Most bonus plans are usually not tied to salary or job standards and, in most instances, agency owners end up paying a bonus to employees to do the job they were hired to do. To be effective, a bonus plan must be tied to growth and it must be fair to both employees and owners.
Many years ago I asked one of my mentors, Gary Holgate, to help me with the creation of an employee bonus plan. He resisted at first, and told me, "I have a problem with most bonus plans. They are usually not tied to salary or job standards and in most instances, you end up paying a bonus to employees to do the job they were hired to do."
As we began to develop an Incentive/Compensation Program we determined that the success of any independent insurance agency relates to growth. In order for an agency to grow, the following objectives must be achieved:
1. The agency must provide superior service to its existing customers. This will ensure that the customers will remain with the agency. It must be remembered that renewal income generates in excess of 90% of the average agency's P&C Income.
2. The agency must write every coverage possible for each customer. It is extremely important that employees constantly be advising of additional coverages available when in contact with existing customers. If account development occurs, studies have shown that the more coverages a customer has with an agency, the better the renewal retention ratio with the agency.
3. The third objective of successful growth is the writing of new customers. It is critical that employees make every effort to write the insurance for every prospective customer they come in contact with, as long as the underwriting guidelines of the insurance companies are observed.
In order for an Employee Incentive/compensation program to work, it should be designed to:
1. Create a financial reward program for all employees based on growth.
2. Create an incentive/compensation program that is fair for all employees.
3. Create an incentive/compensation program that is fair to ownership.
If an employee, either full or part-time, begins the year in the employ of the agency, and leaves before December 31, either on their own request or management's request, the employee is not eligible for their portion of the Annual Income Growth Bonus. An employee must be employed by the agency on the last day of the year to be eligible for the Annual Income Growth Bonus.
For this Employee Incentive/compensation program to work effectively, management must periodically communicate the results throughout the year.
It is recommended that each month management conduct a meeting with employees showing the status of the agency's growth and a comparison to the last year's results for the same period. This will communicate to employees how they are doing and motivate them to perform their sales and service functions at the most optimum level.
Copyright 2001 by Jack Fries. Used with permission.