Planning is Indispensable

Dwight Eisenhower is credited with saying, "Plans are useless, but planning is indispensable.” This makes some people uncomfortable - especially when quoted in the context of not planning. To some, this seems contradictory. It's not. Think about Eisenhower's most famous plan, the D-Day invasion in June of 1944. An enormous amount of planning went in to the preparation to take back France and the rest of Europe from the German's. But D-Day was originally planned for June 5th. Bad weather almost forced the Allies to revise their plan considerably.

A thorough understanding of what it would take to postpone the invasion until the next favorable season, and a real understanding of the risks associated with delaying and proceeding, put Eisenhower in a position to make his decision.

For most of us, the fate of the free world does not lie in our ability to get through the indispensible planning that prepares us to take advantage of opportunities or avoid the risks. It does matter, however. Don't let circumstance dictate your well-being and the well-being of your family and your employees and your customers. So what if your plan becomes useless. And it might. It's the process of planning - the practice of planning - that prepares you to take action when action is needed and to hold back when holding back is the smart thing to do.

We're coming into the time of the year when many businesses start their planning cycle for the coming year. Some of you are probably pretty far along. This has been a year when plans had to be revised. A lot of people were caught off guard - with their plans down, so to speak. For those of you who turned the corner, it was the planning - not the plan - that made it possible.

Change Management and Sales

An insurance agency is a sales business. Sure there is definitely a service component but nothing happens until somebody sells something. If you're feeling the economic pinch, and we all are, then sales - to new customers and to existing customers - is more important than ever. If you're not doing something to improve sales effectiveness then you are going to struggle to make it to the other side of this market.

One of the keys to the effectiveness of any sales organization is total commitment. Every one of your employees needs to be on the sales team. Are they? Is "sales" a department or a state of mind in your agency. If not the latter, then cultural change may be in order. And what does that require? Well, more sales of course.

"The key to successful leadership today is influence, not authority." As much as I would have hated it as a line manager in corporate America, this quote by Kenneth Blanchard says it all. Of course, if you're the business owner you have the authority. But that's not how you get the best from your organization. You have to sell it. My friend Marsh Egan said it very well in this article on "The Convincing Side of Change."

Employees are customers, too. If you don't think so, remember back to the recruiting and hiring process. You (or someone in your organization) spent a good deal of effort selling that prospective employee on the benefits of working for your business. Just as you don't stop selling to customers, if you want buy-in and commitment to new ideas, you can't stop selling to employees.

It never ceases to amaze me that some of the very best sales people in the world, don't use those skills where they would do the most good. Right in their own businesses.

Accountability and Hiring and Firing

Building and maintaining a business where everyone owns their own job takes discipline. An agency owner told me he had recently terminated two employees. Not because he was cutting back but because he needed to upgrade his staff. These two individuals just wouldn't follow procedure. They weren't bad employees. They just couldn't sign on to doing things only one way - the agency way. "I tolerated it for too long," he told me. "And I realized last week that if I was ever going to have an organization where people were truly accountable to do things the right way, then I had to do something different. It wasn't easy but it needed to be done."

So now he's recruiting to fill two jobs. For the job market, it's a wash. For his agency - short term - there is some big expense. Hiring and training take time. For the long term, however, it could mean higher productivity and better performance. So, better profit. Higher return on investment. For the economy, it's a win.

Apparently this strategic thinking agency owner isn't alone. Check out this article in the National Underwriter: "Insurance Hiring Continues Despite Poor Economy, Says Expert."

If you're looking for help to make a touch decision about a marginally performing employee, the bad economy might be a blessing for your business. One of the good things about a bad economy or a soft market is that it forces us to be more disciplined.

Measures of Success

Is your business successful? How do you measure success? In this economy - in this market - how do you feel about your business results? Are you "satisfied?"

We hear:

"Revenues are down.
"Rate continues to be low."

"I'm losing accounts because they are going out of business."

"Revenue per account is down."

So does that mean your business is "in trouble?" Last year you had a successful insurance agency. How did you measure success? By that measure, are you still successful? If you answer, "No," then why? What has changed? Maybe nothing has changed. And maybe that's the problem.

There is no question that some businesses will fail - are failing - in the current environment. Many of those business owners would have said to me less than a year ago, "If it ain't broke, don't fix it." Well, there's "broke." And then there's blase. Business as usual is a business killer if the only measure of success is this year's profit.

That said, what do we do about it? Start by looking at how you measure success. Operating profit, how well operating revenue (without contingent income) covers operating expense is a critical indicator - much more reliable than pre-tax profit. Also take a look at the percentage of fixed vs. variable expense. During periods when income is down, do expenses stay high? If so, it becomes even more important to maintain tight expense control even when times are good.

Two other solid indicators of performance are 'hit ratio' and account retention.

Hit ratio measures sales effectiveness - the number of sales made to the total number of sales opportunities. And when you look at this one, be sure to compare your total opportunities to prior years. If you're not going after as many new accounts, you may see a false positive here, i.e., hits will be measured against a smaller base.

Account retention tells you how many customers you retain. It's a little more difficult to measure than revenue persistency, which is what we usually refer to as "retention," but is a better measure of service effectiveness. If revenue per account is down, it's more important than ever to keep the customers you have.

Everyone is feeling the effects of economic downturn. And the lingering soft market. Businesses that are not "in trouble" are the ones that measure their success consistently and critically - regardless of the economy or the market cycle.

The Revenue Paradox

If you haven't seen the Insurance Journal article Bad Economy Not Impacting Essential Insurance Coverages it's worth looking at if only as a bit of encouraging news amid all the bad.

The results of this survey shouldn't be surprising - and I'll bet a similar survey of businesses would produce similar results. It highlights what I call the "Revenue Paradox." You must be willing to reduce revenue to retain accounts. And, in fact, you must expend resources to reduce revenue to retain accounts. Ouch!

Managing expenses is more important than ever. There just isn't any room for waste. We're working on tools to help with expense review and reduction as well as a rolling cash flow tool to highlight critical issues before they get to be disastrous.

The good news continues to be, if you manage your business well in tough times, as things get better, you have a distinct advantage over companies that think business as usual is good enough.

Differentiation

"When you fail to differentiate yourself from another service firm, the competition is reduced to choosing between commodities. But, law firms, accounting firms, management consulting firms, financial service firms, insurance firms, and the like are certainly not commodities – unless those in the industry commoditize themselves by failing to differentiate their offering from that of another."

The author went on to say that any buyer, faced with competing firms that all seemed "near clone-like," will either stay with what they have or make their decision based on the best price.

The above quote and reference is from a long blog dealing with the process of responding to RFPs in writing. You can read the entire article here. The message is applicable whether the "proposal" is in response to an RFP, in writing, or verbal. And the point is clear - your ability to differentiate yourself from other insurance agencies and, perhaps more importantly, from Internet carrier and consolidator sites, is what will enable you to survive and thrive in this economy or any other.

It's NOT all about the economy

Even in this difficult economic environment, is price the driving criteria for any purchase? When you've lost an account, it's easy to assume so - especially in the absence of a more definitive reason. When clients tell me it's all about the economy, I'm more than a little skeptical. Our own unscientific research shows that, whether it's insurance or groceries, price is almost never the only reason why anyone selects one product or service over another.

And now there' s research that supports my theory - and the "buyers" in this case are insurance agents. "When it comes to an agency's satisfaction with its personal lines insurance companies, commissions do not rank as tops. Nor do commissions rank second. In fact, out of six satisfaction factors, compensation from an insurer ranks dead last, according to a new industry study. "

You can read the article on the Insurance Journal website but it's not surprising. You select your carriers based on a whole package of customer needs and preferences, knowing that it's value, not price, that will influence their purchasing decision.

A good thing to remember if you're losing business and wondering why.