recruiting and developing young producers

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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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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2009 Young Producer Study4


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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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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Baseline Survey Results

2,727

1,025

Total Number of

Producers Hires by

Baseline Survey

Participants

Total Number of

Young Producer

Hires

48.6%

26.0%23.4%

Successful Unsuccessful Success

Unclear

Frequency of Young Producer Hires

Success of Young Producer Hires

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Key Findings• College recruiting is working

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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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College Recruiting Success

25.7

20.1

At College Pre-Hire Worked Elsewhere

Pre-Hire

143,997136,738

At College Pre-Hire Worked Elsewhere

Pre-Hire

Months Until Validation Year Three New Business

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Successfully Recruiting Colleges

• Investing in on-campus recruiting

• Establishing an internship program

• Hiring in classes

41.0%

48.7%

33.3%

On-Campus

Recruiting

Internship

Programs

Both

Why recruit at colleges? Because that’s where the talent is

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Key Findings• College recruiting is working• Well-rounded individuals trump academic superiority or

sales experience

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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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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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sales experience• Young producer economics can be attractive

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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 Validation

Investment Horizon

~ 30 to 40 Months

Draw22 MonthsTime Until Validation

Investment Horizon

$77,500Young

Producers$43,526

Year 1 Total Payroll

Initial Investment

$77,500Young

Producers$43,526

Year 1 Total Payroll

Initial Investment

$219,108Experienced Producers

$173,954Annual New Business

Production $219,108Experienced Producers

$173,954Annual New Business

Production

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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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sales experience• Young producer economics can be attractive• Young Producer hiring is a different game

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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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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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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


New Producer Five Year Cash Flow Return on Investment

After-TaxYear Commission Expenses Pre-tax Profit Net Income

1 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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New Producer Five Year Total Return on Investment (with asset value included)

After-Tax Value of BookYear Commission Net Income @ 1.5 Multiple

1 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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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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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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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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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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• 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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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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Insuran

ce Tra

ining

Sales

Train

ing

Mentorin

g

Sales

Man

agem

ent

Telem

arketi

ng

Team

Sellin

g

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


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


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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To access Reagan’s Young Producer Study Update – Three Years Later, go tohttp://tinyurl.com/kjjnf75

or visit our webpage atwww.reaganconsulting.com

http://www.reaganconsulting.com/Reagan%20Young%20Producer%20Study%20Update,%20September%202012(1).pdf


Tom DoranSenior Vice President & Principal

Tom 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.

[email protected]

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recruiting and developing young producers

Documents

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