Things were just fine at The HDH Group Inc. in 2000.
“We were on a roll of 25 conservative years of growth, and certainly you couldn’t quarrel with our results,” says Frank G. Mikan, who became president of the company in the same year.
Yet, Mikan knew the insurance broker could be better, and he was going to find out how by doing a deep analysis of cost.
While looking at the number of prospective clients HDH pursued and the number of those that became actual clients, he noticed a gap at the company, which has approximately $300 million per year of premium volume for property casualty and benefits.
“To me, it indicated that we were looking at perspective clients but not to a level that was allowing us to succeed at a percentage that I would like,” he says. “So, we were looking at opportunities that weren’t really opportunities as much as they were just exchanges of information that led to nowhere. That becomes an expensive item.”
He realized that while there were some big scores, a lot of time and money was spent chasing clients who weren’t the best fit for the company
“You tend to think, ‘Hey, look at this. We wrote a $50,000 revenue account.’ But if you chased four others unsuccessfully and it ran you $35,000 in that unsuccessful chase, you really won $15,000, not $50,000,” he says.
“If you’re looking at a lot of clients for which there’s no mutual future for you and the client, why would you even start down that road? Why would you not try to identify better opportunities with better fits and have a much higher degree of success?”
Mikan realizes it is a crazy thought to turn down possible revenue from possible clients, especially if you want to grow. But, you have to remember that the more you pursue new clients, the less time you have to devote to your current clients.
“I think you have to be realistic in what you do and how you do it,” he says. “Not only from the standpoint of prospective clients but from the standpoint of our existing clients.
“If we are chasing down things we’ll never catch, that means that we are diverting attention to a prospective client that will go nowhere and maybe a client who we’ve had for a while is not reaching the person they need to reach here.”
You have to be honest with yourself and the client and evaluate if the client really needs your help. While on the surface the increase in revenue seems great, it comes with a stigma.
“There is merit to bringing in every revenue dollar you can because it just increases the numbers on your balance sheet,” he says. “That’s one way to look at it. But the truth of the matter is, if you aren’t doing anything impactful for that client, then you are, to a degree, commoditizing yourself. Commodities are very, very replaceable.”
If you aren’t delivering a service that a client values, the likelihood of you retaining that client for a long time is slim.
“Once you start out there writing every dollar you can for the sake of writing it, those dollars churn,” he says. “You don’t develop a relationship, you’re not really solving a problem, you do not have a long-term client base. You are going to force yourself every year into having to bring in mountains of new dollars to replace the clients who see you as a commodity and very replaceable.”
Mikan wanted to make a change and lead a company that is more focused on the client and only pursue possibilities that could result in mutual relationships. That meant listening to the clients and finding out how HDH could help them — or if HDH could help them at all.
“At the end of the day, what’s it about for the client? They need to live to fight another day, do it profitably, and we need to know how that happens for them,” he says. “Because, if it doesn’t happen, insurance discussions can become secondary very quickly. So, that was key in what we did and why we did it.”
State your case
After discovering the gap between clients chased and clients caught, Mikan was essentially telling his sales executives to limit the amount of opportunities they had to make money. Salespeople don’t want to hear that, so you better have a compelling argument or data to back why your idea is worth giving a try.
“Anything you do like this, you’re going to have to have a result,” he says.
You also have to present the change in an understanding manner. Mikan stressed that he knew the company was doing great, but he thought it could do better. He showed everyone the data he researched and asked, not told, employees to give his idea a chance. If his idea backfired, he wouldn’t hesitate in admitting he was wrong and switch back to the old method of doing business.
“It wasn’t the sort of thing, ‘Here it is, like it or lump it,’” he says.
You want to communicate you aren’t fixing something that already works; you are just trying to improve in areas you know can be better.
“But we’ve never really said to anybody, ‘If you do this, you will be an overwhelming success.’ That’s ridiculous,” he says.
“But we did say, ‘We think that your chances of success will increase if we do this.’”
Yet, no matter how you present the change, not everyone will be happy.
“It’s like anything you do, you always get people to buy in to that very quickly and some who are slow to come to the game.”
You have to take resistance by a case-by-case basis, and go from there.
“You have to take a look at who’s resisting it and what their current track record is,” he says. “If you’ve got someone who is resisting it who has been an average performer or below expectations ... you take a look and say, ‘Based on your track record, you want to continue what you’re doing? Let’s take a look at what you’re doing, and let’s be candid about that.’”
The conversation with that employee can be short if he or she continues to resist and does not improve performance.
“Because you really say, ‘Well, the truth of the matter is based on what you are doing; you are doing OK,’” he says. “‘But, we’re really not in business to do OK. We’re really in business to do an excellent job. Not even a good job, we want to do an excellent job. And doing what you’re doing pretty much guarantees that you are going to be OK.’”
As far as your best performers, you need to be a little more lenient with them.
“Now if they are doing really well and resisting this, you say, ‘OK, I get what you’re doing. I have no objection to you challenging these ideas, but I think I can make you a little more effective,’” he says. “’So, let’s try this on a couple of opportunities going forward. If I’m wrong, maybe you and I need to re-evaluate our approach.’”
Listen to the client
Whether it’s on a date, at a party or at a business meeting, no one likes a person who doesn’t shut up.
Mikan has been in the business for more than 30 years and he’s seen too many meetings where it is a one-sided sales pitch about what a company can do for the cli
“If you go to a doctor with a health problem, you don’t want to listen to the first 45 minutes of his history of how he became interested in medicine and where he’s gone in 30 years,” he says. “You really want some assistance with the problem.”
If you are doing all of the talking, there is no time to find out if there is a mutual future because you are the only one sharing information. You aren’t going to create a client-based company if only one side of the story is getting out there.
“To some degree, everybody gets involved in this — you spend a lot of time talking to clients and prospective clients about yourself,” he says. “Obviously, they’re going to want to know who you are and what you can do. But the truth of the matter is, the whole relationship is structured on what the client’s about.”
By letting the clients do most of the talking, you can hear what they need and know if it links to what you do well as a company.
If the sales executive identifies that HDH can help fill a client’s need, then a second meeting is set up and the meetings become more technical.
If the salesperson knows HDH wouldn’t be of any help to a client, then the pursuit is put on hold. However, the sales executive lets those clients know that if they have another need come up in the future, to let HDH know.
“The idea of just entering into a competition for the hope of winning is just a bad idea,” he says. “It’s a bad idea for the client … because you are going to introduce some mythical competition that is really unnecessary and doesn’t really help your balance sheet.”
In addition, don’t go into a meeting automatically assuming that you are going to work on the opportunity.
“Instinctively, if you are an effective sales executive or have some role in growing your company, you probably have some pretty solid instincts,” he says. “After awhile, instinctively, you kind of know what an opportunity is and is not. Circumstances can impact your instincts. So, if things are not going well for you and you run into an opportunity that you know instinctively is not necessarily good for the current time, you may talk yourself into thinking it is, just for the chance of maybe having a success.
By going in with your mind made up that you will take this opportunity, you feed into your own problem.
“Trust your instincts, be honest with yourself and be candid with a prospective client,” he says. “I think, at the end of the day, prospective clients appreciate that. Maybe not universally, I understand. But I think, at the end of the day, they look at the discussion and relationship you have.
“Even though it may not have been something that we pursued in 2009, if you stay in touch, somewhere out there, whether it’s in one year or four, that client will remember the way you worked, the way you approached him or her and you will have success.”
It took a year, but the numbers supported Mikan’s theory, and the new approach has improved the company’s success ratio by about 25 percent.
“It’s something that we really try to emphasize, especially the last seven, eight, nine years,” he says. I think in one measure or another, (we were) client-focused probably since the day we opened the door. But, we really formalized it much better, much clearer than we ever had before a few years back … and it’s worked really well for us.”
How to reach: The HDH Group Inc., (412) 391-7300 orwww.hdhgroup.com