Transformation Advisors, Inc.
B.I.G. Strategies for Business Excellence
In This Issue: Strategic Management for Hard Times
Volume 9, Issue 1
      The soft market never hardened and then the economy took a dive. Even where rates aren’t going down, premium per account is, as exposures decline and customers look for ways to save money. It’s what I call the Revenue Paradox. You have to work harder – expend more resources like sales and service time – to help customers reduce premiums.  The net result to you is higher expense and lower top line income. Or worse, the customers leave anyway, either out of business or looking for something they think is less expensive from a competitor.

Agency owners are spending more time in the trenches, selling and servicing accounts. On the one hand, this is where many of you really want to be anyway. Nothing is quite as personally rewarding as building and nurturing relationships with customers. The bad news may be less management and more organizational chaos, less strategic planning and more quick fixes, less leadership when it’s needed most. 

Someone reminded me that for many business owners their strategic plan lasts only as long as it takes to be confronted by their next tactical emergency.  I immediately thought of Dwight Eisenhower’s quote about strategic planning,  “Plans are nothing; planning is everything.” 

Are you thinking that the Strategic Plan you wrote last year isn’t relevant when the national economy is in the tank?  Well, your Plan may need an update.  If there was ever a time for Strategic Thinking and Strategic Management, it is now. So here’s our short list of strategic don’t and do’s during tough times.

Things to avoid and things to do, and keep on doing
 when the market and/or the economy make profitability problematic.

Don’t panic.  Repeat as often as necessary Sir Winston Churchill’s famous line, “We have nothing to fear but fear itself.”  Those who are telling us how dire the situation is do have an agenda. And it isn’t improving your business results.

  • Don’t believe everything you hear.  Was the swine flu pandemic narrowly averted because everyone stayed home or bought N-95 masks and travel insurance?
  • Don’t overreact. Making too many changes too quickly and then changing the changes will create panic in your organization. If the numbers look bad – and they might – it’s still important to make sure your next step isn’t one you’ll undo tomorrow.

Don’t isolate yourself from your vision or your team.  Trying to shield employees from business problems will cause them to feel isolated and fearful. Communicate. Make sure everyone in your organization understands what’s going wrong and what’s going well. If they understand the urgency, they will help. Communicating strategic vision as well as tactical reality keeps everyone optimistic. 

Don’t be diverted from your vision. And don’t allow your team to be distracted. No one does their best work if there is too much noise. And everyone’s best work is what you need right now.

Do get straight with the bottom line.  View profit from a strategic perspective. Planning for profit ensures your viability as a business.

  • Plan for operating profit – without contingent income.
  • Plan for pro-forma profit – independent of owner comp and perks but including reasonable compensation for owners as producers and managers. Plan to make a return on both your investment and your sweat.
  • Plan for each producer to maintain a profitable book of business – and plan to pay producers based on what you can afford – after paying all operating expenses and profit.

Do understand the difference between customers and commissions.  Especially if income is down, look at whether the problem is persistency (commission) or retention (customers).  It’s a strategic difference – and you treat them differently.

Of course you can expect some fall-off of both customers and commissions. But now may be the best time to strengthen your relationships with existing customers. Now is definitely the time to leverage your strategic advantage.

Do look critically at expenses. In many businesses, especially when times are good, we don’t keep asking hard questions about where the money goes.  When times aren’t so good, it’s time to think in terms of financial priorities. If you’re having to make sacrifices, make sure they are the right ones to make.

Do Think S M A R T.
Think about the implications of the decisions you make today on both the mid-term and the long term. And from the perspective of your strategic vision for your company. When you’re ready to make a tactical decision, ask yourself some questions.

  • How will this decision help or hinder reaching our Strategic goals?
  • How will we Measure the results of this decision? If you can’t measure it, you won’t manage it.
  • What changes should we Anticipate as a result of this decision? (Hint:  Think unintended consequences.)
  • Are we being Realistic about the expected outcome of this decision?
  • What kind of Tactical implementation will be required? Remember every “What if…?” needs a “How…?” 

These are the questions that should stay in the back of your mind when you add a job or cut back, when you increase salaries or decrease commissions, when you expand or contract your marketing outreach.

Do ACT with Strategic Intent Tough times require action. And not just any action. Every action you take to improve what may appear to be a bad situation, can be the action that sets your business above the crowd. Even the most pessimistic of the prognosticators will tell you that this, too, shall pass. It’s only a matter of time before things start to turn around again.  Do you know where you want to be when that happens?

Do look for strategic opportunities. Strategic Planning isn’t something you do when times are good.  Strategic thinking isn’t reserved for the best of times. Strategic management isn’t a goal, it’s an operating philosophy. It’s not something you have – it’s something you do. If you don’t have time to do it today, you’ll not find time to do it tomorrow.

  • Strategic Management ensures sustained excellence. 
  • Strategic Thinking guarantees positive change. 
  • Strategic Planning creates and sustains your vision.
Want to ensure that your Business Is Great?  Get a copy of our article on the Seven BIG Strategies.  There's not charge.  Just visit our website or send me an email to info@transformationadvisors.com with "Seven" in the subject line. Pam

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Pamela A. Millard

Our newsletter has a new format and a new name.  We'll continue to provide thought-provoking and useful information and tools to address key management issues facing your agency.   BIG Strategies.  Strategic management to ensure that Business Is Great, regardless of the market or the economy.  

 

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“What happens is not as important as how you react to what happens.”

-Thaddeus Golas

 

 

"Even if you're on the right track, you'll get run over if you just sit there."

- Will Rogers  

 

 

 “The people who get on in this world are the people who get up and look for the circumstances they want, and, if they can't find them, make them.”

-George Bernard Shaw

 

 

"We are continually faced by great opportunities brilliantly disguised as insoluble problems." 

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"Transformation Advisors isn't just a catchy name.  It's what we do and it's how we can help you transform your successful insurance business to one wherre every employee is a partner and every customer is an advocate."

Pamela A. Millard

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