Improving Service Capacity in Your Insurance Agency

Hi Brent Kelly here and before we kick off this podcast, want to remind you that this is part two of a two part series, an interview with Roger Sitkins on sales and service capacity. Last episode we talked about sales capacity and we're going to dive right into service capacity in today's episode. So this is a continuation from part one. If you haven't heard that, go to the Agent Leader podcast playlist and you can check out the part one of this two part series. Thanks for listening. I want to get how this ties into service capacity because you know, let's face it, I mean this is something I've got many of the agencies I personally coach, Roger, that are really struggling with this and they're dealing with it is, it's again just like with sales, it's hard to find good service people. It's hard to figure out how to maximize our efficiency in that area. So I just want you to think about from a service perspective, service capacity, what are, I'll start big picture here. What are some big things that jump out of you in this area that can may help help agencies move forward in this?

Well again they're getting lifted out. They're being recruited like they've never been recruited before. They can work from home. I read one of our agency leaders the other day tell us, he said we've got, I've got two or three of my best commercial people that are being attacked. Someone's trying to lift them out and they're offering them 20, $30,000 a year more and they're saying they can work at home 100 of the time. Right. Well that's tough. That's tough. So when I look at this, we look at capacity, I think the number one thing is how much revenue are they handling. And it always concerns me when I look at the best practices numbers, then I look at agencies that are applying to be with what we do and you'll see so many discrepancies among their team. You'll have a commercial lines service rep, account manager, relationship Manager, that's handling 500,000, 600,000 of revenue. And you have the person in the next cubicle over that's handling 350,000. And the one handling 350 actually is crazier and busier than the one handling 5 or 600,000. And yet the book of business is about the same personalized. We see the best personalized service reps, again, relationship managers, they're handling 400, $500,000 of revenue. And then you look at others that are going, man, you know, he or she, they're just, they're covered up at 250,000. So it comes down to number one and we've talked about this, we've had some rough notes, articles about it, the simplified improvement processes that people are following. And if we don't have that agency's way of doing business for new business, for renewals, again, our continuation process for claims, whatever it may be, if we don't have those processes in place that are being followed, everybody does it a little bit differently. That guarantees that we're going to have different results versus saying this is the way we do it here, it's the way we do it in large commercial, small commercial, high net worth, personal lines, regular personal lines, small benefits, large benefits, self funded benefits, whatever it may be. But we're looking at it and we're saying, okay, what happens here? What drives it? Well, again, low revenue per client will drive some of these numbers to what you're doing. So that's the number one concern. And I would just challenge agency managers, owners, leaders. Take a look at your revenue per employee, service employee. In every one of the books of business, you'll have discrepancies. Find out why, find out why. The next thing that gets ignored. I think everybody's heard of it, 8020 rule. We've heard of it, we've heard of it. But do you know it in your agency and as individual producer, do you know your 8020? Because we look at this and we know the A accounts, the top 5% or 50% the account, the B accounts middle 15% are 30% and the C accounts, the bottom 80% of the customers are 20%. Everybody's heard it. As we've talked about here, and we talk about it every one of our sessions, 90% of our sessions, okay, is that you've got to know those numbers. You've got to know those numbers because you're living in a false world of security. The we look at the A accounts, the top 2% of the customers, we would call them, the super A's, are about a third of the revenue. What if you lost them? What if you lost, what if they went away just like that? They all had the same renewal month, okay? And they all went away. So we look at it, number one, we've got to know our numbers, not guess them. But the more I look at the spread and I look at capacity, I say we've got two choices. We've got to hire a whole bunch more people and train them, get them to do it. Our Way or maybe. And this is going to challenge a lot of people, and I hope so. Okay, maybe we just have too many customers and maybe we have that too many customers paying us too little money. Each and maybe. And if you're taking notes on this one, maybe you are wasting service capacity on the wrong types of accounts. Are you wasting service capacity on the wrong type of accounts? Because the bottom 50% of the customers in the average age, this is the whole agency now, not broken down by department. The bottom 50% are normally a little less than 10% of the revenue, and the bottom 25% of the customers are normally a little bit less than 5% of the total revenue. Now, I know some people right now are going, it's not us. If you don't know your numbers, you don't know. Okay, I would just say if your numbers are better, congratulations, if you're more balanced. When we break it down by personal lines and small commercial as a separate profit center, we see that the top 20% of the customers in personal lines are 50% of the revenue and the bottom 80% of the other 50%. So what do you think the bottom 50% are doing there? Same thing in small commercial. Top 20 or 50, bottom 80 or 50. What are the bottom 50 doing? So I look at this and I say, you know what? Should I just get rid of that business? I say, you've got to take a hard look at it and maybe get rid of the transaction, but keep the revenue. Maybe get rid of the transaction, keep the revenue. That this is not for everybody. And some people probably just shut us off right there. But all I would say is just play a what if game. What if we took 50% of our customers that are, let's say it's 10% of the revenue and we move them as many as we could to a service center? Or we outsourced the transaction itself, you know, the, the second half of the transaction, the processing part. And we freed up capacity for our current people who are on our team that are part of our team. We love having them on the team. And they're looking for some upward mobility in their career. They don't want to be stuck doing what they're doing for the next 20 or 25 years. So we find ways to move transactions but keep revenue. Now, if I go to a service center, do I give up basically 1% or 15% of what your average is? Yeah. And realistically, that's 6.7% of the revenue. But I can pretty much guarantee, Brent, based on profit center studies, I've done through the years. The average agency is absolutely losing money on 50% of their customers. Now we've got some agencies that have done a great job. We've got focused and personal lines alone, let's say, and we can make money in that department if we're really in it. If you're in the commodity business, you've got to be really in it. But more importantly, know where are my people, my service team, how much capacity am I using? Because we've got the bottom 50% of our customers. And what if I moved them? What if I moved them? What could happen? Well, everybody would wind up handling, I mean, every service person, because we'd rearrange accounts, etc. Every service person would have fewer customers to service, but they could give better service. And, and now instead of giving service, they could work on a great experience. When we work with the account managers in our account manager, the AMFIT program, it's always amazing to me when I say, do you have certain customers that when they call you, hey, how are you? And you've really got a relationship. And by the way, when there's a relationship at that level, that's one more exit barrier. If there's no relationship, so it's easy for people to leave. But if your service person and your producer have great relationships with their accounts because they can spend more time, they know things about them, guess what, it's another exit barrier. And so when I ask them, do you have certain customers you love? Oh, yeah. Do you have others that when you look at their name on caller id, you go, well, think about how much capacity, service capacity gets drained by caustic relationships. By caustic relationships. Because as we talk with the account managers, and this was a huge thing in that big one we did now two weeks ago from when we recorded this, where they talked about the fact that when they get in the flow, when they're in the zone, they're really working well. And you and I always use two different numbers. I think yours is correct. The study said when someone gets interrupted, it takes it 23 or 24 minutes. 23 is what I read years ago, 23.75.

Okay, sure, whatever.

That amount of time to get back in the flow. And when we look at the fact there's only so much time in a day, eight hours a day, and maybe you're going to get four, five, six good hours of productivity, we've got to eliminate interruptions or anything that takes them out of the flow versus saying every service person in our Perfect world will handle fewer accounts, but their book of business will be larger, the relationship will be better, the overall experience is better, and quite frankly, then the customers you do have turn into raving fans. And maybe that sounds old school and I'm quite frankly okay with it. It doesn't mean we don't use technology, doesn't mean we have apps where our clients can go on order, certificates of insurance, whatever, make pay, I don't care. We're going to use technology as much as we can to free up, to free up the service person so they don't have to do things that someone could do on a mobile app. And now they can spend more time knowing the clients, understanding them and serving them at a much better, deeper level.

All right, I, I really do. I mean, I, I, we've talked about this, Roger. I've heard, you know, you or we've, you know, some of our programs we run, but as you said that and went through it, it's just like a whole different level. Hits me as I was listening to this and I hope agency leaders are as well. I know some of you might be going, oh, well, and you write shut down. That's not me. Okay, But I hope that you at least go, huh? What if, what if we actually looked at some of this and made sense? Because, I mean, here's, here's things that I heard, Roger, is that we talked about capacity, capacity, capacity, capacity. You know, the time, the energy, the problems, the expenses, the employees. How much of that is truly getting sucked up? As you said, the top 50, bottom 50 into that bottom 50, it's a bunch of urgent stuff. It's stuff that a lot of times we don't like those conversations. I mean, think about just the chain reaction of that versus doing what you just said is saying, what if we could take our people, in essence, if you're, if you're taking number, writing numbers down, we're taking our people and saying we're going to free up 50% to allow you to take that 50% to reinvest into the top, the top 50%, which you really enjoy working with, which pays more revenue, the agency, which we can go deeper with. And the last thing I'll say on this, because technology, I said this the other day, one of our programs, I mean, technology does not replace relationships, it enhances it incredibly. Because what it can do, and we'll talk more about this in a second, is that it can free you up to do things that only humans can do. Empathy, problem solve, be proactive in emotional communication. Like, computers don't do that real well. Humans do. And when you say, listen, the technology is going to take care of a lot of those things. Thank God. I love technology. We're using it right now. Right? Right. But it thinking about it not as, oh, how is that going to replace stuff? Is how is that going to free up my people to do human stuff? I know that's pretty broad, but guess What? Even in 2023, people appreciate, applaud, and really desire human stuff because guess what, you don't see it much anymore.

So.

All right, my, my rant's over. Roger on that, but it's great points.

Well, you know, let's not go away from technology yet, because the importance of it, and I know we've talked about this on the podcast before, but our content partner in the Better Way Agency, Angela Adams, which I, I still feel Angela Adams and her team are the best internal consultants, workflow process, et cetera for agencies. And every single time I talk to her, we just talked three weeks ago, I always ask her the same question. She said, I know what you're going to ask me. I what percent of the systems are the. Is the average agency using today on their technology, their agency automation system? And she always says the same thing. It's about 50%. Well, that drives me crazy. And we say we have a capacity problem. Maybe we have too many customers in the agency. But then we've got this technology that's supposed to drive our simplified improvement processes, and about 50% of it gets used proper. Now, no one's going to use 100%. That's not realistic. But why can't we get to 80%? Why can't we get to 80% usage and make sure that our people are doing what the system is asking us to do? Are they going around the system? One person does it one way, one does it another. So much of this comes down to, here's exactly how we do business. Now, one of the things that Angela really pushes, you know, we're talking about outsourcing the transactions. It's not for every agency. One of the things I know that Angela teaches is, okay, we're going to hire processors, and that's the training ground for our next service person. Right? But, but why hire processors to do processing work when only 50 of the system's being used? And so the beauty is, if I would bring a processor in, whatever, whatever you want to call it, but you say, okay, this is exactly how we do business. This is exactly how we do business. So we can develop them Internally if we need to. But again, it's so tough. And I start looking at, you know, we're talking about making investments. Invest in your agency, invest in your people. Okay, well that's roi. There's another one called roa. Okay? It's Return on Automation. Return on automation. Because if I have, let's say I'm spending a hundred thousand a year on technology, which is pretty easy to do now, but by people only using 50% of it, wouldn't that be like having an employee that I pay a hundred thousand dollars a year and they only show up for work 50% of the time? But we say that's okay, that's okay. Let's, let's say it's a, a business development coordinator, a personal assistant to producers, whatever, and they only show up 50 of the time. That's okay, we'll keep paying you, don't worry about it. It's okay. I mean, some of the things we allow to happen, and one of the reasons these things can happen is because it is a good business. It's a great business, right, where you don't have to do this stuff and you'll still get a pretty good return. But if agency valuation is still so crucial to us, then I think we've got to be, well, it comes back to knowing our numbers at a much deeper level. So as you know, one of the things we talk about all the time with agency principles is, you know, what are your key performance indicators, what are your KPIs and what are some things that, that we can absolutely measure? Well, to me, as everybody knows that knows me, I love it. Simple blocking and tackling do the basics better than everybody else. And we always say too, it is simple, just not easy because it takes the discipline to do what you said you're going to do. Okay, but when we look at it, we say, okay, let's start thinking about where are we today and where do we want to be as an agency in certain KPIs that would help us measure capacity? Well, the number one of course is revenue per employee. That's pretty simple. Total revenue divided by total full time equivalent employees. That's my revenue per employee. But the one that is actually more telling, a spread per employee, average revenue per employee, average compensation per employee. What's my spread per employee? As we would say gross profit per employee. Because I truly believe, and in our planning we do this with our members say, look, you've got to look at every single employee as a profit center. Am I making a profit having that person on my payroll, having that person on my team. Next one. What's our revenue per validated producer? Okay, I didn't say plateaued producer. I said validated producer. What's our revenue per producer. What are they bringing in? Okay, what's our revenue per service person? Break it down. Personalized, commercialized, large, commercial, small, commercial, ABC accounts. Okay? Revenue per relationship, which we've talked about several times already, it's still a key because we know that, that, you know, the A's are five times larger than the B's, the B's are eight times larger than the C's. So the A's are 40 times larger than the C's. Again, you want four quarters or 100 pennies? Okay. @ the end of the day, every one of those managing, to them we say, okay, let's say we're at only 150,000 revenue per employee now, which is so low. But our goal is to get it to 200, then 250, then 300. And to me it's like the four minute mile. Let's get to 300,000 revenue per employee. Is it doable? Yes. Is it easy? No. Is it worth it? Valuation? Absolutely. So we look at and we see every hundred thousand dollars in today's marketplace of improved profit, not revenue, but profit is worth, right, at a million and a half dollars. And even if the valuations drop back a little bit, and if we still do have more economic problems than we're certainly hoping we don't have, okay, right. But maybe it's only worth 1.2, 1.3 million. So every hundred thousand dollars that you make at the bottom line is worth a million, 2 million, 3 million, 5. Isn't that a pretty good investment? And it's, it's not, you know, doing these things again, it's tough, but when you do them, what's the return? What's the return? So, agency owner, I love it. One of our best private clients. Remember the first, actually the second meeting with them, and he had just received his valuation report. He was one of the many owners, okay? And he said, you know what's really cool? He said, I made a million dollars more last year and didn't even know it, didn't know it till the valuation report came in. Why not? I mean, is this a great business? Yes, but you have to change. Actually, the second meeting with them and he had just received his valuation report, he was one of the many owners, okay? And he said, you know what's really cool? He said, I made a million dollars more last year. And didn't even know it. Didn't know it till the valuation report came in. Why not? I mean, is this a great business? Yes, but you have to change how you think. You have to change what you do. And one of the things that we've been sharing with the producers and the sales leaders recently, and it just hit home with me so well, when I hit it or read it, it said knowing what to do is not the problem, it's the consistency of doing it. Yeah. And that's one of the things we hear all the time. I know, I know, I know. It doesn't matter if you know. Right. Are you doing it consistently? Because when you do, as we always say, the results are very predictable. In fact, they're guaranteed. Yeah.

Well, Roger, I'm gonna. I'm gonna wrap it there because that was a wealth of information and knowledge, and I certainly highly appreciate it, you being a guest on, here, coming on, sharing that. You know, I don't. I don't say this because you're the CEO of the Sitkins Group, maybe partially. I don't say it because I've known you for a long time now, but I do say it because I mean it in the fact that, you know, the value you bring to the industry and your expertise and knowledge. And seeing this for a long period of time makes a substantial difference in agencies and certainly how they think, the strategies that they implement, the processes. And of course, the end of the day, as you just talked about the results and. And you know, to me, it's. You talk about the results and the money of that, then it becomes down to what does that mean for you personally? What does that mean for you professionally? What does that mean for your team? What does that mean for your future? What freedoms does that provide? What opportunities does that create? So there's a whole wealth of opportunities around that. But I just want to. Again, thank you for sharing that. I think what I've noticed here, too, is there might be two or three subjects within the subject of capacity that we could probably go deeper on as well. We certainly, certainly might. Might do that in the future. So thanks for being a guest on today. I appreciate it.

It's my. My pleasure. Thank you.

All right, for. So again, thanks again, agency leaders, for. For listening to the Agent Leader podcast. We appreciate. Appreciate you. If this has added value to you, this podcast, and certainly this one certainly should have added a great deal of value to you or any other episodes.

Please give.

Give us a rating and review. We'd appreciate that. Trying to grow the audience and we're doing a great job of that, but looking for more agency leaders who truly desire that best version possible. And although we say that as a mindset, it is a process as part of the best version possible experience. And if you want to learn more about that, what it means for your agency, what the top agencies that we talked about in the Value Impact Study are doing, and you want to be part of that, go to sitkins.comexperience to learn more sitkins.comexperience. so with that, thank you again, Roger, and wish you all the best and your success. Success. Thanks for listening.