2001 Best Practices Study

Analysis of Agencies with Revenues Between $2,500,000 and $5,000,000

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

“Empowered employees want to know where the agency stands relative to the larger goals.” “We have no excuse for not letting our employees know how we are doing. They are the ones doing the work.” “Some of our insurance companies think that they are in a lesser position in our firm. By showing them the numbers, it helps communicate where we stand relative to our goals, and shows them what they need to do to get to their goal.”

Many agencies have taken great efforts to enhance their level of communication with their employees, clients, and insurance carriers. Practices such as annual reports of the agency’s operations outlining financial and operational results, monthly or quarterly newsletters, and other communication tools are becoming regular practices of the leading agencies. In regard to communications with employees, there is clearly an increased openness to share financial and operational data with employees. By doing so, employees are brought into the decision making process so that they can influence the results. Many of the best agencies communicate goals annually, and let the staff know the progress made towards the goals. In regard to client communications, the use of email is clearly a practice of the leading agencies. The opportunity to do broadcast emails and the opportunity to periodically make proactive contacts with clients has become a practice of the leading firms. Finally, in regard to communications with carriers, several firms indicated a willingness to “open the books” with their carriers to let the company know exactly where they stand relative to the other carriers with the agency. While many of the leading firms remain reluctant to do this, enough of the agencies interviewed are sharing specific premium volume of other carriers, that the practice was worth noting here. For the Best Practices agencies in this study group, financial management goes beyond preparing the annual budget, keeping receivables in check and monitoring the P&L statement. Decisions regarding producer hiring, automation utilization, productivity measurements and profitability are better made with a full evaluation as to the operational and financial impact to the firm. With mergers, acquisitions, the purchase of books of business and the other significant financial commitments that face these agencies, confidence in the financial modeling, and the ability to create “financial accountability” is clearly a critical success factor. As a result, these agencies have elevated the responsibility for the financial management of the agency to a more strategic position. Increasingly, they have someone in the position of financial manager who possesses the skills to provide the critical thinking and analysis to help management properly evaluate decisions and measure success. F INANCIAL M ANAGEMENT

“The budgeting process has eliminated many of the disagreements that the shareholders used to have about spending money. We budget at the beginning of the year, and then manage exceptions to the budget. If it serves our clients and employees, we spend the money. Otherwise, we don’t.” “We recently hired a new producer. Our Controller helped us measure the return on investment given a number of different assumptions. The returns can be so high for a successful producer that it got all of the other producer/owners invested in this person’s success.”

81