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Getting to 2020: the Right Way to Lead (Part 4)

“We have met the enemy, and he is us.” Walt Kelly, Pogo

To conclude this four-part series on setting your agency up for what it needs to be in 2020 (the first three parts of which can be found here, here and here), I asked a longtime friend to describe the surprise he experienced when it came to leading just such an effort. Many of you will face the same surprise, so what he says is well worth reading. I’ll follow his thoughts with two exercises that will help you avoid nasty surprises and will help leaders and agencies make the necessary transition.

Here is what my friend wrote:

“Like many independent insurance agencies, ours is a family business that has been passed through successive generations. Entering our 85th year, we are in the midst of a transition from the third generation of family ownership/leadership to the fourth.

“Like most agencies, we face an array of challenges. We face looming retirements for our most successful producers and most experienced staff. The decision-makers at both our clients and our insurance carriers are also retiring, and their younger replacements are unaware of all the great work we have performed on their behalf for all of these years. On top of that, we can add increasingly cumbersome regulations — especially in employee benefits — the dizzying array of new, complex product offerings from our carriers and the need for massive technology upgrades.

“The pace of change has been accelerating within our agency, but only recently have we begun to deliberately chart a course that will prepare our agency to thrive in the competitive landscape we anticipate in the year 2020 and beyond. Within our partnership group, the concerns and deliberations usually focused on our staff’s willingness and ability to adapt and grow into the roles we will need them to perform in 2020. We focused on planning and communicating our initiatives to garner staff support. We stressed the mutual benefits and long-term opportunities available through our Agency 2020 initiative. Conventional wisdom said the main threat to our success would be skeptical, change-adverse staff members.

“The conventional wisdom was wrong.

“The main threat to our success was the commitment we had not secured from each other, the agency partners. Midstream, we discovered that we all had different levels of faith, commitment and desire in an initiative that would last beyond some influential partners’ tenures. We were faced with two paths. One involved structural, compensation and leadership changes, and it held the potential — but not a guarantee — of internal perpetuation. The other path meant an immediate and reliable payout by an outside buyer, but also working for someone else and the end of our 85 years of tradition.”

How to avoid the nasty surprise

This article is not a debate on the pros and cons of selling your agency. This article is about unity of effort. This article is about a willingness at all levels to change. This article is about committing to a common goal. If you want to perpetuate your agency in the next five years, your entire organization must be committed to this goal, starting with your ownership. The same is true if you want to maximize your agency’s sale value in the next five years. However, if your ownership’s main goal is to maintain the status quo — the compensation model, the production model, the vacation time — then you do not have real commitment, and you are destroying your agency’s value through inaction with each passing day.

To really ascertain your ownership group’s commitment, I believe you need to have a frank and open conversation. Ask each member to independently complete the following exercise. Leave space after each question, and require the respondent to explain her answer.

Exercise #1

Relative Value

    There are 20 points available in this section. Have each owner assign these 20 points to the following items. Ask which two items he would be willing to sacrifice to protect his top two items.
  • Individual production income
  • Total agency profit
  • Total agency value
  • Ability to influence agency decisions
  • Ability to craft agency culture
  • Lifestyle (vacation time, ownership perks, etc)
  • Maintaining the agency as an independent, going concern

Production

    Ask each owner to rate the agency on these criteria on a scale of 0 to 10. Scores of 0 to 6 mean, “I’m pretty doubtful about this”; scores of 7 to 8 mean, “We can probably do this”; scores of 9 to 10 mean, “I am very confident we can do this.”
  • We have the producers in place or can recruit, train and retain the necessary producers to achieve our year-over-year sales goals for the next five years.
  • We have the carrier appointments/relationship or can develop the necessary carrier appointments/relationships to support our agency’s growth over the next five years.
  • We have the profit centers or can develop the profit centers we need to support our agency’s growth for the next five years.
  • There are enough clients/prospects within our reach that need our products and services, or we can develop that marketplace to sustain our agency’s growth over the next five years.
  • The marketplace, industries and populations we serve are in ascendancy.

Infrastructure

    Ask each owner to rate the agency on these criteria on a scale of 0-10. Again, scores of 0 to 6 mean, “I’m pretty doubtful about this”; scores of 7 to 8 mean, “We can probably do this”; scores of 9 to 10 mean, “I am very confident we can do this.”
  • We can retain, attract or develop enough qualified staff to sustain our agency for the next five years.
  • We can evaluate, install and utilize the necessary technology and workflows to keep our agency efficient and competitive for the next five years. We can remain profitable even if commission levels are reduced.
  • We can accommodate the physical space needs of our agency for the next five years.

Leadership

    Ask each owner to rate the agency on these criteria on a scale of 0 to 10.  Again, scores of 0 to 6 mean, “I’m pretty doubtful about this”; scores of 7 to 8 mean, “We can probably do this”; scores of 9 to 10 mean, “I am very confident we can do this.”
  • We have or can develop the leaders and managers our agency will need for the next five years.
  • We have sufficient alignment and commitment from our ownership group to sustain our efforts for the next five years.
  • Our ownership group is willing to innovate, delay gratification and make personal sacrifices to enable the agency to reach its goals for the next five years.

Now aggregate your data. You will need to identify both trends and outliers, and you must depict the data in a manner that best speaks to your group (narrative, spreadsheet, graph, interpretive dance…). Then gather your group together and facilitate a discussion on each section. Allow all sides to be heard, especially the outliers — they may be out in left field, or they may be on to something. When you get to the end of the list, step back and look at the responses as a whole.

Now ask each member to complete the next exercise by providing a detailed response to these questions:

Exercise #2

Five years from now:

  • This is what I plan to be doing and how I got there.
  • This is what the agency will look like:
    i.      Volume
    ii.      Number of people
    iii.      Location(s)
    iv.      Products
  • This is who will be serving in leadership positions.

Ten years from now:

  • This is what I plan to be doing and how I got there.
  • This is what the agency will look like:
    i.      Volume
    ii.      Number of people
    iii.      Location(s)
    iv.      Products
  • This is who will be serving in leadership positions.

Again, aggregate your data and look for those trends and outliers. Ask each member to talk through their vision for the agency. It is unlikely that every vision will be similar, so you will probably have two or more “camps” that form. Ask each camp to contrast its vision with the group’s results from Exercise #1. Are they compatible? Which vision from Exercise #2 best aligns with the reality you determined in Exercise #1?

Can your group coalesce around this as the common vision? You probably now see yourself in one of three states: 1) everyone is clustered around a common, viable vision (best-case scenario); 2) a majority feels one way, with a united or fractured opposition group (most likely scenario); or 3) everyone is all over the board (worst-case scenario).

If you’re lucky enough to be in Group #1, go out there and get to work making your vision a reality. If you’re unlucky enough to be in Group #3, I suggest girding yourself for a long, frustrating process, and recommend you bring in some professional facilitation.

For the majority out there, you will have to find a way to resolve the gap between your majority and minority opinions. Search for compromise. Approach each perspective with empathy. Work to achieve the best possible solution, not just the solution that best suits your personal situation.

Here are a few thoughts I recommend you keep in mind: 1) Debate, disagreement and compromise are positive features of any high-performing organization, but the majority must be able to make decisions. A minority opinion cannot hold the agency hostage. 2) The agency’s path forward cannot be responsible for compensating for past mistakes. Your past mistakes are sunk costs. Resolve not to repeat them in the future, and move on. You also don’t have to fix everything at once. 3) Don’t fight over problems that will fix themselves with time. If you can afford to accommodate something for the short term that will benefit the agency in the long term, then make that deal.

Working through these exercises will allow your ownership group to agree on the vision that best builds your agency’s value. These are hard, personal conversations, but exercises like this are part of being agency stewards, and as agency stewards it is your responsibility to constantly build agency value.

What you choose to do with that value is also up to you. That is the ultimate privilege of ownership.