Of all the line items on an independent agency’s P&L, there are a few that always determine profitability. One of those few, maybe the most important, is sales compensation. We thought this Burke Ink piece might serve as a useful review for experienced agency managers, and as a primer for new ones.
This blog entry is excerpted from the March 2011 Burke Ink, which can be found in its entirety in the Articles section of our site (../Articles).
Virtually all independent agencies need, and really benefit from, effective sales management. Few of them, however, will get that by naming a single sales manager.
To sharpen their sales-management performance, most agencies will need first to view the function as having two main parts: Sales Admin and Sales Leadership.
The most important duty in the Sales Admin part of the function is information production. Information about the activity and results of new and veteran producers; new and lost business; hit ratios; business mix; retention rates; carrier placements; carrier programs and specialties; marketplace and competitor intelligence; and more.
We’ve seen a lot of so-called sales management conducted with really thin data and faulty assumptions. Most of our client agency principals are capable of making good decisions for their firms if they have good information. But there is reason to be concerned about faulty management decisions (or lack of decisions) caused by lousy information and bad assumptions. Think of how crazy most agency principals would get if you took away their phone or their car! Well, to someone with sales-management responsibility, their info should be just as important. It’s an attitude thing. And where that attitude is lacking, it’s usually explained by a legacy of not having good data and just not expecting to have it. (This is intertwined with a decades-long habit of accepting the standard menu of reports generated by the dominant vendors of agency management systems — another story.)
The Sales Leadership part of the sales-management function has a few sub-parts:
Most agencies do not have, and should not seek, a single person who can do both the Admin and Leadership pieces. For one thing, there is usually not enough time in the day, but also those skills don’t usually reside in the same human body.
You need to embrace the idea that sales management in the independent agency is a team sport.
For the Sales Admin piece, someone in the agency, preferably not a principal with a large book of business, has to own the function of providing good and timely sales-management information to the sales leader(s) and producers. He/she does not decide on the content alone. That’s developed over time in conjunction with the sales leaders and some consulting help. And it will take time to get it right because it requires a change of attitude and a change of expectations.
Who performs this function will differ with agency size and make-up. Ideally, it’s not the bookkeeper or the IT person, but instead an insurance type who relates well with producers and “gets it” in terms of the agency’s sales and service culture. The Sales Admin job will typically not be a full-time job.
The Sales Leadership piece can be a team sport within a team sport. In larger organizations there can be a producer council, designated mentors, new-producer coordinators, and a variety of players. In smaller firms Leadership might be shared by a couple players. If you are seeking our input on who should be the capo di tutti capi (the boss of all bosses), it would be an agency principal (i.e., an owner) with demonstrated success and credibility in insurance sales.
Compensation, you ask? Incentive compensation is usually part of the picture too. We have a lot of experience on that score. But it works only if it accompanies good management (Leadership and Admin). It cannot replace it. — BHB