Know Your Numbers
The NASBP 5-15 Leadership Circle Committee members recently worked with Wayne A. Walkotten, CPA, CVA, Executive Vice President of Marsh, Berry & Co., Inc., over a period of several months to gain insight into how to improve each of their agencies’ operations and set realistic goals for their agencies through analysis and peer review. Below is an article by Walkotten describing how, under his direction, members of the NASBP 5-15 Leadership Circle Committee participated in and analyzed the results of a survey titled, “MarshBerry/5-15 NASBP Leadership Circle Survey.”
“Know your numbers,” the first piece of advice provided to the 5-15 Leadership Circle during a recent survey and follow-up. Without knowing your numbers, and how they compare to peers, agency management is likely to make decisions in a vacuum. While it is important to know your agency’s numbers, context is also important, so knowing the trend can be critical to making improvements.
For instance, an agency that has extremely high customer service productivity may have producers doing too much of the service work themselves. At the same time, without perspective regarding producer productivity, the agency may be overlooking those producers doing too much service work, thereby potentially creating a drag on the ability to write new business.
Some key areas to monitor on an on-going basis, and against Peers, are as follows:
- Expense ratios
- Productivity ratios
- New business and organic growth
The cultural section of the survey encouraged participants to focus on employee turnover, difficulty of adding staff, and ability to attract and retain staff compared to peers in the marketplace.
Historically, organic growth has been a weakness in our industry, and therefore it was another area assessed. While the agencies represented by the 5-15 Leadership Circle had growth rates up to 35% in contract surety and 18% for commercial surety, the range was -5.5% to a high of 35% in contract surety for the year 2012. Peak performing agencies have a sales culture resulting in growth in most market cycles. We encourage you to understand the attributes driving a higher sales culture and consider implementing these in your organization. These attributes include:
- Setting new business goals,
- Tracking a pipeline of activity toward attaining those goals,
- Rewarding producers that attain agency growth targets, and
- Developing a plan for those producers that are not making new relationships and writing new business.
In conclusion, without knowing how your agency stacks up compared to peers, it can be difficult to set realistic goals. As a result, we would encourage the establishment of a methodology of tracking results and year-over-year improvement.
*The input for this proprietary database comes primarily from an extensive group of agency subscribers to a MarshBerry financial management system called Perspectives for High Performance (“PHP”). Data from each subscriber is updated every quarter, but in total, the database changes almost daily. The system calculates critical financial and productivity ratios and establishes benchmark statistics we call the “Average” and “Best 25%.” Average is the average of all agencies in the PHP database, while Best 25% is the best 25% of the Average.
To receive a copy of the MarshBerry/5-15 NASBP Leadership Circle Survey results, e-mail your request to info@nasbp.org.
The author of this article is Wayne A. Walkotten, CPA, CVA, Executive Vice President of Marsh, Berry & Co., Inc., Grandville, MI. In addition to managing the company’s Michigan office, Walkotten is also a vital resource to MarshBerry in the areas of mergers and acquisitions, strategic solutions, business planning and financial management. With the assistance of a senior consultant and two financial analysts, Walkotten performs agency valuations and provides consulting services in the areas of agency improvement, perpetuation planning and mergers and acquisitions.
Walkotten frequently speaks before groups representing the banking and insurance industries. He has been published in insurance publications, including Rough Notes, American Agent and Independent Agent. He frequently contributes to The MarshBerry Letter. Walkotten can be reached at Wayne.Walkotten@MarshBerry.com.
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