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Risky business Featured

7:36am EDT July 29, 2005
If there is a single word that describes what animates the culture at the Graham Co., it could very well be “scrutiny.” Meticulous attention to detail dominates when it comes to selecting employees, evaluating clients’ risks and simply conducting the day-to-day work at the insurance brokerage.

Not surprisingly, that preoccupation with particulars starts at the top of the organization.

Says Bill Graham, chairman and CEO: “I’m the most compulsive individual you’ll ever meet.”

The extraordinary attention to detail isn’t excessive, given the Graham Co.’s business. The company goes after clients who are the riskiest of the risky. Contractors doing steel erection on new skyscrapers in crowded, bustling mid-town Manhattan or demolishing old ones in the same kind of environment rely on the brokerage for policies that cover every exposure imaginable.

Graham achieves high levels of performance from his employees by applying a grueling screening process that burns off all but the most promising of candidates. Even at that, a considerable number don’t make the cut by the time their three years of training at the company ends.

With a 98 percent client retention rate, finding those high performers pays off handsomely for his 165-employee company, Graham says. Establishing long-term relationships between Graham Co. employees and clients means the business is unlikely to go anywhere else, he says — even if they could find the same quality of service, something he says is unlikely.

Graham talked with Smart Business about the rewards of covering risk and how hiring and compensating top performers keeps Graham Co.’s clients happy.

How would you describe the clients you represent?

Our customers are larger. We normally would not want to develop a relationship with a customer that does not pay at least $500,000 a year in premiums. If you were painting the Walt Whitman Bridge and you were trying to figure out what safety harnesses and which tie-off procedures you would have to have, you would really need us.

Our safety department employees are going to the top of all of the bridges, 450 feet up in the air, on a weekly basis, as the Delaware Port Authority bridges are being painted. As a broker, we place coverage with insurance companies that have an appetite for writing insurance for demolition contractors or people 450 feet in the air painting bridges.

So if there are big claims, like if three or four painters drop at one time, that would be an $8 million to $10 million claim, depending on their circumstances. If we don’t do a good job, if there is a major uncovered claim, we would be sued for not having it covered.

So we do have a high amount of risk. When a claim happens, it better be covered.

How do you maintain such a high client retention rate?

It’s just having very, very smart, articulate people that are very well-trained in insurance handling all of a customer’s insurance needs on a day-to-day basis. I would say that maybe a day doesn’t go by when a client is not in contact with an account manager, claims consultant, producer or loss control person.

So being available when questions or problems come up and being able to turn responses around very quickly, solving problems very quickly, is really key to customer satisfaction.

It’s difficult to describe all of the things that come up in the course of a day for someone running a business, but there are many things, and the way they are handled a lot of times plays a big part in keeping our customers happy. Their lawyer may have told them they need a certain type of coverage, and the coverage may not be available.

So we would talk to them and talk to their lawyer and tactfully explain that there may be a better way to handle that issue or concern. So being readily available, providing practical solutions to challenges or problems, is really the key to success over the long term.

How does the high rate of employee retention benefit your business?

Keeping customers happy by having low employee turnover is really crucial. Our customers have relationships with someone we call a producer, which is sort of like a quarterback for the service provided and also responsible for new business development.

There’s also an account manager and all of the day-to-day questions that come up — maybe a customer is asked to sign a contract. They would never do that without faxing it to us and have the account manager review it, make suggestions or changes, or maybe even talk with the customer who has asked our client to sign the contract. They may be required to purchase various coverages, maybe a railroad protection policy or other form of coverage for a specific job or project or maybe explain the coverage our customer has to one of their vendors.

All of these day-to-day service needs are handled by the account manager. And they also have a claims consultant that advises them on a continuing basis, the status, what direction we’re taking, suggesting alternatives or a settlement. Over a period of years, a close relationship develops between our customer and different people at our customer and the account manager, the producer, the claims consultant and people in our loss control department.

Each of our people has 15 or 20 customers, whereas at other brokerage firms they might have 300 or 500. So a very close relationship develops. Now, if the person servicing the account changed every year, which happens at a lot of brokerages, that would do a lot to erode the bond between the Graham Co. and the customer.

We do have very high retention of customers and employees, and the two really go hand in hand. I go around and shine our employees’ shoes once a week to make sure they’re happy. We do have to cut employees sometimes; the 98 percent retention rate doesn’t include the people we ask to go somewhere else.

I would say 20 percent to 25 percent of the people we hire, before the end of three years, we feel are not a fit and we suggest it might be good if they looked somewhere else.

How do you select employees?

We might interview 100 people before we select one to go through the process. It’s very difficult to find what we’re looking for.

But we’re relentless to make sure that the person we decide to hire will really satisfy our customers, will develop strong relationships with insurance companies and will fit in well with the people in our company because those three relationships are very important.

Many people think we won’t hire from the insurance business. That’s not true. What we don’t do is limit our hiring to the insurance industry.

When we hire someone from the insurance industry, we put them through the same training as someone from General Electric would get, exactly the same training.

How do you maintain such a high employee retention rate?

There are a number of factors that help us retain people. One, we’re really selective about who we hire. We go through a grueling two-month process before we hire them, and even with that, it’s not always perfect. And then we give them extensive training so they’re very self-confident and they know they’re with the best organization and have better training than anybody they’ll compete with.

We hire people that really want to excel, and I just don’t think they would really feel equipped without the right training. All of our producers, account managers and claims consultants have private offices, and they’re 50 percent to 75 percent bigger than what a design firm and architect recommended us to provide. The reason is our people put in a lot of hours, so I want them to have the most beautiful, comfortable, inspiring work environment you could possibly dream of.

We have the best equipment, we provide home computers for them, so if someone wants to work three hours on a Sunday, they just bring up the home office at their desk at home. We have a lot of company functions, a great employee-spouse dinner during the holidays. We have a company picnic that 400 or 500 people attend.

People develop close relationships, and a lot of them develop relationships outside of work. Those bonds do a lot to keep people together.

We also have a very complete benefits package. The Graham Co. pays the full cost of all employee and dependents medical coverage, long-term and short-term disability. We pay people very well, and we have opportunities for people to make more money than they would in other places.

But my feeling is that if we paid people a lot less, they would still want to work for us. I think it’s the notion of playing on an all-star team.

What kind of people do you look for?

The Graham Co. is a kind of unique organization. We hire people that are very, very successful in various backgrounds. Only about 5 percent or 10 percent of our people worked in the insurance industry before joining us. We hire people from places like Bechtel Corp., Xerox, General Electric and many others.

What we hire are the brightest and best. We have an extensive interview process. Typically, a person would come in for 10 to 14 interviews with different people at the Graham Co.

They would go for a day of psychological testing and then would go for what I would call a high-pressure panel interview with a psychologist and three other people, including me ... for a final interview.

So we are able to get very, very good people, very, very smart people and then, even if they can’t spell insurance when we hire them, we put them in a classroom for six months and they learn policy forms, contracts, manuscript endorsements. After that, they continue in a very structured training program and on-the-job training.

And it’s not what many companies call on-the-job training, where you sit by someone’s desk and watch them make mistakes and learn to make those same mistakes. This is supervised by 13 people in our technical development department, and these people do nothing but education and training.

So by getting very, very good people and giving them great training, we’re able to put together very extensive risk management studies for prospective customers, and we’re also able to do a very good job marketing to insurance companies what are typically considered difficult or high-hazard risks by the insurance companies.

HOW TO REACH: The Graham Co., http://www.grahamco.com