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		How to Pay and Evaluate CSRs By Bill Schoeffler and Catherine Oak, CIC, AAI The role of the customer service representative must never be underestimated-just ask any owner who just lost a great CSR. In the typical agency, the CSR is the foundation of good service and therefore they are a major part of the agency's reputation. The question for most agency owners is how to grade CSR performance and what is fair compensation? There is no denying that finding a good CSR today is a difficult chore, especially due to the low unemployment rates. This scarcity of potential employees has had a profound impact on agency performance and profitability. CSRs account for roughly half of all employees in an agency. Keeping in mind that payroll is the largest expense in any agency, the productivity of the CSRs is directly related to the profitability of the agency. The hiring and retention of good CSRs including establishing fair compensation is a key to increasing profits and agency value. *Job Fundamentals* The role of the CSR boils down to the collection, processing and distribution of information. The collection of information aspect tends to be the most significant skill. The CSR needs to know what information to gather and how to ask for it. The CSR also needs to be a "people" person. Good social skills and the ability to act as a go-between for the different parties-clients, producers, underwriters and agency owners-are a must. The typical CSR spends about half of her time talking to clients or insurance company personnel gathering and distributing information and problem solving. The balance of her time is spent on paperwork and computer input. *Job Performance* The first step to evaluating job performance is to write a job description spelling out the CSR's tasks and responsibilities and making sure both parties agree to it. It is important to include predetermined performance standards. A CSR needs to know what size book management expects her to handle. Management, on the other hand, needs to offer proper training and support to allow the CSR to get the productivity level expected. There are several ways to objectively measure job performance. Many automation systems allow the tracking of transactions by CSR. These automated reports reflect the information recorded on the agency database as the CSRs move through their daily work. This allows management to review the volume of work performed by each CSR. These numbers however may be misleading. For example, a CSR may need to spend hours or even a whole day to complete one transaction that saves an account. Therefore, the reports generated must span over weeks or months so the average workload is evaluated. Also, if a CSR performs a transaction but makes a mistake and needs to perform another transaction to correct the mistake, does the report reflect two transactions or one? Another issue is finding a good benchmark to set performance standards. How does one know what the appropriate number of transactions that CSR should perform to complete their task? Transactions required will vary based on the composition of the book of business handled. Some types of business are more labor intensive than other types, for example contractors. Another method is to compare the number of accounts and commission dollars handled by each CSR. It is important however to compare apples to apples. Breakdown the CSRs' book by line of business (personal, commercial, life and health). Then determine the average size account in each line (commission dollars divided by number of accounts). The last step is to compare performance to a benchmark (see Table 1. This method provides a clear indication about the profitability of a CSR and the book of business that they handle. It must be noted that even a good CSR could be stuck with a troublesome book of business and appear to be unproductive. Management needs to use the performance numbers in their proper context. Even if each CSR in an agency is measured relative to each other, a problem may occur if each CSR handles a vastly unique book of business. For example, one CSR may a have a large number of contractors that could require more labor then another CSR's book which is mostly retail businesses. Performance should also be based on subjective measurements as well. Once a year key clients handled by each CSR should be surveyed to see what they think of the service they are receiving. Underwriters of the important markets should also be asked for input on the performance of each CSR. Performance rating should be a combination of subjective and objective criteria. A CSR's strength (and value to the agency) may be partially hidden if performance is graded on only one type of input. *Job Compensation* The next big question is what is fair compensation? The first criterion is to make sure it is affordable compensation. Hiring the world's best CSR is not a good idea if the cost will sink the company. Compensation needs to be in line with job duties and responsibilities. A good way to look at compensation is to do a quick reality check. Simply take the commission dollars to be handled by a CSR and subtract compensation costs (include taxes and benefits) to determine what the "spread" is for that specific position. The next step is to evaluate if the remaining dollars is enough to cover producer compensation, overhead and provide a fair return to the owners. This analysis will have to rely on a "gut feel" rating. Unfortunately there are no reliable benchmarks on what the spread should be since there are too many variables from agency to agency. The bottom line for this process is to see if there is a fair return to owners after expenses are taken out. A low return or loss will require an adjustment to compensation (CSR or producers) or somehow overhead costs would need to be lowered. If adjustments are not feasible, then management must think about rehabilitating or getting rid of that specific book of business. The analysis of affordable compensation is important, however, what an owner may feel is appropriate unfortunately may not be the same as what they will need to pay. Today's strong economy has a tremendous impact on what the prevailing wages are. A recent Oak & Associates survey of California agencies shows that the average salary for a newly hired experienced personal lines CSR is now $23,579 for rural agencies and $33,000 for urban and suburban agencies. Experienced commercial lines CSRs are now receiving an average of $29,075 and $42,000, respectively. What must be noted is that salaries have clearly gone up in recent years but there has not been a corresponding increase in the commission dollars handled. Major reasons for the stagnant size of the CSR's book of business are the continued soft market and lower commissions paid by the carriers. It also seems that automation has actually increased the CSR workload because everyone expects more and more information and service. Also carriers expect the agencies to do more of the companies work without getting paid for it. *A Final Thought* Hiring and keeping a good CSR requires management practice both art and science. Review the numbers to make sure all the statistics are in line, but make sure the subjective side is also included in the process. It often proves true that it is better to hire a well-qualified CSR and pay them more rather than just filling the position with a low paid, not-so qualified person. Highly productive CSRs handle more work with less supervision and thereby can save expenses in the long run. For the typical agency, the quality of the CSR determines the quality of the service and the quality of the agency overall. The path to reaching top performing agency status is not easy, but the right CSRs are necessary for the journey. Sidebar Table 1. CSR Productivity Analysis Oak & Associates recently performed a compensation and productivity survey of California agencies and brokers. Contact Oak & Associates for a copy of the full report. Keep in mind that the number of accounts and commission dollars handled by the CSRs will vary based on the average size of account. The following table shows the California average of personal lines and commercial lines CSR productivity. Line of Business Ave. Size Account (comm. & fees) Accounts per CSR Comm. per CSR Rural S/Urban Rural S/Urban Rural S/Urban Personal Lines $127 $302 766 412 $97,478 $124,166 Commercial Lines $677 $1,240 277 216 $187,389 $267,769