The Competitive Advantage: The Value of an Employee Handbook

Most small agencies, and quite a few middle-to-large agencies, lack a current employee handbook or at least one of quality. Honestly, day-to-day, an employee handbook really is not that important, especially with just a few employees. More importantly, employee handbooks are boring subjects for agency owners to address. These manuals do not involve customers or sales, so they get ignored. I get it.

Employee handbooks are important though, because these manuals, when well-written and designed purposefully, minimize many of the time sucking responsibilities agency owners dislike so much. These are the issues that cause owners to cringe. They procrastinate whenever possible dealing with these human resource issues. I have yet to meet an agency owner who became an agency owner so they could become an HR manager.

Here then is why, not how, a quality employee handbook is worth your while.

Saves Time

Employee handbooks decrease training time. I know you will miss spending time training. It is your decision whether your time is best spent there or out selling. In a small agency especially, the agency owner is usually the key salesperson, and sales do need to be made for an agency to thrive. However, maybe giving up the extra time you enjoy training people so you can increase revenues is a trade-off you are willing to make.

Reduces Regulatory Exposures

A quality employee handbook decreases the probability of Department of Labor (DOL) and employment practices liability (EPL) exposures. I know you relish the opportunity to make your EPL insurance premiums back by causing your EPLI carrier to pay out on your behalf. Maybe you even dream of the opportunity to go toe-to-toe with the DOL and prove them wrong. Is this truly a good business strategy? I am not neglecting the importance of stroking your ego, but sometimes an ego-boosting strategy does not reconcile with a quality business strategy.

Reduces E&O Exposures

These handbooks decrease errors and omissions (E&O) exposures, believe it or not. This benefit is more difficult to see, because employee handbooks do not address coverages or procedures. However, a well-written handbook does address two really important E&O exposures.

• Job Descriptions. It will contain job descriptions (or reference an addendum that contains the job descriptions). These job descriptions will describe who is to do what and when. If designed in collaboration with agency procedures, the odds of a gap existing is greatly diminished.

For example, I commonly come across the situation when I ask, “Who exactly is responsible for checking that the surplus lines policy contains all the coverages promised?” Often the producer points to the CSR, and the CSR points to the producer. Maybe you have that base covered, but give some consideration to whether you have all your bases covered because this is an important reason why E&O claims occur.

• Procedures. It will contain a requirement that everyone will fol- low procedures. What is one of the top causes of E&O claims? Someone not following procedures. Who is most likely to not follow procedures? A pro-ducer. Why? Because most agencies do not actually have a requirement that producers follow procedures.

High-Quality Manuals

Agency owners are optimistic. They wish producers would follow procedures, but they do not want to talk about having to follow procedures (or be fired), especially when the employee handbook does not require that producers follow procedures. Of course, this is assuming that the handbook has a job description for producers.

One of the key methods of turning a high-quality employee handbook into fireplace fodder is to buy one, never read it, never customize it and never review it to learn if it reconciles with your procedures and job descriptions.

Honestly, many owners may not include these requirements because they know the producers will not willingly follow procedures. Owners abhor the idea of having to talk to producers about following procedures, so they leave the requirement about following procedures out of the handbook. Also, because they so enjoy listening to CSRs complain about how someone does not follow procedures, they get the best of both worlds.

It is interesting to me how in agencies that have switched to environments that ensure producers follow procedures, morale always increases for the entire agency (sure, some producers mope around for a while). Also, in my experience, sales usually increase.

Believe it or not, quality manuals that are up-to-date and followed enable agencies to hire higher quality people. This is a great collateral effect because higher quality people want to work in higher quality organizations. Higher quality employee handbooks, in my experience, create a subliminal environment that just raises everyone’s performance, and when people interview, they feel it.

Where does an agency get a high-quality manual? Many sources exist. One of the key methods of turning a high-quality employee handbook into fireplace fodder is to buy one, never read it, never customize it and never review it to learn if it reconciles with your procedures and job descriptions. Every organization is different, so plug and play does not realistically exist.

Purchase a high-quality manual and then methodically go through it even though it is boring. Parts you will be able to use in sales to help your customers in their organizations. If you need an outside consultant to write it or help you implement it, your EPLI insurance company may assist you. Another option is Don Phin, or you may know someone local. Getting it done now and then staying on top with an annual review will save you more time and money over time.

Like so much in life, you have a choice of concentrating more effort upfront in turn for less overall work and money or vice versa.