by Shirley Lukens, September 2005

National Underwriter

Earlier this month the Independent Insurance Agents & Brokers of America released the 2005 Best Practices Study Executive Update.  For more than a dozen years the annual study has served as a tool to help agency owners and managers understand how their business operations perform and measure up to the top performing firms across the country.  It is a "must have" for those agencies that want to become the best they can be.

Consequently, it was with some anxiety that this year's numbers were compiled.  Had the soft market dramatically impacted the performance of the leading agencies in the country?

With the average revenue growth rates plummeting by approximately half (relative to the prior year's growth rates) in all seven of the 2005 Best Practices Study groups, one might expect significant drops in profitability and productivity.  That was not the case.  In fact, for most key performance measures, results for the Best Practice Agencies were level with, or slightly better than, their prior year results.

How these agencies were able to hold their ground in a soft market and in an industry under intense scrutiny is worth exploring.  The reasons can be attributed to a number of things but, in our opinion, ultimately it comes down to good leadership.

Good agency leadership is often confused with good agency management.  While they are definitely interrelated, they are not the same.  Generally speaking, leadership deals with change, inspiration, motivation and influence.  Management deals more with planning, organizing and controlling the activity of others, i.e. with the administrative aspects of fulfilling the agency's goals. 

To get a better handle on how leadership differs from management, we interviewed several leaders from the study's top performing agencies, asking several basic questions. 

• What are the top 3 roles or jobs of a highly effective agency leader?
• What are the most important practices that allow you to accomplish your job as your agency's leader?
• How do you stay focused on leading versus managing?

Their responses were very similar.

Each leader believes his or her most important job is to provide a clear picture or vision of what and where the agency needs to be in the future and to keep everyone focused on that vision.  They all admit that this is not always an easy task but feel that a key practice that allows them to continually lead is to make time to focus regularly on the "strategic" rather than the "here and now."  Each is disciplined in spending the time to seek and digest information that helps them get a clear understanding of what their agency does well, how to build on those strengths, and why they need to change or continue to do something in order to move toward their vision. 

In reality, these owner/principals must lead as well as manage, and finding time to focus on the strategic is hard.  In smaller agencies where the leader wears many hats, that time might be found at night, during the weekends, or simply as a few minutes added to the day's priority list.  The point is they make the time.

Good leaders of both large and small agencies have learned that giving up some control through effective delegation, off-loading a portion of their book of business to other producers, or even sharing ownership can keep them from being overwhelmed with the administrative aspects of achieving the agency's goals, allowing them the time to focus on the strategic.  As one leader said, "Management is reactive.  Leadership is proactive."  Being strategic requires leadership.

An equally important job listed by the leaders is to find and recruit top talent for their agency.  A key practice is that they are always on the lookout for those people that have special expertise, knowledge, or skills that could enhance the agency's performance and culture. 

One leader, who spends a majority of his time recruiting new production talent, feels recruitment is so critical to the agency's strategic direction that he rewards others in the agency to prospect for new producers.  Employees are paid a $5,000 finder fees if a producer they find is hired - regardless of the producer's success.  The leader acknowledges, however, that most new hires are successful because the agency has a very comprehensive screening and hiring process that tends to weed out potential underperformers.

Whether recruiting talent for production or other key positions, the leaders stressed that finding quality employees makes the difference between being a good agency or a great agency.  This is evident since the leaders continuously credited their employees, rather than themselves or their good leadership skills, for the successes their agencies enjoyed.

The third important job described by the leaders is to serve as a role model.  Ultimately it is the leader that sets the overall agency goals, values, and standards.  It is incumbent upon him or her to model the way in which business is conducted and the ways in which employees treat customers, vendors, and each other -- to provide cultural leadership.  For instance, the leader of a large commercial lines agency often vocalizes this motto to his employees, "We are here to serve.  If you aren't serving the customer, then you are here to serve someone who is."  His open-door policy with employees demonstrates his adherence to those words. 

In another example from a smaller agency, the leader, who is also a producer, influences what is expected of others through his account production.  His book of business is a model for the type of accounts the agency seeks and the way accounts are to be managed. 

Although these leaders came from different backgrounds and training, they all felt comfortable in their role as leader.  They told of defining moments when they had to make leadership decisions without asking permission or suddenly realized they had the knowledge and confidence to trust their ability to make good leadership decisions. 

At the same time, they remain humble because they realize that they don't have all the answers.  They are willing to turn to others for both positive and negative feedback.  They are good at identifying their own weaknesses and are willing to share control to build on the collective strengths of their partners and employees.  As one leaders explained, "We all have egos but it doesn't get in the way at our agency.  It doesn't matter who gets credit.  We demand a lot from each other."  

Shirley Lukens (shirley@reaganconsulting.com)  is a principal at Reagan Consulting, an Atlanta-based management consulting firm that serves the insurance distribution system.  Visit Reagan Consulting at www.reaganconsulting.com.