Why Agency Owners Employ Producers Who Cannot or Will Not Sell

I have analyzed more than 700 data points specifying what producers generate in commissions versus what they are paid as a percentage of their commissions. I must emphasize that this is verified data. I did not take the agency owners’ word and I did not take the producer contracts at face value. This is their real compensation divided by their books per their producer codes. (An interesting side note to this is that approximately 50 percent of the producers were paid more than the owners stated they were paid.)

The National Alliance Research Academy’s book, “Producer Profiles, 4th edition,” also shows the worst producers are paid more than the best producers on a percentage basis (which is the only basis that matters from a management perspective). The results shown in the chart above actually make the situation look better than it is because some of the worst producers’ commissions are actually house commissions. They did not generate them but I could not separate their actual sales from house business because the agency owners used the same producer code for both!

Only someone outside the industry would ask, “Why would such a universally asinine situation exist?” I have never had an agency owner ask this question. Instead, they ask, “What will it take to get my producers to sell?” or they ask, “How do I hire better quality producers?”

These are the wrong questions. The far more important question is the outsider’s question, “Why would such a universally asinine situation exist?” It is a key, crucial question to ask and answer if the industry is to fix the problem, if the industry is finally able to create considerable success hiring and developing producers and therefore, generating organic growth.

The answers to the outsider’s question lies deep in the psyche of agency owners.

First, most agency owners do not actually want to hire a good producer. J.P. Morgan had a great quote, “A man generally has two reasons for doing a thing: one that sounds good and the real one.” It sounds good to say one’s goal is to hire a good producer but that is not the real goal quite often. Sounds incredulous, I know, but they do not and here is why: Their subconscious goal, which is more powerful than a conscious goal, is protecting/enhancing the ego.

Many agency owners feel much more successful, much more powerful employing many poor producers, regardless of cost, than the alternative of employing few or maybe no producers. Some even enjoy complaining about how their producers do not produce but they will not fire them. This may be an ego issue or it may be insecurity. They may want to feel more powerful but they may also be insecure if they do not have producers regardless of quality. Evidence that insecurity and ego are the true driving forces is shown in the graph below.

Owners continue to employ producers for years, sometimes decades. No good business reason exists for their decision to not fire these producers who do not produce. This may also be a fear factor because the owner may fear, truly fear, not having producers even if he loses money on them. It may be the fear of looking too small to competitors and carriers. It may be the fear of not having backups. It could be fear of other items.

Some owners are so insecure they cannot stand employing producers who are better than they are.

Some owners do not mind employing better producers if the producer is not paid more than the owner. As the owner they believe they should be paid the most no matter what. I’ve seen more than one bank owned agency make this egotistic mistake.

Many agency owners are seriously conflict adverse. They cannot deal with firing bad producers. Emotionally, they would rather lose money year-after-year rather than fire a poor producer.

Most agency owners I have met — and I have met and worked with thousands of agency owners and “most” meaning 80 percent-plus — tell everyone they are a good judge of people. They are not. If they were, they would hire more successfully.

The fact is people are just not that good at judging people quickly. Google studied hiring and discovered that virtually no one can judge potential employees accurately (as to who will make the best employee). In other words, to hire successfully, eliminate hiring by your “gut.” Your gut is going to be wrong far, far too often. Google’s study found that four decision makers acting together can make the right hiring decision the vast majority of times.

Witch’s Brew

If one combines conflict aversion with deep ego/insecurities, the result is a witch’s brew. Employing producers who do not produce is not a smart business decision. This issue has to be addressed before hiring good producers because the subconscious will continue to cause the owner to choose lesser candidates until resolution is achieved. Nothing, absolutely nothing good will be realized without radical solutions.

Three possible radical solutions are:

When failure is so endemic to an industry for a position with the simplest measure of success possible, the issue cannot be candidates. The Chinese proverb comes to mind: When you point a finger, notice where the other three fingers are pointing.

To fix hiring and managing producers, either fix yourself or outsource the entire process. Period. Understand your real motives if you are strong enough to do so. Success is awaiting those willing to work on their own psyche first and producers second.