ACG - Agency Consulting Group

The PIPELINE

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

The Service Ceiling

* What Causes It

* How to Recognize It

* How to Break Through It

We have a small Middle-Eastern restaurant in our neighborhood that is family operated, serves delicious food and is reasonably priced. Most important, their creed has been to cater to the customer from their opening day. The owner was proud of that creed and moved from table to table to be certain that all of the customers needs and desires were met. Every so often he "thrilled" us with an extra glass of wine or a free desert.

Obviously we returned frequently - and so did many others. Within a year, he expanded. He now needed three waiters where one (a relative) sufficed before. He began getting crowded at lunch and dinner, so he started offering 'take-out'.

We now rarely go to the restaurant because it is always so crowded. And, recently, after again waiting an inordinate amount of time for a called-in order, we told him that as much as we liked him and the food, we would have to go elsewhere in the future.

Change 'restaurant' to 'insurance agency' in this example. Does it ring any bells?

Our restaurant owner, like many agents, hit the Service Ceiling. The Service Ceiling is the point at which your customer needs and desires exceed your ability to perform to your own level of satisfaction or to theirs.

The restaurateur, like most agents who have hit the Service Ceiling, knew that things were changing even as he became more successful. First, as his staff grew, he felt that he was losing some control. Management was easy when it was all family and communications, while sometime volatile, was always open. He trusted his intuition, so he hired people too casually and they sometimes took advantage of him. He was too nice, so he delayed "pulling the trigger" on employees who didn't fit. This caused deterioration in the service in which he so prided himself. The kitchen (i.e. back office) was busier with the increased traffic but his wife, the cook, was uncomfortable giving control to others or doing things differently, so the speed of delivery of the product slowed. Finally, the menu rarely changed, so the choices available to customers were limited.

By the time we spoke to the restaurant owner, he looked and felt guilty because he knew things were not the way he wanted them and he didn't know how to change. The money was still good so, while he was sorry to lose us, his remarks were in the form of reasons and excuses for the deterioration instead of introspection about the future if he maintained this course.

All insurance agencies face Service Ceiling's as they grow. Agencies hitting the SC find their growth slowing, complaints growing and/or long term customers leaving (presumably because insurance is cheaper elsewhere). Most agency owners get an uncomfortable feeling that they are losing control and that service levels are slipping. Too many do not trust their intuition and continue the course because they have never made more money. At this point these agents do not yet realize that financial success is not equivalent to being a successful businessperson. In fact, most truly successful agents who we have encountered admit that they know how to make more money. However, if they pursue their business in a way that is self-satisfying and makes them proud, their financial condition continues to improve anyway.

Many agents experience the Service Ceiling by the time they reach the $500,000 revenue level when staffing beyond family members occur. The traditional management ceilings occur at the $1 Million, $2 Million and $3 Million revenue levels. At those levels management styles must change to accommodate the business size and further growth.

What Causes Service Ceiling?

--The inability of the owner to change from the principal implementer of great service to the manager of great service. Insurance knowledge, combined with empathy and sales skills permit most agents to become successful. It takes years to gain the technical, sales and social skills to be recognized as an 'excellent' agent. Most understand that it is the attention paid to the customer, more than the price or even the product, that made them successful. Yet few take any time to study or learn management techniques when they realize that the sheer volume of business requires increased service staff. So staff is hired, usually based on experience and/or recommendations. Sometimes, in desperation, staff is hired because they are "better than nothing".

Unfortunately, when staffing service positions, you often don't get what you pay for. Sometimes the result is less knowledge than needed for the job. Once identified, that problem is easily solved through re-training or replacement. More insidious are the myriad of employees who lack the people skills to represent your company the way you desire. These people often are unrecognized for years with only a few negative remarks made by other employees or customers. The customers may not approach you regarding tactless employees or those who change your service creed from "we'll take care of it right away" to "as soon as I can" or "we can't do that". Your customers know you for the excellent agent you are and are reluctant to get someone in trouble or are embarrassed. The eventual result is the departure of the customers, usually with the cost excuse. If long-term customers leave you simply for price they are sending you a message - you have little, if any, added value in your organization. Any program with a comparable or lower price is acceptable to customers who see no added value to your services.

If a lack of management skills is the cause of Service Ceiling and the loss of customers is the indicator that Service Ceiling has been reached, what can be done to break through this artificial barrier to growth?

1. A major attitude adjustment must be made from the top of the organization, down. The owners must reiterate and re-commit to the service philosophies that made them successful in the first place - in writing. Write a Service Pledge. Avoid cliches like "best", "high quality", or "fast" unless you are prepared to define them in measurable terms.

2. Develop written service goals - with your staff - that will progress you toward your Service Pledge. These goals must be realistic, objective, measurable, and achievable within one year. Including your staff in this process permits them to "buy into" goals that they help create. It also gives the reprobates on your staff fair warning to either change their attitudes or prepare their resumes. Initially, some staff members won't believe that the Service Plan will be implemented. The proof is

3. To measure results against objectives. This implements the management phase of the service change. Measurements include productivity reports (if speed is one of your goals) measuring transaction time from customer contact to completion. Another measurement is customer interviews and surveys in which you ask questions like, "How has our service changed in the last 'X' months?" Service Ceiling ores from 1 (gotten worse) to 5 (much better).

The results of this change will shock the organization into activity and any activity is better than none when you've hit the Service Ceiling. If you are also breaking the $1 Million, $2 Million or $3 Million revenue ceilings, you must add education and professional management to your agenda. At the $1 Million level you need different people managing sales, service and finance and you must begin Strategic Planning. At the $2 Million level you must graduate to a professional manager (Chief Operating Officer) who manages the company and implements the Plan while the owners sell insurance. At the $3 Million level a working Board of Directors is appropriate along with divisional profit centers. The revenue ceilings are covered fully in a separate article, Breaking through the Glass Ceiling.