Compensation survey of P-C agencies and brokerage firms
shows that employees want more than just a good wage
By Phil Zinkewicz
The story goes this way. A young man, straight out of college, is applying for a job with a medium-sized firm. The personnel director asks the young man what he is looking for in terms of starting salary. "Two hundred thousand dollars a year," says the young man. "But, of course, that would depend on benefits."
The personnel director doesn't bat an eye. He responds: "What would you say to four weeks' paid vacation, unlimited sick days, 15 personal days a year, total health and dental insurance paid for by the company and a brand new BMW every two years?"
The boy answers: "Wow! Are you kidding?" Smiling, the personnel director says: "Yes. But you started it."
Gauging the right compensation and benefits packages to attract, motivate and especially retain talented employees has become difficult in today's changing economic environment. It is estimated that the cost of replacing a valued employee can be as much as 150% of an individual's annual salary. However, according to a new survey by Business Management Group (BMG), a management consulting firm that is wholly owned by The Hartford, there are ways for agents and brokers to avoid this unnecessary expense.
"Agencies and brokers need to have a better understanding of compensation trends so they can design and implement programs that will attract and retain the best employees," says Suzy Hammett, a vice president with BMG, who specializes in incentive plans and management recruiting.
This is BMG's seventh annual survey of independent property and casualty insurance agencies and brokerage firms. According to Hammett, it provides the latest statistics on salaries, incentive programs and benefits for non-producer positions--ranging from office service and support staff to middle managers. As part of the survey, information was collected regarding compensation, bonus and incentive programs, and basic employee benefit plans. The results were analyzed and then organized by geographic region; urban, suburban and rural location; revenue range at the national level; and revenue range and location within each region.
The survey results indicated that agencies and brokerage firms reported spending more for salaries and benefits even though employee contributions for benefits increased. According to the Bureau of Labor Statistics, compensation costs, which include wages, salaries, and employer costs for employee benefits increased 4.1% from March 2000, to March 2001.
Says the survey: "Changes in lifestyles and the faster pace of today's work and competition for talent are clearly reflected in shifts in the benefits organizations are providing. Major concerns of the Baby Boomers and the GenXers are having benefits relative to their lifestyles and balancing work and family issues. The effect of their jobs on their personal and family life consistently ranks higher in importance on employee surveys--typically higher than the nature of work, job security and salary."
For these reasons, the survey notes, agencies and brokerage firms are offering more flexible benefits, as well as more flexible work schedules. Designated leave benefits, such as paid sick and vacation days, are being replaced with Paid Time Off Plans (PTOs). Under a PTO, all leave is combined into one general pool for which the employee can decide how it will be used. Also, flexible work hours have grown steadily since 1999, from 39% of the agencies offering this benefit to 53% in 2001.
Moreover, according to the survey, the trend in compensation has shifted back to the basics of performance and reward. BMG says that agencies are linking their business strategies and incentive plans to connect non-producer performance with rewards for achieving specific sales and tasks objectives. In short, agencies have realized that to be effective, reward programs must be aligned not only with the needs of the business, but also with employee expectations.
According to BMG, the national results contained within the survey are intended to give agencies and brokerage firms the opportunity to see what other agents and brokers, in the same revenue range, are providing across the country. The survey population consisted primarily of commercial lines- or personal lines-focused agencies, not employee benefits or life and financial services firms. Fifty-four percent of the responding agencies derive at least 60% of their revenues from commercial lines, and 57% derive at least 29% of their revenues from personal lines. In addition to the national results provided in the survey, the survey results were broken down by regions with states in the Northeast, the Mid-Atlantic, the Southeast, the Midwest, the Southwest and the Pacific.
One finding of the survey was that more than 80% of the agencies queried offer managers a bonus and/or incentive plan. Fifty-three percent of the agencies indicated they use specific performance criteria to determine the manager's bonus, and 61% of the agencies award bonuses based on dollar amount vs. percentage amount.
Long-term incentives are offered to managers by 28% of the agencies. Firms in the Pacific and the Northeast report a participation rate higher than the survey national average. BMG found that the primary criteria used to determine the manager's bonus generally include such things as: accomplishment of certain objectives, percentage of annual agency profit, percentage of annual agency growth, and discretionary. More than 75% of the agencies offer bonus/incentives to non-manager staff.
The survey also queried agencies on telecommuting. Eleven percent of the agencies allow employees to work from their homes and view this benefit as a recruiting strategy to help their organization attract and retain staff.
In many instances, according to the survey, the personal lines CSRs have sales goals and are provided with an incentive for new business production, while commercial lines CSRs have a growth bonus. In addition, managerial staff receive a bonus based on departmental and/or agency growth and profitability. This flexible approach to bonus and incentive programs allows agencies to support the strategies of each department and line of business with programs specific to them while controlling the compensation expenses, says BMG.
The survey also found that performance reviews are becoming increasingly important in agencies because owners and managers see the value in setting goals and rewarding good performance. The majority of agencies (74%) have written job descriptions for their staff and managers, and 71% of agencies conduct written performance reviews, says BMG. Of those conducting written performance reviews, 88% conduct them annually and 12% conduct them semiannually.
"If an agency or firm is having difficulty attracting and retaining talented performers, it's time to begin reviewing compensation and benefits programs and gain back that competitive advantage," says Hammett. *
"The effect of their [Baby Boomers and GenXers] jobs on their personal and family life consistently ranks higher in importance on employee surveys--typically higher than the nature of work, job security and salary."
--BMG compensation survey
For more information:
Business Management Group
Phone: (800) 772-0208
Web site: www.bmgconsulting.com.