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  • Writer's pictureChris Burand

Keeping, Leaving & Coping

An employee shortage is obvious to most agency owners, managers, and employees too. It is also obvious to almost everyone that hundreds and often thousands of agencies are bought and sold annually, and that there are about the same number of independent agencies starting up from scratch as there are existing agencies being are sold annually. So much M&A activity creates more employee movement than has ever existed in the independent agency space.

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Add in all of the existing labor laws that are now being enforced with more regularity, along with the probability that non-competes will be outlawed for regular employees in the near future, and it is easy to see why some people feel they are facing chaos.

The labor problem goes both ways, for the employer and the employee. Here are some considerations to ponder with regard to employees of agencies with and without acquisition activity, employees who want to leave after their agency has been sold, and suggestions on how to cope with a new employment environment after your agency is sold.

Keeping Employees:

I would be very rich if I had a silver bullet solution to this stressful situation. The solution is unique to each agency and their employees and always involves a combination of enticements. For staff, high quality procedures create a richer, safer, and better environment. Almost all agency owners ignore this point. However, my clients that have enacted the best procedures, and where those procedures are also enforced upon producers, have the least staff turnover. This uniformity makes the work environment more fair and fair sells.

Obviously, compensation is important because staff wages are going through the proverbial roof. It is becoming more common to see high quality commercial account executives being paid more than producers, sometimes into the six figures. The idea then of paying low wages and getting and keeping quality staff is simply a bad idea. If you want to hire high quality people, regardless of whether you are in a small town, you must pay higher wages. The benefit, assuming the agency has good procedures in place and quality producers (who needs poor producers?), is that the best people can service larger books resulting in a win for both the employer and employee.

Most people, I assume, want a job that has meaning. Post pandemic, the need for a meaningful life has taken on additional emphasis (as an aside, young people seeking life's meaning should watch Monty Python's Meaning of Life for their solution). Insurance is one of the most meaningful industries that exists -- if it is done well. An agent called me the other day who has never read any of the policies he has sold. He is providing zero benefit to his clients. He is doing a poor job and adding no real value to anyone.

However, insurance that is crafted to fit each individual insured's true needs so that if they have a life changing claim they have coverage is absolutely one of the most meaningful jobs anyone can choose. Knowing a person has all the UM/UIM coverage they need to recover from a horrible auto accident is almost as important as that person having a great surgeon because you have created the means by which that surgeon is going to be paid.

Leaving an Employer:

Throughout my career I have never seen so many employees leave agencies and I have never seen such aggressive litigation involving employee departures. Many employees are leaving because they want more meaning in their life, a better work/life balance, or they are coping with family members who have serious health problems. Others are being offered huge wage increases. Many are very unhappy with the new work environment that developed after their agency was sold.

If you are contemplating leaving your agency for any reason, I encourage you to review any applicable contracts you have signed. If you do not understand what you signed, or perhaps you signed it 20 years ago and are not sure if the law has changed in some manner that would affect the contract, then get quality employment law advice (do not go to a regular attorney). Abide by the contract to the extent of your attorney's advice. Try to leave the agency without burning bridges because while this industry employs hundreds of thousands of people, it is really quite a small community. You might think burning a bridge will not matter, but ten years down the road you might be unpleasantly surprised.

If your attorney advises that a grey area exists that might enable you to, for example, take your clients with you, then you must decide how much angst and money you are willing to spend if your former employer sues. Some of the suits I have seen over the last three years have left me wondering about some of the parties' sanity because the basis for the suits seems insane. I share this insight because I hear a lot of people say their employer would "never" sue them.

Also, the fact of the matter is that some of the buyers of agencies create unpleasant work environments which causes a lot of employees to leave. In fact, the exodus that these employers create becomes such a problem for some agencies that they sue the employees who leave simply to send the message to other employees not to leave.

Coping With Employees And Employers In An M&A Environment:

Expect employment and personnel changes after an acquisition. The lack of such changes may actually indicate a poor acquisition strategy. Often the friction that arises post-acquisition is nothing more than a clash of personalities. Neither the employer nor the employee is wrong. That said, many people work in small agencies because they prefer that environment and when the agency is sold that atmosphere is lost. Those employees will leave and a buyer should not be surprised when they do so. If those employees had wanted to work for a large corporation, they would likely already be working for one.

A number of buyers make changes to the environment of the acquired agency and then become upset when employees leave, especially if those who leave are the best account executives and producers. The more changes made, especially negative ones, the more employees will leave, especially in a tight job market. Some of the changes buyers make are especially negative such as greatly reducing the quality of the service to customers, cutting producer compensation, and increasing workloads.

All of this is great news for agency owners who need new employees because if you have a good working environment, and as insurance is a small industry and everyone knows which agencies have the best working environments, you may find people available to hire from recently purchased agencies. When you hire them, be sure to emphasize the importance of your new employee adhering to their prior contracts and take extra steps to document their compliance. If they allegedly do not adhere to those contracts, you can document that you did not aid them in violating (allegedly) those contracts. Again, many former employers sue just to sue and they sue the employee along with the new employer.

I see many producers who leave to start their own agencies with the focused purpose of building a more equitable agency as a result of the way they were treated upon the sale of their former agency. The good news is that it is currently easier to start an agency from scratch now than at any time over the last 30 years. For all practical purposes, no barriers to entry exist today relative to becoming an agent. Through networks, carrier contracts are easy to obtain, one does not need to know much of anything to get a license, and anyone can work from their bedroom. Such ease of entry is one reason thousands of new agencies have been created from scratch over the last four years.

The current employment market is quite chaotic. However, with a good working environment (and I do not mean all the soft silly stuff like playrooms, free lunches, and enlightenment seminars -- but the hard stuff like quality procedures enforced upon everyone), more opportunity exists to build something really special. I have clients that have already achieved this competitive advantage and are now growing quickly while their competitors are left scratching their heads. Are you enjoying life or scratching your head?


NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand Insurance Education, Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.

None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.


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