Agents who have never had producers dream about building a sales team that will multiply the sales for the agency and utilize the skilled service team to its highest levels.
Agents who have employed producers in the past but have lost good producers or rid themselves of underperforming producers and stepped back to sales by owners often have a bad taste in their mouths because of months (or years) of compensation far above production levels and growing frustration of living with producers who did not achieve their expected success levels.
Yet all thriving agencies (as compared to stagnant or declining agencies) desire adding a production staff, knowing it is the only “natural” way to grow top line revenue for their businesses.
The questions that arrive on my desk weekly usually involve a) how to find producers, b) how to train them to sell insurance (whether new to the business or experienced but not yet successful), and c) how to pay them.
TODAY WE WILL CONCENTRATE ON HOW TO PAY PRODUCERS TO GET THE AGENCY’S GOALS ACCOMPLISHED.
Rules for Compensation:
- You must pay people according to their needs based on their economic lifestyle. This means you can’t take a 35 year old with a wife or husband and three kids and expect to pay them at the same level as a single individual who lives at home.
- No producer may be hired unless (s)he agrees that he must produce no less in their first year than the amount (gross) they take from the agency for their services.
- The agency should not pay producers for their contributions to their savings account until they generate sufficient revenue to sponsor those levels of compensation. We’re not paying them money they haven’t yet earned beyond the amount needed to pay for their basic necessities.
- THE PRODUCER (not you) is responsible for reporting the levels of activity to goals that are set by the agency and the producer to equate activity to the number and income expected to be generated from sales during the course of the each year of employment.
- THE AGENCY (not the producer) is responsible for marketing the products and services – the producer is responsible for building a relationship with prospects strong enough for them to become agency clients.
- The Validation Schedule determines the weekly work effort without which the producer’s compensation is reduced (by his/her own acknowledgement). The premise is that sales call activity (managed properly) will eventually result in sales. We can easily determine the number of sales calls, sales, average premium and commission and total agency commission income that can be generated within the time allocation of the producer.
- PRODUCERS SELL – SERVICE AGENTS SERVICE – combining the two has never worked well. Making a good salesperson do transactional customer service work is like asking a great fisherman to herd cattle or a long-time cowboy to go crab-fishing. If they are good at what they do, let them do what they do best!
We should compensate producers for what they need to pay for their and their families’ normal lifestyle. BUT—they must be capable of generating in a year what they will take out of the agency in wages that year. If we need to pay someone $45,000/yr he will have to generate at least $45,000 in the first year, double that in the second year and triple that in the third year.
The producer should target the lowest compensation level he can manage as a VALIDATION TARGET because the agency will certainly pay him more – much more – if the producers succeeds beyond the validation target. The validation target is the salary the producer will earn (sufficient to pay his bills). All production in excess of the validation target will be paid at a commission rate beyond his annual salary.
Since the target range increases annually each year, any excess generated in the early years will help the producer achieve the goals of the later years more easily and will allow the producer to achieve bonus income each year.
The validation schedule is geared to be the motivator of growth continuously beyond the validation years for the producers. They will likely not complain as their compensation rises to six figure levels even though the validation will always concentrate on SALES CALLS TO PROSPECTS, the main event that will continue to grow the agency.
If you follow these simple six rules for producers and use a validation schedule (ours or your own that does the same thing) you will build a sales team that will help you grow the volume and value of your agency.
If you would like to arrange for Al Diamond to come to you to evaluate whether your team can manage an active, aggressive sales program including one or several new producers, please call us at 856 779 2430 and we will be happy to discuss the potential and schedule a consultation. We highly recommend a consultation before adopting the Producer Compensation and Producer Validation Programs because we have encountered many agencies whose culture is not sufficiently geared toward sales to permit this type of active sales program to succeed in the agency. We don’t want to spend our time or your money on a program that will not work as desired in your agency.