Think Bold. Grow Your Human Capital: MarshBerry Commentary.
Think Bold. Grow Your Human Capital: MarshBerry Commentary
Peter Drucker wrote in The Effective Executive, "An organization that just perpetuates today's level of vision, excellence and accomplishments has lost the capacity to adapt. And since the one and only thing in human affairs is change, it will not be capable of survival in a changed tomorrow." Growth, new people, and new ideas are required. Today's level of vision, excellence and accomplishment is not enough - what will it be like tomorrow?
What is your business doing to embrace change and plan for the future?
People are the lifeblood of your organization - and when the people "run out" a company won't survive or perpetuate. When a business fails to advance its people, recruit fresh talent, constantly upgrade human resources - then it grows stale.
If you are like many insurance agencies in today's market, the answer could be "looking to sell." A robust merger and acquisition (M&A) market has afforded even average agencies a seat at the deal table with high valuations. For progressive agencies with an M&A strategy, there has never been a more dynamic time in the industry for merging, acquiring and selling, if that's the plan.
It's one thing to sell by choice - and another to sell because of necessity. And, without a plan for succession, an agency paints itself into a corner with a single option. Is selling vs. perpetuating what you envision for your people?
For many owners, the answer is, "Well, of course not."
Business is personal. (We are talking about people, after all.) The way you advance the quality of your people, and how you provide career paths and opportunities for ownership, can create a path toward successful perpetuation. What's getting in your way? Here are three strategies that address common perpetuation roadblocks.
Sell Stock Early - and to More Owners
Today's high valuation rates make selling stock to a single owner a challenging proposition. Most individuals simply can't afford it.
A common mistake we see is when ownership of the business is concentrated in one person - or just a few people. For a single person to buy out a business today is often an insurmountable task.
Owners should begin selling stock sooner and create stock opportunities for more people. This way, ownership can become an affordable reality for key employees in the business. And when they can begin "taking stock" in a business early on, they have skin in the game, typically leading to a greater commitment to the company's overall success.
This "skin in the game" also helps to ease a compounding issue, which is agency profitability. Many agencies do not generate a profit margin that is large enough for owners to receive distributions that allow them to pay the debt they owe. Agency owners need to have open, strategic discussions about compensation and expenses - and need to have long-term financial discipline for the perpetuation plan to work.
Think Beyond the Owner
Usually, when we think about transfer of ownership and perpetuation, we assume that the discussion is only about the owner. But it's critical to consider succession plans for other key employees - corporate leaders along with producers.
How will you prepare for a new CFO? What happens to a key producer's book of business if he or she decides to retire or move on? A thoughtful perpetuation plan goes beyond the owner and involves staff that are essential for maintaining a profitable, successful business.
Ultimately, insurance firms need to be proactive in recruiting efforts - and leaders should always be asking the question: Who could replace me if I left the business today? If there is no one currently in the organization that is being mentored to assume your role, then you should be working to bring in someone new.
One focus you'll hear about at MarshBerry 360 this year is the importance of recruiting. The reality is, most young people looking for jobs today are not seeking positions in the insurance industry. This fact combined with the super competitive labor market means we need to be proactive, strategic and constant in our recruiting efforts, especially if you want your business to grow and perpetuate.
Recruiting needs to be a top priority. Who in your organization is responsible for recruiting? Is it someone's primary job function? Or is it number four or five on someone else's list, never to make it to number one because it doesn't feel urgent enough?
Institutionalize Policies, Procedures, & Relationships
Perpetuation requires a culture of mentorship and professional development.
Organizations that are committed to grooming the next generation of leaders are developing a ready bench of talent prepared to take the business to the next level. This requires written policies and procedures that are regularly reviewed and improved upon. And, from a producer perspective, preparing the next generation of hard-driving salespeople means giving more responsibility to service and support staff so clients become loyal to the firm, not one individual (who will eventually retire or possibly move on). Essentially, we need to focus on institutionalizing client relationships, so perpetuation doesn't negatively impact clients' trust and satisfaction.
The Bottom Line: Think Bold
The reality is, today's robust M&A market has made selling more appealing than ever, and when this option is executed strategically, it can be a real win for the buyer and seller.
However, owners who want to remain independent should not feel like selling today is the only choice. By creating a strategic plan and establishing a culture of talent development, owners can secure the future of their organizations and grow strong for generations to come.
Ready to build a strategy for your agency's future? Attend the MarshBerry 360. Register today at (http://www.MarshBerry.com/360) www.MarshBerry.com/360.
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|Date:||May 3, 2019|
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