed to come up to speed, along with the extra clean-up time, is unnecessary and a waste.
At this point you must add the additional cost of potential E&O exposures to the pile.
Furthermore, this type of work environment is not conducive to hiring and retaining quality employees. My clients that have procedural consistency show respect for their staff. Respect is a major factor in retaining employees and an agency demonstrates respect when it insists that their staff follow procedures. In turn, the employees tell their friends and peers at other agencies how much more enjoyable it is to work at your agency. Those of my clients who require consistency do not have a problem with staff turnover. They literally have a waiting list of people who want to work there, they do not have to pay as much in salaries and they do not have to employ as many people because their productivity is so high.
The price those agency owners willingly pay is expending the extra effort required to provide superior leadership. They lead their agency rather than being led by the whiners and complainers who emphatically state they cannot follow procedures and still do their jobs (nothing oxymoronic in that thought process).
Another solution is to establish a career ladder in your agency, especially one that offers part-time work. It is a fact that young people want to work for organizations where career ladders exist. Historically, almost no agencies or brokers included career ladders in their operating plans. The staff was either a producer or a CSR. That is not necessarily the best bifurcation today. In response to the current worker shortage, a far better solution is to create low level entry positions and train people up. One might begin an employee with the most elementary processing functions, perhaps on a part-time basis. The demand by employees for part-time work is extremely high at this point. Then when a higher-level employee leaves, you can move people up the ladder so much more easily than having to find a new, highly talented and experienced account executive at a salary of 20% more than you were paying the former employee.
Your agency benefits by having reduced turnover. Employees benefit by having a career ladder through which they can advance to higher level positions. Efficiency increases. Staff quality improves and the more effective your staff, the more your ability to increase sales grows. Your staff's support and quality of interactions with your clients increases retention of accounts and referrals (or it certainly cannot hurt, while poor support does not improve retention or referrals).
Carriers are in even worse shape, especially when their top leadership is far, far away from the actual tasks of processing and underwriting. Leadership has no clue how poor consistency is on the front lines or that lack of consistency is hurting their sales growth. I have interviewed so many agency/broker executives about why they continue to grow their books with a particular carrier they love to hate. The uniform answer is because the carrier is consistently easy to do business with even though their commissions are low, their forms are not that great, and they sometimes cringe when a claim occurs. Imagine what would happen if a better carrier were as easy to do business with!
Without consistency, there is limited brand value because no one knows the quality of what they are buying. Insurance agencies/carriers think they are different from other types of businesses or they would have fixed their consistency problems by now. I fly almost every week and the consistency of airline customer service when flights are cancelled varies so significantly that I have no faith when I ask them to rebook. But, I do not have a lot of choices either. Insurance is something people must buy and as a result carriers and distributors do not pay as much attention to the value consistency brings to their brand.
However, for the two or three people reading this far in the article who can withstand the shiny silver lures and appreciate the value of consistency, know that you can build a long-term competitive advantage that most of your competitors will never, ever identify or achieve. I remember a particular insurance company who, 35 years ago, was much, much smaller than it is today. Back then the company recognized they could capture considerable market share with consistency and the resulting cost savings. They were so confident their competitors would not figure this out that they offered free tours to their competitors including explanations of how they achieved consistency. The executives at the carrier for which I worked at the time, and is no longer a P&C carrier, identified the value of processing consistency for all other carriers, but not for them. They did not have leadership skills. Do you?
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.
None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.