The compensation and management of Producers (aka – Relationship Managers) in agencies and brokerages differ immensely based on the particular needs and requirements of either the agency or brokerage and those of the Producer/RM. In the over 40 years of our experience, we have seen hundreds of different compensation methods (all based in some way on salary, draw and commissions). But regardless of the way a producer is compensated, the common need of all agents and brokers is to identify the activity requirements of the Producer/RM that would earn him/her the desired or proposed compensation level (or more). And the subsequent need is for both agent/broker and producer/RM to be able to easily measure the activity and results toward the validation levels.
Achieving these two goals is the purpose of this simple, but comprehensive Producer Validation and Management Program that Agency Consulting Group, Inc. designed several years ago and has recently updated for 2011.
If the Producer/RM is fulfilling all of the activity requirements that would support his/her expected compensation levels the Producer/RM’s position and compensation remains on-track. As long as the actual sales activity and revenue follows the producer/RM’s historical or expected success levels, the validated activity will result in the desired compensation levels. In other words, if the agent/broker is paying the producer/RM a salary or draw, that salary or draw remains constant and consistent as long as producer/RM’s activity level meets the validation schedule that “should” result in sufficient commissions and fees to properly pay that annualized compensation on which the draw or salary is based.
First we need to identify exactly what activity level is needed for the producer/RM to achieve the sales goals that would properly compensate him/her over the course of a year. The first two pages (tabs) of the Producer Validation and Management Program, the Producer Validation Schedule, accomplish that in the format most common in agencies and brokerages. The difference between the two tabs is that the first uses the common practice of paying producers on a New and Renewal schedule while the second uses the advanced technique of paying producers for base (the revenue levels they achieved in the prior year) and growth (growth commissions generated in the current year beyond their level in the prior year. See our paper on Growth Loaded Compensation (in this Issue) for more information on this advanced compensation program.
Then we need a tracking device that identifies the activities that would eventually lead to sales. We also need to know how close the producer/RM is to achieving the activity requirements and sales results that would define his/her success in a year. The two Management Reports tabs of the Producer Validation and Management Report accomplish that end (each cover ½ the year).
The Full Version of the Producer Validation and Management Report was designed for a common agency/brokerage producer situation. It costs $350 and includes one year of telephone support. Annual updates and another year of telephone support is $200/year. A 30-Day Sample Version is available at no cost (call 800-779-2430). The Sample IS a full version that permits the agent/broker to “play” with the program for 30 days, trying it out for all of the agency/brokerage’s producers to see how it works. A Platinum Version is also available for $600 that has no expiration date and provides unlimited updates and telephone support.
In the defined sample (which can be changed at will by the user – change outlined cells only) the producer/RM desires a $60,000 annual compensation. The agency desires to provide an initial compensation level of $50,000 (that will permit the producer/RM to pay his/her family’s bills as (s)he builds the sales volume toward the validation level required to earn the $60,000. In this scenario, the producer/RM produced $150,000 of renewable commissions/fees in the prior year the renewals of which will “credit” $135,000 (after an expected retention loss of 10% – due to lost business, soft market, etc) toward his/her compensation in the current year. His/her Renewal Commission rate is 25%. New Business commission rate is 40%. See below for a Validation Schedule based on the more advanced, Base and Growth Commission Schedules.
Two targets are defined, MINIMUM SALES GOAL and TARGET SALES GOAL. The Minimum Sales Goal defines the level of sales (in gross commission income) required in order to support the Initial Salary or Draw. The Target Sales Goal defines the level of sales required to support the producer/RM’s desired compensation in the year.
For experienced producers, the agency/brokerage uses the producer/RM’s historical Proposal to Sales ratio and Sales Call to Proposal ratio in the appropriate source cells (those surrounded by a border). For new producers, the agency/brokerage should evolve the “expected” ratios based on agency/brokerage experience toward which the producer/RM’s sales manager is training the producer/RM.
The results are defined as the Sales Call Target (the most important target in the Program), and the Proposal, Sales, Weekly Annualized Premium and Weekly Annualized Commissions expected. THE SALES CALL TARGET DEFINES THE NEEDED ACTIVITY FOR THE PRODUCER/RM TO ACHIEVE HIS/HER OWN DESIRED COMPENSATION LEVELS BASED ON THE PRODUCER/RM’S HISTORY (or the agency/brokerage’s expectations of performance for which the producer/RM is being trained.
The second Validation tab is for the Base and Growth model, a more advanced way of paying producers/RMs (see Growth Loaded Compensation by Agency Consulting Group, Inc. (loaded in all CDs containing any version of Producer Validation and Management Program) or call 800-779-2430 for an e-mail copy or look it up at www.agencyconsulting.com website, Archive Section). In this tab, the producer/RM is compensated at the rate of 25% for achieving the revenue level attained in the prior year (regardless whether the source of annualized revenue is new or renewal). (S)he is compensated at the higher, growth commission rate for all revenues generated above the base level during the year. The new total revenue generated becomes the producer’s base in the following year.
The next two tabs on the program each reflect six months of activity and results of the producer/RM’s activity. The producer/RM, him(or her)self enters the data each week to reflect the number of sales calls made, the number of proposals and sales and the annualized premiums and Commission (including annualized fees) that will be attained by the sales made that week. The program collates the Year-To-Date results and provides the agency/brokerage and the producer/RM with the calculation of % to Goal on each category measured.
All pages in the Producer Validation and Management Program are printable with one-touch (except in the Sample Version). Simply go to that page and hit your computer’s “print” button.
Agency Consulting Group, Inc.’s Producer Compensation Program is a more advanced product that includes the Producer Validation and Management Program but also defines the changes in the producer’s compensation by his/her success or failure to achieve the activity levels required by the program. For more information about Producer Compensation including the self-terminating producer compensation agreement that both rewards and penalizes the producer based on the success or failure of their activity levels during the year, please call us (800-779-2430).
If you would like a Sample Version of this program, call us (800-779-2430) and we’ll get one out to you. If you know the program and would like to purchase a full version, simply call us or go to our website, www.agencyconsulting.com and access it through the A C G Products Tab, the Producer Validation sub-tab. It will lead you to PayPal where you can purchase the full edition at a cost of only $350 and comes with the one-year program including all telephone support, annual updates for a small fee of $200 per year for continued telephone support and program updates, or you can choose the Platinum Edition with unlimited updates and lifetime product support for $600.