When your insurance agency is starting out, culture is not something you really have to worry about. For most new agencies, it’s just you and maybe a friend, family member, or colleague you’ve known for some time. However, as you start hiring additional “outside” staff, the agency culture will shift and change over time. This is also true for established agencies. The culture you started off with may be drastically different 5 years later.
One of the “unicorn” Silicon Valley insurtech startups had their internal culture exposed to the world when their founder and CEO was ousted a couple of years ago. The culture, as reported, resembled more of a frat house instead of a multi billion dollar valued company. Your agency may not have the issue of hyper growth, where you hire hundreds of people in one year. However, even one bad hire can dramatically change your company culture, and cost you much more than the “hard costs” (compensation and benefits) of that bad hire. The “soft costs” are often the ones that hurt your insurance agency and cost you more in the long run.
The true soft cost of a bad hire can be significant and is often overlooked. In a survey conducted by SHRM* of over 2100 CFOs regarding the cost of bad hires, 39% were concerned about degraded staff morale, 34% were concerned about a drop in productivity, and only 25% were concerned primarily with monetary costs. 95% of respondents said a poor hiring decision at least somewhat impacts the morale of the team while 35% said morale is greatly affected. So what does this mean?
Let’s start with employee morale. The truth is employee morale can be significantly affected by a bad hire. At best a bad hire may temporarily affect production or efficiency. At worst, a bad hire can be a cancer in any organization, with dire consequences for a small agency.
The bad hire can create problems with issues such as: bad attitude, poor work ethic, poor work performance, or personality conflicts. The bad hire’s work performance or work ethic can result in increasing workload for other employees that may have to pick up the slack. It can even lower the bar for other employees due to his/her poor performance.
Many agencies believe the top-performing employee sets the bar for all employees. While that may be true for other engaged and motivated employees, the truth is the bottom employee actually sets the bar for most employees.
For example, have you ever been late to a meeting? How badly did you feel walking into the meeting late? Now, imagine three minutes later, another co-worker walks in and apologizes for being late. What happens to that anxiety and stress you felt when you were late? For most people, the stress goes away. Why? Because in your mind you are thinking, “Whew! At least I’m not as late as he was.” The last person to the meeting set the bar, the same as the lowest performing employee will set the bar for your agency.
“There’s no I in team, but there’s a M and E.”
Another negative effect of the bad hire is personality conflicts with other employees. There is always one person that believes in “There’s no “I” in team, but there’s an “M. and E.” Whether the person is not a team player, or simply abrasive, an agency cannot ignore an employee who is difficult for all others to get along with. You cannot have a solid cohesive team, with one person that just doesn’t get along, regardless of his/her performance. The atmosphere of the agency will be directly affected by it, which will ultimately impact results.
The “Negative Ned or Negative Nellie.” Negativity is another critical effect the bad hire can bring to the company. Have you ever been around that person who’s negative towards everything? This person is negative towards everything from meetings, trainings, to management directives. What is worse is when the negatively leads to “bad mouthing” the agency, spreading the negativity around the organization. This bad hire becomes a “dark cloud” that can spread throughout the agency and infect others. Many times these employees add even more problems upon departure. The longer the bad hire stays with the agency, the worse the “infection.”
One last comment about employee morale. The effect of the bad hire many times is not temporary, but can linger with the agency. How an agency handles a bad hire, may determine the extent of the effect. If the situation isn’t resolved in a proper manner, the risk is extremely high the agency will increase the chance of turnover of other employees. The good employees may seek alternate employment because of the negative effects the bad hire made and the agency’s response or lack of. Lastly, the opportunity cost of money, time, and effort that could have been focused on other areas can be enormous.
One major area of soft costs that is often forgotten is the customer experience. A bad hire can create a bad customer experience, whether it’s a potential customer, new customer, or an existing customer. The bad hire can ruin the experience for a prospective customer where it may take years before this prospect let’s your company back in the door, if at all. Worse yet, the bad hire can ruin a relationship that took years to build. Luckily some loyal customers are forgiving. However, this may be the crack in the door for that other agency to BOR your client. Can you really afford to have many bad hires?
So what can you do to reduce and prevent bad hires and create the culture you want?
1. Decide on the culture you want/your core values: For example, is it fast paced or relaxed? Family oriented or work all hours? Win and move on or high service orientation? Team or individual focused?
2. Recruit and interview for cultural fit: Giant Asterisk - Cultural fit doesn’t mean hiring everyone that’s the same or eliminating diversity. It means you screen for values and traits that fit your company culture. Sample screening questions:
We will have additional interview training in the future program, Hire4Excellence, in our private membership area.
3. Communicate early and often: The leaders of the agency must consistently communicate the values that are critical to its culture and success. It’s not something that’s just written on the wall, but an ongoing process. Remember, it’s "Do as I do, and say.” The leaders of the agency also communicate through their actions. You set the tone for what’s acceptable and wanted not just through your words, but your actions as well. You can't preach work ethic when you are the last one in every morning.
4. Coach, counsel, reward: Coach employees consistently on the actions and behaviors you are seeking. Counsel employees appropriately and immediately when they are behaving inconsistent with your company culture. On the flip side, don’t forget to celebrate and reward, when you catch them doing something right.
5. The 3 “Ts” when someone isn’t working out: If an employee just isn’t working out and is affecting your company culture, follow the 3 Ts in order.
Developing a great agency culture doesn’t happen by accident. It requires discussion, planning and constant implementation. Although this may take time and effort to develop and maintain, it’s well worth it. A great agency culture can help you achieve your financial goals, retain talented employees, and reduce the soft costs of bad hires.
Share your agency culture. We’d love to hear about your good and bad experience in the blog comments section.
* http://www.shrm.org 2/15/16 "Morale, Productivity Suffer from Bad HIres," Roy Maurer
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