Progressive Direct Sales Representative (DSR) - Turnover Reduction - Cross-functional Process Improvement.

University Degree Business and Administrative studies

Progressive Direct Sales Representative (DSR)

Turnover Reduction

Cross-functional Process Improvement

Turnover Reduction

Introduction

At Progressive Insurance, Direct Sales Representatives (Inside Sales Representatives) are available 24 hours a day, 7 days a week to give consumers who call us a Progressive quote and the rates of up to three other insurers. This job involves much more than merely offering price information, it involves counseling and educating consumers about Progressive’s products and services, as well as promoting the products and services, explaining how they can meet consumers’ needs and selling policies. This position is considered entry level at Progressive, and offers extensive training which leads to employees becoming licensed to sell insurance, and becoming functional at handling a variety of customer sales situations. Entry level or not, this position does require selling abilities and interests. Incentives are paid based on sales performance. This type of environment and job duty is not for everyone. Turnover for the Direct Sales Representative position (in the Mentor, OH location) is higher than the entire company average, and this paper will look at why.

Nature of the Problem

Process improvements are necessary for the Direct Sales Representative (DSR) position with the goal of reducing turnover. Employee turnover is a top concerns for managers in almost all call center environments whether the focus is on sales or service. Effective employee retention begins with the initial candidate screening, interviewing, and hiring process. Providing details of the job requirements, environment, and measurements of performance are critical to ensure that new call center personnel know what they are getting into with the new job. Beyond the screening, factors related to training, management, and incentive compensation also impact turnover in a call center environment.

The first six months for the company and the new employee are critical. Here are the primary reasons employees resign within their first six months of employment:

The new employee did not fully understand what the job involved. Most likely,

management did not properly communicate what the employee’s job responsibilities were when the job was offered. The new employee may feel like they accepted a different job than they are being trained to do (Defined as Job Fit).

The new employee feels as if they have been “thrown to the wolves” and was not properly trained. Effective training is not a cost, but rather an investment in the future of the company.
In a sales environment, a lack of success in making the sale can quickly lead to frustration and burn out.
No opportunity for advancement.

Management must understand that employee turnover and recruitment cost far more than proper hiring and training aimed at increasing employee retention. Putting the right employee in the right job results in a happier, more caring and motivated employee more likely to develop skills necessary to do the job well, more receptive to learning and less likely to seek employment elsewhere.

Quality training without quality selection of employees (and visa versa) will result in lost revenue and time spent on employee recruitment. This will also result in extremely low employee retention. There is only one thing worse than a trained employee who quits, and that is an untrained employee who stays. At Progressive in Direct Sales, the training needs to also convey the importance of achieving sales goals to maintain good status. This is unique to a sales environment, and is critical to the retention of DSR’s

In the last two years, Progressive has been faced with competition for high achieving sales representatives from a firm called CMI, in Solon, OH. CMI is an insurance brokerage that uses similar techniques to Progressive in that it provides customers with insurance rate quotes on three company’s insurance. The reason for the competition stems from the incentive program offered by CMI. The sales representative from CMI are paid an incentive for every sale, which leads to much greater opportunity for financial reward for representatives who have strong sales skills and interests. As you will see, a noteworthy portion of the ...

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As you can see, the turnover for DSR’s is higher than the average for all Progressive employees.

Turnover

►21.9% DSR turnover (Mentor DSR Only)

Associate Population 125 (approximate)

►14.3% Total turnover for all of Progressive

Associate Population 20,000 (approximate)

Reasons for Mentor DSR Turnover in 2003 (42 total terminations) – See attached Pareto Analysis

ADD PARETO DETAIL HERE!!!!

Given recent changes in the incentive compensation structure (described below), there may be an increase in turnover of DSR’s who were receiving more regular incentive payments in the past.

Costs for a person leaving DSR position within first 6 months is $30,000 based on calculations which human resources has determined. Factors tied to this cost are:

Payroll/ Employee benefit costs
Training costs (Outside trainers, Progressive trainers, materials)

Fees for licensing in each state

Direct Sales Representatives performance is measured in a number of ways. Incentives are based on number of policies sold. In addition, DSR productivity is measured by the amount of time the employee is logged into the phone system as available. Direct sales management is responsible for monitoring performance and communicating concerns to the DSR’s

Organization Where the Problem is Occurring

Progressive has Direct Sales positions in a number of locations throughout the country. For the purpose of this paper, the Mentor, OH location is the focus.

See Organizational Chart attached

Human Resources
Direct Sales Management
Training

The relationships between these departments is as follows:

Human resources advertises, sources, and screens candidates for the DSR positions. Then these candidates are hired based on a mutual decision between HR and DSR management. The Training department is involved after the hiring of new DSR’s and is then responsible for preparing the new employees for licensing exam and the job functions. DSR management is involved sporadically in the employees training, but become more directly involved once the new DSR is sent to the floor as a trained DSR. This paper will address all of these areas and relationships, as well as discussing the a potential change to the incentive structure

Functions Performed by the Interacting Departments

See “Is” Map attached

Human Resources – The HR department coordinates the flow of applicants, screening, administration of the Progressive Simulation, interviewing, and is heavily involved in who is selected for the DSR position. Based on this, they are very influential in setting the expectations for new employees during the hiring process.

DSR Hiring Process

Review Applications
Determine Interview Questions
Explanation of job requirements
Administer Simulations
Handle all applicant correspondence
Offer positions
Handle all new hire paperwork
Determine compensation and incentive structures
Handle terminations and discipline

Training – There are two training functions involved in the initial new hire training for Direct Sales. Progressive contracts with an outside training organization (Honduras College) to conduct the licensing training for all new representatives. This training happens in the first two weeks after hire, after which the new hire completes the Ohio P&C licensing exam. After completion of this exam, Progressive trainers take over and cover the processes and procedures for the DSR position. During the second phase of training, each DSR is completing training for state licensing exams in a self study/ online format. This training includes training on systems, processes, documentation, and basic sales skills.

DSR Training Process

Orientation
Licensing training
Sales training
Discussion of sales quota
Administer training exams
Mentoring Program

Direct Sales Management – Management within the Direct Sales department is responsible for daily monitoring of the DSR’s quality and quantity of work. Management is also involved in the initial interviewing and hiring process. Managers are responsible for determining which states, and how many licenses each DSR will have. The licenses, which a DSR holds will determine the type (location) and number of calls that DSR can take. The current incentive structure is based on a point system. Policy sales for each state are worth different point, and the overall incentive plans are based on a point accumulation every eight weeks*.

Determine staffing needs (based on call volume)
Interviewing new hire candidates
Monitor DSR call availability
Determine licensing for each DSR’s
Set and monitor process & procedures
Monitor and enforce quotas
Communicate incentives
Document and coach performance

* Note on Incentive structure – In Direct Sales, a small portion of the compensation is based on policy sales performance if the individual. In 2004 this incentive was changed in a way that makes it more challenging for many DSR’s to achieve any regular incentive payments. Previously, DSR’s received an incentive payment bi-weekly based on sales for the previous period. The new incentive structure uses a point system that has less frequent payouts, and only rewards the top 20% of DSR performers. This new system is likely to cause employee dissatisfaction for many existing DSR’s who were used to more regular incentive payments.

Underlying Causes of the Problem and the Consequences for

Each Department and the Organization as a Whole

See Fish-Bone Diagram attached

1) VARIATIONS IN BUSINESS VOLUME WITH EACH LICENSE

Some states are more difficult to get licensed in.
Direct Sales Reps are licensed in states where business volume is low (they get less sales than reps licensed in high volume states).

UNEQUAL NUMBER OF LICENSES PER EMPLOYEE

Direct Sales Reps with more licenses can do more business

EMPLOYEES ARE UNABLE TO DETERMINE SALES NECESSARY FOR TOP 20%

Reduces motivation in some reps.
Decreases productivity in Sales Reps who thrive to be on top (DSR’s do not know where they stand in comparison to other team members)

TIME TRACKING IS TOO STRICT

Increases fatigue
Decreases job satisfaction, which lowers productivity

TRAINING DOES NOT ADDRESS THE IMPORTANCE OF QUOTAS

New hires feel mislead

BONUS PLAN BASED ON SALES POINTS, NOT ACTUAL SALES

Dsr’s can lead the team in sales, but have low sales points (only points are considered in the compensation plan)

CHANGES TO THE INCENTIVE COMPENSATION PLAN DO NOT REWARD DSR’S AS WELL FOR GOOD SALES PERFORMANCE

Decreases motivation in reps who know they will not be in the top 20%

SCREENING DOES NOT ADEQUATELY DETERMINE SALES INTERESTS AND ABILITIES IN APPLICANTS

Increases training time and costs
Decreases productivity (remaining reps. must pick up slack).

Recommendations

See “Should” Map attached

Our recommendations as highlighted on the attached “Should” map are as follows:

Human Resources – We are recommending changes in the hiring process and incentive compensation structure.

DSR Hiring Process

Focus screening efforts on candidates with previous sales experience
Administer a sales skill assessment. This type of assessment is designed to gauge the applicant’s personality traits and skills/ motivations, which ties to their likelihood for success in a sales job. This will be administered in addition to the Progressive Simulation. (See attachments)
Use screening and interviewing questions which determine a candidate’s comfort in a sales environment. Ask for examples of previous sales situations and whether candidate’s compensation has ever been tied to sales performance.
Candidates who are not recommended based on the new sales skills assessment should be considered for other customer service positions within Progressive if they meet all other qualifications.

Incentive Compensation

We are recommending a change to the incentive compensation that would revert to a plan similar to the previously existing plan in Direct Sales. DSR’s used to be paid an incentive bi-weekly based on sales results. The current incentive only rewards the top 20% of DSR performers, every eight weeks based on a sales point system which is very confusing. One concern is that DSR’s can’t even measure their performance throughout the eight-week time period, not to mention the difficulty in understanding the plan itself. Under the previous system a DSR could view their sales to plan or goal at any time.

Training – The training will remain the same for all licensing related functions, as this is required in the State of Ohio, and all subsequent states that a DSR might become licensed. We are recommending that the training contain a greater focus on sales skills, not only to improve these capabilities in new DSR’s, but to reinforce the importance of sales performance for the position. During training, we feel that a greater emphasis on communicating and preparing new hires for the sales quotas is necessary.

DSR Training Process Improvements

Trainers involved in sharing position requirements to candidates who are being interviewed
Orientation to focus on sales quotas
Sales training strengthened to increase sales skills of new DSR’s

Direct Sales Management – We are recommending improvements in management’s involvement in the initial interviewing and hiring process. Generally speaking, more communication surrounding the sales quotas and incentive plan is necessary to ensure DSR success. A review should be undertaken two to four weeks after the training is completed and the employee has had the opportunity to experience the company. The assignment of state licenses ties directly to the volume of potential sales a DSR might make. In the current system, the licenses are not equally issued, and certain DSR’s have a greater chance to make incentives. This is particularly true given the weighting of the point system that is used for the current incentive structure. Certain states are allotted greater point for a policy sale. This method of work distribution and incentive payment to DSR’s may lead to greater turnover.

Train managers on better interviewing skills to assess a candidate’s fit for a sales environment.
Communicate the quotas in the interviewing process
Ensure that the DSR who new hire candidates shadow have the appropriate sales skills
Monitor and enforce quotas and communicate new incentive plan
Assign DSR’s state licenses more evenly

More regular status reports on sales performance

After implementing the recommendations highlighted in this paper we would expect a decrease in turnover from 42 terminations within the first six months to 35 terminations within the first six months.

Turnover Costs

► $1,260,000 total costs for 42 terminations

► $1,050,000 total costs for 35 terminations

$210,000 Turnover cost savings

This is a conservative estimate for improvement. Turnover is often tied to morale and we have not addressed any improvements directly related to building or improving employee morale in this paper. If Direct Sales management made a concerted effort to foster better communication, teamwork and a sense of belonging among the DSR’s in their teams, morale would be bound to improve.

Summary

In a service business like auto insurance staff turnover costs can be very significant. In Direct Sales, the costs tied up in hiring, training, and general administration related to new DSR’s (particularly in the first six months) is enormous. It is our belief that the practices that are used by Progressive Insurance could be improved to reduce the overall costs of turnover. Many of these improvements will make hiring more challenging, as the screening process has been intensified. Additional costs will be encountered to implement assessments for sales skills. Prices can be as high as $250 per applicant for assessments purchased from a third party testing designer. During training, there will need to be new attention given to the quotas and sales competency development. This may extend the training by one day, which also would have an associated cost. Lastly, greater management involvement and communication is also important to ensuring that DSR’s know what is expected of them, and to strengthen the sales culture in the Direct Sales department. There may not be an assignable cost for this initiative, however, managers do have a great deal on their plates, and this may be the greatest challenge. Our expectations for improvement and cost savings were modest, and do not take added cost into account, however, given the $30,000 lost for each new hire who terminates, it is clear that there is cost savings which can be realized through a reduction in turnover.