As you might imagine we see just about every version of a producer pay plan you can imagine in our role as a developer of growing agencies. Some of the plans are quite clever, some are tried and true and some are disastrous.
But what is interesting is that almost all of the time the owner hasn’t really thought through what behaviors the plan encourages and which ones it discourages. This was brought home to me again the other day in a discussion with John Fear who is doing consulting with us regarding our sales team.
So, the point is, decide what you want to accomplish and reward that. Don’t reward what you don’t want. Simple enough? Sometimes it is.
Let’s say you have a personal lines agency and want to grow new business. If you have a 50% new and renewal commission will that work? No. It won’t work over time because you are rewarding non selling behavior (renewal) just as much as selling new business. Eventually, the “producer” will become a “servicer” (not to mention that 50% is WAY too much money to pay for PL production – but that’s another post).
If you want producer’s producing wouldn’t you pay a higher commission for new and lower for renewal? Something like 50% new and 20% renewal?
Is package business worth more to your agency in revenue and retention than monoline? Of course! Do you pay more for package and less for monoline? Gotcha! Think about that. Doesn’t it make more sense to pay more, say 40% for package and less, say 20% for monoline? If you did that I’ll bet you get more package business. What do you think?
Have you ever had a producer get to the point that his/her renewal income meets his/her income needs? I have. What do you think happens then? Of course, they quit producing. When a producer costs more than a servicer does that make sense? Of course not!
What should you do when your compensation plan does not honor your business objectives? Well, if you are a business person you change your plan. If you don’t you simply won’t be as successful. Yes, it’s not easy. Yes, producer’s won’t like it. But let me ask you something – would you rather suffer pain for years or get it over with?
What is your plan and desire for your agency? Think about that and rethink how you pay.