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The dynamics of the risk manager-broker relationship.

The Dynamics of the Risk Manager-Broker Relationship

The risk manager-broker relationship is a complex interaction. Like many relationships, it can be characterized by mutual dependence, shared struggle, power and positive reinforcement. A brief description of these terms will help evaluate the conflicting behaviors of both parties and may offer insitghtful clues as to how the relationship can be improved.

Mutual dependence occurs when two people seek to satisfy a need with the assistance of the other. Shared struggle is the process of personal growth when two or more people solve a problem. Power is the ability to influence another's behavior, albeit positive or negative. For instance, a compensation plan that provides a risk manager with a bonus if certain goals are achieved demonstrates how an organization uses power (money) to motivate an employee. On the other hand, a person who satisfies his or her own needs to the exclusion, or detriment, of others is using negative power. Positive reinforcement is a reward, ranging from a smile or thank you to fame and fortune, that is provided after a person performs a desired behavior.

The risk manager depends on the broker for technical expertise and access to worldwide insurance markets. For his or her services, the broker must be compensated. The underlying element of this relationship is dependence, which should result in a satisfying relationship for both parties.

Shared struggle helps unite people. Risk managers and brokers have ample opportunity to share struggle thanks to the underwriting community. Most can identify with the satisfaction and fulfillment that come after a successful, yet difficult, negotiation process. Both parties sway between negative feelings when failure is perceived and euphoria when success is achieved. This ambivalence creates anxiety, resulting in relief when the process is concluded regardless of the outcome.

Shared struggle also presents an opportunity for personal growth. The expression "No pain, no gain" is right on the mark. In "The Road Less Traveled," author Scott Peck refers to the need to suffer and experience pain in order to grow. As frightening as this thought may be, it is critical to the risk manager-broker relationship.

While it is easy to envision personal growth when results are positive, one must recognize that growth can occur from a negative outcome. Risk managers must realize that brokers will not hit home runs on every project. When a negative experience is successfully integrated growth will still occur. For example, consider a general liability renewal in 1986 that results in a 50 percent premium increase. While the chief financial officer may be irate at the increase, the broker may have done an excellent job. Indeed, given the conditions in the insurance market at that time, the goal should have been to minimize the damage.

Another dynamic in the risk manager-broker relationship is the use of power. Someone who feels as though they are being dominated by another person can become a resistor. If the power feels overwhelming, then this person may displace his or her frustration and aggression onto weaker parties. If the power is absolute, it may cause submission. However, in reality these extremes rarely exist. More often, the balance of power is dynamic because it is constantly changing. One way to influence this balance is through positive reinforcement.

Risk managers are in an ideal position to reward brokers for their efforts. A letter or phone call expressing thanks for a job well done can have tremendous impact on a broker. Still, some risk managers find these tasks unnecessary. After all, the brokers are paid for their work, and people may feel that "business is business." But remember, to effectively deal with people, one must be sensitive to, and attempt to satisfy, their needs.

Brokers can also reinforce the risk manager's performance. However, when a broker verbalizes reinforcement it is often construed as a form of prostitution. Regardless, if a broker wants to commend a risk manager, he or she should do it. For example, a risk manager who can identify the concerns of an underwriter and make an effective presentation to allay these fears deserves positive reinforcement.

Brokers sometimes complain that they must constantly stroke insecure risk managers. This false praise is a sure way to erode credibility. The situation is exacerbated by the broker's organization which often encourages this behavior. Yet, at the same time, some risk managers feel they must be objective when dealing with brokers. Indeed, risk managers and brokers must remain loyal to their respective organizations. But if they maintain a friendly relationship, it will be difficult for the risk manager to remain objective.

A Strained Relationship

Why is the risk manager-broker relationship so often strained? The stresses involved may be due to different allegiances, incompatible personalities and poor communication. Certainly, both parties' primary allegiance is to their employer. And because the loyalties of the risk manager and broker differ, the relationship lacks total commitment. This inevitably leads to conflict.

Sometimes the personalities of the risk manager and broker clash. Do not let this get out of hand. Diffuse this potentially damaging situation early on by requesting a transfer to another account.

Poor communication is pervasive in our society and contributes to poor risk manager-broker relationships. One trouble spot is the failure to express one's feelings because of internal discomfort at being ridiculed. Another weak area is listening skills. Oftentimes a person will think about what to say while the other person is still talking. This is not listening but rather a narcissistic attempt to impress others nearby.

In an effective risk manager-broker relationship, both parties recognize their responsibilities and behave accordingly. The risk manager is responsible for accurately communicating goals and expectations to the broker. If this is not done, the broker will project his or her own expectations onto the risk manager. The chances of those expectations being in sync with the risk manager's are remote. The result can be a grueling relationship for both parties.

By the same token, the broker is responsible for conveying to the risk manager the efficiency of his or her efforts and the results achieved. Indeed, for a risk manager to assign proper value to a broker's efforts, he or she must understand the effort involved. How this is communicated is up to the broker. Each risk manager works differently, but once a mutual understanding is reached, a strong working relationship should result.

Risk managers and brokers often deal with situations that create conflict. Ideally, conflict should be dealt with as it occurs. Usually, however, conflict is shunned and anger and hostility suppressed. As a result, risk managers and brokers resort to power plays. The power plays risk managers use on brokers include unreasonable requests, frequent broker competitions and, in extreme situations, complete disregard for the broker as a person.

Admittedly, many brokers have had humiliating experiences inflicted on them by a risk manager. One broker described the time a client arranged a one-day meeting in Europe. The risk manager and broker were to meet there and return to the United States the next day. The broker arrived on time but the risk manager never showed. In fact, the risk manager never attempted to contact the broker to inform him that the meeting was canceled. Without question, this is unacceptable and unprofessional behavior.

In "Games People Play" author Eric Berne describes instances where people seek out minor injustices and then feel entitled to vent unlimited rage. For example, brokers often try to erode a risk manager's power base. This entails going over a risk manager's head, arriving late to meetings and instilling a sense of indebtedness in a risk manager.

When brokers attempt to secure business by approaching a risk manager's superior, they are committing business suicide. Some brokers feel this behavior is justified because they think the risk manager's decision in a matter was not fair. The message sent to the risk manager is that the broker perceives him or her as incompetent and powerless. It demonstrates a lack of respect for the risk manager's position and the risk manager as a person.

Arriving late to meetings is a way to let the risk manager know that the broker is not powerless. Being late is a subtle way of telling a risk manager, or anyone else waiting, that the broker's time is more valuable. However, this ploy is often counterproductive because it angers the risk manager who may in turn assert more power.

Instilling a sense of indebtedness in a risk manager is a clever appeal to one's guilt feelings. This is evident when a broker performs a service for a risk manager but is not awarded the business. Sometimes a risk manager will award a small piece of business in an attempt to appease the broker. Unfortunately, the broker often uses it against the risk manager.

Comments such as "Thanks for the bone" or "All that work hardly seems worth it" or "I thought we were friends" are intended to make the risk manager feel guilty. These comments will also anger the risk manager. They demonstrate egocentric and self-serving behavior on the part of the broker. Also, it demonstrates an inability on the part of the broker to empathize with the difficult decisions a risk manager has to make.

The key to a successful and satisfying relationship between a risk manager and broker lies in recognizing the dynamics of the interaction. A conscious effort to deal with conflict is continually needed. Pay attention to your feelings when working with someone. If an action or behavior makes you feel uncomfortable, draw attention to it. Risk managers and brokers should recognize and accept that this is an important interpersonal relationship that deserves their full attention, energy and honesty.

George F. Blackall is manager of brokerage/risk management for the General Electric Capital Corp. in Stamford, CT.
COPYRIGHT 1990 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Author:Blackall, George F.
Publication:Risk Management
Date:Aug 1, 1990
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