The document provides guidance on conducting effective strategic business planning for an insurance agency. It recommends identifying key participants, designating a "watchdog" to ensure the plan is followed, and using a facilitator to guide discussions. The planning process should involve analyzing the agency's current state, setting goals, and determining how to achieve those goals. Internal analysis, financial benchmarks, organizational structure, workflow, automation, and office layout are important areas to examine. Conducting open discussions through exercises can reveal strengths, weaknesses and differing perspectives to inform the planning process.

1. THE MIDDLETON LETTER
Volume XIX, Number 9 August, 2003
Business Planning Essentials Likewise, it is extremely important to make sure this
individual is committed to the process.
Business planning is an extremely important factor in
the success of an insurance agency. As a matter of The most successful strategic business planning ses-
course, the best insurance agencies typically conduct sions will typically have a facilitator who is someone
the best strategic business planning sessions. Con- from either inside or outside the organization. Marsh
versely, many agencies have a business plan that is Berry facilitates several of these types of business
outdated or never taken off the shelf. While the time planning sessions both quarterly and annually via our
and energy to construct the business plan is a large services offered within APPEX (Agency Peak Per-
investment, it only makes sense to follow and use the formance EXchange). APPEX is a group of agencies
plan. Remember, the business plan that gathers dust is from across the United States that work with Marsh
providing a negative return on investment for an Berry to maximize the performance and value of their
agency. An agency that constructs a well thought out insurance operations. The facilitator of the planning
business plan will reap innumerable benefits. process will be the person who conducts the meeting.
They will be responsible for capturing all the informa-
What Is a Business Plan? tion and returning it back to the participants in an easy
A business plan establishes a roadmap for future suc- to read format. The facilitator will also draw people
cess. The business plan is a constantly evolving, liv- into conversations and work to open up those who are
ing, breathing document. Because part of business reluctant to speak. A good facilitator should also offer
planning entails developing criteria for reaching ob- suggestions for improvement and have innovative
jectives, successes and failures are easily identified, ideas to solve problems. The facilitator will also man-
quantified and monitored. Naturally, during the busi- age the flow of the conversation by curbing the domi-
ness planning process, a policing process evolves nant participants’ actions and discussions.
which holds individuals accountable for making the
plan successful. Ground rules need to be set. The ground rules spell
out very clearly how everyone is to conduct himself
How Do I Get Started? or herself throughout the planning retreat. Sample
Determine the planning session participants by identi- ground rules follow.
fying the people in the organization who are the deci-
sion makers and will help make the plan come to 1. All cell phones/beepers turned off.
2. Open and honest conversation without fear of
fruition. The people typically involved include agency
repercussions.
principals, personal/commercial lines managers, fi-
3. No hand grenades. Do not set people up for
nancial managers, operations managers and key pro- embarrassment.
ducers. This group will be held responsible for 4. Show respect for all individuals when they are
making the strategic business planning session a suc- talking.
cess. Therefore, it is important to assemble a group of 5. Do not interrupt.
people committed to the business planning process. 6. Do not have sidebar conversations while someone
else is expressing an idea.
Next, designate a watchdog over the plan. This person
will be the one who makes sure all participants are Once these items have been established, it is time to
taking the business planning process seriously. The start the business planning process. First it is impor-
watchdog is typically an internal person such as the tant to develop a mission statement. If a mission
Chief Financial Officer or Operations Manager. statement exists, this is the time to make sure that it is
A MarshBerry Publication in Memory of Carol Hammes

2. up to date. The mission statement should express the on www.MarshBerry.com in the online services sec-
purpose of the agency and why it is in business. Cor- tion, within strategic, forms and documents.
porate philosophies should also be captured in this
statement. In just a few sentences the mission state- Financial Management
ment should capture and convey the essence of the Financial performance is a key element when deter-
agency to stakeholders and the public. The planning mining where your agency is currently performing in
process and outcome should be consistent with the relation to similar size/type agencies. MarshBerry’s
mission statement. Perspectives for High Performance (PHP) is a com-
plete agency performance program that provides an
During the business planning process there are three analysis of critical ratios and performance bench-
questions that should be asked. They are: marks. With PHP, the agency can benchmark their
performance against similarly sized agencies thereby
1. Where are we at today? helping decide where strengths and weaknesses exist.
2. Where do we want to go?
3. How do we get there? Internal Operations
An analysis of the agency’s current organizational
Where Are We At Today? structure should be performed to determine whether
It is important to perform internal agency analysis to or not the agency is a highly organized and disci-
understand where your organization is at presently. plined operation with clearly established reporting
An internal agency analysis includes analyzing your relationships. An organizational chart illustrating re-
operation, identifying its strengths and weaknesses porting relationships should be available for employ-
and determining where improvements can be made. ees. An employee management and development
This analysis helps to establish objectives for your program is necessary and should include position de-
agency that will be used at the planning retreat dis- scriptions with clearly defined duties. Position de-
cussed later in this article. scriptions should also provide clearly defined
objectives for the purposes of monitoring and provid-
A great way to break the ice and to find out where the ing feedback on performance not only during a once a
strengths and weaknesses lie can be found in the “take year review process, but throughout the year. There
a panel” exercise. In this exercise, the participants are sample position descriptions available on
“take a panel” of the flip chart and answer the four www.MarshBerry.com, ranging from Chief Financial
following questions: Officer to Receptionist.
1. How do you currently view the agency? Agency workflow procedures should complement al-
2. What will the agency look like in three years? ready established agency objectives and should be as
3. What are five strengths of the agency? efficient and cost effective as possible. In order for
4. What are five weaknesses of the agency? agency staff to be better able to understand and follow
these guidelines, a procedures manual encompassing
The answers to these questions will often be quite dif- all procedures should be available to employees and
ferent. Therefore, the exercise allows everyone the should be refined periodically to reflect changes
opportunity to get his or her opinions out in the open caused by automation or current events.
in a non-threatening forum. Individuals should present
their answers to these questions to the group. Posting Automation is another key component of internal op-
these panels up around the room should be the next erations. It is important that management is involved
step as the group can constantly refer back to the indi- and committed to using automation and ensuring that
viduals’ thoughts and opinions in order to keep cen- the processes are operating efficiently and effectively.
tered on presented ideas. In conjunction with automation, an effective office
floor plan allows employees to work in an environ-
Sample questions to help guide you through the plan- ment with minimal distractions and disruptions. Easy
ning process for each of these sections are available access to computers and other business equipment
enables employees to be more effective.
The Middleton Letter Page 2 August, 2003

3. Another component of internal operations is customer Marketing Strategies
relations. After all, customer service is key to both In this stage an evaluation is made of past and current
increasing retention rates and developing new busi- marketing strategies to determine what made them
ness. It is important to ensure that customers are effective or ineffective in selling new business. This
treated with prompt and courteous service and that information will then be used to decide how to sell
their questions are answered with accurate informa- products. Some questions to ask include:
tion. In addition, obtaining feedback from customers
on a regular basis can help to continually improve the 1. Do you have a written marketing plan?
processes and also illustrate to customers that their 2. Have you developed an agency image that can be
opinion is valued. A sample of a customer survey is used for advertising and promotional material?
available on www.MarshBerry.com. Please see the 3. Do you have a trained staff to implement these
online services section within sales and marketing, changes?
forms and documents. 4. Is there a proper distribution of service and sales
oriented staff?
Sales and Marketing Management 5. Is there an established marketing area?
Sales and marketing management is another area that 6. Does the agency plan to grow through mergers
and acquisitions or organically?
needs to be analyzed in the business planning process.
In this step, the book of business should be analyzed
to determine the level of concentration in each line of The last step in the internal agency analysis is to
business. This is in order to ensure that the agency is evaluate the existing perpetuation plan or to begin the
focusing its efforts in the most profitable areas. In ad- perpetuation planning process if a plan does not exist.
dition, risks should be evaluated by line of business in For many agency owners, an agency represents a life-
order to decide where resources should be deployed. time of effort and is often the single largest asset of
agency principals. Protecting this asset is of the ut-
After analyzing the book of business, a profile can be most importance. A carefully designed perpetuation
developed for the type of business to be written in the plan makes the transfer of ownership much smoother
future, including insured characteristics, desired geo- if an agency principal retires or passes away. Some
graphic territories and lines of business. In conjunc- key considerations include determining who will be
tion, a decision needs to be made as to which the next generation of owners and how will the per-
companies will be the agency’s partners in the future. petuation plan be funded. The agency can be perpetu-
The best companies will inevitably be the ones that ated internally, which is the traditional way, or it can
share similar marketing philosophies and are commit- be perpetuated externally by selling the agency.
ted to helping the agency achieve its goals. Ranking Proper funding and a process to transfer the stock
the companies by stability, pricing competitiveness, need to be developed if perpetuating internally. Be
breadth of products offered, claims service, etc. can sure the perpetuation plan is in writing and communi-
help determine who will be the best business partners cated to all parties involved. See the April, May and
going forward. June issues of The Middleton Letter for more informa-
tion about perpetuation.
There is a sample company evaluation form available
on www.MarshBerry.com. Feel free to use this form Where Do We Want to Go?
or one that is similar to collect information from each A planning retreat should be scheduled with key play-
staff member who works with a particular company. ers in the agency to create the agency’s business plan
Once the necessary information has been collected, and objectives. Objectives will be based on the infor-
compare the ratings with the volume for each carrier. mation that was gathered in the “where are we at to-
Discuss any poor ratings with the appropriate compa- day” step. The planning retreat should take place at an
nies. Evaluate whether or not the agency should con- off-site location to minimize interruptions and should
tinue doing business with each company. It is be scheduled for 2 to 3 days. At the retreat, discuss
important to revisit this evaluation quarterly. the mission statement and the data that was
The Middleton Letter Page 3 August, 2003

4. compiled to identify strengths and weaknesses of the Creating a business plan can be the key to the future
agency. Based on this information, formulate and pri- success of an agency. In order to formulate a worka-
oritize objectives and create a budget for achieving ble plan and develop objectives that will help the
those objectives. agency meet its goals, it is essential to go through the
business planning process from analyzing the internal
How Do We Get There? operations to evaluating the current and future mar-
Once everyone agrees on what the objectives are, de- keting strategies. Quarterly meetings should be held
velop detailed action plans illustrating the necessary where revisions and monitoring will take place. An-
steps to achieve these objectives. Forecasting reve- nually, the group should meet off site to review, add
nues, expenses and profit by agency segment allows and celebrate successes of the plan.
for the prediction of internal and external variables
that can affect the outcome of the business plan. In conclusion, here are some helpful hints to keep in
Benefits of the objectives should be qualified and mind when developing a business plan. In order to
quantified. Each objective should have a person as- ensure that your goals are attainable, limit the number
signed to it who is responsible for making sure the of goals you want to achieve. Keep the scope of the
objective is achieved. Action steps to achieve the ob- objectives manageable. Also, encourage people in-
jectives are also outlined and assigned in this step. To volved in the development and implementation of the
better ensure success, a monitoring tool should be plan to “sign-off” in order to reinforce their commit-
used to determine whether or not the objective is be- ment. This sign-off process holds people accountable.
ing met as the planning process unfolds. A sample of One suggestion to motivate people is if someone does
how a segment of the business plan should appear is not meet an objective, the person pays $10 to a fund.
indicated below. Barring unforeseen circumstances, the $10 should be
paid to a fund that will be used for donations to a
Actual Projected Projected Projected charity or some other cause. This process typically
12/31/02 Year 1 Year 2 Year 3 works well because it creates just enough pressure,
Commercial Lines 1,000,000 1,250,000 1,500,000 1,750,000
healthy competition and downright embarrassment if
Growth Rates to
25% 20% 17% an objective is not achieved. Usually one missed ob-
Achieve
jective is enough to get the attention of an individual.
Objectives to Achieve Plan Date Person When funds come from someone’s own pocket, they
1. Hire 1 P&C Producer 10/31/03 D.C. are more apt to take notice. This is usually enough to
2. Move small accounts to house business 11/30/03 B.C. motivate people to take the business planning process
3. Integrate all comm. lines departments 12/31/03 J.T.
seriously.
While a true business plan is much larger in scope, the
Sample forms and additional guidelines about creating
above example illustrates how a component of the
a business plan are available on MarshBerry.com in
plan should look. Each area to be discussed will have
the online services section, within strategic forms and
a similar presentation. Putting all of these parts to-
documents.
gether forms the business plan and tools for monitor-
ing. It is not necessary to have a long text-driven
business plan. An easy to read, quick to monitor plan Albert Lloyd is a Senior Vice President and Executive
is usually the most effective. Save the long elaborate Director of APPEX at Marsh, Berry & Company, Inc.
business plans for bank financing and outside parties. He can be reached by phone at 888.371.9547 or by e-
Keep the succinct plan for the internal participants. mail at albert@marshberry.com.
THE MIDDLETON LETTER
P.O. Box 2315 LaGrange, IL 60525 (708) 354-0344
e-mail: Midletter@middletongroup.com
Web Page: www.middletongroup.com
Copyright August 2003