BUILDING BLOCKS OF SUCCESS, THE

Rough Notes, Jun 2005 by Schaetz, Tom, Bosma, Megan, Kish, Mike

Does your agency have a strategic plan of growth and profits?

When surveyed, 75% of agency owners say they have a strategic plan of growth and profits. However, from our experience, this percentage is closer to 25%. Why the difference? Most agency owners answer, "Yes we have an annual strategic plan" because they perform one or more of the following:

* Prepare an annual budget.

* Establish producer sales goals each year.

* Conduct off-site or on-site management or shareholder meetings regularly.

* Meet with their CPA and/or attorney regularly.

While all of these activities are important, these actions individually and collectively do not necessarily constitute strategic planning as they may not address the essential elements to sustainable growth and profits: leadership, culture and operating strategy/model.

Having a proper strategic plan can mean the difference between success and failure in today's fast changing insurance and business environment. In fact, many of the agencies sold externally each year are the result of inadequate strategic planning. Shareholders and management often have a plan that is based more on hope rather than one that is established through a disciplined planning process and grounded in a documented strategic plan.

This article will discuss the primary elements of business planning-leadership, culture and operating strategy/model-which are essential to sustainable growth and profits.

Leadership

As the owner leader, you make decisions every day. These decisions have a profound impact on your business. Accordingly, it is imperative that you focus your time, energy and efforts on what creates a growth- and profit-oriented agency, as well as what makes a successful leader today and tomorrow. Successful leaders:

* Are thorough and rigorous in people decisions.

* Continually focus on getting the right people in the right positions and eliminating redundant/ inefficient positions.

* Recognize the current state of the agency, confront the challenges and refine the operating strategy and model on a regular basis.

* Create a growth- and profit-oriented culture.

Ask yourself: Do you have the right people in the agency and are they in the right position? If not, you will limit your growth potential and more than likely de-motivate your best people. The most common example we experience is an employee who is paid as a producer but in reality is an account executive/customer service representative with minimal new business production and most or all of whose book of business is a result of assigned or referred accounts. This situation will de-motivate those producers who year after year continue to generate new business. The ultimate long-term driver of growth for an agency is not markets/products, technology, or acquisitions; rather, it is the ability to attract and retain the right people. The right people will be self-motivated. The key is not to de-motivate them. One of the primary ways to de-motivate people is to ignore the current state of the agency as well as fail to develop and communicate a strategic plan.

Does your agency confront the critical business issues facing the agency on a regular basis? If not, it is imperative that you conduct a strategic planning session to confront those critical business issues and establish a path to profitable growth. It is impossible to make good decisions without honest confrontation and debate of such critical issues.

Leadership is about vision. However, leadership is equally about creating and driving a culture where the reality of your situation is dissected and growth and profits are the norm. The culture is the means by which the vision will be realized.

Culture

If you were asked to describe your organization, how would you answer the following questions:

* What five words best describe your company?

* In your company, what is really important?

* In your company, what behaviors get rewarded?

* Who fits in and who does not?

Culture is the sum of "how your organization does things" and acts as the operating system of the agency. It drives the agency and its actions as well as guides how employees think and act. Culture is shaped by leadership, priorities, people, processes and incentives. An organization's culture is not the list of values developed at an off-site meeting and framed in the lobby. These are ideals. What you strive to be as an organization may be different from the values and norms displayed in your practices and behaviors. Often, the strongest indicator of culture is what management pays attention to and rewards. This is frequently quite different from the values it verbalizes or strives to achieve.

Does your agency reward employees for coming up with new ideas and challenging old ways of doing things or diminish those who challenge established norms and practices? Is change the norm or does management protect the status quo? Is there an opportunity to be heard (and ultimately the truth to be heard) or are decisions predetermined by management? Is there a consistent disciplined focus on the core business or always a move toward another "once in a lifetime" opportunity? Is there disciplined thought before action or just a move to action? This kind of questioning can give you insight into the real culture of your organization and some of its underlying values and norms. It may not even resemble the culture management thinks it has created.