Taking Down Roadblocks
Roadblock 1: We’re too busy to sell new business
The first roadblock to producers increasing their books of business is that they claim to be too busy taking care of their current client base. For most producers, this roadblock is an excuse, not a reason. They claim to be too busy because they put themselves in the position to service and administer to the client instead of being the Relationship Manager. The answer is to keep the clients satisfied without the time currently spent by the producer, leaving the producer free to generate more new business. The producer maintains the responsibility of relationship management. That includes generating new business through active referrals from every strong client relationship. But the agency should use an Account Executive to assume the daily control of the larger client (including several client visits each year for service and administration). Smaller clients should be serviced by CSRs who maintain regular contact with the clients by phone. While it is certainly more comfortable for producers to visit smaller clients, it is not cost justified. Producers can still make themselves available for special situations without spending an inordinate amount of time during the year with clients whose commissions don’t justify the attention.
Account Executives are a class of employee who manage a book of business, including building and maintaining relationships through customer visits, but do not SELL new accounts as a normal part of their job. Account Executives are very valuable to an agency because they can take the service load off the producers permitting them to continue to generate new business as the cornerstone of their jobs with the agency. The industry has begun adopting Account Executives from the ranks of CSRs who mature into customer relationship efforts, from insurance company employees who are technically competent but have never mastered sales skills, and from their own producer ranks when it becomes apparent that the producers are no longer writing new business as the primary part of their employment relationship with the agency.
Account Executives typically earn 15%-25% of the book of business that they manage based on the complexity of the accounts being serviced, pegged to that rate by the incentive to assume more clients, to retain as much as they can, and to cross-sell vigorously to enhance the revenue base of their book of business without increasing the number of clients serviced. As a point of comparison, CSRs may earn 5% – 15% of the books of business that they service.
The difference in personality between Account Executives and Producers is that AEs are typically more detail-oriented but cannot effectively close sales as well as producers. While AEs are all that is needed for certain smaller, simpler accounts, larger and more competitive accounts require both AE and Producer presence. The AE controls the daily activity on the account and calls in the Producer for the needed Sales ‘Punch’ as needed.
If the agency is already spending a third of the commission dollar on producer costs, an additional 20% for service and administrative staff and 20% to 30% for operating and administrative costs, all that is left is the relatively slim profit margins available in most agencies. Where does it get the money to pay Account Executives?
AE compensation comes from a combination of lower producer compensation from AE serviced accounts and agency contribution to ‘seed’ the producers to grow the agency’s overall book of business. Agencies have been known to lower the producer’s commission by all or part of the AE compensation justifying the reduction by the time that the producer gains to generate more and larger new accounts, most AE workloads are comprised of one or more producers’ smaller but service intensive clients. AE’s are useless as leverage for growth if the producers simply use them as a convenient way to gain more leisure time.