The attention they are receiving is primarily due to the carriers and clients who see regional brokers as an excellent alternative. The perception of the market is that a quality regional broker can provide the expertise of a larger firm while delivering the attention of a smaller organization.

Yet, in many cases, regional firms have not positioned themselves to reach their fullest potential in this market. The main reason is the historical evolution of these regional brokerages. Simply put, many regional brokerages are independent agencies that have grown through the acquisition of other independent agencies.

Some regional brokerages are made up of individual fiefdoms. They are clusters of separate producers, agencies, and cultures. As each acquisition was made, a new culture was folded into the acquiring agency. The regional brokerage became a multi-cultural organization. But it is impossible to reach your full potential as a “melting pot” of agency cultures.

Let me be clear—there is nothing wrong with having the independent agency system as a springboard. However, the strength of the independent agency system is also its weakness when a firm develops into a regional brokerage. The culture of independence has historically involved isolation and individualism. Noble virtues, but not things that are valued by the more sophisticated client.

There is one other phenomenon in regional brokerages. As brokers emphasized growth via acquisitions, the culture of a sales organization has stagnated. Firms that were built on sales excellence have found their new business growth to be slowing considerably. This has happened due to an aging of the producer force and a change in the client expectations.

It is time for the regional brokerage firms to lead the way in the revitalization of sales excellence. These firms have the financial ability, the people, and the industry clout to emerge as a production force to be reckoned with. Unfortunately, a commitment and desire are not enough. Here are some of the steps that must be taken:

• Implement a Sales Culture

The term sales culture means more than saying “we like to write new business.” It is the basis of the entire organization. Everything that the firm does is driven toward two things: the development of new revenue and the retention of current revenue. Period.

A sales culture is established when everyone inside the organization recognizes the importance of internal growth. When the systems and procedures supplement growth. When accountabilities are introduced both from a production and organizational perspective. But most importantly, when the organization and its production force begin to think and position themselves strategically.

Establishing a consistent sales culture is critical to the success of a regional brokerage. As the organization grows in geographic and personnel size, it will be impossible to establish a footprint of quality without it.

• Leverage Size and Geographic Control

As a regional brokerage firm grows, one of its most difficult tasks is to change the focus of the production efforts. Because the firm’s roots are in the local marketplace, some producers have difficulty in seeing opportunities outside their local community. Regional means regional!

It is imperative that sales managers of regional brokerages assist their producers in going outside of their traditional marketing boundaries. That is the only way a firm can truly leverage its marketplace clout. By doing so, a regional brokerage fully utilizes its economies of scale.

Recent developments in sales management and leads software have enabled brokers to reach prospects more effectively. These tools must be introduced to the sales organization in conjunction with cultural changes.

• Establish Spheres of Resources

Most regional brokers have several key accounts that provide huge chunks of income. These accounts are constantly under siege by the mega-firms or alternative risk financing arrangements. The key ingredient in these solicitations is the ability of the soliciting firm to provide superior resource support. These resources are specialty personnel and teams that address specific client problems.

Many regional brokers do not have the financial ability to have teams of specialists on staff. Yet, their clients and prospects have developed a taste for elevated resource capabilities.

The firms that do not have the ability to deploy these specialists are losing their competitive position. However, because of their independent culture some regional firms resist going outside of their own organization.

Regional brokerage firms must develop a number of strategic relationships with providers of specialty services. These services come from various disciplines inside the industry such as loss control, legal, accounting, behavioral sciences and personnel management. In some cases, the mega-firms provide regional brokerages with resources through wholesale distribution networks.

• Develop a Win/Win Compensation Program

There are as many various compensation programs as there are stars in the sky. In some regional firms, there are actually different compensation schedules for different brokers. A firm who has been active in acquisitions can have numerous compensation programs.

Producers are the backbone of a quality sales organization. Absolutely nothing happens until somebody takes the initiative to create revenue. That is the vital role of producers and nothing should be allowed to undermine their success. Having said that, here is another universal truth—the compensation formula must make financial sense to both parties. As client expectations increase, the cost of doing business also increases.

Many regional brokerages have retained the compensation formulas from their days as an independent agency. The formula is based upon individual actions and does not make provision for increased costs. Therefore, as the client expectations increase, the production formulas discourage involving outside teams.

The compensation formula of a regional brokerage must be uniform. It needs to take into account the costs associated with developing and deploying teams. It also should reflect that fact that a producer who learns the new culture will be able to retain and develop a larger book. This formula should not be implemented as a way to cut overhead, but rather a method to allow quality producers to establish a book of larger accounts.

I recently spoke with a producer friend of mine. Here is what he told me: “When our firm began to implement some of the changes you speak about, my book was $1,000,000 in commission. Now, five years later, my book is over $3,000,000 in revenue.” Even if the formula decreased in percentage you can imagine the increase in producer income. That is a win/win!

• Become Part of Something Larger

As most of you know, in sales, perception becomes reality. Regional brokerage firms must be perceived as part of something larger than themselves. Whether it is regionally, nationally, or globally, a regional brokerage firm needs to create the perception of providing increased service capabilities.

For a firm to do this and still maintain its independence, a regional brokerage should join at least one national or international affinity group. On a national basis there are organizations such as RiskProNet, Assurex, Group 500, Appex, Insgroup, Intersure and several other excellent groups.

When discussing capabilities with clients, brokerages like these offer tremendous value. The ability to be perceived as part of a larger service organization is crucial to the development and retention of major accounts.

• Avoid Majoring in Minors

For regional brokerage firms to continue their evolution and growth, they must continue to change the thrust of their organizations. This is not just at the production level, but also at the client service level. Commodity-type business should be serviced and produced in a completely different manner. (If at all!)

We all know stories of the producer who wrote a $500 BOP policy 10 years ago that has grown to a mega-account today. It just doesn’t happen often enough to pay for all the small accounts that stayed small. The overhead is massive against the return.

This is not an indictment against soliciting small accounts or personal lines, as they can still be very profitable to some firms. However, the importance of a regional brokerage firm is based upon its ability to create and retain middle- and upper-middle market revenues. That is the value you have to your carriers and your clients.

If you intend to stay in mass personal lines and small commercial, your firm needs to find an effective way to distribute the commodity. This method should not include high-priced production talent.

The coming years will provide unbounded opportunities for quality regional brokerage firms. Their future will be dependent on the ability to evolve and develop from independent agencies to larger service organizations. The key ingredient in this change is the development of a sales culture. The most successful regional and super-regional firms will establish this culture for internal growth.

Rob Ekern is Chief Executive Officer of C.R. Ekern & Co., a Phoenix-based consulting business.