Managing the Sales Process

Who is responsible for sales management in most agencies? Often this task falls to the
owner or the top producer in the firm. This is not necessarily a good idea because sales
management can take time away from the manager's own sales efforts, and good producers do not
always make good managers.

Actually, sales management, as important as it is, does not have to be a full time job in
most agencies. If goals are properly set, communicated and monitored, if the right people are hired
and developed, and if management will remove any unreasonable obstacles to production,
producers should essentially manage themselves. They simply need to know that their
performance is being monitored and that poor performance will not be tolerated.

Producer Performance
What is an acceptable level of producer performance for experienced "seasoned"
producers? It depends on a number of factors such as:

-Available producer support
-Sales skills of the producer
-Size and type of accounts in the geographical area
-The competition
-The local economy
-The markets represented

This article provides some rules of thumb. If performance standards are not set for
producers, they will set their own, which may very well be lower standards than what management
expects.

Ideally management can use the performance of the best producer who has ever worked
for the firm as a guideline for "top" producer performance.

According to a recent California survey done by Oak & Associates, owners were asked
what size book they would expect as a minimum for experienced producers to handle after three
years in the agency, they report $162,500 to $250,000 in commissions handled, the range based on
size of firm. The owners' expectations for new business produced each year in addition to the
books handled was a range of $30,000 to $50,000, based on size of firm and/or whether or not it
was in a rural or suburban area.

For new producers without experience, $75,000 to $125,000 in commissions handled is
expected after three years and new business of $20,000 to $37,500 in commissions per year. For
new producers with experience (and without existing books of business), $125,000 to $172,500 in
commissions handled is expected after three years, with $30,000 to $50,000 in new commissions
produced per year. The ranges are based on size of firm and whether the firm is in a rural or
suburban area. Table 1 shows the full breakdown of production expectation based on size of firm
and producer experience.

Production Goals
Producers should be involved in the goal setting process. Each year every producer
(including "seasoned" producers) should be given a new production requirement, such as 10%
growth, net of attrition.

The producer should then let management know how this production will be
accomplished (i.e., the number of quotes and policies that need to be written to accomplish
his/her annual objective). It should be determined whether or not the production goal is
achievable based on the producer's own hit ratio and size of accounts written. The goals should
be broken down into monthly activity to make it easier to manage producer performance.

Management actually needs two sales goals for each producer. One goal is the required
increase in the number of accounts or commissions handled by the producer. The second should
specify the type of account, as well as the source of the new business to be pursued (such as,
account development, writing new accounts from referrals, target marketing or direct mail
programs, etc.).

Sales Meetings
Effective weekly sales meetings need to be held so sales activity can be properly monitored.
Specific sales activity should include: new business produced, lost business, hit ratio for each
producer, prospect activity, what referrals have been obtained from new sales, etc.

These meetings should also provide owner and non-owner production staff with
information on markets, sales goals, collection problems and service backlogs.

Producers have egos and need recognition. These sales meetings are also an excellent
time to recognize superior performance, encourage double-teaming, and to provide support by
coaching and training.

Compensation
Well designed compensation plans make special provision for above average
performance. This can be in the form of additional commission for increasing levels of new
production, additional perks, bonuses or other incentives. For example, an additional 5% in
commissions could be paid per $50,000 in new production after a certain commission goal is met.
Today many firms pay more commission for new versus renewal business. According to our
latest survey, the spread is almost 10 points more commission for new business commercial and
group benefits accounts. A future article will be published that will cover the specifics on what
commission percentages are paid to producers based on location and size of firm.

Today owners realize they cannot afford to pay producers for sales or service work done
by CSRs. The key to compensation of staff or producers is to pay based on the job performed.
This is why many firms have stopped paying commercial producers for personal lines accounts
and often have lowered the amount paid to producers for small commercial lines accounts.

Support Producers
All producers need time to sell new accounts. In the firms we have worked with that
provide support for good producers, there is better productivity and more growth from new
production. Producer support can come from these three main areas:

1.Development of leads and appointments;
2.Assistance in marketing/placement;
3. Servicing of accounts written.

These areas will be explored more in future articles.

Target Marketing
To achieve a high level of performance, producers also need to target larger accounts,
target certain classes of business and write more lines of coverage for each account.

A sales assistant or even a telemarketer can help develop the leads for larger accounts
and can target particular industries where the producer has some interest or expertise (i.e., where
he/she has written at least three of the same type of account).

The best source of new sales is referrals from a producer's existing accounts, especially
in their areas of expertise. Referrals should be sought from new accounts, accounts where a
difficult renewal has been placed and/or accounts that have had excellent claims service.

Hit Ratios
Another sales management key is managing the producer's hit ratio (the number of risks
written to the number quoted). Producers can greatly improve their hit ratio on writing new accounts when they have good marketing/placement support. More and more agencies today are using a central marketing person or department to help write new medium or large commercial accounts.

A hit ratio of 20% to 25% is average for commercial lines, but obviously the closer to 100%, the better. In personal lines the hit ratio is usually 40-60% unless you have a big yellow page ad and attract all the price shoppers.

Hit ratios can be greatly improved when more time is spent initially on qualifying the
prospect. Key areas to uncover in the first critical 20-30 minute interview include: what is most
important to the prospect in their insurance program; what are the politics, price and product the
producer is competing against; has the producer built a good rapport after this initial meeting, etc.
The completing of ACORD forms and collection of copies of existing policies should be done in
the second interview after the prospect has been properly qualified.

If the producer hit ratios are improved, the firm's expenses will be greatly reduced.

Summary
To have a successful, growing agency today proper management of sales and producer
performance is critical. Sales management can be easy if a process is established that monitors
specific sales activity and performance. Effective sales management will not only reward the
owners, now and in the future, but will also assist non-owner producers in achieving their goals.

Table 1. Producer Productivity
Oak & Associates recently performed a compensation and productivity survey of California
agencies and brokers. Contact Oak & Associates for a copy of the full report.

The following chart shows the median book of business handled and new business generated by
producers of various skill levels.

Producer Skill Level
Commission Handled
(in thousands)
New Commission per year
(in thousands)

Rural
S/U
<$1M
>$1M
Rural
S/U
<$1M
>$1M
Experienced
(3+ years)
$125
$250
$162.5
$250
$30
$50
$32.5
$40
New with experience
$125
$187.5
$150
$172.5
$30
$47.5
$30
$50
New, no experience
$75
$100
$75
$125
$25
$32.5
$20
$37.5