ACG - Agency Consulting Group

The PIPELINE

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

THE RISKS OF A BAD HIRE

Hiring the wrong people is not only expensive – it can cost you other employees, clients and carrier relationships. Of course we need good people, and yes, we need producers. And when we need someone in the agency, we tend to need them now! But a few minutes of research can save you time, money and even your sanity.

PURE COST:

If you pay someone as a manager, service employee or producer, it is likely that you won’t realize that he or she isn’t quite what you expected until the “blush is off the rose,” several months after the hire. They are making the same mistakes, they are a little slower than you expect, you have to follow up to make sure they do something, or the producer is spending an inordinate amount of time in the office “preparing” and less time than you expected “selling.” You talk to them, but give them the benefit of the doubt. It may take six months to a year before you realize that this was a mistake. Instead of a non-emotional send-off, we become upset that the person is “doing this to us.” In fact, unless the employee misled us, he or she is probably doing what they consider an adequate. Cajoling and threats follow for a period that could extend years before we get to our wits end and terminate the relationship.

Count up a) the cost of the employee during the period, b) the cost of the benefits that you paid, and c) the lost opportunity costs that would have brought you more revenue with a more appropriate employee and you have the first level of risk for a bad hire.

WEAR AND TEAR:

Once a bad employee is gone, we often hear a large sigh of relief from the employees in the agency. We even get a bit perturbed when they tell us how much better it is in the agency since the departure and acknowledge the friction caused by the inadequate employee. “Why didn’t you tell me about this before?” is the oft heard mantra of agency owners to their remaining employees. “We didn’t think it was our place to criticize another employee,” or “we thought you already knew” is the general response. But the worst situation is when you lose good employees because of the action of inadequate employees. You will likely not regain the employees who gave up on the agency because of the poor employee, even after that bad hire has left.

CARRIER RELATIONSHIPS:

Want to know how to “tee off” your underwriters? Have insecure and failing producers try to pressure them into taking risks that neither the carrier nor the agency should even be considering. Since those producers can only go after the low hanging fruit such like the price shoppers and prospects with serious issues that no one else can address either, they may be stressing your underwriters without your knowledge. That causes a strain between you and your company partners. And a poor service employee is just as bad in stressing carrier relationships. In order to identify these issues, make it a point to visit with your underwriters personally once a quarter, just to check if everything is working with the relationship.

CUSTOMER RELATIONSHIPS AND RETENTION:

We count on our CSRs and our producers to retain our customers, not to lose them. But don’t be surprised, especially in the latter periods of stress between you and your employee, if the customers start hearing negative things about you from the very employees that you are trying to save by pressuring them to do their jobs better.

All of these conditions could exist because you jumped at the first person who seemed to be qualified, who interviewed strongly and made a good impression on the visit. Or maybe it was the first applicant who was breathing and would take the job. There are still agents out there who think that someone is better than no one and that an employee will either work out or will wash out.

In fact, qualifications need to be checked. References need to be called. Multiple interviews need to take place by different people when possible and a third party assessment should be used to determine if the person under consideration has the personality, insurance skills and thinking styles to fit the position.

One of the most devious problems occurs when an agency is hiring someone that the agency owner knows. There is a tendency to avoid the steps that are needed just because you’ve known someone for years. Your exposure to an individual in a social, family, recreational, competitive or even a carrier setting may be quite different than when that person is working for you. It is complicated to terminate a friend or relative.

Before you hire your next employee, we encourage you to review and to use the A C G Hiring System. It will step you through the hiring process and keep you out of trouble. A single bad hire earning $40,000 could cost you over $100,000 once all is said and done, and that doesn’t include the wear and tear on yourself, your agency and on your carriers. And if you keep that person for years, the cost is astronomical.

All of this can be avoided by following the SYSTEM and doing the Assessment of any potential hire. In April we will be conducting a FREE Webinar on the subject of hiring employees. Participation is very limited, so if you would like to be included, call Lilly or Deanna at (800) 779-2430 and put your name in. An invitation will be sent in a few weeks but sign up now to avoid disappointment. It will give you a good idea of the steps to take in the future when you hire new employees.