Motivating Producers: Carrot or Stick?

How do you motivate your salespeople to succeed?

For many independent agencies, the answer comes down to a simple conflict: carrot vs. stick.

If you ask Al Diamond, president of Agency Consulting Group, Inc., to tell you the secret to producer comp, he’ll say it’s convincing your producers that working hard doesn’t earn them more money.

“Success is what gives them more money,” Diamond says. “In order to maintain the same commission levels they’re used to generating for themselves, they have to grow their book of business every year.”

For Diamond, that means you need both the carrot and the stick to ensure success. “Whenever you provide benefit, they will buy the drawback more easily if they do badly,” he explains.

By the same token, “if you show them the upside, show them a downside,” says Diamond, who takes away 1% from both base and growth if a producer lets their volume decrease. “We keep taking away the 1% until such time that they’re either paid as an account executive because they’ve stopped selling insurance, or they understand that they have to go out and sell some new business.”

PayneWest Insurance, a $100 million-revenue agency with about 30 locations throughout Idaho, Montana, Oregon and Washington, relies more heavily on the carrot: The most productive salespeople “get raises and continue see their opportunities and their income rise because of their productivity,” says Stephen Smelley, COO. “Those who don’t either stay stagnant or they just don’t make it.”

Similarly, a new business bonus program at Baldwin Krystyn Sherman Partners in Tampa, Florida enables salespeople to earn up to an additional 15% commission on their written new business based on achieving certain thresholds. Trevor Baldwin, partner, calls it a “tiered carrot program.”

Instead of adopting an agency-wide motivation approach, Justin Moundas, executive vice president and principal at York International Agency, LLC in Harrison, New York, caters to his three personal lines producers’ individual preferences.

“With one, he doesn’t respond unless it’s a stick—the only way he corrects behavior is with heavy-handed oversight,” Moundas says. “Another one, don’t try to approach him with a stick—it’s a de-motivator.”

By contrast, the third producer—a veteran insurance salesperson of 12 years—is self-motivated. “There’s nothing I could incentivize her with or take away from her that’s going to change her behavior,” Moundas says. “She knows exactly what to do day in and day out.”

But personally, Moundas doesn’t love the carrot and stick concept. “We’re compensating these people highly,” he says. “The investment we’ve made in them, if it’s the right person, should be enough motivation to succeed.”

“The comp model is less important than getting the right people and having the right focus,” Smelley agrees. “People and focus will trump comp model every day.”

Jacquelyn Connelly is IA senior editor.