AGENCY FINANCIAL MANAGEMENT
An ounce of prevention
By Paul J. Di Stefano, CPA, CPCU, and Deborah Dziuban
The team approach is the only way to assure a
successful new system implementation.
During numerous Harbor Capital Advisors agency consulting engagements, we have discussed with our clients their experiences in either upgrading their existing operating systems or moving to a totally new operating system. These conversations pointed out rather clearly that an agency's initial decision about agency management systems, as well as the resulting implementation experiences, can be fairly accurately summarized by the following stages:
1. Enthusiasm
2. Disillusionment
3. Panic
4. Search for the guilty
5. Punishment of the innocent
Typically, after investing hundreds of thousand of dollars and large amounts of valuable time, the agency principals may prematurely come to the conclusion that the new system is not all that was expected, based on the vendor sales pitches. Questions to the staff then come in rapid fire: What happened to all of the information we were going to get? What happened to the cut in personnel that we expected? Where is the Lost Business Report? Where is the New Business Report? Where are the financial statements? Why are we still typing I.D. cards? All of these questions may sound very familiar to you if you have made some of the classical mistakes surrounding the implementation a new agency management system.
As an agency principal, one of your basic concerns should be that the agency is running smoothly; that your commercial lines and personal lines managers are making sure that new accounts are being marketed and existing accounts are being serviced properly; and that the agency's accounting manager is effectively keeping track of your financial results.
While these expectations are certainly quite reasonable, one classical error that the agency principal makes is to disrupt these smoothly functioning processes--by deciding that either one of the agency's top property/casualty managers or the agency's accounting manager is the perfect individual to implement a new expensive agency management system. This decision may be based on the fact that these particular individuals are usually the most vociferous "complainers" about the shortcomings of the old system.
The decision to put one of these individuals solely in charge of the process may sound logical but, guess what! Without working as a team, any individual employee--no matter how competent--will be spread so thin that agency operations will suffer and that individual will end up making decisions in a relative vacuum. If you want to ensure that the process will fail, designate one of these individuals as head of the system implementation. Even worse may be designating a computer technician as project head.
Although you as a principal probably feel that you are the only one in the agency who knows how each department interrelates, resist the temptation to take on another horrendous responsibility. The team approach is the only way to assure a successful new system implementation. You and your designated team are the leaders. Although you can always assign staff to the project or hire worker bees, as the principal your most important function is to lead and follow up.
Some important do's and don'ts: Don't let anyone sabotage your team effort and turn the project into a one-man or one-woman show since that individual could hold the agency hostage in the future by preventing other individuals from gaining a detailed knowledge of the process. Do assure yourself that the system access security being set up meets your needs. Don't let the IT department or the accounting department individually control all aspects of the system. We have observed agencies where only one or two people knew how to send documents to the printer, set up I.D. cards, invoices, etc., and only one person knows how to install print cartridges. This is great for individual job protection but is certainly not in the interest of the agency.
We notice a common thread in the experiences that these agencies undergo in the process of conversion. Some agencies virtually come to a complete standstill as the result of the implementation of the latest automation wonder system while others experience a breakdown in efficiency, devoting extraordinary resources to address the unforeseen issues.
When you make the final decision to convert the system, do it ASAP. Time and time again, we have seen an enthusiastic group of people at the onset of the conversion project become bored and disenchanted because of continual delays. This is an agency project from the top to the bottom. As soon as you, a principal, lose interest and focus on other "more important" things, the conversion effort takes a nosedive. Of course, emergency interruptions always will demand precedence, but deal with them quickly and let the team know you are back on track and focused on the conversion.
Most important of all, don't let anyone talk you into an automatic conversion. This will typically result in simply converting the old system of unreconciled "garbage" into a new high-tech version of the same. Although cleaning up and streamlining the old system is cumbersome and time consuming, it is well worth the effort. You may have become too jaded to believe this, but Harbor Capital Advisors' experience in assisting many of our clients with their conversion effort has convinced us that a new agency management system can actually be efficient and organized. In addition--and what is most surprising--it can be quite like the demonstration system that originally was presented to the agency by the system sales representative.
Don't get caught up in the sales pitch of choosing a system that is totally customizable unless you can afford to hire a full-time staff of programmers, complete with non-piracy agreements. The prospect of installing a customized system usually is met with enthusiasm by CSRs, accountants and techies, but it's a nightmare in the long run for the agency principals. A system should be chosen because it is user friendly and can be customized if necessary.
In summary: After you have spent the time and effort to implement a new system, you should not have to deal with garbled letters being sent to one of your best clients (or any client for that matter), or wondering if your latest marketing effort is being communicated to your existing clients. Your new system can prevent these problems if you set it up properly from the beginning. The time and effort you invest in setting up the system, converting existing data, creating standard and automatic letters and--most important of all--training your staff, will pay off in the long run. Professional hands-on consulting assistance may be the smallest cost the agency incurs when going to a new system when weighed against the benefits. *
The authors
Paul J. Di Stefano, CPA, CPCU, is the managing director of Harbor Capital Advisors, Inc., a national financial and management consulting firm which offers services to the insurance industry. Services include agency appraisals, merger & acquisition representation, strategic and management consulting.
Deborah Dziuban, is senior associate of Harbor Capital Advisors, Inc.
Harbor Capital Advisors, Inc., can be reached in New York at (800) 858-2732, or visit Harbor Capital's Web site (www.harborcapitaladvisors.com).