recruiting and developing young producers
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Recruiting and Developing Young Producers. Tom Doran. Pursuing Young Sales Talent. People are an agency’s greatest asset Finding those people is often the agency’s greatest challenge There is an opportunity to include more young individuals in the search for talent - PowerPoint PPT PresentationTRANSCRIPT
CONFIDENTIAL
Recruiting and Developing Young Producers
Tom Doran
CONFIDENTIAL Recruiting and Developing Young Producers
Pursuing Young Sales Talent• People are an agency’s greatest asset • Finding those people is often the agency’s greatest
challenge• There is an opportunity to include more young
individuals in the search for talent• What can we learn about hiring and developing young
producers from those who do it well?
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CONFIDENTIAL Recruiting and Developing Young Producers
Producer Recruiting and Development1. The Case for Hiring Young Producers2. The Economics of Producer Hiring3. Best Practices for Producer Hiring & Development
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CONFIDENTIAL Recruiting and Developing Young Producers
2009 Young Producer Study4
CONFIDENTIAL Recruiting and Developing Young Producers
Successful Young Producers• Hired under the age of 30• Hired within last 10 years• Selling Commercial P&C or Employee Benefits insurance• Successful
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CONFIDENTIAL Recruiting and Developing Young Producers
Young Producer Study Process
BASELINE SURVEY
IN-DEPTH FIRMS
IN-DEPTH PRODUCERS
206 54 91• Assessed
baseline level of young producer hiring in the industry
• Identified firms with success hiring young producers as well as strong sales cultures
• Completed detailed survey on hiring and development practices and production results
• Identified young producers who have been successful
• Detailed survey• Personality and
behavioral assessment
• Interview
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CONFIDENTIAL Recruiting and Developing Young Producers
Baseline Survey Results
2,727
1,025
Total Number ofProducers Hires by
Baseline SurveyParticipants
Total Number ofYoung Producer
Hires
48.6%
26.0% 23.4%
Successful Unsuccessful SuccessUnclear
Frequency of Young Producer Hires
Success of Young Producer Hires
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CONFIDENTIAL Recruiting and Developing Young Producers
Key Findings• College recruiting is working
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CONFIDENTIAL Recruiting and Developing Young Producers
College Recruiting Frequency
34.2%26.1% 24.6%
15.1%
1.2%
52.9%
3.5% 5.9%N/A
36.5%
0%
10%
20%
30%
40%
50%
60%
AnotherIndustry
AnotherAgent
College InsuranceCompany
Move WithinAgency
Baseline Survey Successful Young Producers
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CONFIDENTIAL Recruiting and Developing Young Producers
College Recruiting Success
25.7
20.1
At College Pre-Hire Worked ElsewherePre-Hire
143,997 136,738
At College Pre-Hire Worked ElsewherePre-Hire
Months Until Validation Year Three New Business
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CONFIDENTIAL Recruiting and Developing Young Producers
Successfully Recruiting Colleges
• Investing in on-campus recruiting
• Establishing an internship program
• Hiring in classes
41.0%
48.7%
33.3%
On-CampusRecruiting
InternshipPrograms
Both
Why recruit at colleges? Because that’s where the talent is
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CONFIDENTIAL Recruiting and Developing Young Producers
Key Findings• College recruiting is working• Well-rounded individuals trump academic superiority or
sales experience
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CONFIDENTIAL Recruiting and Developing Young Producers
Look For the Raw Athlete
58%
41% 48%• Percentage of
Successful Young Producers who were involved in at least two campus activities and who worked during school
• Percentage of Successful Young Producers who were involved in at least two campus activities, had a leadership role in at least one student organization and who worked during school
• Percentage of Successful Young Producers who were involved in at least two campus activities, worked during school and maintained a 3.0 GPA or higher
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CONFIDENTIAL Recruiting and Developing Young Producers
Variables Influencing Success
21.3
22.8
GPA Under 3.0
GPA 3.0 - 3.4
GPA 3.5 or Above
Sales Experience
No Sales Experience
Generalists
Specialists
21.8
24.2
GPA Under 3.0
GPA 3.0 - 3.4
GPA 3.5 or Above
Sales Experience
No Sales Experience
Generalists
Specialists
19.5
22.9
25.8
GPA Under 3.0
GPA 3.0 - 3.4
GPA 3.5 or Above
Sales Experience
No Sales Experience
Generalists
Specialists
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CONFIDENTIAL Recruiting and Developing Young Producers
Key Findings• College recruiting is working• Well-rounded individuals trump academic superiority or
sales experience• Young producer economics can be attractive
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CONFIDENTIAL Recruiting and Developing Young Producers
Comparing Returns
FactorMetric
ExaminedYoung
ProducersProducers of All Ages
Advantage
Hiring Success Rate
% of Hires that are Successful
~ 50% - 55% 53% Draw
~ 30 to 40 Months Draw22 MonthsTime Until
ValidationInvestment Horizon
~ 30 to 40 Months Draw22 MonthsTime Until
ValidationInvestment Horizon
$77,500 Young Producers
$43,526Year 1 Total Payroll
Initial Investment $77,500 Young
Producers$43,526Year 1 Total
PayrollInitial Investment
$219,108 Experienced Producers
$173,954Annual New BusinessProduction $219,108 Experienced
Producers$173,954Annual New
BusinessProduction
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CONFIDENTIAL Recruiting and Developing Young Producers
Capturing Returns• The economics of Young Producer hiring don’t appear
riskier or weaker than the economics of producer hiring in general
• Young Producers give agencies an opportunity to diversify risk in producer hiring
• Young producer hiring can be a low-cost organic growth strategy
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CONFIDENTIAL Recruiting and Developing Young Producers
Key Findings• College recruiting is working• Well-rounded individuals trump academic superiority or
sales experience• Young producer economics can be attractive• Young Producer hiring is a different game
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CONFIDENTIAL Recruiting and Developing Young Producers
Attracting Young Producers
• Compensation opportunity is tremendous– For younger producers, cash
is more important than equity• Ability to build relationships with
clients• Freedom and flexibility• Gratification: “Winning”
Reaching the Target Audience Messaging
Percentage of Successful
Young Producers
entering the industry via
family, friends or “accident”
46%
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CONFIDENTIAL Recruiting and Developing Young Producers
Managing Younger Producers• Young producers generally need more extensive training
in the insurance industry and in sales• Mentoring programs are critical
– 97% of the firms in our study had mentorship programs– Most programs lasted up to three years or longer
• Hire in classes to foster competition and efficiently spend training dollars
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CONFIDENTIAL Recruiting and Developing Young Producers
Producer Costs
Salary/Commission 50,000$ Until validation/33% of commissions thereafter
Benefits 10,000 20% of salary/commission
Total Producer Pay and Benefits 60,000 40% of book when validated
Other Operating Costs (Selling and overhead) 15,000 (Assumed to grow at 15% per year)
Support Costs (CSR, claims, administrative) 7,000 (20% of commissions produced)
Total 82,000$
The Economics - The Cost of a New Producer21
CONFIDENTIAL Recruiting and Developing Young Producers
New Producer Five Year Cash Flow Return on Investment
After-TaxYear Commission Expenses Pre-tax Profit Net Income1 35,000 82,000 (47,000) (30,550) 2 70,000 91,250 (21,250) (13,813) 3 105,000 100,838 4,162 2,705 4 140,000 110,813 29,187 18,972 5 175,000 131,235 43,765 28,447
4%5 Year Cash Flow Return on Investment
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CONFIDENTIAL Recruiting and Developing Young Producers
New Producer Five Year Total Return on Investment (with asset value included)
After-Tax Value of BookYear Commission Net Income @ 1.5 Multiple1 35,000 (30,550) 52,500 2 70,000 (13,813) 105,000 3 105,000 2,705 157,500 4 140,000 18,972 210,000 5 175,000 28,447 262,500
74%5 Year Cash Flow Return on Investment Including Value of Book
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CONFIDENTIAL Recruiting and Developing Young Producers
2 Reasons why Reinvesting in Agency is so Positive Financially
• State and Federal Government subsidize people investments
• Asset value is larger than most people realize
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CONFIDENTIAL Recruiting and Developing Young Producers
Four Key Principals in Recruiting and Development1. Recruit in the Right Places2. Recruit at the Right Rate3. Set New Hires Up for Success4. Make Quick Mistakes
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CONFIDENTIAL Recruiting and Developing Young Producers
Recruit in the Right Places - Producers
Under 30 Within the Industry
14%
Over 30 Within the Industry
46%
Under 30 Outside the
Industry17%
Over 30 Outside the
Industry23%
Current Sources
All categories, 2013 BPS Study
Success Rate
62%
Are You Recruiting in the Right Places?
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CONFIDENTIAL Recruiting and Developing Young Producers
Recruit in the Right Places - Producers
Producer w/o Book
Producer with Book
From Outside Industry
From College Other
22% 22%
34%
18%
5%
28%
11%
27%
20%
14%
Future Past 5 Years
Easier to Teach Insurance or Sales?Source: Group of Large Agents
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CONFIDENTIAL Recruiting and Developing Young Producers
Recruit in the Right Places - Producers
• Maturity• Business Acumen• Compensation Requirements• Active Management Required• Life Experiences• Network
What is Your Agency Best Equipped to Handle?
Challenges of Under 30 vs. Over 30
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CONFIDENTIAL Recruiting and Developing Young Producers
Step 1: Find the total comp of all unvalidated producers
Number of unvalidated producers 4
Actual payroll of unvalidated producers $300,000
Step 2: What would the unvalidated producers earn under the agency’s normal producer commission schedule?
Unvalidated producers’ total book of business $600,000
Agency blended commission rate 30%
Implied (“earned”) compensation $180,000
Step 3: Calculate the NUPP as a percentage of revenues
Actual payroll of unvalidated producers $300,000
Implied (“earned”) compensation $180,000
NUPP $120,000
Agency Net Revenues $10,000,000
NUPP as a percentage of revenues 1.2%
Source: 2013 BPS, Agencies with Revenue between $10.0M and $25.0M
Net Unvalidated Producer Payroll
Recruit at the Right Rate – Effective Investments in Sales Talent
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CONFIDENTIAL Recruiting and Developing Young Producers
Insuran
ce Tra
ining
Sales
Training
Mentorin
g
Sales
Manage
ment
Telem
arketi
ng
Team Se
lling
Speci
alizati
on
Support
Staff
Value A
dded Se
rvices
Sales
Proces
sCRM
Comm Invo
lvemen
t
Center
s of In
fluence
0
5
10
7
6
8
5
4
6
8 8 8
6
5 5
8
On a scale of 1-10, what factors have had the most impact on your success?
Mentoring is Perhaps Most Important
Source: Young Producer Study Update
Set New Hires Up for Success - Producers30
CONFIDENTIAL Recruiting and Developing Young Producers
How Soon Do You Know If a Producer will be Successful?
Top 25% Average Median Bottom 25%
6.6
22.0 22.5
39.4
How Long Until Validation (Months)?
Source: Young Producer Study
Make Mistakes Quick - Sales31
CONFIDENTIAL Recruiting and Developing Young Producers
Misses Have Broad Impacts
Make Mistakes Quick - All
• Culture• Economic• Clients• Carriers• Productivity
• Hire and Fire Day One• Clear and Measurable
Targets• Frequent Performance
Assessments
Three Key Principles Impacts of Non-Performance
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CONFIDENTIAL Recruiting and Developing Young Producers
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To access Reagan’s Young Producer Study Update – Three Years Later, go tohttp://tinyurl.com/kjjnf75
or visit our webpage atwww.reaganconsulting.com
CONFIDENTIAL Recruiting and Developing Young Producers
Tom DoranSenior Vice President & PrincipalTom joined Reagan Consulting as a consultant in 1993 and became a principal in the firm in 1995. He holds an undergraduate degree in Computer Information Systems and a Masters of Business Administration from Georgia State University. Before joining Reagan Consulting, he worked in the computer industry, both as a software developer and as a management consultant. Tom’s areas of expertise include merger and acquisition representation, agency valuation, ownership perpetuation planning, agency valuation enhancement and strategic planning facilitation. Tom is a regular contributor to Reagan Consulting’s industry studies and is frequently published in various insurance industry publications. He also speaks on a regular basis to industry trade groups and associations on a wide variety of topics concerning the insurance distribution system.
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