Production, Service & Employee Satisfaction Drive Higginbotham to the Top

Fort Worth-based Higginbotham & Associates began as a small personal lines agency in 1948 representing Trinity Universal Insurance Company and SAFECO. Today it is one of the largest independent agencies in North Texas, with some 200 employees working out of offices in Dallas, Denton and Weatherford, in addition to Fort Worth, and it expects to write between $250 and $300 million in premium in 2003. According to Higginbotham CEO Rusty Reid, the company remained a “somewhat sleepy” agency until around 1989 when major changes were made in its business model, notably the decision to become an employee-owned firm and an expansion into financial services.

The company’s property/ casualty and risk management division accounts for 63 percent of its business and includes not only commercial P/C expertise but also bonds and personal lines, as well as loss control and risk management services. The financial services side delivers services such as employee benefits, life insurance, wealth management and retirement planning.

Following are excerpts from an interview with Rusty Reid, in which he discussed the company’s business philosophy and its plans for the future.
Insurance Journal: Do you consider yourself a brokerage now?

Rusty Reid: We’re still an agency. … [With] larger accounts, sometimes the word that they are used to hearing is ‘brokerage.’ We’re still an independent agency, if you will … but we represent multiple, multiple carriers and today our job is to match up the right product and service for the client. And because of our size, we have a tremendous number of avenues to explore in that regard—be it something like a PEO all the way to a very sophisticated self-funded risk management group.
IJ: Would you say you have an overriding philosophy and how did that develop?

RR: I really think we do and it’s reflected in our current motto: Shared Vision, Shared Success—for everyone from our customers to our employees to the community surrounding us.

A couple of things make us unique to our peers as we live out this philosophy. One is our ESOP [Employee Stock Ownership Plan]. We are an employee owned company—as a matter of fact, we are 100 percent employee owned. And what that means in my mind is that everyone from myself as the CEO to the receptionist at the front desk shares collectively our success. We think that’s been a tremendous driver of our growth. …

And we introduced back in 1995 what we refer to as a New Producer Mentor Program, which was all about us bringing in and developing young talent into the organization. Looking back I find that kind of interesting because in ’95 most of the executives running the firm were all of about 33, so most of us were young at that time. But I guess because we were all introduced to Higginbotham at relatively young ages, we knew that the youth factor and perpetuation were extremely important.

We also around that time introduced what we refer to as a Sales Center. We created a system and an outbound call program staffed with insurance professionals—not just outsourced telemarketing—where we really went out and let our message be known .…

We also embraced what I refer to as the ‘Schwantz culture,’ which is driven off of a book written by Randy Schwantz called ‘The Wedge.’ It focuses on a sales strategy that this firm has embraced now for almost a decade.

And we continue to focus on our entrepreneurial spirit. We have certain principles within our company that we embrace on a broad basis, but we don’t micromanage anybody. We say ‘Here’s our focus, here’s our culture—which is very much about cross-selling and having a complete relationship with the client—and how can you leverage the resources that are within this company to make you successful in that process?’ And … we truly are very involved and believe in giving back to the community. That’s what creates an environment that allows us to grow and be prosperous. We have a very broad network of different boards and community services that we embrace as a company.

We also with our clients have what we refer to as our strategic alliances, which are mostly preferred vendor programs. If we’ve got clients that we know do a great job within their respective fields, we don’t just keep that a secret. We let our other clients know about that. And then we also really subscribe to an open book management where it’s not just a few of us in the corner going ‘Okay now what do the results look like?’ Because as an ESOP we share those results really on a quarterly basis, and annually on a very formal basis with the members of the ESOP.

And then we just continually try to reinvent … a lot of the things we do today—the New Producer Program, the ‘Wedge’ training, the complete relationship initiative—we’ve been doing those things for a very long time. But what we try to do on a regular basis is think, ‘What other unique services can we introduce in the marketplace? What are we hearing from our customer base that they want and can we indeed fulfill and bring additional value to them?’ And that doesn’t come from just one person, that’s in effect [from] the teams that drive this company thinking on a regular basis, ‘How do we get better? How do we perform better? How do we serve our clients better?’

IJ: How did the ESOP initially come about?

RR: Bill Stroud was the gentleman that owned Higginbotham from about 1962 to 1989. He was actually the nephew of Paul C. Higginbotham—so there was a Higginbotham. And the decision I had to make when Bill wanted to sell the agency was, do we want to just go to the bank and borrow money and then in effect shift the equity from Bill to me? Fundamentally I didn’t subscribe to that. Because I had just finished about a three-year period working with American General Fire and Casualty and what I saw more often than not were producers that were really driving the value of the company and they didn’t have any equity. And the ESOP
did what I thought made the most
sense, which was to allow people to share in the vision of the company and at the
same time share in the success of the
company.

When we looked at it, it made a lot of sense for us not only in economic considerations—there were tremendous tax advantages to consider by doing that—but more culturally and philosophically, it did what I thought was most important, which was to give value to those that are driving the company. Which isn’t just in the corner office, it’s everybody from the secretary to the CEO. …

The ESOP was just clearly the path we wanted to take. And now reflecting back on that decision, I think it was absolutely the right decision to make.
IJ: Was there any negative reaction to that decision?

RR: Absolutely not. I remember when we introduced that this was the approach that we were going to take, at that point the company had about 20 employees and they were literally ecstatic. Because for the CSR it meant, ‘Hey, now I’ve got an opportunity to build a retirement.’ For the producers that were very much involved in helping me execute this new business model, where we really going to embark upon cross selling customers—providing not just property/casualty but also employee benefits and other financial services—it gave them the opportunity to share in the success. … Versus saying, ‘Okay, I’m not going to worry about trying to develop additional people in the company, I’m just going to be a producer.’ It basically provided the right incentive for them to think beyond that.

At the same time for the gentleman that owned the company, Bill Stroud, he felt really great about it because … for those people like Morgan Woodruff who had been with him since 1970, he now had a vehicle by which he could provide equity to him. Which in the past, he did not. So it really ended up being a win-win for all parties.

IJ: Could you describe your complete relationship initiative?

RR: Back in ’89 … we really took the view that our client at Higginbotham is the business customer. And our belief was that the business customer wanted a single source to work with. However, we had to have expertise in those areas. We couldn’t be a jack of all trades, master of none. That wouldn’t work, particularly as we worked with more sophisticated insurance buyers and risk managers and HR directors. But if we could come up with ways to have those buckets of expertise and be able to introduce all the products to that customer, knowing that we had experts in each area—be it personal lines, retirement planning services, employee benefits, property and casualty and risk management—we could be successful in leveraging that business model.

And more importantly, as we were out there growing the company in the early days, that’s what we would hear from the customers. The customers would say, ‘I wish I didn’t have to deal with this person on this and that person on that and so forth. I would like to deal with one person.’ So in effect, we listened to the client and we developed this single store—internally what we refer to as a complete relationship initiative. Then as we evolved we had to find experts in particular areas, like retirement plans. By bringing the expert into our retirement plan group, they would then focus on, ‘Okay, what is missing in the marketplace? Is it not having an investment policy? Is it not providing consultative services to make sure that they’re 404(c) compliant?’

On benefits, the pain was when you moved from one group to another group. What happens is that person—which we’ve all heard about—you’re at the pharmacy and you’re trying to get your prescription filled and they tell you that you’re not in the computer so you have to pay for the prescription out-of-pocket … so we came up with an answer to that, called our Higginbotham Credit Card Program. So as we evolved and as we continued to grow through that evolution, we were able to identify holes in the marketplace and in effect plug them, because we were bringing in experts to each one of those broad categories. … It’s enabled us to serve a client from their personal insurance needs to their very sophisticated and robust risk management needs or HR needs.

IJ: What percentage of your clients takes advantage of this holistic approach?

RR: We recently did a study on our top 200 clients and we found that for the majority … we were actually providing more than just a single offering to them. What I mean by that is, we would have their property/casualty and we’d have their employee benefits, or if we had their employee benefits we would also have their executive compensation plan or their personal lines.

We spend a lot of effort focusing to make sure that we round out those clients and make sure that they can fully embrace our business model, or what we refer to as our complete relationship initiative, on a regular basis. We actually have meetings with our production staff on a monthly basis and spend a lot of time and energy focused on that exact thing, strategizing on it. How can we introduce this certain offering to our clients and make sure that they realize the value in that offering?

IJ: How did you manage your expansion?

RR: When we set up the ESOP in 1989, I brought on two individuals at that time—Michael Parks who came out of the Mass Mutual system and Jim Hubbard from New York Life. And the purpose was to get them to cross sell clients both life and employee benefits. Because as I was starting to change our focus into more of a production driven organization … clients all the time were asking me, ‘Rusty, do you indeed offer employee benefits?’ And the answer was ‘no.’ And then I teamed up with a couple of insurance companies to begin providing that type of product, and found that we were having more success than not.

Anyway, I recruited those two individuals and they became the foundation of our employee benefits practice. And as we continued to expand, most of the expansion in financial services came from producer recruitment and producer development.

We then saw the need to focus on the executive compensation needs, which are more ‘life oriented’ if you will, and we were able to find a producer who was already established and bring him over via an acquisition. That became the foundation of our life offering.

And then we did the same thing on the retirement plan side. We saw that in order for us to really bring the right value to a corporation, to their 401(k) plan, we needed somebody who was an expert in that field. So we intentionally went out and recruited an individual from Morgan Stanley to do that.

But most of the growth in our financial services has really come from—going back to our intentional strategy that we deployed in ’95 when we developed our New Producer Mentor program—people that we’ve actually brought into the organization, in many cases without books of businesses, and mentored them and developed them into employee benefit producers. And their production has come from, one, internal clients that we already had on the property/casualty side—so that’s the cross selling—and two, from our Sales Center. And three, from them developing their own centers of influence.

IJ: Do you have any advice to agencies that are trying to grow?

RR: We have an annual meeting where we sit down and do a ‘post mortem’ of the prior year and ask ourselves ‘What did we do well, what did we do poorly and what do we need to do to improve?’ But then we also look forward and say, ‘Okay, what do we need to do to properly serve our clients going forward?’

At the end of the day we have three principles we live by: we want to maximize production; we want to have what we refer to as outrageous customer service; and [we want] absolute employee satisfaction. So as we look into the upcoming year we say, ‘Okay, how can we maximize those three initiatives?’ And then we also like to look out three to five years and say, ‘Where do we see ourselves in that time frame and what do we need to do today to make sure we can get there?’

From my point of view it’s very important for agencies as they continue to grow really regardless of their size, is to identify what are those three to five principles that have made them successful today and what do they need to do today to add to those to make them successful in the future. And, they need to spend a lot of time on strategy and developing a plan to execute that strategy.

Oftentimes people say, ‘I just want to grow.’ And maybe they just go acquire agencies as part of that strategy. And at the end of the day maybe they don’t have a real definition about what they’re trying to do—what kind of agency do they want and why did they get that agency, and so forth.

IJ: Where do you go from here?

RR: Right now we are in Dallas, Fort Worth, Weatherford and Denton. … That was back to our ’95 strategy. We felt that with all the growth in North Texas, particularly what we referred to as the Golden Triangle, we wanted to make sure that we were properly positioned in this market to be able to compete successfully. Now, it’s not that we’ve dominated the market by any stretch, but we feel that we’re leveraging our business model and meeting our goals and objectives.

We now want to take that same strategy and deploy it in the South Texas marketplace. Particularly when you think about transportation, healthcare, real estate and energy, and technology as well, there are great pockets of business in Houston, San Antonio and Austin. We think we can leverage not only our specialty practice leaders that have a property/casualty focus exclusively on those kinds of industries, but we also can introduce our approach on the financial services side of the house, and leverage again what we refer to as our complete relationship.

I would say that it wouldn’t be surprising for us within five years to be—if not the largest independent agency in Texas—firmly expanded into the South Texas marketplace. And we still will be embracing those three principles—driving production and delivering outrageous service to our clients as well as absolute employee satisfaction. And we think that our ESOP is that nice little bow that holds all those things together. It truly makes Higginbotham & Associates a place with a shared vision by the employees, and, at the end of the day, a shared success.