ACG - Agency Consulting Group

The PIPELINE

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

HOW DO YOU PROMOTE GROWTH AND PRODUCTIVITY IN YOUR AGENCY IF YOU PAY FOR ACCOUNT MAINTENANCE AND PERSONNEL LONGEVITY?-

Most agents are aware that Agency Consulting Group, Inc. creates Producer Compensation Programs and Incentive Compensation Programs (for non-producer employees) that move an agency from archaic, subjective methods of compensating employees to paying for the achievement of agency goals.

It has been a challenging task to turn the entire industry from service-based producer compensation to paying them for the primary task for which they are hired -- to grow the agency’s book of business. It has been equally daunting to convert staff compensation from longevity based to productivity based. While every employee needs more each year to sponsor their lifestyles, in what world is it written that a business must pay employees more each year simply because they have been in the job a year longer if the agency hasn’t grown its productivity and profit sufficiently to justify increased compensation? Even top line growth (commission income) is insufficient reason to increase employee salaries if expenses increased as much or more than revenues (excluding owner’s benefits).

ACG Producer Compensation Program

Our Producer Compensation Program tailored and designed specifically for each agency, trains new producers and re-trains those producers who are open to earning more money into Relationship Selling skills. We teach producers that they maximize their income only if they grow their books of business annually. This means that if they RIP (Retire-In-Place) and stop producing, they may still be valuable to the agency as an Account Executive –just not as valuable as they are if they are an active producer - growing the agency’s book of business.

In our Producer Compensation Program, commission levels remain consistent as long as producers continue to increase the book of business. In some agencies all a producer needs to do is grow from his/her prior year gross agency commission to retain his commission rates. In other agencies a mark is set (i.e. a percentage growth) that the producer must achieve to retain his commission rate for another year. Conversely if a producer loses ground in a year, his/her commission rate is negatively affected in the following year and continues to diminish in each year that the book of business for which the producer is responsible decreases.

All they need to do to regain their original commission levels is to return their book of business to above the previously highest annual level. What this does is convert “RIP” producers into Account Executives, valued by the agency for retaining their accounts, but leaving the higher commission rates to more active and to new producers. Of course there are many other nuances in the compensation program that are tailored to each individual agency to meet unique and individual needs.

If producers are paid for growing the book of business they are naturally interested in retention of clients, account rounding and cross-selling. Each one of these actions adds dollars to existing accounts that make growth easier for the entire book of business. But it becomes quite clear to each producer that his/her income stream is based on growth, not on simple retention based servicing.

Key Indicator of Growth

We monitor the key indicator of growth, Sales Calls to prospects. It is well-nigh impossible to write a substantial amount of new business annually unless the producer becomes acquainted with and build a trust relationship with more prospects each year. As much as we would like to manage growth from inside our agencies, the reality is that trust relationships are best built in person by becoming friends with prospects over a prolonged period through multiple visits. Personal lines have become commoditized largely in part by agencies trying to compete with direct writers by simply quoting prospects over the phone and through the internet.

Unfortunately, that has lowered us to the level of the price-quoters and has eliminated our greatest strength, local knowledge as the insurance expert. Commercial Lines is still primarily a relationship business. We can use our strength by meeting the prospects on multiple occasions to make friends and to build trust relationships. Independent agents are better positioned and better suited to accomplish this goal than their competitors.

So if our best results are generated from repeated calls to a substantial number of prospects, that is what we should measure and monitor in our producer force. Our compensation programs are individually designed for agencies to accomplish the goals of growing agency commission income through writing more clients each year through multiple visits with every prospect. If these are our goals, an agency’s producer compensation program should respond and measure these indicators.

ACG Incentive Compensation Plan

Our Incentive Compensation Plan (ICP) educates agency staff that they are logically paid more when they become more productive for the agency and every job has metrics that can be available to the individual performers to tell them how productive they are on a daily basis.

On the retention side, it has always been the relationship build after the sale between the clients and the agency staff that has cemented the burgeoning relationship created by a producer to win the client in the first place. Our ICP (Incentive Compensation Program) is designed for the agency staff to be diligent about satisfying the customer and keeping the account alive while enhancing systems and procedural capabilities to allow the same number of employees to handle growing client counts. The more clients that are handled by the staff, the more we can pay them because they are responsible for larger revenue books of business without the need for the expense associated with additional staffing. Productivity, the keystone of the ICP is measured in Revenue per Employee for service staff (other staff have other measurement devices).

A combination of Producer Compensation that rewards growth and Incentive Compensation that rewards inside staff for being more productive and more profitable for the agency, allows every employee of an agency to work toward their own, and the agency’s common goals. If the agency grows, so do the compensation levels of its employees, producers and administration alike.

If you would like to discuss Producer Compensation and/or Incentive Compensation for your agency you are invited to call us at 800-779-2430.