Business Basics

People, plans, principles, processes, powers, and purposes are the basic building blocks of success in any business. Therefore, this paper’s message follows six guiding principles:

q     Formal business plans should be written and shared with everyone who is expected to contribute effort to any business venture just as general contractors share their blueprints as team plans with subcontractors. 

q     Business plans should reflect stakeholders’ principles, processes, powers, and purposes so resulting products and services are attractive to customers.

q     Popular products and services result from realistic plans reflecting sound principles, logical processes, well distributed authority, and meaningful purposes.

q     People’s principles and powers should reflect their purposes; plans should reflect stakeholders’ reality.

q     Implementation of a well developed plan enables planners to influence organizational culture by proposing new values, introducing new ways of doing things, and articulating new governing ideas.

q     People tend to maintain best what they have created most so plans should be developed by whoever should use them.

 

Efficient and effective use of the previously mentioned building blocks prompts many decision makers to use goals, objectives, strategies, and tactics.  Do you see how all business plans should include the following items? 

q     A strategy is a formal or informal statement of purpose with one or more goals.  Strategies are made realistic by large-scale action plans’ details explaining ways to interact with the business environment in order to achieve long-term goals.  Strategies are implemented as tactics are executed.

q     Tactics are the specific actions required by the organization to implement its strategy.  Tactics are executed as activities are implemented.

q     Activities are groups of tasks required by organizational units or departments for completing a tactic.  Activities are implemented as tasks are completed.

q     Tasks are defined limited action assignments with target completion dates or well defined cycles.  Tasks are the most basic actions individuals and teams perform continuously at work.

 

This chain of logic could be summarized as: Plan to do the tasks you need to accomplish so your activities will give you a tactical advantage in strategic ways.  Using this chain of logic enables users to act in ways that are more aligned with their organizations’ values and abilities because their thinking is changed or at least structured differently.  Changing how people think, changes their actions.  Organizational cultures change/evolve as people’s beliefs, assumptions, and values change.  Communicating such planning and making people accountable for selling will evolve a sales-oriented culture.

Sales Specifics

A business plan to increase the frequency and significance of insurance policy sales in excess of the industry’s growth rate should enable users of that plan to act in ways which will enable them to gain tactical advantages as they implement the plan.  The following descriptions of tactics reflect a sales-oriented mindset/strategy.  Implementation of these tactics in a gradual manner would lead to sales success and secondary benefits such as personal accountability for work performance. 

 

1.      Understanding and reflecting social styles to increase trust enables sales people to begin, build, and maintain productive relationships, producing loyal customers.  Build a values-based system which encourages mutual respect to facilitate the development of trust.

2.      Using credibility and authority to drive a wedge between prospects and their incumbent agents will increase our team’s sales-to-quotes ratios.  Develop a commonly shared method for setting prospects’ expectations and committing them to appreciate our work.

3.      Engineering coverage in response to less than ideal but not obviously poor risk characteristics helps to prevent unintended coverage.  Using non-insurance risk management techniques helps to and avoid predicable losses.  Use insurance and non-insurance risk management techniques to get more premium dollars more profitably.

4.      Empowering all players to participate in creation and use of a team playbook assures fairness and equality in ability for all who will use the playbook to communicate and script their speaking and acting.  Create a document the team can use to learn, commit, and do good work.  Holding all players accountable for their actions in our expansion will gain their commitment to our purposes.

5.      Encouraging team members to have fun constructively will generate enthusiasm for their work and reduce employee turnover.  React to customer and employee challenges in cheerful ways with humor.

6.      Translating corporate marketing objectives into practical underwriting procedures and policies increases the likelihood of underwriting results reflecting what marketing departments have set as targets.  Make sure employees’ efforts are directed to produce desired results (e.g., use what is traditionally known as MBO “management by objective”) while using the right methods.

7.      Verifying each employee understands his or her roles, duties and responsibilities will increase the entire organization’s effectiveness and attain high efficiency.  Build a process to communicate expectations and test each employee’s understanding of what is communicated/expected—just because they nod “yes” doesn’t mean they got the message.

8.      Managing use of our existing customer base to generate more referrals, enable sales people to cross-sell lines of business to existing customers, and retain the most rewarding segments of our books of business.

Lack of organizational alignment and congruence is often seen in groups with diverse needs and abilities.  The tactic referred to as CYA is not a customer focused strategy for increasing sales but many members of middle management take actions and perform tasks in an effort to avoid political damage.  CYA does not produce results which are congruent with an organization's values.  Alignment and congruence will result in collaboration between an organization’s teams with diverse concerns.  For example: work assignments delegated by sales/marketing professionals as opportunities for success are often perceived as more work for the same pay by operations people—often the cause of much friction and discontent among visionaries and front-line employees.  

 

Activities and Tasks

The activities and tasks chosen for executing a tactic often reflect people’s perceptions more than they reflect their organizations’ strategy or reality.  The scope of this paper does not include a specific organization therefore no specific strategy or reality is readily available for use in determining what activities and tasks should be performed to execute any tactics.  Enough and sufficient activities and tasks must be defined, planned and implemented so each tactic can be implemented successfully to produce each organization’s preferred results. 

 

 

Illustrations of the eight sales strategies

The following bulleted statements reflect how the actions listed above could be applied to an agency’s sales staff: 

1.      Understanding and reflecting prospective clients’ social styles in an effort to earn their trust will enable producers to begin, build, and maintain productive relationships with insureds.  Prospects and clients can begin to appreciate agency personnel as reliable subject matter experts who encourage economically efficient risk management practices.

2.      Driving a wedge between prospects’ and their incumbent agents will increase producers’ sales-to-quotes ratios.  Set prospects’ expectations and commit prospects to appreciate our combined efforts.

3.      Engineering markets’ coverages and limiting potential hazards in response to less than ideal but not obviously poor risk characteristics helps to prevent negative loss results and increase policies-in-force counts while preserving profitability.  Agency personnel should encourage clients to use insurance and non-insurance risk management techniques to get more premium dollars more profitably. 

4.      Empowering agency personnel to participate in creation and use of an agency team playbook will enable producers and CSRs to collaborate and cooperate more efficiently and effectively, benefiting more of the agency’s clients/customers.  All agency personnel should be made aware of what they can do and when they can do it so they can act with greater confidence, comfort, and consistency.  Accountability will enforce this awareness.

5.      Encouraging agency personnel to have fun constructively will generate enthusiasm for their work and endear them to their agency team members.  Agency personnel who react to challenges posed by prospects and insureds in cheerful ways help CSRs and producers feel safe and confident in their relationships with agency owners/managers.

6.      Translating markets’/insurers’ underwriting guidelines and marketing materials into practical front-line underwriting procedures and policies increases the likelihood of producers and CSRs producing favorable underwriting results.  Agency managers and owners who make sure their personnel’s efforts are directed to produce desired results will get more of what insurers’ want produced and be able to ask for more exceptions to underwriting guidelines.

7.      Verifying each producer and CSR understands his or her roles, duties and responsibilities will increase each agency’s effectiveness and attain higher efficiency.  Agency owners and managers who build a process for communicating expectations and testing each producer’s and CSR’s understanding of what is communicated/expected will get what they want more reliably than those who just assume their message was received.

8.      See the last page of this document for explanations and illustrations of the book of business strategy tactic.

 

 

Strategy summary

The seven tactics listed on page 2, when embellished with specifics and implemented as a formal plan, enable insurer and agency personnel to stop guessing and start growing profitably, acting with greater consistency, correctness, and comfort.  Expectations will be communicated and plans will be developed to achieve those expectations as people are held accountable for their roles in expansion of an agency’s market share.   

 

 

Next steps

Trent, what would you like to consider and do next?  Here are questions I can offer which may prompt actions:

q     When may we begin using this line of reasoning and these principles to spur development of your agency’s sales culture? 

q     What should be revised or replaced in this document? 

q     How do you suggest we define and diagram a plan to pilot this effort?

 

 

Guiding principles for book of business management include: 

q      Analysis and planning should result in referral generation and cross-selling of accounts.  The best clients should be sold more lines of business and services.  The most loyal/happy customers should be encouraged to give referrals (e.g., their vendors, their customers, and their friends) and be more loyal to your agency.

q      Use the ABCs of business planning:  a) Plan what you should do.  b) Implement your plan.  c) Monitor the results of the plan’s actions and how well the plan is implemented.

q      Establish data integrity and maintain the quality of your data, documentation, and other supporting information such as a written business plan.  Be able to track your progress over time by using trending of spreadsheet data and viewing a calendar summarizing what actions you’ve taken and when each action was completed.

q      Service established accounts in ways your retention ratio will increase more than 15% in two to three years from when you begin.  You may loose over 50% of your less rewarding/productive accounts when you start managing your book of business, focusing on your most rewarding/profitable accounts. 

 

Here are the basic steps for analyzing your accounts using a spreadsheet software program in preparation for planning what action steps to take after the analysis is complete:

1.       Make your insurers’ marketing representatives and underwriters aware of your intent to manage your book’s growth and profitability without giving them details of your plan.  Ask them for electronic copies of your loss runs with any other electronic data they can provide you.  Ask when they can next meet with you in person or on the phone in approximately 30 days.  Learn how they are measuring your agency’s performance. 

2.       List your accounts from largest to smallest in terms of written premium.  The list should include the clients' names, their premium amounts, commission amounts, types of insurance purchased from your agency, and expiration dates for all policies had by each client.

3.       Add up the total number of accounts and multiply the total by 20% to approximate the quantity of accounts which may be your most productive in terms of income, if the 80/20 rule applies to your book of business.

4.       Sort the list to find the 20% which are generating the most commission dollars for you.  Can you select the top 30 clients and develop service programs for each type of client?  Here are suggestions for how to create a high-value proactive service timeline to endear clients to your agency:

a)      When should claims histories be reviewed?  Make sure inflated reserves are lowered and old reserves closed. 

b)      When should x-mod worksheets (for workers compensation clients) be completed?

c)      When should payroll be reviewed? 

d)      When should coverage certificates be inventoried & updated?

5.       Identify the least productive, in terms of commission dollars, 20% of your accounts.  Can you plan how to best increase these account's profitability or politely get rid of them?

6.       Plan and work to avoid low payoff activities, routine service items others should perform, and poor systems and processes which slow you down.  Avoid having too many small commission accounts costing too much overhead.  Make sure routine service actions can be delegated or automated.