MARKETING AGENCY OF THE MONTH
Dealing with change leads to astounding success for Rutherfoord
By Dennis H. Pillsbury
From left: Thomas R. Brown, President, Rutherfoord; Thomas D. Rutherfoord,Jr., Chairman and CEO; and George (Shad) Steadman, Executive Vice President.
When John F. Kennedy was asked how he became a hero, he quipped: "It was involuntary. They sank my boat." Of course, we all know that isn't completely true. The outcome is the direct result of the character of the person or group. And that character is displayed at its best or worst when the situation calls for action.
Most independent agencies have faced numerous situations that tested character. And some have continually tested themselves in order to bring out the best in all their people. Rutherfoord has been through many tests and has come out the other end stronger and better.
Rutherfoord was founded in 1916 in Roanoke, Virginia, as a partnership between Thomas Rutherfoord and Horace Maher. It also opened offices at 55 William Street in New York City and in Welsh, West Virginia. The early emphasis was on railroad and related heavy industries. The agency insured Norfolk & Western as well as the transit system in New York. It also put together the first retro plan ever written for the brake division of Bethlehem Steel.
The partners split up over a difference in management styles with Rutherfoord remaining in Roanoke and Maher taking over the New York office as a separate entity, which eventually closed in the '30s. Eventually, Thomas's nephews Julian and Thomas D. Rutherfoord, Sr., joined the business. When the founder died in 1952, the younger Rutherfoords took over ownership of an agency that boasted a large book of contracting business that grew with the building boom that followed the end of World War II. In fact, Thomas D. Rutherfoord, Sr., wrote one of the seminal books about bonding that was sold by the NASBP to agents who needed to understand the business. He was recognized as one of the deans of the surety bond business.
In 1963, the two brothers decided to split up the business with Thomas continuing with the property/casualty side and Julian leaving with the life and health business. The agency was renamed Thomas Rutherfoord Bonding & Insurance. In the '70s, Thomas D. Rutherfoord, Jr., who is now the current chairman, joined the agency and worked with his father to grow the contracting business. Like his father, he became an expert in surety and even wrote the second edition of the bonding book originally written by his father. The emphasis on railroad and related industries also continued.
Facing the challenge
Then in the early '80s, the railroads, disgruntled with a new form from Lloyd's, banded together to form their own captive and Rutherfoord's railroad business "just went away," Thomas R. Brown, president and grandson of the founder, says. "We lost a segment of our business. We were also suffering through a soft market. At the same time, interest rates were very high and that was impacting on the construction business. The agency was cut back in size. And Tom, Sr., handed the reins over to Tom, Jr., who faced a huge challenge."
Tom Brown continues: "But Tom (Rutherfoord) never looked back. It was almost like starting from scratch. He operated from the Alexandria, Virginia, office. He recruited George (Shad) Steadman, who was in Florida, to run the Roanoke office. I was running the Richmond office. He and I went on a recruitment drive to attract talented producers. It's been an amazing ride."
Shad, who now is executive vice president, says a lot of credit goes to the "strategic planning instituted in the late '80s. With the help of Bobby Reagan of Reagan & Associates, we went through the whole process of looking at all segments of our agency in a two-day session off site. We looked at both threats and opportunities and have continued to do so every year since. We recognized that our strength was our customer focus. We had always admired Johnson & Higgins for its focus on quality and realized that that was our direction as well. We wanted to continue to be a customer-focused agency that emphasized quality services for them."
"I took over in 1986," Tom Rutherfoord, Jr., remembers, "and put together a plan to operate differently. I wanted to plow earnings back into growth and build depth throughout the organization. I recognized that it really is all about the people. We have bright people who understand both the insurance business and general business and risk in the broader sense. We needed to keep those people. Retention of clients and employees is really at the heart of our success.
"In 1992, we set up an ESOP so that all of the employees would have an even greater interest in the success of the company," Rutherfoord continues. "Acting as owners, they do the best possible job for the client. It has allowed us to attract top-level people in the industry. Many of our producers have come from the big brokers. The big broker environment stifled their entrepreneurial spirit and we offered them an opportunity to grow."
Rutherfoord uses the "fish!" philosophy, which encourages fun in the workplace. The Commercial Account Managers use Fish to signify the completion of a renewal.
The share price for the ESOP was $355.60 in 1994 and has grown steadily, reaching $1,426.08 in 2003. "Most of the employees didn't really think about the growth in the price of the shares when their 401(k) was also rising," Tom Brown notes. "But our success really hit home when the stock market started dropping, but their stock in Rutherfoord continued to rise."
Proactive service
Tom Brown remembers: "We hired our first risk control person in a leap of faith and that became a catalyst for adding expanded risk control resources and claims people. We brought in claims professionals from Fortune 500 companies so we could take a stronger advocacy role for our clients. We monitor claims and get them settled quickly. At the end of the day, claims is our product," he notes.
The result of that effort has been the formation of Assurance Services Corp. (ASC), which includes 17 claims and eight risk control specialists, who have experience ranging from small workers comp claims to catastrophic multiline claims. It provides services on a 24/7 basis which include:
* Cost containment
* Litigation management
* Customized tracking and reporting
* Regulatory filings
* Generation and review of loss runs
* TPA claims services for the Virginia Contractors Self Insured Group Association, Rutherfoord's Captive Program, and others
* Multilines claims handling
Rutherfoord recognized the need to be active in the alternative risk transfer market and about six years ago set up a captive in Bermuda, which is managed by their Assurance Capital Corp. (ACC) unit. In addition to managing the captive, ACC also helps clients explore alternative risk strategies including:
* Captives
* Self-insurance
* Reinsurer led plans
* Risk retention groups
* Risk purchasing groups
* Finite risk
* Credit enhancement
* Loss portfolio transfers
* Integrated guarantee products
* Project specific programs.
"We're actually doing a risk management economic impact study for the Port of Virginia," Shad says. "It is our ability to provide quality risk control and claims service that has really set us apart and allowed us to compete with the national brokers and win. We can be leaner and meaner and in areas such as environmental, we probably have an edge, thanks to our recent acquisition of Faulkner & Flynn, an environmental engineering consulting firm based in Roanoke."
From left: Robert A. Bamberger, Executive Vice President-Sales; Julie Townsend Smith, Vice President and Account Executive; and William B. Mason, Executive Vice President-Operations, review a few of the 165 suggestions from staff.
Tom Rutherfoord points out that the Faulkner & Flynn acquisition was the agency's first acquisition and "it exemplifies our philosophy of focusing on client needs. This expands our ability to help our clients mitigate risk."
Everybody contributes
One of the most difficult tasks as the agency has grown, Tom Rutherfoord says, "is remaining nimble and creative." Rutherfoord now has 225 people in offices in Roanoke, Alexandria, Richmond, and Virginia Beach, Virginia; in Charlotte and Raleigh, North Carolina; in Atlanta, Georgia; and in Philadelphia, Pennsylvania. Revenues at the end of 2003 totaled more than $31 million.
"We stay interconnected through video conferencing and internally with technology," Tom Rutherfoord points out. "We have different practice groups that stay in touch regularly at all levels. We focus on bringing people together as part of our strategic process. In fact, our entire organization is involved in the strategic process. We recognize that great ideas can come from anyone and encourage all our people to submit ideas. When we present ideas, we ask our people for feedback. We want them to be involved from the start so that when an idea is brought to the table, there already is consensus."
Tom Brown adds that employee involvement in the unified strategic plan led to the submission of 165 ideas. "These fell into three general areas and we've set up three committees to consider every one of these ideas. We will respond to everyone who identified him or herself when they submitted an idea." (Some were submitted anonymously.)
Tom Brown notes: "Our people continually come up with interesting ideas that have let us step outside the box and do some creative and unique things, particularly for an agency our size. For example, Rutherfoord International has a contract with the State Department. We recently picked up the voluntary benefits for the United Nations in a joint venture with a French insurance agency. We also insure companies that are operating in Iraq, including the company that provides security for Paul Bremer. We're now experimenting with a new bond-type product where we are bonding auctions on the Internet. The coverage is written by an offshore captive, with The Hartford acting as the fronting carrier. It's just getting started, but so far we've bonded about 20,000 auctions. We underwrite the seller and will provide bonds on their auctions."
Tom Brown concludes: "We make a big investment in our people and reward their creativity and innovation. After all, it really is our people who have made our success possible. We try and share our good fortune with all of them and their families. We have a huge holiday party for our employees and their spouses, trips for our producers and our support people. Every year we've rewarded our support people. Last year, they went to Myrtle Beach from Thursday through Sunday. The producers stayed in the offices and answered the phones. It makes for an atmosphere where all our employees feel part of the Rutherfoord family."
Rutherfoord has gone through some interesting times and has grown to become a dynamic and creative regional broker. By continually challenging itself and its people to think outside the box, it is clear that Rutherfoord will continue to be an important part of the insurance marketplace. They richly deserve recognition as the Rough Notes Marketing Agency of the Month. *