The Five Biggest Mistakes Agency Leaders Make
Mistakes are inevitable. In fact, the only way not to make a mistake is to do nothing (which is also a mistake). But rather than think of mistakes as failures, we should view them as opportunities. The challenge is to learn and grow from them.
Recently someone asked what I think are the top mistakes agency leaders make. The following five stood out as being the most common blind spots that have the greatest impact on agency performance.
Mistake 1 – Making busy a badge of honor. Most people misunderstand the concept of time, believing it is something you can manage. Well, you can’t. Time management is a myth. All of us—me, you, your agency team—have 168 hours in each week, or seven days of 24 hours. The concept of time management was created during the industrial revolution of the 1800s to facilitate mass production with specific processes. But in today’s information and digital age, productivity is not a matter of repetitive processes; it’s about doing things that lead to actual results.
Often, we not only mistake activity for accomplishment, but we also reward those activities, regardless of whether they yield results. After all, activity makes us feel worthwhile. “At least I did something!” While that may give us a small feeling of satisfaction, it’s meaningless unless we’ve actually accomplished something.
Unfortunately, that’s what we see at many agencies. They’re busy being busy. Whatever happens, happens because there’s no productive strategy. They do the same thing over and over, year after year. (And isn’t the definition of “insanity” doing the same thing over and over, expecting different results?) Does this describe your agency? If so, the following questions may help you begin to get out of your rut.
Are you measuring TSS? Time Spent Selling is probably the most important and underused metric of agency success. Your producers can be busy, but if you’re not busy doing sales and sales-related functions, they are part-time producers, even if they’re making a full-time living. Imagine how well your agency would do if your producers made a concerted effort to maximize their TSS.
What is the relationship between sales and service? Do you have clearly defined roles and responsibilities between your agency’s high-performance sales teams and service staff, or is it sort of haphazard? Do they communicate? Unfortunately, too many agencies have high-maintenance teams instead of high-performance teams.
What gets rewarded? Does your agency applaud busyness, or does it recognize activities that contribute to a result? People sometimes pretend to be busy just so they won’t get bothered. Don’t make the mistake of applauding activity vs. rewarding results in your agency.
Mistake 2 – Ignoring the Power of Pareto. The 80/20 Rule is attributed to Italian economist Vilfredo Pareto who in 1896 discovered a predictable imbalance in the universe: 80% of the output is created from only 20% of the input. Those who understand and apply this principle find that it accelerates results and reduces frustration, both in business and life. The key is identifying the 20%.
Are you aware of your agency’s 80/20 in key areas? For example, who are your:
- 20% of clients who produce 80% of your revenue
- 20% of carriers that produce 80% of your commission
- 20% of producers who generate 80% of your sales
- 20% of team members who create 80% of the problems
Once you’ve identified your 20%, what are you doing to leverage your energy and effort? The focus must be on the vital few vs. the trivial many.
Mistake 3 – Replicating average. Have you ever heard any of the following phrases from a prospect?
- I’m looking for an apples-to-apples quote.
- Can I get a free quote?
- I want to keep my current agent honest.
- We’ll give you a shot to bid on our insurance program this year.
- You insurance people are all the same.
These kinds of questions and statements are typical because most insurance buyers are used to average agencies and producers doing the same thing. Knowing how to respond to these comments can differentiate you from the competition. The best way to do that is to ask great questions that make a prospective client stop and think. You want to hear, “That’s a great question” or “What do you mean by that?” or “No one’s ever asked me that before!”
For instance, let’s say someone asks for a free quote. The average producer will gladly provide a free quote or unpaid consulting without thinking twice about it. That’s because their agency is focused on quotes and transactions. As a result, they either don’t take time to understand what makes their agency different or they fail to realize that their concept of differentiation actually makes them like everyone else (“We offer great service/competitive pricing/the best people,” and so on).
Conversely, producers at elite agencies will reply in a way that allows them to talk in terms of risk advice and relationships, and that elicits more questions: “I appreciate your asking the question, but we don’t provide free quotes.” Typically, the prospect will ask, “Well, what do you do?” This opens the door for the producer to share new ideas and then explain what’s unique and compelling about their agency.
To differentiate your agency in the marketplace, you must be able to convey what makes your agency different. Only then can you distinguish yourself as a trusted advisor vs. a commodity broker like everyone else.
Mistake 4 – Stepping over dollars to pick up dimes. Even though the greatest investment we can make is in ourselves and our team, this is something that agencies frequently overlook. Despite the desire to grow, too many agencies will step over dollars to pick up dimes. Statistics bear this out. According to research published in Training magazine, the best professional service firms invest just 2% of their revenue in employee training and development. But what’s truly staggering is that the average best practice insurance agency invests only 0.4% of revenue in the tools and resources needed to train and develop its people. And agencies wonder why they’re struggling!
Sadly, starting producers often receive little more than a phone, a laptop, and best wishes for success. This insufficient investment of resources is not just a missed opportunity to empower team members, it may be significantly detrimental to agency valuation and profitability. How significant?
Based on the current agency valuation model of approximately 10 times EBITA, every $100,000 in lost profit results in a $1 million loss in valuation. So why wouldn’t you invest in improving your team and yourself to maximize your return?
As an agency leader, ask yourself:
- Who are the peers, mentors, and coaches that my team and I can learn from?
- What is our team learning?
- Who holds me and our agency team accountable for results?
Mistake 5 – Running the wrong way enthusiastically. A couple of years ago, I was referred to the book “The Road Less Stupid,” by renowned speaker and entrepreneur Keith Cunningham. Cunningham has an incredible story that includes building—and losing—several multi-million-dollar businesses before he rebuilt them and achieved even greater success. In the first chapter, he explains why many businesses (specifically insurance agencies) don’t succeed. He says quite simply, “Running the wrong way enthusiastically is stupid.”
Succeeding is not always just a matter of working hard. Most agency leaders will attest to keeping long hours and maintaining a rigorous work ethic. So why do some agencies have higher organic growth rates, higher retention rates, and a positive culture while others are stagnant and frustrated? It’s possible the underachievers are running in the wrong direction, or maybe too many directions. Like a hamster on a wheel, they’re working tremendously hard and going nowhere fast!
On the other hand, the most profitable, high-growth agencies with a strong culture have a plan. It’s not just a theoretical plan or a list of aspirational buzzwords, but a directive that connects the heart (why we do what we do) and the head (how we’ll do it). To be effective, a plan must be clearly defined, consistently communicated, and inspire a full agency commitment. It’s part of the agency DNA.
A well-designed plan should address these key elements:
- Mission (why we do what we do)
- Vision (where we are going and why you should be excited)
- Success factors (non-optional behaviors/core principles)
- Key Performance Indicators (what we measure, such as revenue per employee, profitability, retention, and how we manage them)
- Rallying cry (the agency’s main purpose or area of intense focus)
A great plan is simple, memorable, and actionable. Everyone knows what they’re supposed to do. Does your agency plan create excitement and clarity or resentment and confusion within your organization?
The bottom line
While these aren’t the only mistakes agencies make, they’re the most common. They’re also avoidable, provided you recognize and correct your agency’s blind spots. Blind spots may range from ingrained, self-limiting beliefs to counterproductive habits and behaviors. Or maybe your current direction is taking you away from your destination rather than toward it.
Keep in mind that you won’t notice blind spots unless you deliberately seek them out. Once you are aware of them, you can make adjustments to keep them from holding you back.
Get the good stuff
Get regular hits of insurance inspiration delivered to your inbox.