what works - Higginbotham

what works By Peter van Aartrijk Jr., CIC

INDEPENDEN T AGENT april 2012

A

Developing

Secret

Sauce

A

CHALLENGE: Grow while maintaining culture. A SOLUTION: Involve employees.

What We Learned

Higginbotham CEO Rusty Reid

believes he has solved the challenge of managing culture as his large agency grows. The key, he says, is to be sure every employee feels valued as a team member. The firm’s initiatives include: • An employee ownership structure enables all employees to profit from the firm’s success. • Small groups of employees that regularly go on relationshipbuilding outings. • Companywide appreciation events such as a holiday party, Halloween costume contest, chili cook-off and water activities. • A group of 40 managing directors representing all of the firm’s departments and offices to help unify its best practices. The managing directors attend an annual off-site retreat to gauge progress and strategize for the upcoming year.

Both Sides of the Bucket

The result: an environment in which all 520 employees are heard and represented, says Reid, 49. “This is a little bit of our secret sauce,” he says. “If you think of an insurance brokerage firm, you have those who fill the bucket and those who empty the bucket.” On the revenue-driving side of the house are “those who are filling the bucket. They are building relationships. There are those who, say, run a retirement plan practice, then become a managing director in our company,” he notes, adding that

they “have a seat at the table at the annual and quarterly meetings. The whole objective is to hear what they need and that we’re acting. “It also acts as a best practices platform,” he says. “Something very successful in Wichita Falls is something we want to share with all offices.” On the “emptying the bucket” side, says Reid, are those who service customers after the sale. It would be silly, he says, to hear from only those who drive revenue. Thus, some 20 team leaders representing service groups participate on the leadership team. Each office has a team leader or multiple team leaders. “The whole purpose is to have a seat at the table on how to best operate the organization on workflows, hiring metrics, carrier partners and leveraging our management system,” he says. For example, one location created efficiencies with front-end scanning, so the firm rolled it out to other offices.

Growing Through Employee Ownership

The firm was founded in Fort Worth by Paul Higginbotham in 1948. His nephew Bill Stroud purchased the firm when Higginbotham passed away, and Stroud managed it until 1989 when Reid assumed leadership. Though the office has relocated several times—eventually landing downtown—the firm’s headquarters is still in Fort Worth and it operates 16 additional

fter having built two offices from the ground up, Texasbased firm Higginbotham wouldn’t take on that challenge again, says CEO Rusty Reid. Although the firm hired talented producers to launch the offices, they were too heavily burdened with typical duties required to staff and manage an office—on top of their efforts to build their own books of business, Reid says. Thus, rather than starting an office from scratch, Higginbotham has found more success in merging with an agency and supporting its growth. The firm also stopped hiring expensive production talent, Reid says. “Top-paid producers are expected to perform at a level that justifies their pay, often setting the bar so high that they cannot achieve their production goals or validate their employment,” he says. —P.V.

offices across Texas, most of which are located in highly-populated metropolitan areas with diverse business communities. Since 1989, Higginbotham has been widely held with majority ownership by its employees. Every employee is given grants of stock appreciation rights and has the opportunity to invest in the firm. Before joining Higginbotham, Reid had been assigned to the Ft. Worth territory for American General Fire & Casualty. He learned in working with various agencies that if equity was not shared with the big producers, they would leave to build ownership elsewhere or start something new. “The one thing that attracted me to the [employee share option plan] was to spread wealth to all employees. That was the missing ingredient,” he says. “It’s to retain good folks, but for attracting good new ones too. “Employee ownership has helped fuel the firm’s growth by aligning employees’ interests—providing excellent customer service,” he says. “It has been a hallmark of Higginbotham’s employment and growth strategies since 1989.”

Value Added

B

eyond core broker services, Higginbotham provides support that attracts and retains clients, including: • Safety and loss control • Claims management • Contract review • Litigation support • Certificate validation • Electronic claims analysis • Benefit communications • Wellness programs • Employee call center • Human resources technology • FSA and HRA administration and compliance —P.V.

Leveraging Single Source Sales Strategy

The firm has practice groups for energy, construction, transportation, life science, nonprofit, public entities, financial institutions, schools and churches, health care, technology and real estate. Higginbotham’s professionals practice only within their fields of expertise—whether commercial, personal, employee benefits, life, executive compensation or retirement plans. By eliminating the need to engage multiple brokers and vendors, Higginbotham maximizes clients’ cost, coverage and administrative efficiencies, Reid says. The firm calls this concept “single source.” Moreover, because Higginbotham’s product, client and geographic mix are so diverse, a downturn in any one area will not significantly impact the firm’s success, Reid says. A sales strategy team consisting of a cross-representation of top producers manages Higginbotham’s producer training and development program. A key component of the program is cross-selling, which is the predominant driver of growth, Reid notes. Bimonthly sales strategy meetings promote collaboration for cross-selling as well as provide tips for prospecting, presenting and marketing, among other topics of interest. Financial incentives and

annual contests with prizes motivate cross-selling as well. Higginbotham’s corporate development group—staffed with six insurance professionals— is responsible for developing leads and matching prospects with appropriate producers based on practice area, industry specialization, account size and locale. The group’s sales strategy reinforces cross-selling by educating prospects on Higginbotham’s practice areas and engaging multiple producers on accounts. Higginbotham writes 16,000 personal lines customers, and many originate from that single-source business relationship, Reid says. Personal lines accounts can get big: Beyond the primary residence can be a second home and a farm and a ranch. But it’s not an accommodation to the business customer, he stresses. “A lot of times you have a customer with a very nice home, or a home that is set up in a trust, and it can

get rather complicated in certain circumstances. We want to make sure we get it right.” The single-source model started by accident a number of years ago. “I was getting many inquiries about employee benefits and began to land a couple cases,” Reid says. “But I realized early on we needed expertise in that area.” So the firm hired two specialists with life company experience. But as they added business it was clear there were other issues emerging, such as government compliance on the sale of various products. “We have always had a keen eye on what our customer needs, and part of that is we bring the absolute best product and service to that customer,” says Reid. “So we thought it would be diluted when we were a jack-of-all-trades and master of none. We thought we would build buckets of expertise.” Thus, retention went up as Higginbotham managed more business for customers, says Reid.

we wouldn’t want “Ifto have Thanksgiving dinner with them, we don’t want them as partners.

’’

Higginbotham

Ft. Worth, Texas, and 16 offices FOUNDED: 1948 GROSS REVENUES: 2009, $54.7 million; 2010, $61.1 million; 2011, $77.0 million EMPLOYEES: 520 REVENUE PER EMPLOYEE: $148,000 BUSINESS MIX: Commercial propertycasualty, 47%; benefits, 40%; personal p-c, 7%; retirement plan and investment services, 4%; life and executive compensation, 2% CARRIERS: Ace, Allstate, America First, American International, Chartis, Chubb, CNA, Fireman’s Fund, Hanover, Hartford, Liberty Mutual, Philadelphia, Progressive, Pure, Republic, Safeco, St. Paul, State Auto, Travelers, Texas Mutual, United Fire, Zenith, Zurich and some 225 more. CLIENT COUNT: Personal lines, 16,000; commercial lines, 13,000 RETENTION RATE: 92% TECHNOLOGY: CSR24 self-service certificates; Vertafore Sagitta agency management; MITS data reporting and analytics; Zywave data warehousing, claims trending/analysis, benefit plan modeling and benchmarking; and internal sales portal for managing prospect lists, tracking sales, meetings, reminders and marketing collateral. CONTACT: Rusty Reid, CIC, president, chairman and CEO; rreid@higgin botham.net; 817-347-6969; www.higginbotham.net.

“We have multiple sets of eyes on one client; you can’t help but recognize when an issue is brewing. It was a really good business strategy for us and we began to supercharge our organic growth.” The model was brought to other lines of business, combining

product and service to contain the total cost of risk (see sidebar).

Acquiring the Right Agency Partners

Since 2007, Higginbotham has had a vision to be the state’s leading broker, or what it calls “Best in Texas,” says Reid. To fulfill this vision, Higginbotham is strategically acquiring independent agencies with strong footholds in local markets and that share the firm’s business philosophies and commitment to customer service. In recent years, it has expanded operations in eight cities. There is flexibility on potential agency partnerships, Reid says. “We ask, ‘Are they a property-casualty partner or employee benefits partner, or a single source?’” Candidate partners often emerge from Higginbotham’s other offices, Reid says. “Managing directors not only are serving a client role, but they’re in that market and really are getting to know who they want to be in business with. And once that relationship is made and it’s a great cultural fit, we can work out the economics after that. It’s not a game of just buying revenue for the sake of buying revenue. We want to make sure they pass the ‘Thanksgiving test.’ If we wouldn’t want to have Thanksgiving dinner with them, we don’t want them as a partner.” The plan is working. From 1986 to 2007, the firm grew from $1 million in revenue to $37.5 million predominantly by organic growth, Reid says. After 2007, it has boosted growth by acquiring agencies. New producers supplement the existing agency staff, which means

the combined firm can leverage relationships in certain industries with “red-hot introductions into customers,” he says. Meanwhile, other staffers work on operations and growth management—rather than leaving that activity to the sales team (see sidebar).

Keeping the Brand Local

Furthermore, Higginbotham doesn’t force its brand on agency partners, Reid stresses. “We migrate them to the Higginbotham brand when it’s the right time,” he says. For instance, the firm runs three different brands in the Houston market; some names have been around for 75 years. “We want to communicate to the market that [its] local team is still there—the local touch— and we need to say we bring the collective ‘we,’” he says. “We might evolve this over three to five years. Other agencies say, ‘We need your brand in this market,’ and so the Higginbotham name will emerge [more quickly].” The firm has no plans to grow outside of the Lone Star State, Reid says. “We are basically a Texasfocused firm. We think to really do what we do and make it the best place to work for our employees and bring the best customer service to our clients, we would make a mistake to go national or even regional. “It’s a marathon, not a sprint. We still have parts of the state of Texas to really fill out. We think it is a large enough sandbox to do what we do.” I Van Aartrijk ([email protected]) is an IA contributing editor.

Reprinted with permission from Independent Agent, April 2012. On the Web at www.independentagent.com. © Independent Agent. All Rights Reserved. Foster Printing Service: 866-879-9144, www.marketingreprints.com.