Objections to the 80:20 Rule

Welcome to the Agent Leader podcast. My name is Brent Kelly, your host. Thanks so much for joining me on today's episode. As all the Agent Leader podcasts are designed to do our purpose, my purpose for you as an agency leader, whether you are an agency principal in your agency, whether you're a sales manager in your agency or sales leader, whether you're a producer or even in the service side, whatever your role is, a professional insurance person. My goal is to help you gain clarity. So really think about about where it is you want to go, why you want to go there, build consistency, what are the habits and behaviors you need to do routinely, and then make a commitment. And certainly I can't make you commit from a podcast, but just to get you to think about ways and who you can commit to and what the commitment means so that you actually turn ideas into execution. Before I get into today's topic, which I'm going to dive a little bit deeper into some of the fears or resistance that we often see with agency leaders and in particular producers, and not implementing the idea of 80 20. And I'm going to give a quick recap of 80 20. I've talked about it on this podcast a few different times. I think there's a title called the Vital Few and I've done a keynote around this. So I'm going to give just a quick Overview again of 80 20, but really spend more time on this podcast talking about, you know, why do we not move from knowing to doing if we know that we can better leverage our time and efficiency and effectiveness with in particular, our clients? I'll talk about today. Why don't we as agencies and producers do it? What are some of the hesitant why are we hesitant? Why do we hold back? Why do we resist? So I'm going to dive into that just in a second before I want to make one more note here. We're running short on time as far as probably when you're listening to this podcast, but if you have not yet signed up or looked into our Profit net, this is our Professional Fitness network event on March 11th through the 13th. Beautiful Cape Coral, Florida, Florida, at the Westin Resort. We have elite leaders and professionals, have some great speakers, coaching workshops and really again trying to give you tactics, practical things you're going to take back with you, please check it out again. Time is running short. There's very few spots, if any at this point, but it's worth checking out when you listen to this. But go to sitkins.com profit net sitkins.com profit net to learn more about that. And if you don't make it this year, you may be out of luck. And I hate to say that, but this will be most likely the last time we'll ever have a public event of this capacity. We'll be doing it just with our private client members moving forward. So with that, let's get into today's content. And again, I want to speak a little bit about the idea of 80 20, the principle of 80 20, which I've talked about before. And you know, many of you listen to this, have heard this, whether it's for me or somebody else, but the idea of 8020 is pretty simple. And understanding the fact that 20% of our input in really all kinds of different areas of life and business produces 80% of the output. So, you know, again, from a personal level, we can find everything that, you know, you wear 20% of your clothes 80% of the time. You know, just little things. In the agency perspective, we see 8020 hold true in many areas. That 20% of your insurance carriers for most agencies produce 80% of the premium. We know that 20%, especially if you've got multiple sales producers, 20% of your sales producers produce 80% of the results. And where I focus a lot of time, we focus a lot of time at Sitkins and working with our private clients is that 20% of our clients produce 80% of our revenue. Now, a lot of times people will get this and they'll say, okay, yep, I hear what you're saying. You know, this principle, this paretos principle, this 80 20, this vital few principle, I get it. It makes sense. I know it. And my question today on the podcast is, if you know it and if agencies know it, why aren't you doing anything about it? And so my overall question that I want to ask you as the listener today is why do agencies and. Or producers. Could be both, could be one or the other. But why do agencies or producers resist trading down unprofitable and transactional clients? And I'll talk about that more in a minute. In favor of gaining more profitable and relationship based clients. When I ask the question, it seems pretty stupid, right? Like, why do agencies and producers resist trading down? Or I would say spending more time on profitable and transactional clients. You know, why do we spend more time on unprofitable and transactional based clients versus spending the majority of our time on profitable and relationship based clients? And you say, well, I don't know, that seems pretty obvious. Why wouldn't you do that? Well, because there's this gap between what we know and what we do. And I've talked about this before, we call this performance gap. It's a performance gap. And oftentimes there's a resistance. There's a reason. So one of the things that I love, one of my favorite aspects of coaching, and we do some training, but just coaching, professional coaching, performance coaching, is to dive deep and not just to understand the concept, but what are the behaviors behind it or the lack of behaviors that is causing the friction. And again, I'm guilty of this. In my life, I've hired many professional coaches because we get stuck. And it's like, I know I should be doing this, I get it, but I'm just not doing it. It could be habits, it could be attitude, it could be mindset, it could be head trash, it could be there's a resource or tool that we're just not accessing. It could be a lot of things. But why do we get stuck? And so I want to go through, there's four areas and I'm not going to dive real deep in a lot of this just because I wouldn't have the time. And the other part is we help clients achieve this at a very deep level. But I think if I share four things that I often hear and see from either agencies or producers on why they resist this concept of maybe not even understanding it, but why they resist actionable items to have more time with profitable clients that produce more revenue, that cause less friction versus doing this transactional stuff they're doing all the time. Well, here are four things that I hear. The first one is this. Well, Brent, I get that 8020 is out there, that Pareto's principle was invented in 1896. There's a lot of studies, many, many studies that we see that do show that 20% of input leads to 80% of output. I get that, but. But it really isn't true for me or my book of business or our agency's book of business. It's interesting. We have run thousands, I mean, thousands of reports of 80 20. By the way, here's a quick call to action. If you would like to learn how to do it or want a quick resource guide to it, just email me brentidkins.com and say I'd like an 8020 analysis and I can send you over a sheet that you can look at it for your agency. It's pretty simple, but they'll say it isn't for me. Now, again, we've run thousands of these studies and I can tell you that it's amazing to me with the agencies and producers I work with, that it almost always comes out to somewhere in the ballpark of 80 20. Now, maybe it's 20% leads to 71%. Maybe it's 20% leads to 84%. It doesn't have to be exactly 80 20. Sometimes we miss the point, right? The point is there's a predictable imbalance, and if we can leverage our time and energy, it's effective. Now, there are a few cases if you're a personal lines only agency or you work just on small commercial, it may be more like 2050. So it's not as severe of a predictable imbalance, but there's still a predictable imbalance. But my answer to this 8020 isn't really true for me, means you probably haven't run a true report or at least an accurate report. I've seen some inaccurate reports because they didn't know how to do it. So I would challenge you if you say, well, 8020 really isn't for me or my book of business or my agency. Okay, run the report. And if you run a report report, and again, I gave you a couple exceptions. With personal lines only or just all small accounts, it may be 2050. But if you run and it's way different. Send me your copy. I'd love to talk to you. Not saying it doesn't exist. I'm saying it's very, very, very, very rare. So that's a fiction. Number one, it isn't true for me. Number two, the resistance that I see is that, you know, here's the deal, Brian. If I'm going to kind of take a hold of this 8020 principle, meaning that I've got to spend more time when we talk about, round out, retain and replicate clients who spend the majority of our time in the A and B clients. And we've got to systematically begin to kind of trade down or give up or look for different ways with our C clients. That means I have to do something different and my life's pretty good right now. So the resistance is this. I get it, but my life's pretty good, and I don't really know that I want to do something. I'm a little bit scared. Now, producers in particular aren't going to say this outwardly, but their actions will demonstrate that there's a fear level. There's a fear that if they do something, life is going to change. One that I will tell you. And I got this directly from Roger Sitkins in many conversations, and now I've been doing this for many years with agencies is we have never seen a producer or an agency focus more time on A's and B's and begin to do some type of trade down process with their Cs where they haven't made more money or been more successful. It just never happened. So this fear isn't really real. Again, it's kind of a head trash. But what I can't challenge and what I can't change is the fact that is the fact that this is. If your philosophy is life's pretty good and this is a great industry and you're not willing to make some of the changes, you're not willing to do any form of giving up to go up, well then it's not going to work for you. And I can't change attitude. I can't make anybody do anything. That's your life, your choice. But one of the resistance I get is the fact that because this business is so good, it really is, even if you're average, you're doing okay in most cases. In the agency world, in the insurance agency world, why should I make a change? Two different philosophies and concepts. There is something called horizontal stagnation which most agencies and producers run into at some point, which is this. Their book of business is directly tied to the number of accounts they write. At some point you run out of capacity. Now we dive deep into high performance teams and all things you can do to help with that. But really you run out of capacity. So your clients and your book of business always align. They match well. When you begin to understand that if I would spend more time on A's and B's to round out so make sure they're full time clients, that I put a continuation and relationship management key, proactive strategy around my best clients and I begin to earn and ask for referrals systematically. I begin to trade down and I'll talk about some ways to do that in a minute with the C clients. This gap between my book of business and my clients begins to expand because I have a huge, much greater revenue per relationship. But is there some sacrifice in doing that? Yeah, there is some sacrifice in doing that. And I'm going to talk again a little more about a couple more areas here and how and how and maybe where to do some of this. But this fear is real. I think this is probably one of the top fears that we see. Again isn't necessarily outwardly said, but it's real and impactful is the fact that, you know, my life's pretty good. Brad and you're asking me to do something uncomfortable. I will tell you this, and I'm sure you've heard this phrase before, but it is absolutely true. All growth, all progress starts on the outer edge of your comfort zone. And my challenge to you, listening to this, and this is true in 80, 20, but this is really true in any area of life or business that's pushing you a little bit. Is that is good, good enough for you? Is that how you want to look back and go, well, you know what, I went along and did the same thing for 10, 15, 20, 30 years. And you know, it was good. You know, it's pretty good now. I knew there was better. I knew there was the best version of me that I could have pursued and really tried to, to really maximize who I was. But I just settled for good. And I think that's a question you have to ask yourself. It's a question I ask myself all the time. And it's not out of this ego or ambition. It's just, why would you ever settle when there's greater possibilities for you? But a great mentor of mine, Jim Rohn, said this. He said, how tall does an oak tree grow? As tall as it possibly can. And one of the things I see with producers and agencies, individuals I work with, is that they settle. And I don't want to see anybody settle. Life's too precious, life's too short. I'm probably getting off the roadmap a little bit of 80, 20. But this is one part that I see is that people are hesitant to give up, to go up, that I'm going to have to make some sacrifices and changes and change a little bit about who I work with, challenging myself. I always say, do you get better in your career? And the answer is yes. Well, shouldn't your clients get better? Well, yeah, they should. So why do you have the same clients and the same type of clients you're working on 10, 20, 30 years ago that you do today? You know, so again, number two is my life is good and I'm scared. So let me go to number three next. Okay, so the number three, fear, resistance, objection, whatever you want to call it to why we are spending more time, effort, energy, capacity on unprofitable transactional based accounts, don't really truly appreciate the value you provide in the marketplace. Hopefully you're providing great value to the marketplace is the fact that the response that I get either directly or indirectly is, hey, we value or I value all of our clients, all of our relationships. And to say that the 80, 20 principle. Yes, it makes sense, Brent, but, but you're asking me then to kind of push away, trade down, whatever the word is. We're going to, you know, how we're going to do. And again, I'm going to give some examples in a minute or two on this, but some of the quote unquote, smaller accounts that I may have written that account 10 years ago and you know, that was one of the first accounts that I wrote and I really appreciate them and you know, what they've done for me to get my career started, or the fact that this is a person who has influence in the marketplace. So let me address just a couple things here. First of all, and we dive deep in this, in our training, is that we do have agencies and producers look at your total book of business, just to have a level of awareness and say, you know, where in the future, moving forward, do I need to focus my time and energy? Is there a minimum account size or minimum account standard so that I can make sure that I am allocating my most precious resource, my time, in the right capacity? So certainly I think that's part of it. However, this is not a black or white issue. We don't just say here's a line in the sand and anything below this has to get cut immediately. Or you could never, ever, ever, ever look at an account below this threshold. What we talk about, and here's an analogy or a concept that we share, this always gets a chuckle in our camps is that you can have a few pets, you just don't want to have a zoo. You can have a few pets, you just don't want to have a zoo. And obviously what we mean by that is you're going to have some accounts that maybe don't fit your specific future ideal client profile that fall below some type of minimum standard, but maybe they do have great influence in the community or with another high level relationship that you have or through an association, whatever it is, you just have to use common sense. Because what happens too often, and what I see is that it's easy to make the exception the rule. Make the exception the rule. Well, this happened once, or we had a small account that I wrote and it grew into this big account. Does that happen? Yes, it does. Now be honest with yourself. Now. If, if the majority of your small accounts grow to large accounts, well then you've got to use your own common sense. But when you really look at your book of business, typically it's the exception, not the rule. You've got to again, use common sense around that. Here's the other part and where I could give some pushback in this response that. Well, Brent, all relationships are valuable. First of all, I agree all relationships are valuable. My thing that I would say, especially to an individual producer now this is maybe different from an agency perspective is the fact that just because the accounts are valuable doesn't mean you are the person that needs to specifically handle it. There may be a better situation within your team, whether it's high performance teams that we speak a lot of at Sitkins, how to build your high performance team. I'll speak about this in a minute, but maybe there's some type of special or small account unit that you develop that they get a high level of service. Because here's what we really find and this is, you know, where I can give pushback to their pushback. And again, every situation is unique but we're certainly have to be honest with yourself is most small accounts and these are often we'll see especially the small, small accounts or monoline auto or one piece of business insurance that someone needed. So you know, those, those calls that you get at the end of the week or something came in and like how do we even get that account? In fact, we don't even call those accounts C accounts. We call them Y accounts. It's why did we write this account or why do we have this account? And those accounts typically, those, those bottom level C accounts are typically treated with benign neglect anyway. If we're really honest, they may get a renewal shoved out the door, out in the mailbox, probably typically directly from the insurance carrier once a year and that's about it. Are you really offering professional risk service advice? Are you really proactively looking out for their needs? To be honest, you're not. And it's because you don't have enough time. You're also going to look at leveraging your time going, well, we're making the agency too many touches. We're already losing money on this account. You just have to work smart and think through these things. Again, part of that pushback is are you really proactively working on these accounts? So again, just a couple things to think about this. I value small relationships. Every account that's in your agency should be treated with great service, right? That should be the expectation. There is no doubt about that. However, I will say if I was a large client of your agency, right, we're paying serious premium dollars to the insurance carrier on behalf of your agency and you're helping me in doing different things and you're speaking to someone who calls in for non payment more than you're speaking to me. Again, I probably don't know that, but if I did, I would be like, wait a second, why would we pay you all this money when you're not even spending intentional proactive time in my account? And typically what I'd ask most producers and agencies, if you only had one huge account, what would you do for that one account? And while we would do this and we would do this and we think about this and we look at this and we would do this. Well of course you would because you have unlimited time for that one account. The reason we often don't spend more proactive intentional time on these larger accounts in particular. And again, whatever large means to you, it spans depending on your agency and your book of business. But the larger side of your book of business, why we don't spend as much time in those accounts is not because we don't care. It's because we haven't devoted the time necessary to achieve the results for the client that we'd love to achieve. That's truly the bottom line. And so again, the pushback of well, Brent, 80, 20 is real and I get it, but I value all my relationships. I would just ask a couple pushbacks. Number one, are you giving those small accountants true proactive attention? Is there other people? Does it have to be you in the agency? Is there a different department or area or person that could best handle that? And again, I'll talk about some of those ideas in a minute. And if these accounts have influence with another large account in the agency, they tie to a different department, a big part of the community, fiber whatever it may be. I get that. Use common sense. You can have a few pets you just don't want to zoo. That's number three. Which leads me to number four, which this is the execution part of it. So I've gone through three already. Number one, well, 80, 20 isn't really true for me. I've disputed that again in most cases, almost all cases, I'll tell you that's probably fiction. Number two, it's just an attitude and I'm scared. My life is good. I'm making pretty decent money. Life's okay, I'm comfortable to do this. I'm going to have to get a little uncomfortable by giving up some long term accounts potentially even though we don't do a lot with them. I just talked about and or challenge myself to work on accounts with a little more, you know, a little more professional services needed around those Number three is I value all relationships or I value my small relationships. And I just talked about that one. And so the last part is, okay, I'm okay in all three of those. Brent, I'm ready to go. I'm all in. I'm ready to make this move. How do I do it? And again, I don't have time in this podcast and I wouldn't matter anyway because every agency, every producer is a little bit unique in how you'd want to do this. This is where you actually need to have a deep discussion and talk about what really works with the culture of your agency, with you want to do things right. Because every agency has a specific vision or mission. I hope you do. And a culture that you want to build. So that's got to kind of depend a little bit on your culture. But I'll tell you some different things of how you can do this. Here's just some things that we see big picture, number one, and there's agency side and there's a producer side for this. The first approach that really no one takes. There's been a couple of people that have done it and actually it worked. I'm not going to get into this whole story is just basically a leap of faith saying, listen, listen, I get it. We are spinning our wheels, our time, our energy, our problems, our employees capacity, our expenses for the agency has all been driven into these accounts that really aren't profitable, that we don't always enjoy even working with some of these clients, we're just going to sell them or trade them or whatever all at once. We're just going to most. We're just going to sell them to somebody. That's a leap of faith. Now, my guess is this. If you're all the way bought into 80 20, and you would come home and say, hey, listen, I attended a Sitkins event and we're going to get rid of 80% of our clients. My guess is people in your agency and your family would think you were crazy right now, by the way. It has been done and it worked. That's an individual decision, but that would be a true leap of faith. And again, you just take a part of it. We're going to sell this off in whatever capacity. The next part is a little more of a semi leap of faith, or I would say instead of diving all the way in the pool, you're just kind of jumping in. And that really is more of a 5050 approach. So if you look at the bottom 80% of your revenue, which is again, the 80% of your clients that produces 20% of the revenue. You would break that up into 40, 40 or year one. You would look at and go, okay, we're gonna, we're gonna scale back the bottom 40% and then year two we're gonna scale back the next 40%. Right? That would just be kind of the semi leap of faith and then the last way, which is probably the most common and certainly if anyone has objections or challenges or resistance to actually doing this, and this is typically what we see and I deal with this with our private client groups, agencies that go, hey, we totally get this, we want to do this. We're just not really sure how a, because it, you know, it's a little bit of a, of a. We have a resistance from a leadership team to a degree and we also have a leadership of getting buy in from our team. It's completely understandable. Right? It's a big change in culture is to just do a 20, 2020 approach. So on month one you would trade down 20%, month 12, so the end of the first year, start of the second year would be another 20% and then month 24 and month 36. So basically it's over three years, right? Three years you would basically trade down. And I'm going to talk about some ways to do this in a second second 20% of your book of business, right? Just to free up time and capacity. And I mentioned, I think this earlier and if I haven't, I probably mentioned on a different podcast, when we actually look at 8020 numbers, the bottom 20% of your book of business is typically less than 5% of your total revenue and more like 3% in most cases. So it's not like you're giving up much revenue even for individual producers. I say listen, if you're going to do this, why don't you focus on writing the minimum account or the target account that you want want moving forward, right. To really be intentional with future ideal clients. And my guess is in fact I can tell you right now that if you write one of these, you're already going to replace that bottom 20%. So you, you never really go backwards, right? You're just, but you're being very intentional about this. So that's, that's kind of the again, the 20, 2020 approach that you do over the course of, of three years. So the other part of this, well, where does it go or who would it go to? Well, again this depends completely by agency culture what you want to do, what you have set up up. We work with agencies that range from a couple million in revenue or just below a couple million in revenue all the way to close to 30 million in revenue. So I can tell you it depends and we have very detailed conversations by type of agency. But it could be for larger agencies in particular. You've got newer producers, you can trade it to a newer producer, it gives them some accounts to work on. Some agencies like this idea. Some say, why would I want to give it to a producer if eventually we're going to trade down anyway? Well, that's your call. But a new producer can kind of start their own 80, 20, right. And build from there and give them a book of business. So that's one option that you could do. Some agencies love carrier service centers. Some agencies can't stand carrier service centers. And I think they've improved a lot certainly over the years. It's interesting. One of the things with carrier service centers, back to what I said earlier, is a lot of agencies, you know, I hate, I can't give up control. We own that account, we control that account. And I understand that. I spent 15 years in an agency, so I get that. But again, back to the benign neglect. If agencies are being honest with the right accounts, the bottom accounts, they're probably not doing anything anyway. In fact, oftentimes we find they get better service when they go to a carrier service center. Now, some would argue with me and I get that, but again, this is all about all progress starts by telling the truth. And so you have to see where your agency is at with that also, whether it's a small business unit, small account unit, special account unit, whatever you want to call it. We've had some of the agencies do that. This goes back to as a producer in particular, if you're saying no, that it doesn't fit or you're doing a trade down, you're sending them to a different place in the agency that's set up specifically for that client. They have more efficiency, they have more focus in these areas. And from an agency perspective, we're not paying a producer long term to sit on these small accounts and not do anything right. So it's just the fact that we've got an actual unit or account side in our agency internally to take care of that. And the last part, this kind of goes back to Leap of Faith is you can just see we've had agencies just sell it, say, listen, I'm going to find my greatest competitor and I'm going to see if they want to buy some of this so I can go and focus A round out, retain and replicate my top clients. So again, these are just some different ideas, high level perspective. You know, one of the things we always say at Sidkins is you're not going to agree with everything we say. And I think that's fine, that's good. I always like to be challenged and you're not going to implement everything. But I will tell you this, the agencies that have really understood this and thought about this, and part of this is if I tell you it might be true, if you begin to analyze it yourself and look at it, it is true. Right? So that's what my challenge is for you today is. From what I said about this, if you do believe 8020 is real, and I think that concept in general has been proven time and time again, but then you look at your agency in the book of business, just say, why wouldn't it? If 20% of our input, our time, effort, energy, results in 80% of our output, why would we not want to leverage ourselves or agency to be in the best possible position to win, to be competitive? And by the way, this is also about a client experience. And I haven't really even mentioned that. And that wasn't my intention, but that wasn't the point of this podcast. But the client experience improves exceptionally, because like I said earlier, there are some really nice accounts out there that would love more proactive attention if only the agency and producer and account team could give it more time. And the reason they can't give it more time is because we're stuck in this crazy activity, right? Of all this stuff. Busy, busy, busy, reactive, reactive, reactive, reactive, reactive. And we can never sit down and go, what can we do? It's better for the client, it's better for the agency, it's better for the producer. And it just makes the insurance business not just profitable, which is really important, but allows you to start to get something that most agencies and producers truly desire and they don't often talk about, about. It's freedom, right? It's freedom to be able to do the things you want to do, how you want to do them, and the capacity that you want to do them. And so I hope this podcast was helpful for you. Last shot again, I want to mention Profit Net again. By the time you're listening to this, it may already be over for many of you listening to this. But if you still, if it's late February 2020 or early March 2020, there's still time. March 11th to 13th, Cape Coral, Florida. We're going to dive into so many different concepts, important concepts, concepts like this. And not just ideas, but how are you put pen to paper, how can you execute and surround yourself with people in a room that will help you think higher, think differently. That's part of being in a great mastermind networking program. And that's what this event is all about. If you want to learn more about me Sitkins what we do, just Visit us at sitkins.com@s I t k I n s.com sitkins.com with that, I wish you all the best in your success. Thanks for listening.