How to Maximize Agency Productivity
Maximizing employee productivity has a direct impact on the bottom line. Managing workloads is something most managers or supervisors try to do. But it doesn’t really work to just shift accounts from one account manager to another. Perhaps there might be some changes to the work flow. However, in the end, dust is kicked up for a few weeks only to settle back down in a new location!
The biggest single agency expense is agency personnel, typically costing 52 percent to 73 percent of revenue. In general, owner and producer compensation ranges between 25 percent and 35 percent of revenue, office staff compensation ranges from 20 percent to 28 percent of revenue and benefits and taxes costs 7 percent to 10 percent of revenue.
This means if a firm can get more work done with fewer employees then the savings drop to the bottom line. For example, if a firm can increase revenues by 10 percent without increasing staff then that 10 percent is mostly profit.
The Secret to Improving Productivity
The secret to improving employee productivity is … there is no secret. Every agency has its own personality. Owners and managers need to use a blend of art and science to arrive at the formula that works best for their specific firm.
This does not mean to give up and be satisfied with the status quo. It means that owners and managers need to get into action and do what it takes to find that proper mix of ingredients that will work for the agency.
The place to start is with the people doing the work. Management needs to hire the right people. Those that do not work effectively with others and efficiently, should be “let go” as soon as possible. One bad employee can spoil the whole work environment. Productive people notice. It causes real morale problems, when the problem employee is not addressed.
Manage by walking around and asking questions. Employees know what works and what does not work.
Management’s role is to determine which ideas are the most cost-effective solutions, if any. Management should ask the employees the following: “What three things can be done to make your job more efficient? Or make you more productive?”
Bring the staff together to discuss the suggestions. Brainstorm on the issues. Delegate some of the problem solving to the staff and have follow-up meetings. The best suggestion should win a monetary reward, depending upon the savings. Or even time off, which everyone really appreciates. This process should be repeated annually.
This is exactly what good consultants do. When brought in to improve the operation, they get their ideas from the staff sitting in the desks. It isn’t rocket science.
Key Ways to Analyze
Owner and managers should perform their own analysis. The following are some basic areas to explore.
Is the agency overstaffed? Compare the agency productivity to peer groups using one of the published benchmark studies. The key is to make sure the standards used are based on size of account, not just location of the country and size of agency. If overstaffing exists, why and what can be done? Get rid of under-performing employees and reward the high performers.
Is the layout of the office efficient? Can people print and fax from their own computers? The first step is to take an inventory. Does the agency have enough properly functioning and up-to-date office equipment? Sometimes a new machine can make a big difference in productivity.
Is the telephone system efficient? Is there extra space that could be better utilized? Is the rent too high? Can telecommuting work for those who live far away? How can this be policed? Could four-day work weeks be implemented?
One client moved into half as much space in a very expensive city and completely redesigned the office. Partitions were brought down, people sat side by side, booths were set up for private call meetings and mini-conference booths for clients. The proximity to their neighbors kept people from making personal calls and playing games, and made people communicate more with each other. Camaraderie soared. Even the producers shared offices and could learn from each other, listening to calls and sharing ideas when the calls did not go so well on new business prospecting.
How is the employee morale? Any number of things can cause poor morale. Often it is related to perceived unequal treatment. All employees should be expected to meet the same high standards. Be consistent with managing this. The annual performance review is the time to clearly communicate performance expectations and past results. Have the employees first complete the review for the manager’s review and critique.
Is the staff properly trained? On-the-job training is good to make sure the staff follows agency procedures. Unfortunately, it can perpetuate the same old inefficient ways of working. It is great to send the employees outside the agency for new ideas, when possible. Make sure the staff is kept up to date with insurance coverages and procedures. Have the employee inform the rest of the staff on what they learned after they return from the training.
Communication is imperative. Does management have a clear direction for the agency and is it communicated to the staff? Employees need to be pointed in the right direction and told what their purpose is. Having a purpose will prevent the employees from getting bogged down in the minutia.
The key with agency automation is not to buy the most expensive and sophisticated system. The key is to maximize the usage of any effective agency management system. Some small firms spend lots of money buying a name brand system, but they don’t always have the proper training or utilize it for most functions. They would be better served buying a less expensive system and utilizing most of its functions.
When it comes to the computer system, is the staff double entering data? This can occur when one person writes down information from a phone call on a piece of paper rather than bringing up the computer screen to complete the transaction, and thus the work is done twice. Or, this can occur when one person takes only some of the information rather than transferring the call to the appropriate person (e.g. claims, PL CSR or the producer).
Is the agency using transactional filing or is it paperless? The new software, scanning machines and larger disk space, as well as company uploading and downloading makes being paperless the way to go on many lines of coverage today.
The jump to being paperless requires a leap of faith. Almost all that have made the move have been happy and have eventually seen a jump in service staff productivity.
There is one glitch in the automation arena — maintenance. When the computer system is down, most of the work in the agency is close to a standstill. Medium to large firms now must add an IT (information technology) person to the staff. Others have added data entry people. This is necessary for many larger agencies, but the addition of personnel and more expensive automation, adds to the firm’s expenses and lowers profits.
Today many agencies also have two or three terminals on each person’s desk. This is done to be able to multi-task various activities, including accessing carrier rating systems and information.
The Book of Business
The type of insurance sold limits the productivity of employees. For example, firms that sell employee benefits tend to have very high productivity. One producer and two staff can easily handle $500,000 or more in commissions. In contrast, a non-standard auto agency might need three or four employees to service $300,000 in commissions. Commercial lines usually falls between personal lines and employee benefits productivity, when it comes to productivity.
Even within each line of business certain classes of business are more labor intensive than others. Contractors and truckers will require a lot of service work, such as certificates. The good news is that there are some tricks to change the agency’s mix of business to improve productivity.
Some agencies have also gone to using outside services to handle labor intensive activities, such as certificates, policy checking and even small commercial lines accounts, etc. Two that seem to be very popular are Resource Pro and Patra.
Does the agency cross sell its accounts? Relationships are strengthened when an agency sells more than one coverage to its clients. Efficiencies are gained by earning more commission per account and spending less time generating the sale because they are already familiar with the firm and employees/producers with the account.
Does the agency have any program business? Selling a unique product that is slot rated can be an incredible income generator. Usually these sales require less work to sell and service. The similarity of the book of business can create high productivity.
Do the producers pre-screen their prospects? Pre-screening will help eliminate business that the firm cannot write or should not write. Know the price, product and politics needed to close the sale as soon as possible. It is best to find out the quality of the prospect in the phone call before the visit, then during the marketing process. Hit ratios will also improve.
If increasing employee productivity were simple, everyone would be making more money. Owners and managers need to make a commitment and then handle the items described above, one at a time.
Sometimes it helps to bring in an outside partner to get the process started. Oak & Associates can assist an agency in performing a Management & Organizational study and make appropriate recommendations for management to follow. Again, many of these recommendations are uncovered in the staff interviews.
Owners and managers need to use a blend of art and science to arrive at the productivity formula that works best for their specific firm.
Small gains when compounded over time result in enormous savings. The goal is to work smarter not harder.
Implementing the ideas that are laid out in this article will take some time. We know it will also change the way the operation is run long into the future. These things make employees feel more respected and more efficient, which makes life easier for owners, managers, the producers and service staff. This also results in happier clients.