The question we are most frequently asked is this: Assuming it is possible to create a sales culture, what are the steps that must be taken to get there? Here are three observations of firms that weve seen make real progress in transforming themselves into true sales organizations.

Sales culture agencies recognize that not all who carry the title of producer are really producersand do something about it.

A client of ours became increasingly frustrated that several of their producers consistently fell short of sales goals. These producers were valuable employeestheir superior technical and relationship skills made them great at holding on to customersbut they simply didnt produce new business. Our client slowly realized that this chronic underperformance had spread like a cancer throughout the firm.

Other employees followed suit. If the producers werent required to live up to their sales goals, why should everybody else be held to a higher standard? The firms ability to build a culture of accountability and discipline was being undermined.

Finally, our client decided the situation had to be addressed. The CEO got up at a sales meeting and explained that the title of producer would in the future apply only to those individuals who consistently generated new client relationships.

If a producer (no matter how large his book) failed to live up to a minimum standard of new business generation for two consecutive years, his title would change to account executive, and he would be placed on a salary-plus-bonus arrangement, with his performance measured primarily by account retention.

The CEO put it well when he said afterward: We simply could no longer tolerate service people masquerading as producers. The genius of the CEOs solution was that it didnt put agency management in the position of declaring who was and who wasnt a producer, but instead let the producers decideby their own performance. A year later, the sheep were truly separated from the goatsand a major step toward agencywide accountability was achieved.

Sales culture agencies are breaking up the old client-service model and replacing it with a team-based approach.

Sales culture agencies are recognizing that their production support model can be the difference between success and failure.

One of managements most important jobs is to equip producers so that they have enough time to dedicate to new business development. Are your top producers getting to spend at least 25-to-35 percent of their time soliciting new business? If not, you need to revamp your service model.

For smaller agencies, the first step is often to take certain taskssuch as claims handling or new business placementout of the hands of customer service representatives and consolidate them into the hands of a dedicated specialist. For larger agencies, it often means creating an entirely new positionsuch as an account executiveplaced between the CSR and a top-performing producer.

In our experience, most agencies need to reevaluate their entire service model every three-to-five years to make sure it still fits their customers and producers. Every single producer must have enough time available to generate new commissions equal to 15-to-20 percent of their book each year.

Sales culture agencies are spreading ownership broadly among high performers.

We are frequently asked by principals being pressed to spread ownership around: How many shareholders should an agency have? The Best Practices Study provides a surprising but simple-to-grasp answer.

Once an agency grows beyond $2.5 million in annual revenue, it adds about one shareholder for every $1 million in growth. This means Best Practices agencies with $5 million in revenue normally have five shareholders, while $50 million revenue agencies have 50 shareholders.

Although this may appear overly simplistic, the pattern among Best Practices agencies is undeniable.

The two most important ownership issues are who should own it, and how much should they own.

In our experience, a healthy way to address this is to work backward. How much value does a given individual create each year? Agency value is created by those activities that increase the growth and profitability of the agencysuch as new business generation, agency leadership, attracting other talented employees into the company, sales management, etc.

A good starting point in determining how much of the agency each shareholder should own is roughly six-to-eight times their annual value creation. If thats the case, an agencys value will grow by 10-to-15 percent annually.

After having doubled their value between 1999 and 2003, many agency principals are starting to realize the next four-to-five years will make for a tough encore. Whether they double in value or not, the sales culture agencies will be leading the pack.

Kevin Stipe is a senior vice president and principal of Reagan Consulting Inc., an Atlanta-based management consulting firm that developed and produces the Independent Insurance Agents & Brokers of America “Best Practices Study,” which may be accessed for free at www.reaganconsulting.com. Mr. Stipe may be reached at 404-233-5545 or at [email protected].

Reproduced from National Underwriter Edition, April 15, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.