The main differentiating factor …
for success is proactive, intentional leadership.
Agencies cannot run themselves; employees,
regardless of how motivated they might be, need clear structure and purpose.
By Mary M. Belka, CPCU, ARM, ARe, RPLU, CIC, CPIW
Leadership is a primary risk management tool
We live in interesting times. For many years it was possible to be a fairly successful agency owner without much real change. No need to listen to naysayers predicting a dynamic, automated, competitive environment that would expose weakness and reward strength. Just keep doing what you’ve always done—things will be fine. Fast forward to 2021—not so much.
The scope and speed of change over the past 20-plus years has finally taken hold—there is a new reality. A reboot of sorts is needed, to meet current and future leadership challenges, including:
- Unprecedented emerging exposures and risk management concepts, including cyber, climate-related risk, COVID, parametric solutions, and more
- Acceleration of technological change, reducing claims and future agency premium levels, as well as the continuing impact on agency operations
- Shift in buying, marketing, and communication trends and expectations—driven by technology
- Generational and diversity challenges
- Up to five generations in the workplace at once—unprecedented communication and management challenges
- Baby Boomer “brain drain” as this generation exits at a breathtaking speed—along with the expertise, wisdom, and stability they take with them
- Growing diversity of potential employees and clients—continued comparative non-diversity of independent agencies
- Insatiable carrier appetite for growth, compression of markets, and shifting agency income and expense model
- COVID—Remote workplace formats are here to stay—invariable procedures and operations oversight have never been more crucial
Enter intentional leadership
These challenges represent opportunity to those who recognize how to leverage them for growth and profitability. Some agencies have experienced their most profitable year ever, while so many others have struggled mightily. The main differentiating factor we have identified for success is proactive, intentional leadership. Agencies cannot run themselves; employees, regardless of how motivated they might be, need clear structure and purpose. The leader who has the foresight and commitment to run his or her agency like a business, anticipate challenges, and stay the course once set, enjoys a measurable, competitive edge.
These are the primary steps that make it possible to deal with the myriad challenges that will undoubtedly arise. It is hardly a complete list—but includes the primary factors that appear to have the greatest impact on results.
Leadership is about creating a framework that makes it possible to anticipate some issues, and deal with all challenges as objectively as possible. The ability to make small corrections on a regular basis, eliminates the potential for seismic shifts. Some big issues may occur—COVID comes to mind—but if an agency is well-run, it is better equipped to deal with uncertainty.
After all, isn’t that the business we are in—managing risk? Leadership is the primary risk management tool to ensure a smoother journey.
- Clear strategy—and execution. The best-performing agencies have leaders who have taken the time and effort to go through the process to create—and execute—a viable plan. The challenges listed above and more, need to be considered in this process. Leaders engage associates and create alignment. At a minimum, a plan should include:
The best-performing agencies have
leaders who have taken the time and effort to
go through the process to create—
and execute—a viable plan.
- Agency mission, vision, and specific goals—at least growth, profitability and retention
- SWOT (strengths, weaknesses, opportunities, threats) analysis
- Financial analysis
- Sales and operational objectives— including digital strategy—related back to primary agency goals
- Specific target client for each discipline
- Analysis of carrier relationships—identify and align with appropriate carrier partners to achieve stated strategic goals
- Consideration of likely—and unlikely—scenarios, and a basic framework to deal with them
- Business continuity
- Scalable business model. Who does what? Where, when, and how do they do it? Did they do it and do it right? These are the most critical questions we see unanswered in agencies where too many are left to their own devices due to a lack of intentional leadership, with or without a strategic plan in place.
The generational component is adding pressure, as younger employees in particular have high expectations regarding structure, feedback, and training. To ensure success, real leadership requires clarity regarding delegation of critical management areas.
Essential building blocks include:
- Growing without adding staff—or even while reducing staff. Expense control and maximizing profitability while delivering real value to clients is the charge of operations management. Supporting increased growth required by carrier partners will take real leadership and planning. It doesn’t “just happen.”
- Organizational chart that will scale into the future—including positions critical to ensuring that goals are achieved. Intentional sales and operations leadership is needed.
- Simplify for success—your clients deserve it. A small number of qualified account managers can do more than a large number of processors and/or outsourced service providers. Effective use of technology by the best employees increases return on investment, reduces expense and the potential for E&O—and improves the client experience. This will not happen without intentional leadership.
- Accountability and performance-based compensation. Measurement, analysis of results, and rewards and consequences are crucial to staff development and reaching strategic objectives. Agency leaders who recognize the need for and invest in operations management, regardless of agency size, reap the rewards.
- Remote employee considerations. Interestingly, “remote” is just a place—the focus is on the client and on the plan. Working remotely is generally not the problem; rather, it has exposed issues that existed in the workplace prior to this shift. If invariable procedures and consistent standards and measurement are in place for all, regardless of venue, challenges fall away. Understanding Equal Employment Opportunity Commission (EEOC) and employment practices liability insurance (EPLI) requirements, as well as engaging and communicating effectively with employees has always been necessary. Operations management is more important than ever, regardless of where employees may work. Leaders understand they must harness this trend for improved performance.
- Avoid the “buy-in” trap. Agency owners have traditionally used this in order to avoid execution—they fear employees will push back or leave if they don’t agree with every decision. It’s a fact—not all decisions will be embraced at first by all employees. As Harry Truman once said, “Leadership is the ability to get people to do what they don’t want to do and like it.”
Leaders don’t abdicate responsibility or try to be everyone’s friend. Rather, they weigh the issues and options; make decisions; and unwaveringly—and intentionally—lead their associates through change in order to reach overall agency goals that will benefit all concerned. While they may seek input before taking action, they make it clear that the final decision may not be what everyone wants to hear. They don’t let fear of change derail their strategy.
Intentional leadership results
It is heartening to hear success stories of agencies that are determined to lead with purpose during difficult times. Again, the common thread is that each had a plan—and executed it. They made the business model changes necessary to achieve their goals. They led their employees proactively with a positive result.
Case Study—Keeping it simple—and profitable. Over the past seven years, an agency that is 90%-plus personal lines, has grown by 40% to over $1,350,000 revenue (not premium) while reducing staff from fifteen to six total employees. Each of the three personal lines account managers is handling $450,000 in revenue. The agency created and implemented their strategic plan, including several relatively simple yet critical steps:
- Identifying target clients—including increasing minimum revenue per relationship
- Writing accounts, not policies
- No longer taking cash or direct bill payments from, or calling—or otherwise contacting—“poor-paying” clients; they lost no clients when making these changes years ago
- Implementing a specific method designed to help agencies remain caught up—no items take more than three to five working days to complete
Planning creates a clear competitive
advantage and enables agency owners to lead
Case Study—Small—for now—yet mighty. Prior to the pandemic, an agency with six employees developed an aggressive strategic plan and began transitioning a commercial lines manager to full-time operations management. They hired and trained a new commercial lines producer in order to capitalize on their best opportunities for growth. Other accomplishments include:
- Adding a receptionist, so account managers can focus on helping clients
- Investing in formal, written, audited procedures
- Completing the automation of all processes
- Beginning to implement a performance-based compensation approach for account managers
- Identifying an unmet exposure/need and approaching a carrier partner with a unique solution that creates a significant opportunity for growth
- Implementing an ongoing rotational remote working schedule, originally for COVID—but which is now permanent
- Outsourcing most accounting functions
Case Study—Staying the course. Also prior to the pandemic, an agency with seven employees created a strategic plan, including the purchase of a new agency management system. The pandemic began as the system was to be implemented, and the agency was forced to have all employees work remotely literally overnight. They moved forward as planned and implemented their new system, experiencing their best year ever. They also:
- Transitioned an account manager to operations manager, who oversaw the system implementation and became a “power user” of the system
- Created formal, written procedures
- Successfully transitioned to having employees work remotely as required during the pandemic, and have continued to make this an option
We have seen the tough side as well—those agencies experiencing E&O claims and ongoing difficulties due to a lack of planning and proper operations management.
The choice is yours—investing time to make things happen—or letting things happen to you. Planning creates a clear competitive advantage and enables agency owners to lead with purpose.
It’s never too late to start.
Mary M. Belka is owner and CEO of Eisenhart Consulting Group, Inc., providing management and operations consulting to the insurance industry. She also is an endorsed agency E&O auditor for Swiss Re/Westport. A graduate of the University of Nebraska, Mary holds the CPCU, ARM, ARe, RPLU, CIC, and CPIW designations.