1. FIGURE 1 – An Insurance Firm ACTUARIAL Dept. MARKETING Dept. AGENCY Dept. CLAIMS Dept. INVESTMENT Dept. Basket of Policy Variations Portfolio of Policies Claims Pricing of Policies New kinds of Policies Sales Cash Inflows Investment of Cash Reject or Accept Lapsed Policies Matured Policies Premiums Operating Expenses Model Boundary proxy for performance is agent productivity (sales / op. exp.)

2. FIGURE 2 – Productivity of the 3 groups Productivity is measured in UK £ per person per year FIGURE 3 – Normalized Productivity The y-axis has been normalized, base set to 100

3. FIGURE 4 - Model Boundary ACTUARIAL Dept. MARKETING Dept. AGENCY Dept. CLAIMS Dept. INVESTMENT Dept. Basket of Policy Variations Portfolio of Policies Claims Pricing of Policies New kinds of Policies Sales Cash Inflows Investment of Cash Reject or Accept Lapsed Policies Matured Policies Premiums Operating Expenses Model Boundary proxy for performance is agent productivity (sales / op. exp.)

4. PRODUCTIVITY SKILL HEADCOUNT COMPENSATION SECTOR FIGURE 5 – Model Overview agent quits hires agents promoted Agents skill per agent product sales products lapsing agent quit rate skill level of hired agents MANAGER MANPOWER growth target Agents lost skill from promotion MANAGERIAL COMPENSATION variable agent compensation manager quit rate promotion rate impact on lapse rate ATTITUDE TO GROWTH TARGET achieved growth rate de-facto growth target

5. Agents' Sales Skill added skill at hire skill per agent lost skill from quits level of hired agents relative skill of quits standard agent skill at hire lost skill from promotions relative skill of promoted agents PRODUCTIVITY SECTOR HEADCOUNT SECTOR hires agents promoted agents quits COMPENSATION SECTOR FIGURE 6 - Skill Sector modified by Agent Learning agent learning HEADCOUNT SECTOR Agent Learning Rate Agents impact of recent compensation + + + + + + + +

6. time required on each activity indicated recruiting time target number of recruits days needed per recruit indicated coaching time target days of coaching per agent in a year total time needed ratio HEADCOUNT SECTOR Agents FIGURE 7 - Time Allocation Sector managerial time available working days per year per manager Managers skill per manager standard manager skill admin effect of relative on efficiency manager skill relative efficiency of managers MANAGER MANPOWER SECTOR shortfall weight to recruiting shortfall of each activity share of time allowed for ratio each activity HEADCOUNT SECTOR SKILL SECTOR + + + + + + + + + + - - + +

7. Alpha: Full weight to recruiting Beta: Full weight to training Net products sold per year Time (year) 048121620 108K 83K 58K 33K 8000 Units: policies per year (left) and equivalent years of experience (right) Skill per agent 6 5 4 3 2 048121620 Time (year) FIGURE 8 – Differences in Performance FIGURE 9– Divergence in Size Graph for achieved growth rate Time (year) 0.20 0.10 0.05 0.0 0.15 048121620 Units: dimensionless (left) and agents (right) Agents (size of sales force) 048121620 Time (year) 1600 800 400 0 1200

8. FIGURE 10 - Attitude to Growth Target achieved growth rate perceived growth rate change in perceived growth rate time constant 1 Adjustment factor for change in target weight to sales growth target Sales Growth Target time constant 2 de-facto growth target change in target HEADCOUNT SECTOR + - + + + - - - -

9. Time (year) 048121620 105K 85K 65K 45K 25K 5K 048121620 Time (year) 10 8.6 7.2 5.8 4.4 3.0 2.2 Alpha-x: Full weight to recruiting Beta-x: Full weight to training Units: policies per year (left) and equivalent years of experience (right) Units: dimensionless (left) and agents (right) 048121620 Time (year) 1800 900 450 0 1350 Time (year) 048121620 0.20 0.15 0.10 0.05 0.00 -0.05 Net products sold per year Skill per agent Agents (size of sales force) Graph for achieved growth rate FIGURE 11 – Differences in Performance FIGURE 12– Divergence in Size