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6 ways to improve producer recruitment success rates

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A new study by Reagan & Assocs. finds that only 56 percent of producer hires in the insurance distribution system in the past five years are successful.

In a baseline survey of 562 agents and brokers, the survey determined that while success rates were significantly more successful for top-performing firms (84 percent), most agencies and brokerages are still struggling with hiring, typically identifying it as the biggest challenge they face in their businesses overall.

While the overall success rate was 56 percent, employee benefits success rate was 53 percent, commercial lines success rate was 56 percent, and personal lines success rate was 59 percent.

Most firms hired new producers from inside the industry: 55 percent hired experienced producers, and 10 percent in the industry but not in a sales role. For the 35 percent of hires coming from outside the industry, only 6 percent were college hires.

Not surprisingly, producer success rate varied dramatically based on the success level of the firm, according to the Reagan Value Index. Firms in the bottom 25 percent saw producer success rates of only 22 percent, compared with the 56 percent average and 84 percent success rate for the top 25 percent of firms.

In drilling down with a supplemental survey and subsequent follow-up interviews with the firms most successful in recruiting, Reagan identified six critical factors for firms that were successful in producer hiring.

Read on to learn their recommendations.

For a copy of the report, contact Reagan Consulting at [email protected]

strategy

1. Defining hiring needs

The Reagan study found that 55 percent to 60 percent of agents and brokers are under-hiring.

“The top 25 of these firms will hire 10 producers to end up with 8 successful hires,” the survey notes. “To end up with 8 successful hires, the bottom 25 percent will have to hire more than four times as many producers.”

Reagan identified three key measurements firms can use to establish an appropriate level of hiring: sales velocity, generational capacity, and producer investment.

Sales velocity is calculated by dividing this year’s total new business by the prior year’s total commissions and fees. For example, an agency with $10 million in total commissions and fees in the prior year that generates $1 million in new commissions and fees has a sales velocity of 10 percent. Agencies can use sales velocity and its relationship to growth to calculate the number of producers they need to hire.

Generational capacity relates to the number of producers in each age band (up to age 35, 36-45, 46-55, and over 55), and the contribution to new business by each age band.

Producer investment centers on the Net Unvalidated Producer Payroll (NUPP) metric, which is a mesure of an agency’s investment in developing producers. NUPP is the difference between what an agency pays its developing producers in direct payroll versus what the producers would earn under the agency’s normal commission schedule A NUPP of 1.5 percent to 2.5 percent fo net revenue represents a healthy level of producer hiring.

hiring

2. Determining who to hire

The most successful firms are strategic in who they target and are willing to make necessary investments in their recruiting, hiring and development efforts to ensure the success of those hired.

Although hiring experienced producers is preferred because they need little training and frequently come with their own books of business, the long-term success of an agency — and the industry — lies with attracting new people.

The Reagan study found that most producer hiring is still primarily male: 79 percent of all producers, 85 percent of personal lines, 74 percent of employee benefits, and 45 percent of personal lines producer new hires were men.

However, hiring varies widely by age, with most new producers in their 20s or 30s; more than 60 percent of producers in the supplemental survey were hired before their 40th birthday. The survey found that the success rate increases with the age of the producer hired; approximately three-quarters of all producers hired with a book of business were 40 or older.

See also: Where is the next generation of financial professionals?

pool

3. Building the candidate pool

Building a recruiting pipeline begins with identifying how many new producers need to be hired. Top firms begin with a target number of hires and then develop smaller steps that support the achievement of the target. For example, most firms typically interview 5 to 10 candidates for each producer they ultimately hire. To ensure a quality pool of candidates, they build a pipeline at least 5 to 10 times their hiring target. Firms reported that expaning their pool of candidates has allowed them to be more selective in their hiring decisions, leading to higher levels of success.

Successful firms report looking for leads in as many places as possible, including a strong internal referral pipeline, working through “centers of influence” such as carriers, local trade partners, etc.. Additionally, 41 percent of firms use social media as a recruiting rool.

selection

4. Elevating the ability to select winners

Top-performing agencies have a systematic producer selection process, typically focused on interviews, testing, reference checks, internships and other tactics, and finally, selling the opportunity to the candidate.

As with all elements of producer recruiting and development, it’s good practice to designate one person to be responsible for the selection process. This is typically a human resources employee, which ensures timely and consistent communication with the candidate.

hired

5. Maximizing success for those hired

Once a promising candidate is hired, the firm is resposible for providing them with the necessary training and development. Specialization in a growing trend; producers with a specialty have a higher success rate than those who do not. The most successful firms in the study require a higher percentage of their producers to specialize; nearly half of their commercial producers and more than a third of benefits producers are required to specialize.

Team selling is a move away from the old-school technique of selling by individual producers. Team selling helps disseminate knowledge and provides for smoother succession of client relationships when the current generation retires.

Mentoring is another key element, with more than half (55 percent) of all producers in the supplemental survey mentored, and 57 percent of producers in commercial lines being mentored. Mentoring is typically provided by senior producers and sales leaders, with 40 percent of firms providing compensation for mentoring. Technical training, sales training and other resources such as lead generation assistance can also be helpful.

improvement

6. Owning and leading the strategy

Reagan identified four key business practices to elevating and owning the recruiting and hiring process:

  • Elevating and promoting producer recruiting and development
  • Ensuring real leadership for producer recruiting and development
  • Investing the necessary time, capital, and resources
  • Practicing accoutability.

A solid first step in this process is to identify and visibly support one person as the producer recruiting and development leader. This doesn’t have to be the agency president or CEO; it could be an HR leader, branch leader, sales manager, COO, or anyone with the authority to oversee and execute the plan.

When it comes to capital investment in recruiting, leading firms must be willing to have 1.5 percent to 2.5 percent of revenues tied up in unvalidated producer payroll alone at any given point.

Finally, creating accountability around recruitment involves documenting key tasks and responsibilities, meeting regularly to discuss the strategy, tying copensation to success, sharing the strategy across the organization, and refining the process as needed.

See also: Why you should use team bonuses based on firm revenue