PLANNING YOUR STRATEGIC DIRECTION
By Catherine Oak, CIC, AAI and Bill Schoeffler
Oak & Associates
Glen Ellen, CA

Let's start off with three simple questions. 1. Do you think business planning is important? 2.
Do you have a business plan? If you answered no to question two, you are not alone, today
there are still too few agencies (less than 10%) that have good written plans. One final question:
3. What is your business strategy? It is imperative that you know the answer to this last
question.

Strategic Business Plans are essential to proper agency management and are now often necessary
to receive "preferred" status with carriers. In today's changing climate, to be a successful, high
performing firm an agency must have a Strategic Business Plan. The successful implementation
of a business plan lies in knowing the answers to three important questions:

Where is the agency today?

Where does agency management want the firm to go tomorrow?

How can it get there with the resources available?

Strategic planning owes its development from the military. It is the science or art of long range
planning and directing large scale operations. Tactics on the other hand relate to the specific use
or deployment of resources to meet a short term objective. Too often business plans contain only
tactics. An effective business plan should be based on a strategic plan.

The Annual Planning Meeting
An annual meeting of key managers and agency owners should be held preferably off-premises, a
retreat-type atmosphere is the most effective. At this meeting, the planning team will develop the
Mission Statement, map out the agency's strategy and sketch out the formal business plan.

It may be beneficial, at least for the first time, to have a third party expert (such as a consultant)
attend or moderate the planning meeting. The consultant can help keep the ideas flowing and
keep the meeting on track. Above all, the consultant can offer expertise on what works in other
firms. The advantage a third party has is the ability to look at the agency objectively from the
outside.

An agency's strategic direction is the big picture or the vision needed to guide the firm along the
way. The best way to start the process is to create a mission statement. The agency's mission
statement is a clear and specific summary that describes the firm's purpose. This exercise is a
crucial first step to map out the direction of the firm's future and assist in the planning process.

The next step is to determine the current status of the agency. Owners and key employee need to
look within the firm -- a self assessment of the agency and its resources including an inventory of
strengths and weaknesses. This allows the planning team members to create meaningful and
reachable goals using appropriate tactics. Team members need to evaluate the strengths and
weaknesses in nine primary areas.

1. Profit
2. Growth/Business Development
3. Personnel
4. Management and Organization
5. Compensation
6. Accounts Receivable/Money Management
7. Markets
8. Accounts/Book of Business
9. Workflow

Well written Strategic Business Plans capitalize on the strengths of the organization and strive to
minimize or eliminate the weaknesses. The major weaknesses identified can be turned into
opportunities for improvement. These opportunities then become the agency's goals of the
coming year.

The Strategic Plan
At this point, the current status of the agency will be clear. The planning team then needs to spell
out the assumptions for the agency's operating environment. This includes both internal (within
the agency, such as staffing, planning, procedures, resources, etc.) and external (factors outside
of the agency's control such as; market cycles, competition, local economy, the social and
legislative climates, etc.) The team evaluates these factors and determines the future position of
the firm within the assumed environment.

Now the long term goals and objectives (the agency strategy) can be delineated. Strategies are
broad statements that support your mission statement and become the basic priorities of the
agency. The team needs to ask fundamental questions such as: What mix of the different lines of
business should we have? The answer to these types of questions will allow the team to map out
the overall direction that is most appropriate for your agency.

Action Plan
Once the agency's strategy is mapped out and the strengths and weaknesses are determined from
an analysis of the nine primary areas, management should prioritized the weaknesses. From the
prioritized list, opportunities for improvement are selected and turned into agency action plans
and goals for the short term.

All the necessary steps to accomplish the goals need to be identified These steps are then
compiled into individual Action Plan sheets so they can be communicated to those affected.
Responsibilities need to be assigned for accomplishing each step and the required time frame
clearly stated. These assignments should become part of each person's performance evaluation.

Monitor the progress on the steps at least quarterly or, preferably in monthly staff meetings.
Adjustments to the steps may need to be made periodically to take into account changes and
problems that will occur.

Conclusion
Competition is keen. Expenses need to be well-controlled. Market cycles continue to cause
havoc and agency value is at stake. This annual planning process and self-assessment is the key
to success. If you don't know where you are, how can you possibly plan for tomorrow and know
how to get there?

Agencies without a plan are totally reactive to their environment and have little control over their
future. Firms that incorporate an annual planning process tend to be more efficient, more
profitable and highly valued businesses. The choice is yours. Take the time to plan ahead and be
successful or be at the mercy of the winds of change.

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The planning team need to review and analyze the basic element of the agency which can be
summarized into nine primary areas. The following is a list of some of the fundamental questions
the team needs to answer for a proper analysis:

1. Profit:
- How has it changed over time?
- How does the agency compare to others of similar size?
- What expenses need to be controlled?
- Which expenses are non recurring, non-operational or not necessary to maintain the book of
business?
- What is the true profit available to spend in the budget, prior to giving owners perks and
bonuses?

2. Growth/Business Development:
- What are the best sources of new business?
- Is there in-house expertise in certain classes of business?
- How can attrition be better controlled?
- Can existing accounts be further expanded?
- Do producers need more support to increase sales time?
- Are producers motivated?
- Does the firm need a sales plan?

3. Personnel:
- Are there turnover problems?
- How can the quality of service and support staff be improved?
- What kind of training and education is needed?
- Would job descriptions help?
- Can employees move up in the organization?
- Is there a good Personnel Manual?
- Are performance reviews effective?
- Is there a good screening process for new employees?

4. Management & Organization:
- Are management responsibilities among owners segregated properly?
- Do middle managers have the qualifications and authority needed to carry out their
responsibilities?
- Is communication flowing well throughout the organization?
- Can staff meetings be improved?
- Is work delegated down to the least costly qualified employee to handle?
- Is there a good Agency Procedures Manual that spells out the "agency's way" that can be used
as a training tool?

5. Compensation:
- Is there a good salary administration program in place with salary ranges by position?
- Is pay fair for the work performed?
- Are there incentives available for the better performing employees?
- Are performance reviews tied to salary increases?
- Are salaries and benefits competitive for the area?
- Is the producer compensation plan effective and profitable for the agency?

6. Accounts Receivable/Money Management:
- Are collections good? Are bad debts a problem?
- Is the collections procedure written and communicated well to all employees?
- Is premium financing used effectively? Is binder billing done?
- Is investment income what it should be?
- Should direct bill be used for some commercial accounts?

7. Markets:
- Do market relations need improvement?
- Is there a need to be concerned about loss ratios and volume commitments?
- Do markets need to be consolidated?
- Are additional new companies needed?
- How can a "preferred" status be achieved with each carrier?
- Are certain types of businesses targeted that are attractive to the agency's carriers?
- How can the marketing/placement process be improved?
- Does centralized marketing need to be established or refined?

8. Accounts/Book of Business:
- Is there a heavy concentration of business in a particular line of coverage or class of business
that makes the agency vulnerable?
- Should the agency specialize or generalize?
- Is a low average account size in personal and/or commercial lines adversely affecting
productivity?
- How can larger accounts be written?
- Are key accounts tied to the producer or the agency?
- Does a better job need to be done to develop existing accounts?
- Does the mix of business need to be changed (e.g., write more life/group insurance, less personal
lines, less small commercial)?

9. Workflow:
- Are producers delegating service work?
- Are assistants to CSRs being utilized?
- Is the talent in the agency being used?
- Are there bottlenecks in the workflow process?
- Are procedures spelled out in writing?
- Is there uniformity from desk to desk?
- Are there communication problems?
- Is the office designed to effectively move the paper?
- How can the computer be better utilized?