Winning Strategies

Rapid producer validation

Find a good fit, assign a mentor, and be quick to fire if things go bad

By Roger Sitkins

A question I'm constantly asked is: How long does it take for a new producer to validate? The industry standard historically has been about 36 months. Although every agency has its own way to measure validation, we suggest that the norm is when a producer's commission income is three times the amount of the draw he or she has been receiving. (For example, if he/she were getting a $50,000 draw, he/she would need to be bringing in $150,000.)

Because the average producer takes too long getting to this three-times milestone, a major problem we continue to see in independent agencies is that profitable producers are subsidizing unprofitable producers. While this may make sense over the short term, over the long term it makes no sense whatsoever.

Typically, it's the owners and one or two "big dog" producers who generate the majority of an agency's income. In the larger agencies, we find that the 80/20 Rule exists, whereby the top 20% of producers generate 80% of the revenue.

Assuming that "profit" is not a four-letter word in your organization, how will you increase the odds of a new producer becoming profitable and validating the compensation plan you have in place? Here are some very specific steps that will take you in the right direction.

The Ideal Hire. It all starts with the hiring process. Anytime you are "marketing," you've got to have the ideal target in mind. In this case, you're marketing the agency to a potential hire. What does the ideal producer look like? Just as you would create a Future Ideal Client Profile, you should have a Future Ideal Producer Profile. What's the right fit for you?

What do you want in producers? What is their background? What is their experience? How do they test out on sales skills, aptitude, and other tools of the trade? How do they test out on a call reluctance report?

While certain producers can be major account producers, others are middle-market producers, and some are strictly suited to be VIP personal lines producers. The key question is: Which one are you looking for in this next hire?

Future Producer Pipeline. It's imperative that you have a future producer pipeline, just as you have a prospect pipeline for future clients. To create one, start accumulating the names and résumés of individuals who appear to fit your profile.

Recruiting. The recruitment of new producers must be an ongoing duty of the agency's sales manager or CEO. Admittedly, fewer than 10% of agencies have full-time, effective sales management in place, which is a problem. Why? Because for most agencies, recruitment becomes an event, not a process. It needs to be a process: a continual effort.

Hire the Pipeline. Many agencies make the error of hiring people based on their insurance knowledge rather than on their sales skills. While we agree that insurance knowledge is a plus, you must hire talent first. (You can always teach insurance knowledge if you have the right person.)

The real key is to hire sales talent that already has a pipeline. Therefore, hiring the pipeline should be an overall theme of the agency. Why? If you'll recall the normal improvement cycle we see at Sitkins, it's that the first problem a producer solves is Closing Ratio, followed by Revenue per Sale. If the first two are in place, then the only other problem to solve is the Quantity and Quality of At-Bats.

Assuming that your agency already has a high closing ratio (because you have your set offense in place and you believe in No Practice Quoting and you already have a high revenue per sale), hiring great talents with a pipeline from their previous employer gives you an immediate edge. Right away, they can visit the prospects in their pipeline and start talking about how your agency's unique approach to the marketplace differs from the traditional agencies out there.

By the way, you do have a unique story to tell, don't you? Or are you still selling the old way (Look, Copy, Quote and Pray, a.k.a. Show Up, Throw Up and Blow Up)?

Assign a Mentor. Now that you have great new talent with a pipeline on board, you've trained them in your set offense, they're rapidly gaining insurance knowledge, and they're out there telling your story—what next? They must have an assigned mentor. Someone in the agency must take responsibility for mentoring this "newbie" every single day.

Some of the best mentors we've seen place the new producer's desk right in their office. That way, the producer can watch the mentor in action, listen to how the mentor handles phone calls, and deals with clients. Just make sure the mentor is a role model for what you want and demonstrates the habits you want to replicate. You don't want a failing producer as a role model.

Note: This mentor should be compensated for the results of the new producer.

Maintain Accountability. In addition to having a mentor, the producer must have two levels of accountability. One is to the designated sales manager as it relates to the producer's annual sales plan (you do have a customized plan for each producer, right?). The second is an accountability partner. This involves pairing up two producers who hold one another accountable for their actions each week. As such, they should also regularly participate in low-risk practice by videotaping role-playing situations.

Develop Specialties. We see the best new producers as those who have developed a specialty. This is a critical component of rapid validation. In any profession, specialists always make more money than general practitioners. It's true in the medical, accounting, and legal fields; it's also true in insurance. The most successful producers will choose and focus on one or more specific classes of business.

Stay on Track. To keep producers on track, you must not fear probation. The producers must be accountable, not only for their actual results, but also for the behaviors and strategies that are driving the results. Any producer who veers off track should be put on probation (according to legal and agency guidelines). At that point, you must tell them that their behaviors are not acceptable and must change. They must also be told that if they don't change immediately, they won't get the required results and they will be terminated.

Be Quick to Fire. The saying, "The Best Day to Lose the Sale is the First Day," is similar to the one we have for new hires: "The Best Day to Fire Them is the First Day Your Gut Tells You They Aren't Going to Make It." That's not an easy thing to do, but often it's the only smart thing to do.

Gary Holgate, my mentor in the consulting business, used to remark that the average agency owner would rather divorce his or her spouse than fire a producer because there's always the outside chance that the producer will change.

No one wants to go through the arduous process of hiring a new producer only to quickly realize that they made the wrong choice. However, if this has happened to you, please do not blame yourself and feel guilty. First and foremost, it's not necessarily your fault. Some of the people you've been interviewing are professional interviewees. They've applied for jobs with so many different companies that they've become experts at telling you what you want to hear.

Also, when you consider that in major life insurance companies, only about 15% of their hires will be career, life-long producers, it's very likely you're going to make a bad hire along the way. So don't be afraid to admit it when it happens! Not only will you be doing your agency a favor by saving it a lot of money, you'll be doing the producer a favor by saving them from a career at which they're bound to fail. Let them fail on someone else's payroll!

Recognize the Warning Signs. If you've ever fired a producer, I'll bet you knew you it needed to happen at least six to 12 months before you actually pulled the trigger. What's really amazing is that some agencies will keep underperforming producers forever! So how do you know if it's time to show a producer the door? It's easy.

If you find yourself complaining about the same producer at every management or ownership meeting, it's time to fire that person. If it's become a repetitive part of every agenda, why is that person still there? As you were reading that, did someone immediately spring to mind? If so, you'd better go ahead and do the firing now!

Nurture Success. Studies of large sales forces across all industries reveal that about one-third of any given group is successful and reaches its goals, about one-third is simply average, and the remaining one-third should be fired. Nonetheless, most owners and managers spend most of their time on the squeaky wheels and never take proper care of their best, most successful producers. It all comes down to resource management. Where are you investing your organization's resources, and what is your ROI?

The fact is, with a little bit of support, your best producers could become even more successful. For example, producers who are already doing $1 million in commission income can quickly boost that number by 50% if you support them at a higher level. It's the low- to mid-range producers who tend to get all the attention but who never grow significantly, regardless of the resources you devote to them. That is not profitable growth.

The bottom line

According to Reagan and Associates, if you are not investing at least 2% of your gross revenue in new producers annually, you will soon be in deep trouble. That's because your aging producers will plateau, new revenue generation will stop, and retention will slip. What happens to the profits and value of your agency then?

It is critical that you make great hires that have sales talent and an existing pipeline. Further, you must create an individual sales plan for them and hold them accountable for it. Also, you must have a set offense and make your producers practice it regularly. Finally, assign a mentor to each new producer and fire quickly if it's necessary.

Do you have any tough decisions you haven't made yet? If so, what's the cost of doing nothing?

As always, it's your choice.

The author

Roger Sitkins is founder and chairman of Sitkins International. He is the creator of The Vertical Growth Experience™ programs, which are offered exclusively to the Sitkins private client group. These programs focus on continual improvement of agency/brokerage operations, providing members with strategies that are designed to force vertical growth in the critical indicators of closing ratio, revenue per employee, revenue per relationship, and revenue per producer.