2001 Best Practices Study

Analysis of Agencies with Revenues Between $5,000,000 and $10,000,000

C OMMUNICATIONS – E MPLOYEE , C LIENT , AND C ARRIER

“Our entire staff meets more frequently than any I’ve heard of, and yet we achieve extremely high levels of productivity. Many of our competitors seem to believe that there is a trade-off between frequent communication and productivity, but we have demonstrated that communication enhances productivity.” “With many so-called ‘service businesses’ frustrating customers by extensive use of automated phone systems, we believe we have a real competitive advantage by focusing on more, rather than less, customer contact and communication.” “E-mail has become an invaluable tool that enhances communication, while also providing documentation, and with great speed.” “Aggressive growth plans (including several acquisitions) have put us in a position of forced discipline regarding profitability. This discipline has served us well, since now that the acquisition debt has been paid off, we have developed the habit of careful attention to profitability.” “Developing a budget and sticking to it has been the key to our success. Communicating progress toward our growth goals has helped keep the staff engaged.” “Tying the compensation of managers to the achievement of specific financial objectives has been critical to our success.”

Technology (in the form of email, voice mail, and faxing) has done much to help in the area of communications. However there is a growing awareness, especially in a service industry, that technology may actually hinder effective communication in many instances. Best Practices agencies work hard to apply technology when appropriate, but recognize that the insurance business, at its center, is a very personal business requiring frequent personal interaction. The Best Practices of effective communication identified include: extensive use of email, frequent staff meetings, agency Intranet sites, Internet websites with direct email links to employees, well laid-out office spaces, frequent customer contacts, human phone operators (who offer voice mail as an option), and “management by walking around.” Many agencies in this size group have the added complication of multiple agency branches, making internal communications even more challenging. The financial management function for businesses of this size is critical. In fact, it is interesting to note that this revenue size group is generally the first Best Practices group in which a Chief Financial Officer position may be found, as the emphasis expands beyond bookkeeping and accounting to a broader focus on complex financial issues. Increasingly at this size, the management and measurement of cash flows, investment returns, equity ownership arrangements and operating investment decisions requires a level of expertise not generally required by smaller agencies. The Best Practices identified in the financial management arena include: effective cash management (investment sweep accounts, cash flow planning, etc.), acquisition analysis, capital planning, receivables management, the establishment and management of acceptable investment returns, operational budgeting, automation maximization, a plan to track key agency benchmarks (profitability and productivity), and consistent and appropriate compensation structures. F INANCIAL M ANAGEMENT

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