Sales Does Not Diminish Service
A sales organization does not imply a lack of concentration on service. In fact, we have seen no successful sales organizations that weren’t obsessive about high levels of service to clients and to prospects. However, the insurance agency industry has become so centered on service that it has all but forgotten how to be professional salespeople. We must remember that service is necessary for us to live up to our commitments to our customers and to retain them. The lights of competition are bright and uncomplimentary. Many of Agency Consulting Group, Inc.’s customers have found that having a good price does not compensate for the promises of your competitors of service levels that you have not been able to reach with your existing customers. So, regardless of how much emphasis we put on the sales effort, we do not mean to diminish the stress of agencies to constantly enhance their service levels.
The Sales Dilemma
For the last fifty years, the industry has sunk into the morass of commodity products that all look alike. The companies, and the agents behind them, have fallen into the mode of being the technicians and “experts” who understand the products and coverages, but not the methods of selling them. Both companies and agents have relied on the “P” word (the word is Price – but I’ll not repeat it again) to gain customers. “We can be more competitive” is simply a gentler way of saying, “I can get it for you cheaper!” No wonder we sound like Used Car Salesmen! Our competitors in the industry (direct writers) and from outside the industry (banks, self-insurance funds and other innovators) have found that they can play the “P” game as well, or better, than the agency companies, but they have an edge. They are still creating their niche and are learning from our mistakes. They can become just as knowledgeable as we are about the products, provide equal or better claim service, advertise more effectively than our companies can, and they can teach their salespeople how to SELL.
On the other hand, the insurance agents and companies have been in the sales game for two hundred years. As Sales moved from the category of art to that of science, the insurance industry did not follow. For some period, the carriers provided professional sales training for agents (much like the life insurance industry). But the companies did not see the payoff as the result of these investments, so they stopped much of the sales training when the market changed and cash flow diminished. The agents are far to fragmented to develop organized sales training for the industry, so the decline accelerated. Some large agencies (invariably with sales management) developed in-house and outside sales training for their sales staff. These firms continue to grow and professionalize. A few innovative smaller agents also created sales training programs using outside facilities. These firms now fit the IIAA’s definition of “Best Practices” agencies. They continue to grow and prosper regardless of the industry direction because they have the ability to flex to the current situation and sell the products that are available at any time.
The Producer Trap
Only one in seven people have the personality characteristics to become a successful salesperson. The problem is that most of these 14.3% of the population never get into sales careers. They can be found graduating from colleges and high schools. They can be found in existing sales careers. They can be found in careers totally unrelated to sales. There are even some (but not many) working in the insurance industry – and most of them are in the life insurance industry or with direct writers. If you hire any of the other 86% of the population, you will find that you have either failures or mediocre producers on your hands. They may sell (when they have the lowest price), but have problems responding to objections, managing rejection or in the closing process, itself. You are lucky if you encounter the truly terrible salesperson. Eventually, you will fire him (or he will leave). But the worst case scenario is to hire the “Mediocre”. These producers will eke out a living, selling just enough for you to justify keeping them around. They will never be successful and will be personally stressed most of the time. They are a generally unhappy lot, subverting the agency (inadvertently or on purpose) to other employees, companies and clients as a transferal of guilt about their inadequacy in sales. They are more trouble than they are worth, but inertia causes them (and the agency principals) to keep them around long enough that they become a “fixture”. At that point, we hear the phrase, “Oh, he doesn’t sell much but he supports his book of business and has been here for a long time. He doesn’t COST us anything.” But of course, the agent is wrong. The mediocre producer, like the failed producer, costs the agency and the owner much in terms of money, aggravation, lost opportunity, time and morale. Compare this, all to common, scenario with that of a Sales Organization.
The Sales Organization
The Sales Organization begins by carefully selecting its producer candidates. They spend considerable amounts of time and money to be sure that the selected candidate is right for the job and the organization. They understand that a poor selection will cost far more than the selection process itself. This is one area most frequently overlooked by the traditional agent who will hire anyone who says they want to sell, has a good personality and doesn’t ask for much money. It often takes six months or more to verify that a producer has “caught on” and will become successful. If the hire is bad, that means six months of management effort, six months of service and marketing support, six months of frustration and ever-increasing levels of management (in the effort to correct the problems) before the decision is made that the person was the wrong one for the job. The Sales Organization has found that spending the time and money to find the right candidate up front results in higher producer retention and more sales and revenue in the short and long term.
Once selected, the Sales Organization does NOT give the producer a desk or office and the assignment to, “Go out and sell something!” Instead, they provide a manager, a “big brother” or a shepherd to advise and assist the new producer until success is apparent. The role of this advisor is to coach, counsel and train. This is not a policeman, responsible to be sure that the producer is out selling. If you need a policeman for a producer, you have the wrong person in the sales job. The advisor teaches the producer the agency way of performing in the job. He goes out on sales calls with the producer and helps him hone his sales skills if they need polishing. If he notes a deficiency in sales or technical skills, he arranges for more formal training to permit the producer to become successful as quickly as possible.
Producer compensation is an involved subject deserving of its own dedicated discussion. However, it is important to note that the successful Sales Organizations do not look for producers who will not cost the agency much money. Of course, cash flow is important in every agency. However, the intelligent sales managers will seek the success oriented personality and compensate based on how fast they can be expected to generate income and by how much the individual needs to support his/her current lifestyle. The validation schedule created by the Sales Organization is individualized to assure that the producer’s results will validate the amount paid to sponsor the individual. They develop the validation schedule with the producer in order to assure the agency and the producer that the compensation can be earned through expected levels of production.
The Sales Organizations continue to manage producers during their initial stages in the agency and for many years thereafter. Management, again, does not imply police efforts. Rather, the manager’s role is to make the producer’s job as easy as possible. It puzzles us to find so many agents actually resisting providing lead generating activities to the producer – as if the producer is not doing his job if he isn’t cold calling or providing all of his own leads. In actuality, the goal of the agency (and the producer) is to generate as much revenue from new sales as possible. There are no limitations or exclusions to that phrase. The manager’s job is to help the producer establish realistic estimates of annual production, to provide sufficient training and marketing support to permit the attainment of those goals, and to track the results in order to refine the marketing program, as needed. The producer’s objectives are best tied to compensation expectations since that is of key importance to every producer.
The Solution
Hire well. Prepare job description both for your sales candidates and for you. Use the job description to formulate interview questions designed to elicit the candidate’s ideas, personality, future desires, income needs, work ethic. Use open ended questions only. If your question can be answered yes or no, refine it. Explain the job then let the candidate be the predominant speaker during the interview. Test every candidate that passes your interview screen and would be hired. Most agents use Caliper or Omnia, simple but effective personality tests. However, many agencies are moving toward full psychological testing to assure that the candidate will fit the culture and personality of the organization. This avoids putting a “Sales Shark” in the agency that has a non-confrontational, amiable culture.
Train your producers. Every producer from your most experienced to the least should be involved in on-going training, preferably weekly. One-half hour training sessions are adequate and most can be given by the producers, themselves, and other employees or by company personnel. Constantly train in the specifics of company products that you are selling. Use company marketing personnel to perform the training. Stress the differences between their products and their competitors, both in basic coverages and in the “bells and whistles.” Use seminars and professional trainers for Sales Training. Sales training has become a science. The career salespeople understand that, like marksmen, they must constantly practice and hone their skills to keep them sharp. We all tend to fall into “grooves” and make the same mistakes over and over. Sales training reminds us of the core qualities needed to make a sale. We need to train ourselves and our personnel that we, in fact, don’t SELL anything! We simply find out what the prospects problems are – and solve them. We are successful in direct proportion to the degree of problem solving we can provide to our clients. That is what creates value and loyalty in the eyes of the customer (much more so than the “P” word). If they see us as both seeking the best value for their dollar and solving their insurance problems, we will insure them for many years. Sales training, reinforced properly, will imbue the sales force with the Problem Solving philosophy of sales.
Manage your producers. Whether or not you can afford a professional sales manager, your sales organization is doomed by the strengths and weaknesses, by the degree of motivation and by the ability of your salespeople. If you can afford a Sales Manager, it is one of the best investments you can make in your business. If not, you must become the Sales Manager – or discard the thought of being a sales organization.
What To Do If You’re Just a Small Agency
You don’t have to be a large insurance agency to be a Sales Organization. But you are limited by your time and your financial resources. Here are some guidelines that will permit you to determine if you can (or want to) become a Sales Organization:
1. Be prepared to support a new producer on a decreasing cost basis for one year. During that period of time a new producer should be at least successful enough to cover his/her total compensation. Your soft costs (service, marketing, and your time) will be your investment in the producer’s future.
2. Don’t even place an ad in the newspaper without a detailed, written job description defining all of the functions that you expect a producer to accomplish for you. Read it over and strike out any function that does not relate to direct sales. The less administrative functions given to a producer, the better his chance of success. Those functions that are not directly related to sales are both reasons and excuses for not being out on the street with prospects.
3. Use the job description to write out a series of questions that will tell you if the candidate’s experience and personality fits your culture and the functions that you expect. If a question seems to call for a “yes” or “no” answer, change it to an open-ended question that requires the candidate to talk about himself or herself.
4. Budget both the time and the money to provide constant sales training to the producer.
5. Don’t be cheap when considering salespeople. Instead of thinking that you got a bargain if a producer is willing to come to you for $20,000 draw, ask, instead, if you would be satisfied if that producer just validated that $20,000? — Or would you be hiring mediocrity?
If you are not willing to follow these minimal guidelines, you will be disappointed in every producer you hire (and vice versa). Most agencies will not become Sales Organizations. The agencies who do succeed in sales are led by motivated salespeople and by visionaries who see the potential return on their investment. They see producers, training, and management as investments, not costs. Like the stock market, wise investors can win and they sometimes lose. However, the person who sits on the sidelines because he doesn’t want to risk the price of admission to the market can not possibly see a gain on his money from investment. Similarly, there will be many agents who find that the investment is not worth the risk that they perceive in the sales organization. They would be best served continuing their organizations as they are currently configured.