Big corporate ideas work in small agency
Former NASA engineer applies principles learned early in career
to family agency operations
By Elaine Tolen
In 1997, when Juan J. Padron invested in his brother Abraham’s start-up Allstate agency in the southernmost tip of Texas, he asked, “Couldn’t you pick a better business to go into?” In Juan’s mind, insurance had a reputation akin to that of used car sales. “But I’m behind you, Brother,” Juan assured Abraham.
At the time, Juan was an engineer at NASA’s Johnson Space Center in Houston. While at NASA, Juan earned an MBA with a concentration in operations management and information systems.
Eventually getting restless, he decided to experience life outside the United States. In early 2001, Juan accepted a job with General Electric, which had potential assignments around the globe.
While at GE, Juan became a Six Sigma Black Belt, part of an elite group that implements the Six Sigma business management strategy. Developed at Motorola in the late 1980s, Six Sigma originated as a set of practices designed to improve manufacturing processes and eliminate defects, but its application has extended to other types of business processes as well.
Juan’s career continued to advance at GE. “Then came 9/11 and I lost the desire to work internationally,” he recalls.
All the while, his brother’s “little business” in McAllen, Texas, was growing to become one of the largest Allstate agencies in the country.
Also in 2001, Abraham’s wife, Delfa Padron, formed Safeguard Insurance Agency—an independent insurance agency—to insulate Abraham’s Allstate clients from going elsewhere for their commercial insurance.
Around that time, Abraham and Juan started talking about going into business together. “As most siblings do, we fought a lot when we were growing up,” he muses, “so we had to talk through various business situations and scenarios and how we would handle them before jumping into a professional partnership.
“Abraham and I are very different,” Juan continues. “I’m the back-office person who sets up the processes. Abraham is the friendly face, the marketing/sales person. Together we make a complete person. He knows how to make money and I know how to hold on to it,” he laughs. Juan is licensed to sell P-C and life & health but isn’t involved in day-to-day selling or account servicing.
In late 2002, with 13 years of engineering, manufacturing, project management and process improvement experience behind him, Juan moved to the Rio Grande Valley—four counties on the Texas-Mexico border which have traditionally relied on agribusiness and tourism for their livelihood—to join the family Allstate agency. He admits he had a bit of culture shock moving from a metropolitan area (Houston is the fourth largest city in the United States) to an area characterized by small towns, slower pace and less diversity.
Crossing to “The Other Side”
While working for the captive agency, Juan began to realize the advantages of an independent agency. “An independent insurance agent can offer just about anything to his clients. Independent agencies can also expand to other product lines, which Allstate didn’t look upon favorably.”
In 2004, Juan and Abraham sold the Allstate agency, moving over to SafeGuard Insurance full time to manage the fledgling business. In 2004, they purchased the agency from Delfa Padron.
“We got out of the Allstate business at the right time,” Juan explains. “Market conditions changed and business for captive agents in Texas became more difficult. Selling our agency would have been a lot harder to do if we had tried to sell it a year later.”
In the last five years, Juan says SafeGuard has grown and is more profitable than their former captive agency. “When you can offer many products and services to customers, a lot of doors open,” he says.
After Juan and his brother came to SafeGuard, Juan became involved in the Independent Insurance Agents of Texas (IIAT). At an IIAT meeting he met the owner of an agency in the nearby town of Weslaco who mentioned that she might be ready to retire. “We were looking to expand into Weslaco, so we jumped at the chance to buy the agency.
“One of the pluses was that the agency had a contract with a Texas farm mutual,” Juan continues. “The next year we bought an agency in Brownsville.” The remainder of the agency’s eight offices were started from scratch, Juan says.
With his experience in corporate operational strategies and technology, Juan was soon involved in the IIAT, serving on the Small Agency Advisory Council and Personnel Recruiting Task Force. He has served on the board of the Independent Insurance Agents of the Rio Grande Valley for two years and is currently president-elect.
And with just five years of independent experience under his belt, he has been appointed to the Independent Insurance Agents & Brokers of America’s Diversity Task Force.
The Task Force’s goal is to find minority independent agents “and bring them into the fold. Many are unaware of the resources available to them through IIABA and state associations. Company partners want to find them also, to diversify markets,” Juan explains.
Serving on the national level, Juan says, has been eye-opening. “I’ve met representatives of carriers who want to do business in Texas. These are higher-level decision-makers than those at the local branches.”
Paul Martin, CPCU, IIAT director of education and young agent liaison, says, “Juan is a great thinker when it comes to operational issues, particularly for a small agency that is trying to leverage technology.”
Big company ideas in a small agency
Juan is a partner in the business but he’s adopted the title of business manager because it is general enough to encompass all of the roles that he plays in the agency. Abraham is president of the 28-employee firm. The agency is 85% personal lines and 15% commercial lines, with the expectation of growing the commercial lines side.
“Even though we’re a small business, we operate like a big business,” Juan says. “As our agency grows, we want to already have an infrastructure in place that can expand as the agency grows.” Taking advantage of available technology—such as an online agency management system and Internet telephony—is one way the agency functions like a bigger firm. Juan is continually looking for ways to operate the agency more efficiently, including the possible outsourcing of some business processing functions.
“My goal is to help this agency operate so well that I work myself out of a job,” Juan quips.
To that end, “as we started to add locations, I wanted to replicate some of the operational processes we had at Allstate,” Juan says. “There, almost everything was centralized—the billing system, computer system, etc.” Most of the agency’s functions are now centralized, including the telephone system which allows all eight branches to function as one, he says.
And with a streamlined system, Juan says, “all you need is a computer and Internet access and you can open an office anywhere.”
That office need not be brick and mortar, either. SafeGuard’s “Agents on Wheels” are mobile branches that take the agency anywhere in The Valley. SafeGuard’s name and logo are affixed on the body of seven Honda CRVs which are equipped with a laptop, portable printer, scanner, and mobile Internet access.
Juan explains that these four-wheeled offices serve as marketing tools and service locations. “These Agents on Wheels bring in business that wouldn’t otherwise come to us. The vehicles allow us to touch current customers—prompting them to refer new customers to us—as well as make ourselves known in every part of The Valley.”
A competitive edge
With a large Hispanic population (approximately 87%), the Rio Grande Valley is more affected by the Mexican economy than the U.S. economy, according to Juan. Many families have relatives on both sides of the border, and Juan says that quite a few affluent Mexican citizens have second homes in The Valley.
“From an insurance perspective, doing business in The Valley has some unique challenges,” Juan continues. “Our proximity to Mexico and the Gulf Coast scares carriers that are unfamiliar with our part of the world. For folks who haven’t visited, South Texas probably conjures up images of the Wild West and hurricanes. ‘Winter Texans’ or ‘snowbirds’ who spend up to six months of the year living here have figured out that that is not the case, but sometimes it’s difficult to convince carriers of the opportunity that exists for them in The Valley.
“The Valley is a very entrepreneurial place,” Juan continues, “There aren’t too many large corporate or even government employers here to impact the area socially and economically. When I moved back here, I found the mindset of small business owners and their staff to be very pragmatic. As I delved more into our business I was able to share in the challenges of small business ownership and understand the local mindset.”
With the global economy taking a hit, Juan concedes that The Valley isn’t immune to economic upheaval. “During these times we are glad that we have more personal lines accounts. People aren’t likely to drop their car or home insurance during bad economic times,” he explains. “We have many smaller accounts and those add up to keep us going.
“SafeGuard sets itself apart from the competition in several ways,” Juan says. “We offer more options than captive agencies, including commercial coverage; we have a multi-location strategy; and we work with a variety of carriers. Also, we’re one of only a few agencies that offer farm mutual options; we represent two of the top farm mutual carriers in Texas, each focusing on different parts of the market.”
To remain personally sharp and competitive, Juan attends training sessions and events unrelated to insurance in addition to insurance-specific meetings and training events. “It keeps me on my toes to observe what other industries are doing and to see how I might translate that to the insurance industry,” Juan explains. “Regardless of the industry you’re in, there’s a temptation to fall into a rut when you hang around the same people with the same interests. It’s easy to get complacent and to stop looking for new and innovative ways to compete.”
Besides taking advantage of educational opportunities to improve professionally, Juan is an advocate of education for young people. “I’ve been speaking to school kids, Cub Scouts and high schoolers since my early NASA days, encouraging them to stay in school, graduate from high school and go on to college,” he says. “Kids will sit up and listen to me talk about education because of what I call ‘the NASA gee-whiz factor.’ Nowadays when I speak to groups I also try to promote careers in insurance.”
His community involvement includes serving as president of both the Houston and Rio Grande Valley Chapters of the National Society of Hispanic MBAs and graduating from “Leadership McAllen,” a local organization that develops up-and-coming leaders.
Juan has also served on the board of the Narciso Martinez Cultural Arts Center, an organization dedicated to preserving the cultural heritage of The Valley. He is also a member of the local Community Emergency Response Team (CERT).
For years, Juan Padron worked in an industry where the universe is the limit—literally and figuratively. In the last five years he has found another industry that is just as vast, and he is poised to explore its heights and depths as well.