Marketing Agency of the Month

Kickin' it old school

Producers manage, and managers produce at this Tennessee agency

By Dennis H. Pillsbury

Conventional wisdom these days seems to be that agencies need full-time sales managers to reach the next level. Of course, as anyone who has spent time with independent agents knows, conventional wisdom is more honored in the breach than in the observance. Independent agents are well named. They are independent and have a tendency to do things their own way. And many of them are quite successful. That’s certainly true of Chappell, Smith & Associates, Inc., Nashville, Tennessee.

We talked to Chris Turnbull, one of the agency’s leading producers, president of the aviation division and chief financial officer as well. “We don’t have the traditional hierarchy of management,” Chris explains. “All of our producers basically help with the management of the company. One of our producers handles all of our training. He’s licensed to do that and our agency is licensed to do our own continuing education. I’m responsible for budgeting and finance. We don’t get paid for those extra jobs. Because of that, there’s no corporate ladder to climb, so nobody’s stepping on other people to get ahead.”

This structure arose out of a philosophy that “it is our job to set a good example for the troops,” Chris explains. “We can’t do that if we aren’t out there in the trenches. We’re in daily contact with our customers, so we understand what our employees face every day. We’re producers first and assume other responsibilities that match our particular talent or interest.”

The results speak clearly. The 40 employees at CS&A are responsible for nearly $50 million in premium. “We have grown by double digits in the last few years,” Chris points out. “At one point in time, we were running about $500,000 in new business per month. Even in the very soft market of 2007 and 2008, we were profitable and able to backfill most of the reductions in premium rates because of our new business strategies. We have budgeted conservatively for 2009 anticipating both the effects of the recession and the continued soft market.”

Tom Chappell, chief executive officer, says, “In July of 2008, Chappell, Smith & Associates joined Sitkins International. The economic and political indicators were not making any sense. I am not a financial analyst but it was easy to see the train wreck coming. Our new business sales were declining and our clients were becoming very cautious. We needed a sales plan and the Sitkins organization seemed to be exactly what we needed.” Although the CS&A organization has not fully implemented the Sitkins program, the process has begun and the agency’s management team anticipates positive growth in 2009 despite the recession.

The agency is a niche writer, with nearly half of its revenue coming from the aviation division. Another important niche is the restaurant division.

“The agency’s founders, Tom Chappell and Charles Smith, realized early on that we could not be experts in every field, so they decided to focus on niches where we could develop an expertise and really educate our clients about their insurance needs and risk mitigation techniques,” Chris says. “We talk to them about the insurance markets and actually put together a side-by-side comparison of what the insurance markets are offering. We don’t sell the lowest quote. We compare the coverages as well as the price. We share everything with the client so that they ultimately can make an informed decision with our help. Thanks to that effort, our retention is very high and that’s key, particularly in aviation, where accounts have seen consistent premium reductions in the double-digit range. We must hold on to those accounts.”

A very strict budget

The agency’s budgeting philosophy is one that probably should have been adopted by more people and businesses in this country. Put simply, “If we don’t have the money for something, we don’t buy it,” Chris says. “We don’t have debt. We pay our bills on time. We have a rainy day fund. We’re rigid budgeters and especially conservative with our revenue. We make certain that anything we buy is necessary to the success of the agency.” Among the items that have been deemed essential is a state-of-the-art computer system, an internal graphics design firm that produces all of the advertising and marketing materials for CS&A and Next Dimension Publishing Co. Next Dimension produces several industry-specific insurance and risk management publications in house. Communications and transportation are also high on CS&A’s priority list. From their company aircraft to their state-of-the-art voiceover IP telephone system, they can work seamlessly from any location, have direct access to their London brokers and can be on the doorstep of most of their clients in a matter of hours.

The conservative budgeting philosophy, however, faced an interesting challenge following a decision around 2001 that “we were going to perpetuate the agency and started hiring a lot of younger employees. Ten years earlier, you would have thought you were in a geriatric ward,” Chris quips. “We had to act while we could rely on our trusted veteran production team to train our next generation.”

Chris recalls that the younger people who came in for interviews often did not share or even understand a philosophy that involved spending money only when you had it. “Many of the young people we interviewed were seriously in debt and were looking for salaries that were based on how much debt they were in.

“We realized that the result would be a constant churning of employees if they continued to carry a debt load that virtually required them to continually look for a higher paying job,” he states. “We also realized that they certainly weren’t ready to run a business—and we consider every producer we bring in as a potential owner in the future. We want our employees to be financially sound, not chasing after money rather than looking for a career.”

The agency has always been a strong supporter of education. As noted earlier, CS&A is approved for continuing education training for individuals in the industry. Why not use education to promote financial responsibility and, in the process, create a financially healthier and ultimately happier workforce? There is nothing like reducing and eventually eliminating debt to improve the morale of an employee.

What the people at CS&A realized through many years in business was that the problem was never about what you make, but what you keep. The agency did not accidentally survive and prosper from 1881 to today after its founding as Buell & Crockett Insurance of Nashville. After several name changes reflecting new ownership the current name was adopted in 1981 when Tom Chappell and Charles Smith purchased the agency. Tom Chappell continues to work at the agency today. Around 2001, though, the question was how can the agency convince young people who come in with college and credit card debt (that was unheard of only a few decades ago) that this is not the best way to fly?

They turned to financial guru Dave Ramsey, whose syndicated radio show focuses on financial management and the need to reduce debt as the first “baby step” toward financial security. Out of the radio show grew Ramsey’s Financial Peace University, which features a 13-week course on becoming financially sound. CS&A decided to offer this course to all employees at the agency. Both the employee and his or her spouse attend the course, which meets once a week for 13 weeks. “This has definitely been judicious use of our funds,” Chris says. “If these individuals learn how to manage their personal finances, they are one step closer to our conservative culture.”

But the education doesn’t stop there. The agency also set up a junior board of directors that is tasked by the senior board with issues and problems to solve. The chairman of the junior board has a non-voting seat on the senior board.

“In addition, the agency has formed a think tank of five younger individuals that often comes up with some amazing and highly successful solutions to problems,” Chris points out. “They often see something that we don’t when analyzing a problem. We ask them to look at current events and tell us what they would do if they were running the company. We’re grooming them with real problems so they already are thinking about how to run a company.”

Training the companies

The agency also borrowed an idea from the insurance companies. In the old days, many of the insurance companies offered training to their agencies. They would bring young agents to the company’s headquarters and train them in the nuts and bolts of insurance. There are only a couple that still do that. “We looked at the idea, and reversed it,” says Chris. “We invite young company underwriters to spend a week at the agency. They get an overview of how we operate as an agency and how we interact with clients. We spend time with them explaining our marketing and budgeting procedures.

“We also familiarize them with our different departments, including aviation, restaurants, personal lines and life & health,” he continues. “And we mix in some fun as well. We take them on a golf outing, bring them onto our company plane, take them out to dinner. It’s really a fun learning experience. Almost without exception, they have gone back to their companies and reported on how fantastic CS&A is. They gain an understanding of the pressures and problems that confront their agents. This is the start of what we hope will be a long-term relationship with the underwriter. Many of them move on to other companies, but they remember us and want to work with us wherever they go.

“We also hold open houses at various locations and invite underwriters and our clients. All this is designed to maintain and build on the good relationships we have,” Chris says. “We want our insurance companies and clients to know each other. We believe that creates an environment where clients really feel they are working with someone they know, and the insurance company sees and understands how committed our clients are to carefully managing their risks.”

Being first in the niche

“We also make certain we are regularly in front of clients and potential clients. We write the only magazine on aviation insurance, which is distributed to more than 22,000 readers each quarter, and also have a restaurant division magazine. But we also recognize that many people rely on other media for information. We go to great lengths to provide a library of articles on our Web site, which is designed to educate our clients and friends in the aviation community. We want to be number one when it comes to aviation,” Chris says.

“We also do quite a few speaking engagements to aircraft ownership associations, restaurant associations and trade associations each year. By doing so, we are very successful at getting our name out in front of our target audience and establishing our expertise,” he points out.

Supporting that effort to be first is the fact that everyone in any of the agency’s areas of specialty is an expert.

“In aviation, every producer has an aviation background,” Chris notes proudly. “We have created an environment where everyone knows what they are talking about and anyone in the division can provide a solution when a client calls. We also have our own airplane so we can get to a client quickly whenever the need arises.”

Chappell, Smith & Associates exemplifies the independent spirit that is the hallmark of the independent agency system. We are proud to recognize the agency as the Rough Notes Marketing Agency of the Month.