Managing Producers: How to Set Sales Goals and Monitor Performance

Sales management is vitally important to the growth and survival of an agency. However, as important as it is, sales management does not have to be a full-time job in most firms.

Often the task falls to an owner or the top producer. This is not necessarily a good idea because sales management can take away time from the manager’s own sales efforts. The key to effective sales management is to set up a system to monitor performance and encourage the producers.

Ideally, once an effective sales management system is created, self-motivated and properly trained producers can essentially “manage” themselves. The sales management role, in this hypothetical situation, is to monitor performance, remove any unreasonable obstacles to production and create an overall environment for sales.

However, producers are human too, and in reality, need guidance and support in order to succeed on a regular basis. A good sales management system creates a structure for the producers to succeed while minimizing the effort required by the sales manager.

Producer Performance

What is an acceptable level of producer performance for experienced, “seasoned” producers? It depends on a number of factors, such as: available producer support; sales skills of the producer; size and type of accounts in the geographic area; the competition and the local economy.

If performance standards are not set for producers, they will set their own—which most likely will be lower than what management expects.

Ideally, management can use the performance of the best producer who has ever worked for the firm as a guideline for “top” producer performance. The average property/casualty commissions per producer, from firms in our database, are in the range of $250,000 to $350,000. The range is based on size of firm, the location and the typical target clients of the agency. These commissions are not the producers’ book, but include “house” accounts and direct bill commissions of the firm, which are not necessarily commissions “handled.”

Well-run firms have $350,000 to $600,000 in commissions per producer. In surveys in which owners are asked what size book they would expect experienced producers to handle after three years in the firm, they report $150,000 to $300,000 in commissions handled, based on size of firm. With regard to their expectations for new business produced each year in addition to the books handled, the range is $30,000 to $65,000, based on size of firm. New business produced each year as a percentage of the book handled averages 18-20 percent.

For new producers without experience, approximately $100,000 in commissions handled is expected after three years, and new business of $25,000 to $40,000 in commissions per year. For new producers with experience (and without existing books of business) $150,000 to $200,000 in commissions handled is expected in three years, with $35,000 to $50,000 in new commissions produced per year.

Setting Producer Goals

Producers should be involved in the goal-setting process. Each year, every producer (including seasoned producers) should be given a new production requirement, for example 10-20 percent growth, net of attrition. The producer then should let management know how this production will be accomplished (for example, the number of quotes and customers that need to be written to accomplish his or her annual objective).

Based on the producer’s own hit ratio and size of account written, it should be determined whether or not the production goal is achievable. The goals should be broken down into monthly quote-to-write activity to make it easier to manage producer performance. Management actually needs two sales goals for each producer. One goal is the required new business increase in the number of accounts or commissions handled by the producer. The second goal should specify the type of account as well as the source of the new business to be pursued (such as account development, writing new accounts from referrals, target marketing or direct mail programs, etc.).

Sales Meetings

Effective sales meetings need to be held so sales activity can be properly monitored. Specific sales activity should include new business produced, lost business, hit ratio for each producer, prospect activity, what referrals have been obtained from new sales, etc. These meetings also should provide owner and non-owner production staff with information on markets, sales goals, collection problems and service backlogs.

There should be individual coaching of producers at least twice a month, in addition to the monthly sales meeting.

Producers have egos and need recognition. These sales meetings are also an excellent time to recognize superior performance, encourage double-teaming, and provide support by coaching and training.

Hit Ratios

Another sales management key is managing the producer’s hit ratio (the number of risks written to the number quoted). A hit ratio of 20 percent to 25 percent is average for commercial lines, but obviously the closer to 100 percent, the better. In personal lines, the hit ratio is usually 40 percent to 60 percent. If the hit ratio is improved, the firm’s expenses will be reduced greatly.

Hit ratios can be improved greatly when more time is spent initially qualifying the prospect. Key areas to uncover in the first critical 20-to 30-minute interview are: what is most important to the prospect in the insurance program; what are the politics, price and product the producer is competing against; and has the producer built a good rapport after this initial meeting, etc. Survey forms and collection of copies of existing policies should be completed in the second interview after the prospect has been properly qualified.

Producers can greatly improve their hit ratio on writing new accounts when they have good marketing/placement support. More and more firms today are using a central marketing person or department to help write new medium-size or large commercial accounts.

Sales Management Is Critical

To have a successful, growing firm today in these difficult times, proper management of sales and producer performance is critical. Sales management can be easy if a system is established that monitors specific sales activity and performance. Effective sales management not only will reward the owners, now and in the future, but also will assist non-owner producers in achieving their goals.