For Sarah Brown, president and CEO of Keller-Brown Insurance Services in Shrewsbury, Pennsylvania, and her parents, Joy Keller-Brown and Jeff Brown, perpetuation was a carefully planned and executed process.

“I started in the agency in 2008, and we had identified early on that I would be the one to take over, but my parents still had some time left that they wanted to work," says Sarah Brown. “In 2018, we formalized the perpetuation plan, and I became president and CEO in January 2019."

Sarah Brown (middle right) is pictured with her parents and her daughter Claire on the vineyard her parents own and operate as they transition into retirement.

Sarah Brown may have officially gained the leadership title in 2019, but taking the reins from her parents has been a decade-long process of training and development as the agency invested in its future leader.

“My parents wanted me to learn all aspects of the business," she says. “I spent time in personal lines and commercial lines. I did sales, I did service, and I was involved in our conversion to a new management system, which was huge from an operational understanding. It gives me a good background when I'm looking at our big picture."

It was a different story for Michelle Rupp, president of NRG Insurance in Seattle, when she took over the agency 30 years ago.

“This was my dad's agency," she says. “I had quite the rocky road because he died suddenly and without a perpetuation plan. He had intended to sell to somebody, but it wasn't clear who."

The agency's three producers presented Rupp with an offer to buy the agency, and when Rupp declined, they walked out. The case ended up in court, where Rupp ultimately prevailed.

Because of the sudden transition, Rupp had little preparation for what she was getting into. “I wish I would have been 20 years older than I was at the time because I was really young and it was reflected in some of the things I did," she says. “I think one of the things I didn't realize is how much of an impediment it was for me to be a woman, and particularly a young woman, at the time. There were so many incidents of men telling me the truth and saying, 'Yeah, you're excluded.'"

One approach that helped Rupp overcome the challenges was an emphasis on learning. “It was really good for me that we valued constantly learning in our family," she says. “I watched my dad read and study every single Sunday night, and he'd cut out clips of newspapers and magazines and pass them along to the agency staff so they could learn too."

Luckily, the independent agency channel seems to have taken a lesson from experiences like Rupp's. Nine in 10 agencies say they have at least some type of perpetuation plan, according to the 2020 Agency Universe Study—although only 56% have a formal business plan. The most common plans center around family members or other agency principals.

If an agency is, like the majority, hoping to perpetuate through internal channels, “the valuations that exist in today's marketplace make that a lot harder," says Brian Deitz, partner at Reagan Consulting. “Owners always have a choice between perpetuating internally and being privately held for the next generation or selling the firm to a strategic partner—and the valuations offered by those strategic partners have never been higher."

For many agencies, the most difficult part of perpetuating is “finding the buyer that can do two things: one, afford the shares from a financial standpoint, and two, be capable of leading the agency with regards to production, management and strategic vision," Deitz says. “Often, when agency owners are thinking about selling the shares internally and maintaining private ownership going forward, the hard part is making sure that they've got a really strong team of folks that can come in and not only buy the shares but can continue to run and grow the agency."

Adding to the complicated perpetuation picture, the average principal with 20% or more ownership in their agencies is 55 years old, according to the 2020 Agency Universe Study. And few are ready to take their place. In fact, finding qualified staff members is the No. 1 challenge agencies face—even more challenging than growing commercial lines, growing personal lines and finding new business.

As the talent gap widens, the insurance industry stands to lose a “basis of understanding," says Chris Boggs, Big “I" executive director of education and risk management. “Understanding how a coverage form has developed over time makes it easier to understand the current coverage and explain the coverage to clients. The loss of that historical knowledge will be hard to replace."

How do you get talented employees to stick around and participate in the agency's future? The answer lies in educating to perpetuate—perpeducation, if you will—and while it's a long game, it's the game agencies must play to secure their future.

“There's not only a challenge with finding the people who want to be in the insurance industry," says Susan Toussaint, vice president of Growth Solutions, U.S. with ReSource Pro. “Even when we bring people in, we're not necessarily giving them the vision of where they could be and focusing on the skills development."

“We see a lot of people that are ready to retire, and it becomes a cascading issue when they bring new producers but don't train them properly," Toussaint explains. “That can hinder the producer's ability to grow the large books of business that will allow them to perpetuate."

Older generations of agency leaders have decades of wisdom and experience, and the sooner they begin passing the training on to the next generation, the more time agencies have to establish well-rounded teams, dedicated staff and competent leadership.

It's an approach that has served Brown and her parents well, especially with the coronavirus pandemic.

“The plan was for my parents to take an additional five weeks out of the office every year for five years, but then 2020 happened and frankly, I needed them operationally," Brown says. “I needed their experience. Currently, we're targeting 2023 as their exit date. You can go through the perpetuation process slowly or quickly, but we're doing it slowly and it's really helped get a solid team established."

Older generations of agency leaders have decades of wisdom and experience, and the sooner they begin passing the training on to the next generation, the more time agencies have to establish well-rounded teams, dedicated staff and competent leadership.

No Such Thing as Soft Skills

By now, we all know that “soft" skills aren't really soft—they're essential. To truly leave your agency in good hands, future leaders should be trained in managing people.

“You've got to make sure that leaders are comfortable engaging and empowering the folks around them," Deitz says. “Whatever soft skills are required to make sure they can do that, it's all about arriving at a place where leaders can engage and empower."

Here are some starting places to steer rising stars forward:

1) Mentorship. “One great thing to determine who should be on the perpetuation track is finding out if that person is a good mentor," Toussaint says. “Are they good at helping others be successful internally?"

Like any other skill, mentorship can be taught and takes practice. “We see agencies, especially larger ones, building producers to a certain level and then providing mentorship training and asking them to become mentors," she says.

2) Public speaking. The ability to express ideas and convey authority while communicating—whether through a conversation or a presentation—is crucial for career development.

To improve, Rupp participated in the local Toastmasters International club. “I felt like I was a bit of a rambler, and I wanted to be more concise with how I spoke," she says. “I wanted to be comfortable in front of an audience. And I'm so glad I did that."

Jill A. Francis, senior vice president, North America field marketing and agency management, Chubb North America, emphasizes how a foundation in public speaking and communication can help your team be active members of the community and recommends Toastmasters as a great way to gain comfortability. “Look for local and online skill development courses on networking, negotiations and public speaking—LinkedIn, Coursera and Microsoft all offer a full suite of free courses," Francis adds.

3) Team building. For Brown, the importance of a strong team was a valuable lesson. “I'm an athlete, I'm a competitive person," she says. “It was hard for me to realize, but humility is such an important part of running an agency. One time we brought in a hire who did really well very early on, better than I had done. At first, I didn't like that, but then I thought, 'No, I need to surround myself with people who are better than me, or we won't have growth.'"

“That experience was so important because I can't do everything—I'm going to need rockstars and experts in certain fields, especially ones where I'm not as good," Brown says.

Even if a developing employee isn't ready to make staffing decisions, they can hone their eye for team building by working to develop an important asset: a values system.

“One thing I would have done differently is understand my value system and not assume everyone is on the same page," Rupp says. “I've done many a value-based exercise along the way, but what has been most helpful is being observant. When people reflect things back to you, what is it that they like? Ask yourself, 'What do I like about this particular employee?' I asked those questions, and then one day it suddenly struck me, 'Oh, I value a sense of gratitude.'"

By cultivating a strong sense of values, an employee will be equipped to build a culture when they eventually take over team-building decisions. “By maintaining that awareness, I'm more able to figure out who's a match for our agency and who isn't," Rupp says.

4) Personal growth. “I've done a lot of seminars so that I can understand how to handle my own emotions and deal with my own baggage," Rupp says. “I've done a lot of therapy. As I got clearer, I didn't have those weird neural pathways that were showing up for me, and as a result, my business got better."

“That's the biggest thing I would tell somebody—get out of your own way," she says. “You can do that by doing a lot of self-help and spending a lot of time on your growth."

Trading on a Technicality

When it comes to developing industry skills to perpeducate your agency, Toussaint says the first place to look is the new marketplace. “Clients are demanding producers who have the skills to conduct risk assessments to help them identify newly emerging risks," she says. “They want to engage with producers who understand the industry, the business challenges and the risks."

Here are some key technical skills agencies should encourage their future leaders to explore:

1) Invest in designations. Both Brown and Rupp point to their designations as extremely helpful during their assumptions of leadership. Brown earned her certified insurance counselor (CIC) and certified risk manager (CRM), and Rupp earned her chartered property-casualty underwriter (CPCU) and accredited advisor in insurance (AAI).

The designations have been crucial, not just in obtaining the credential, “but continuing that education and using instructors as a resource," Brown says, who is also encouraging her staff to pursue designations. “Education is a huge thing in our office. It's a major investment we put into our team, but it's important to be able to understand the coverages and help our customers."

2) Pick a niche. “We're seeing producers who have been brought into the agency, been given a book of business, and been told to go out and make relationships with a generalist mindset," Toussaint explains. “Those producers don't do as well as producers who have been encouraged to pick two or three niches and gain those specialized capabilities."

Producers who focus on a niche can grow their books of business more effectively and gain more skills, Toussaint says. “If one day you do trucking, and the next you do health care and then you hop over to nonprofits, it's hard to build a referral network. By picking a niche in an area you enjoy, you can develop a center of influence strategy and gain the skills to meet client demands."

Agents can make a start by taking a look around them. “Staff members need to understand the drivers of the local economy and be deeply versed in any specialties in your agency or your economy," Francis says. “For example, are you a college town? Someone should be an expert in education institutions and all the local businesses that support the college."

3) Acquire a taste for data. One emerging skill that the next generation of owners can use to strengthen their careers is data analysis, especially as clients increasingly seek a personalized, consultative approach to risk mitigation from agents.

“Clients are looking for producers who can help them make more data-driven decisions," Toussaint says. “Sales and servicing professionals must gain more consultative skills, specialized capabilities, and be comfortable with helping their clients make decisions with data. In some cases, we see more data analysts and actuaries being hired and developed within agencies to leverage those skills in client relationships."

4) Stay up-to-date with industry trends. Technical education is all about constantly having an ear to the ground. “There's a myriad of skills you need around the craft of insurance, and you're forever, always, constantly learning," Rupp says.

And with virtual classes more commonly offered, there's no excuse to avoid learning opportunities. Some resources agencies can point their future leaders to are:

Carriers. Not only does Brown recommend attending special courses offered by carriers on niches and developing industry trends, but she also discovered that keeping carriers in the perpetuation loop is expected.

“When you've identified a successor, having them involved in meetings with your carriers is very helpful," Brown says. “However, we just assumed that whenever I took over from my parents, we'd just continue the contracts with carriers, but some carriers may want to vet and approve the new leader before they continue the contract. One carrier underwrote me—I got interviewed, I got a background check."

That same carrier also provided Brown with “a binder of training resources on topics from financial management to education," she says. “I took notes every time I had a meeting with them. It was very helpful."

Associations. “Once you've identified the people you'd like to cultivate into leadership, use industry resources to educate them—industry associations are great for those next-generation education opportunities," Deitz says.

“Our state association is fantastic for education and we constantly use all their resources," Brown agrees.

User groups. Another big pain point for agency owners is technology. Deciding what software to purchase is one thing, but the transition, implementing new workflows and maximizing the full power of the technology are other things entirely.

“When I came in, we were on the cusp of automation," Rupp says. “By being involved in a user group, we could jump on board when Windows came along and were one of the first agencies to use a Windows-based agency management system. Going to seminars and seeking advice helped us develop this important piece of our business."

5) Gain familiarity with the business side. Financial management of an agency is one area Brown wishes she had learned more of before taking over the agency. “I was involved with financial decisions early on, but it's different to be an audience member versus the leader thinking through each line item of a budget," she says. “Anyone who wants to run a business will need to know that." 

Beat the Talent Crunch

As the world of work comes to grips with COVID-19's long-term impact, many agencies are realizing that staff have different expectations—and those expectations should be addressed to retain top talent.

“Listen to your staff and ask what they want," Brown says. “Where are we without our staff? We were early adopters of going remote in 2020, but in 2021 we had assumed that people would want to return to the office. After discussing what that could look like, we then asked our staff—and it turned out almost all of them wanted to continue working remotely."

“You have to listen to your people, or they are going to jump ship to go someplace else that's willing to offer remote work," Brown continues.

“There is a talent crunch right now, and if you start alienating people, you're going to lose that good talent," Toussaint agrees. “This younger generation that's entering the workforce has a lot to offer, but they also want that flexibility."

The lean toward remote work opens up opportunities for agencies to expand their talent options. “An agency can think broader geographically, if there are specific attributes or positions that they're trying to hire," Deitz says.

Technology Is the New Culture

The wise incorporation of technology is essential for an agency to retain the next generation of staff.

And really, it's not just about tech. “It's an investment not only in technology but in the culture," Toussaint says. “This is how you'll engage internally with each other and your clients."

Purposefulness around technology means “don't go into too many tech initiatives too quickly," Brown says. “Our staff wants to do the right thing, and they want to do a good job. If we overwhelm them and never work out the bugs, it'll be frustrating."

“I was on a call with a number of producers recently, and they shared with me that they were being exposed to training around two or three different tools at once, but the 'training' was just a series of demos with people clicking around," Toussaint says. “You need a path to train in technology so your staff gains the skills."

“Being sensitive to everyone's learning styles and speed is the first step to success," Francis agrees. “Creating 'pods' of new users to share tips and ask for help is often successful."

Technology is always shifting, and up-and-coming agency leaders must continue to be aware of emerging trends to remain competitive. “You should be pretty aggressive once you've identified folks with the capability for broader agency leadership in educating them on InsurTech, valuations in mergers & acquisitions, and the vision for the firm and how industry market dynamics could influence it," Deitz says.

AnneMarie McPherson is IA news editor.