THE FOUR “R’S”
A few generations ago the three “R’s” , Readin’, Ritin & ‘Rithmatic were the keys to education and success in the business marketplace. While these are still important (and rarer to find that in the fifties sixties and seventies), the survival of businesses in the american economy now depends on the new four “R’S”, Restructuring, Reorganization, Reengineering and Reinventing. Each of these new “R’S” are responses to soft markets and competition from both independent agents agency carriers writing direct and direct writers themselves.
Restructuring means reallocating the resource of the agency to direct the attention of the staff toward the products that are most desirable to the clients, most competitive from your providers and most economical to produce and service by the agency. A short time ago we were in an agency whose personal lines was effectively shut down because of a combination of natural disasters and economic conditions that resulted in carriers refusing any growth whatsoever for the time being. The agency left it’s personal lines department in tact but the employees and owners alike expressed frustration over their inability to generate growth. Restructuring would have directed the agency to leave a skeletal staff managing the service and administrative aspects of existing personal lines customers with other employees cross-trained into the cross selling and development of other lines of insurance including active target and telemarketing programs.
Reorganization completely changes the way a business is operated in response to new conditions or technologies that may render some of the functions in an agency obsolete. As insurance agencies step into the technological future and adopt transactional filing and optical scanning within their agency management systems, many administrative positions become obsolete. The employees in those positions should be retrained into newly arising productive tasks but the maintenance of a file department, for example, in a fully automated agency means that the reorganization to enhance efficiencies following automation had not been accomplished.
Reengineering is a more mundane process that has been utilized by industrial engineers for seventy years. A reengineered agency has analyzed every step of every procedure to eliminate all redundancies and to make each process the responsibility of the lowest level employee capable, trained and able to handle every transaction in one single contact. A reengineered job would not permit an endorsement request to be hand written by a producer and given to a CSR for transmission to a company followed by an input operator processing the paper into the computer.
Reinventing an insurance agency is the most radical approach to planning possible. In zero based budgeting every revenue and expense is projected anew each year based on the current knowledge and plans of the agency. When reinventing the agency, the owners imagine that the business has burned to the ground and that any company would be available to them to market any product in the insurance field. The owners decide what course they would pursue if they could begin over. Which functions would they no longer accept for themselves or the agency? Which products, companies and markets would they prefer to deal in? Once the exercise is completed an analysis is made to determine if any of the reinvented business plan can be integrated into either the tactical or strategic plan of the agency. The mental exercise itself is extremely valuable because it causes the agents to reevaluate their entire system of operation. Many find that even considering all the difficulties of today insurance industry they would repeat the same course of action while others find that they would truly like a new direction for the agency and begin it at this point.
Imagine what your insurance agency will look like in five years. We are facing more changes in our suppliers, in our commission schedules, in the insurance economy and in the competitive nature of our business now than has ever been experienced by the insurance agency industry. Those agents who pay attention to the the four “R’S” and spend time restructuring, reorganizing, reengineering and reinventing their businesses will find that they can flex with the changing conditions in the industry. Those who choose to follow their head in the sand and gripe about how bad things are will find that the self-fulfilling prophecy will come true and their businesses will be absorbed by others.