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September 2010: Planning and Budgeting for success

Introduction
Almost every organization goes through an annual planning cycle. A portion of this planning process is dedicated to financial budgeting which usually cycles through a number of iterations before it is accepted by senior management.

Process
Not only is the success of the organization tied to achieving financial goals, but frequently incentive compensation plans are also closely tied to these goals as well.

So how does the typical organization set financial goals?

• Is the process “Top-Down”:
  Does senior management set the targets and the organization adjusts the various revenue and expense numbers to meet those targets?
  
• Is the process “Bottom-Up”?
  Do you build your revenue and expense numbers based on what is achievable based on past experience and current market conditions.

In either case, it is important to have a clear understanding of what products will be sold AND by whom.

Revenue Projections
In the context of the Insurance Carrier industry revenue projections include a complex set of variables including:

• Coverage (growth or shrinkage)
• Rate fluctuations
• Product mix
• Regional and local market conditions
• Seasonality of the business cycle

With this level of complexity, it is more likely that the organization will follow a “Top-Down” approach to planning, with broad targets for growth and cost containment. Operational management is then left with the task of determining the impact of the variables outlined above, and organize their plans to ensure that targets are met.

Who’s making it happen?
As is often the case, attention is given to what needs to be sold (and where) in order to achieve the strategic objectives. The “who” portion of the equation is left to chance.

Insurance carriers that have built their distribution model on one that is dependent upon Independent Broker/Agencies are faced with the challenge of understanding which broker/agencies are well positioned to providing the required results.

The Solution
We believe that the best way to achieve strategic objectives is to set reasonable expectations for each Broker/Agency – AND – communicate those expectations ahead of the performance curve. It is just as critical to manage actual performance against the agreed expectations.

Our scorePoint™ solution, with our proprietary Strategic Performance Index (SPI)©, allows you to assign your organizational targets to each broker/agency, by product – by month based on your own  definable rules.

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