Peer Pressure Fuels Agency Performance

APPEX association establishes 250 benchmarks in aquarterly report

When it comes to improving the financial performance and valueof an agency, there is nothing like peer pressure to get the jobdone.

That's the concept driving improvement for members of APPEX, anagency association formed by Concord, Ohio-based managementconsulting firm Marsh, Berry & Company Inc.

Known in the insurance industry for its work as an agencyvaluator, Marsh Berry formed Agency Peak Performance Exchange(APPEX) back in 1997. Its purpose, explained Albert Lloyd, MarshBerry senior vice president and executive director of APPEX,remains the same as it was at its founding to improve performanceby gauging how well an agency is doing against its peers and togive agency heads insight into how to make their organizationsthrough learning the experiences of others.

The association today has 85 privately-held agency members fromacross the country with average revenues of $7.2 million.

It is a program, Mr. Lloyd points out, that first establishesagency benchmarks with a quarterly report, called Perspectives forHigh Performance. The report lists 250 benchmarks, comparing anindividual member's performance against the industry based on itsrevenue size. The data used is collected from Marsh Berry's owndata base, he said.

The members use this information for comparison and to determineif they are reaching the performance of excellence they seek. Butwhat is unique about APPEX is the 12 PAX meetings held twice eachyear. The purpose of these meetings is for members to meet anddiscuss their performance with other members.

The members, who are set up in groups of non-competing agencies(referred to as a virtual board of directors), discuss theirfinancial results with one another. They then discuss with oneanother what needs to be done at each agency to improve agencyperformance. To ensure vital financial information is neverreleased, each APPEX member signs a confidentiality agreement tonever reveal information about what is discussed at the meetings,Mr. Lloyd noted.

“The whole goal is if you bring a problem to that group,inevitably, someone has a solution, because they have been throughthat before. And if they don't, then they know of someone who hasbeen through it and has a solution for it,” he explained. “Itreally shortens the learning curve, or the time to find a solutionto a problem for the members.”

For an indicator of how well the process works, Mr. Lloydprovided a look at how well agencies that have been a part of APPEXhave improved since the founding of the group. Of those who joinedin 1997, by 2003, he reported that agency revenues grew 51 percentand that agency values increased by 102 percent. Although Mr. Lloyddid not have comparable industrywide performance figures over thesame time frame, he believes that these member performance figureswere well above the industry averages.

Brad Havemeier, president of Gulfshore Insurance Inc., inNaples, Fla., who has been a member since 1997, said APPEX hasproven to be a good opportunity to improve his business, whichtoday boasts in excess of $10 million in revenue and more than 75employees in the Naples office and a second office in Marco Island,Fla. The agency is a regional property-casualty insurancegeneralist, he said.

“We strive to be in the top 25 percentile of our businesspeers,” he said. “This is not something for everyone.”

Chief executives who report to the group of mentors must make acommitment for improvement by the next meeting, observed Mr.Havemeier. If the executive has not made that improvement, theexecutive has to explain why to the group, he said.

“We want sincere, committed people who come prepared to thesemeetings,” said Mr. Havemeier. “We have a strong requirement thatsenior management attend these meetings. There is no place to hidein these groups.”

“We can't just take anybody,” said Mr. Lloyd, explaining thatapplicants are selected from among hundreds waiting to join APPEX.“This group wants results and improvements. You will not find ahigher group of performers anywhere.”

To qualify for membership, the agency must generate $3 millionor more in revenue, be open to new ideas, and be willing to sharefinancial information, concepts and ideas, said Mr. Lloyd.

It is also not cheap to be a member. There is a one-timeenrollment fee of $8,000 and monthly dues of $700, plus symposiumregistration fees. Members also have to cover their own expensesfor the symposium meetings. But agents feel the benefits outweighthe costs.

A new member, David McDonnell, president of McDonnell Insurancein Memphis, Tenn., said he was looking for the ability to benchmarkhis company of 47 employees and compare it to the industry average.A commercial p-c firm that also handles a full line of employeebenefits and some personal lines business, he was under theimpression that his agency was a top performer. But when he got hisperformance report from Marsh Berry, he realized his agency was notdoing as well as he thought. Looking for help, APPEX was the placehe turned.

“Consultants are good, but it is good to be with other agenciesfrom around the country to get information on where to go,” saidMr. McDonnell.

He is looking for good, solid organic growth for his agency anda strong perpetuation plan involving his producers in the agency'sfuture.

“We are looking at 15-to-20 percent organic revenue growth inthe future,” said Mr. McDonnell. “Without APPEX, we would not havehad the same confidence to reach that goal.”

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, March 25, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.