Field Leadership & Strategic Management Conference

Revised: 09/22/2006

Notes from the Field Leadership & Strategic Management Conference

October 10, 2004

I attended the Field Leadership and Strategic Management Conference last week in Los Angeles and will share with you both the content and my impressions of that conference.

First and foremost the purpose of the conference is to outline for all District Managers the focus goals of the Farmers Insurance Group for the upcoming year, secondly it is an opportunity to discuss with senior managers specific problems and possible solutions to those problems.

It will come as no surprise to anyone that one of the primary goals for Farmers this year is to recapture its position as the third largest insurer of automobiles in the country. It is very probable that before year end GEICO will surpass us as the fourth largest provider of automobile insurance making us number five. It is also no surprise that this will be more of a challenge in some areas than others.

What may surprise some is that we have also slipped behind Nationwide Insurance as the third largest provider of property and casualty insurance. Pride aside this represents a significant change in our strength within the marketplace and our status in the industry. There exists a large amount of analysis in the financial community that indicates that some of the short term gain by these companies cannot support sustained long term profitability and growth, but they will lead our company nonetheless.

Another focus goal is that of agency development. There continues to be an earnest desire for increased growth of our distribution system and a commitment to that system as the only method of distribution. The challenge to this goal is twofold, first to find and recruit the highest quality people to become new agency owners and the second is to revitalize the current group of owners that are no long achieving a positive business result.

The third focus goal is to continue the growth to surplus that is now, and will power our business growth throughout the coming years. That goal as you know brings with it a significant challenge to us as field underwriters to not only add policies but to add those policies that are accurately priced according to risk. It also requires senior management to apply strict fiscal control over the revenue we generate.

Another focus goal is to become the company of choice for clients, agents and employees. That goal will be achieved by providing an environment and promoting a culture within the company that attracts and retains the best people. Many of the programs are already in place and several additions and enhancements will be introduced to those programs in the coming year.

The last goal is to achieve a business operating profit through increased management effectiveness and reengineering of current operating systems. In short to make more effective use of our resources both human and financial to reduce waste and increase efficiency.

Those are the general goals for 2005. Overall I feel it was beneficial to have attended the conference. As a FNG (Freakin’ New Guy) I had only a modest expectation of what the meetings would yield and no real idea of what they would entail. I will admit to some skepticism as to whether or not any real information would be presented for our use and that the sole purpose might simply to be to fire up the sales team with a bunch of rah-rah. I will report now that there was a significant amount of both. We are all aware of the psychology that goes along with anything that has to do with sales of any type so there was no surprise at the introduction of promotions and the incentives to aspire to greatness. But a very significant tool was introduced to the attendees through the use of case studies and small discussion groups aimed at identifying problem managers and soliciting solutions from the groups to aid those managers. If any manager did not see him or herself in part in any of those studies then that person was reading the sports section of the USA Today.

The goal of these discussions was obviously aimed at getting the attendees to identify what each case study manager was doing wrong our not doing at all and what existing tools that manager could use to improve both the district and the business result of the individual agents in the district. The not so obvious aim was for individual managers to find in themselves the similarity between the case study manager and their district. I found it interesting that the groups generally were ready to fault the manager for poor leadership or communication (same thing) but quickly placed solutions to the problems of the manager on the agents by suggesting improvements to the agency’s business result rather than focus on the personal needs of the manager to make that manager more effective and valuable to the individual agent. The focus was of course to get me and everyone else to suggest that the use of internal marketing tools would positively affect the business and therefore the manager.

I did not agree then and said so and I do not agree now. The tone of the meetings was one of polite resistance. “I know what I’m doing and when I leave here I will continue that which I know has been effective in the past”. My thought was if you feel that way why come and waste the time and money? I always get something out of every meeting or class, sometimes it is in the first ten minutes sometimes it is in the last ten minutes. Trouble is I never know which ten minutes it’s going to be. It may be because I am a FNG but it is clear to me that “the times, they are a changing” and so should we if we mean to continue in our chosen business. I believe that Farmers intends to change in order to continue its business and is inviting us along. All the rhetoric suggests that the basic model of independent agents and sales managers is still valid and is the preferred method of distribution of Farmers products. The change is toward efficiency and a more fluid organization that can adapt to change within the marketplace more readily within the limits of regulation and sound business analysis of those changes in order to continue and grow in the industry and toward a group of people that are willing to change as it becomes necessary. I can think of several big companies that had a corporate culture of “we don’t care what they do now, this is the way we have always done it and this is the way we will continue to do it” that missed the opportunity to change at their discretion and pace but ultimately had to change or face elimination. It is a paradox of our character that we resist change but know that change is inevitable.

I met new managers that were full of ideas and excitement for the future and I met old managers that have been there, done that and had the t-shirt. What was scary was I met new managers that had been there, done that although they had not collected the t-shirt. I think I am where I usually am, somewhere to the right of center as we all know “it’s hard work”. I believe that our theme of “If it makes sense and makes money we’ll do it” is the correct path to take us through the changes with a minimum of disruption.

I have included a number of pages that outline the goals of Farmers for the coming year and ask that you consider those goals as you set your individual business goals. The second thing is that you provide me with those individual plans so that I may incorporate them into my plan. I can sum up my plan by saying it is my primary goal to become a valuable asset to your business while helping Farmers exceed its business goals. How all of that translates into a business plan with numbers and diagrams and 27 8x10 color glossy photos with circles and arrows and a paragraph on the back of each one remains to be seen.

The following pages outline the focus goals with some of the supporting information. I have additional information that I will add when we meet over the coming weeks to go over individual goals and plans. In the mean time I will send everyone a single page business plan outline that I will use to build my plan for the coming year. I am going to use the aim high method because I do not believe we get better by not stretching ourselves both professionally and personally.

We are on our way to posting a 99% combined ratio for this year with just a few months to go. Several ways to look at the reason for this but the best is to pat yourselves on the back and continue the march with aggressive field underwriting and selection of quality business for the companies.

We know who they are and how they are doing it for the most part. If we chose to truly compete with these companies then we would have to change our model to get onto the field before we could challenge them. Apples and Oranges, I believe we should be very focused on our strengths and their weaknesses to capitalize on what is being left on the table.

Here is an area that I have a little control over with regard to finding new candidates and training them to be able to meet this goal. Fact is that most new agents write over 150 count a month already. A subtle message is in this slide, as each of you know I have mentioned repeatedly that 37% of the current agents in Northern California write 0-70 count per month and that is an area of interest for the state executives and the market managers. The goal for us should be to lower that percentage dramatically and quickly to blip the radar. I say that not to escape detection but to rise above the ground clutter and make a positive impact on our business result.

This illustrates a significant missed opportunity and a very quick chance to turn around some of those agents in that 0-70 count bracket. Even a small drop in the 4th quadrant number will mean an increase in both production and more importantly retention as most of the programs are internal marketing programs. The anomaly in this chart is segment three. Several factors may have contributed but one that stands out in my mind would be an agency that sent letters but did not follow-up on the letters or simply retired leads without contacting the clients. Why do that?

While this seems a little nebulous with regard to specific methods to achieve the goal it does define the group think toward the culture of the organization. While no company sets out to be the worst place to work in an industry many companies can become that if there is not a demonstrated and documented effort by senior managers to foster the environment that allows people to feel valued and to encourage each person to take ownership of their position. We have all seen examples of bad places to be, that’s how many of us came to be here.

Investing in educational programs to help people achieve more in their careers reinforces the value of their contribution and avoids stagnation that often leads to discontentment.

A key to the development of people is to provide tools for accomplishing the assigned task. It is not reasonable to assume that a company will invest in programs that help people with their work if the managers do not believe in the value of those people to the organization.

It is one thing to ask more from people and quite another to ask more of yourself. This goal is a commitment by senior managers to use the good work that we do to enhance our overall success as an organization. This is the report card we will use to gage the effectiveness of the programs and policies put forth by those that steer our efforts.

Our overall result with FNWL is very good. While our multi-line competitors are flat or making small gains in life we have increased an industry leading 14% in the last year. We have over 18,000 policies with no life associated with them in our district.

This is good stuff. We will find a tremendous market for these products and we will have exclusivity for a time with the critical illness rider.

This is perhaps our most significant challenge but challenges do make us stronger. Retention is going to play a significant role in our local efforts to return Farmers to the third position of auto carriers. We will spend extra time considering our market position as we plan for 2005 auto production.

Many of us have heard the old adage that “when you are up to your butt in alligators it is hard to remember that your primary objective was to drain the swamp”. This very accurately describes most of our days. The purpose of preparing even a brief outline for a business plan is to remind us about the primary objective. I want little more than each agent in this district to have full advantage of anything that will advance his or her business. The result of that advancement is directly beneficial to both the Farmers Insurance Group of Companies and me as part of the team.

One of the most sobering facts that was presented at the FLC was that only slightly more than half of agents believe that the district manager brings anything to the table with regard to their business and that even fewer would pay for the service provided by their district office. Those are broad statements that we could look at further and qualify but I agree and want to change that feeling. Fact is my agreement with Farmers is that I provide training and technical support for my clients and the other thing is to recruit new clients. So if I receive a failing grade on two thirds of my job then a prudent business decision would suggest eliminating me or my position one. It’s up to me and I am looking toward a long career.

Not so quietly making noise in 2005

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