The Four Pillars of Agency Management
By Catherine Oak and Bill Schoeffler

Today more than ever, agency owners are facing tough times. The continuing soft market and increasing expenses have put a damper on profits. Insurance companies demand higher and higher volume from the agents. The natural first response of most owners is to attempt to increase sales and cut expenses. These actions may make some short-term improvement in profitability, however, they won't make long-lasting improvements to the overall agency's operation.

When looking for ways to improve or streamline agency operations, many owners
overlook refinements to the agency management and administration. This is because people tend to follow the old adage "if it ain't broke, don't fix it." This attitude may cause significant problems at some point in the future.

There is no single ideal way to set up and administer an agency. Management is not a static procedure, it is an artistic interpretation of a scientific process. There are, however, four key elements that successful agencies incorporate into their agency management.

1. Open communication.
This is the most important element for management, since all other aspects of managing people is a subset of open communication. Keep in mind open communication does not mean full disclosure. It does mean keeping your staff informed of vital information so they can perform with confidence. The vacuum of no communication will be filled with rumors and misunderstandings.

Communication begins on a personal level. The best way to start is through written job descriptions. Sit down with each employee to discuss what management expects from him or her-this also lets you know what your employees expect from management.

Let the employees establish their own performance goals, then hold periodic reviews to ensure they are on track. The next step is to involve the employees in the annual planning of goals and objectives. Ask your employees for their input. Use their personal performance goals as a building block to create your agency's goals It is important to get them to sign on to the final plan.

Finally, hold regular, effective staff meetings. Use this time to update the staff about how the agency is progressing toward its goals. Discuss the triumphs as well as failures, but always show how to improve the situation. Allow an open-floor session for questions and concerns. Communication can continue between meetings by routing memos and bulletins to the employees regarding changes and news items.

2. Effective management hierarchy.
Generally, management responsibilities evolve as the business grows. The time
requirement for management grows directly in proportion to the revenue of the firm and the number of employees. Before a business creates or modifies a management structure, it is advisable to perform a thorough review of the firm's resources as well as management requirements.

Smaller agencies could do quite well with the owner just spending a few hours a week on the management of the firm. Regional and national brokers will have a staff of people dedicated to management.

The owner must determine what is the best use of his or her time. Most owners prefer, and may be better at, sales rather than management. Owners who want to concentrate on sales should consider delegating some or all administration duties to someone else.

In most agencies, an office manager position does not need to be a full-time role. The individual may also handle other responsibilities such as the computer, servicing a book of business or accounting.

The need for an office manager should be determined by performing a cost-benefit
analysis. The estimated amount of lost sales from owners spending time on administration should be determined as a factor in the cost equation.

When the firm has grown to point of having middle managers, the owners need to "let go" of the authority once each individual manager has proven capable of managing her department. Their ability to get good results will depend on the amount of information and authority the owners give them.

Delegation of authority is extremely hard for most agency owners. But if the managers are good and have the authority to carry out their responsibilities, this will save the owners a lot of time. Owners' managerial time should be limited to strategic management of the firm rather than day-to-day management activities, whenever possible.

3. High employee morale.
For most agencies, having a work-friendly environment is usually not a problem. But when it becomes a problem, it can wreak havoc throughout the firm. Owners and managers need to be aware of how the employee perceives the workplace. Perception becomes reality.

Some of the more common employee issues are: little employee recognition, uneven workloads, few incentives, lack of communication, chauvinism, nepotism or other favoritism, lack of advancement and responsibility without authority. Learn to distinguish between someone who has a legitimate complaint and a chronic complainer.

Annual employee reviews and regular staff meetings are a good way to find out what the employees' issues are. Once a problem arises it must be addressed and corrected immediately. A festering problem is a ticking time bomb. Don't be reluctant to use outside expert advice. The short-term cost will often be much less than the long-term loss.

It's important that management knows why people leave the firm. Turnover is very
expensive. Exit interviews should be conducted to help management understand why employees leave and ways to improve morale. Exiting employees tend to be more open discussing any problems that they perceived in the firm.

4. A Firm foundation
A business without a plan is like a ship without a rudder; it can only go where the prevailing winds are blowing. A business plan should be short and concise. This makes the creation and implementation of the plan more practical and palatable.

Every year, the owners and key managers of the firm should go off-site for one to three days (depending on the size of the firm and the specific areas of concern) to develop the coming year's goals and the action steps to achieve those goals.

An analysis of strengths and weaknesses of the agency should be completed by each individual prior to attending the planning meeting. The results should then be analyzed in the group session. Goals also need to be determined in the group meeting.

The steps required to accomplish the goals should be put in writing. Specific individuals need to be held responsible for the implementation steps and time required to reach each goal. At least quarterly, management should review the progress made on the action steps to determine if headway is being made as expected or if corrective action is needed.

A final thought
Success in an agency is not just a reflection of the bottom line in any particular period of time. Owners should think in terms of making their business a personal statement on their philosophy, vision and talent. The goal should be to create a business that treats employees and clients with respect and still generates a fair profit for the owners.

To create a successful working environment (and agency), owners must realize that the administration function requires dedicated commitment to ongoing improvement. Management needs to be a continual process.