AmeriLife and Its Basic Agency Problem: Looking into the Source of the Problem

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Table of Contents

Introduction
Agency Problems Analysis
Five Core Job Dimensions
Conclusion
Reference List

Introduction

Way back in the late 1970s, noticing that the insurance issue left much to be desired in the U.S., Gary Raymond Boesh decided that he could try applying his business, management and leadership skills in order to create a company that would provide the residents of the USA with the kind of insurance that they need. Much to Boesch’s credit, he succeeded – in 1971, AmeriLife was all ready to make the life of the American population safer.

At some point, Boesch and his partner Timothy North decided that AmeriLife must expand; thus, the period of consistent growth started, spawned by a surge in the number of AmeriLife clients. As a result, nowadays, AmeriLife includes over a hundred of independent agencies (InsideView, 2013).

Agency Problems Analysis

When it comes to specifying the defining features of AmeriLife, one is most likely to make it clear that the company is striving for not only dominating the U.S. market, which, in fact, it already does, but also entering the world market, and, therefore, expanding even further to try new opportunities and check how far its capabilities can stretch.

Needless to say, the given step can be considered rather risky, especially in the light of the fact that starting from the mid-90s, the company has been facing a pretty stiff competition in the U.S. market. Thus, it can be assumed that, in the world market, the AmeriLife Company will face even denser competition and will probably be forced to retreat. However, it is quite remarkable that the AmeriLife Company does not fear the risks and relies on its system of production process coordination.

Employee Needs

Therefore, one of the basic problems of the company concerns not the way in which it deals with its clients – though, quite honestly, the given issue also leaves much to be desired – but the manner in which it addresses the needs of its employees – or, to be more exact, the way it ignores these needs.

Traditionally described by any person who has ever crossed the threshold of the company’s staff room as a captive outfit, the head of the AmeriLife Company should clearly adopt a more reasonable leadership approach to coordinate the work of his employees.

In addition to the aforementioned issue, another related concern should be mentioned. It is important to understand that the lack of understanding between the employees, the management department and the clients does not come out of nowhere – quite on the contrary, there is always a bunch of factors, whether the internal or external ones, that contribute to the development of the issue and its further evolution.

Information Management

In AmeriLife, the key factor that has led to the drastic events that can be observed a present and, therefore, the basic agency problem concerns information management. Indeed, according to the evidence acquired from the people formerly working for the company, AmeriLife has some of the worst equipment possible.

With the technological development of the company being stuck in the nineties, the given issue cannot be regarded as a big shock, yet it definitely poses a huge threat to the performance of the staff, the efficiency of the management, and, therefore, the overall benefit of the company.

Results

When putting the two factors together, one can easily spot the point at which the latter starts influencing the former. Due to the lack of cohesion between various departments, some of the employees and even the members of the management team experience lack of information, which affects their choices and makes them pick the alternatives that make the company look bad or spoil the overall performance of AmeriLife.

Because of the lack of communication between the customer and the company support department, the clients receive the services of poor quality, which, needless to say, leaves them mad. Consequently, the company loses its clientele and, therefore, a major part of its revenues, at the same time acquiring pretty bad reputation within the insurance market.

In a nutshell, AmeriLife’s basic agency problems are the inefficient information management caused by the lack of high-quality equipment and the authoritative leadership strategy that does not presuppose that the employees should have any kind of job satisfaction.

To understand the issues that lead to job dissatisfaction in the AmeriLife Company, one will have to take a closer look at not only the relationship factors that lead to inefficient production process but also the job design that the company adopted since it was founded and has been using since without any basic change.

One of the most remarkable flaws of the job design in the organization concerns the reward system. According to the testimonies of the employees, managers, as well as the company leader, provide encouragement and rewards close to never. The fact that the employee’s efforts are not being rewarded and are basically taken for granted to the point when these efforts are not even recognized clearly kills any attempt at being initiative in the organization.

The aforementioned job design has its negative effect on the corporate culture and the organizational behavior adopted within the company. As a result, the employees’ motivation drops significantly; having no reason to provide excellent services, the staff works just so that the managerial department of the AmeriLife could not could not find any faults in it. The given attitude, therefore, ruins the little reputation that AmeriLife had to begin with.

The given problem is being reinforced by the expansion strategy that is currently being implemented in the company; with even less control over the organizational processes, the company leader cannot influence the relationships between the staff and the managers, therefore, encouraging more unfair treatment of the former unwillingly.

Five Core Job Dimensions

Analyzing AmeriLife from the standpoint of five job dimensions proposed by Hackman and Oldham (Daft & Marcic, 2010, 421), one will be able to consider the problem from a different angle:

Skill variety

As it has been stressed, the AmeriLife Company does not provide enough room for professional development, which must be addressed.

Task identity

According to the existing data, AmeriLife pays much attention to the task identity. It is the attitude to the clients and employees that raises questions.

Task significance

Following the guidelines of the managers blindly, the company’s employees do not feel that their work bears any significance. Therefore, the idea of switching from authoritative leadership style to a more democratic one seems legitimate.

Autonomy

One of the key weaknesses of AmeriLife concerns the methods of control adopted. Because of the lack of autonomy in making important decisions, the employees feel that their efforts are not recognized as significant ones.

Feedback

As it has been stressed above, the feedback system in AmeriLife cannot possibly get any worse, mostly because of the inefficient knowledge management system. The key problem is that the relationships between the employees leave much to be desired and, therefore, the employees are unwilling to share the information at their disposal; another factor concerns the numerous geographical locations of the company’s affiliates and, therefore, the lack of cohesion between the actions of these affiliates.

Conclusion

With that being said, it will be safe to say that AmeriLife needs radical changes in its job design and job dimensions, not to mention the leadership approach and the strategy of shaping organizational behavior. This is especially hard seeing how deciding on the choice of the job design is very individual – there is no book and depends solely on the specifics of a certain company.

Therefore, to change the current state of affairs, AmeriLife will have to reinvent its entire perception of business and business relationships – perhaps, even to the point of changing its mission and vision.

Recommendation

It is clear that at present, AmeriLife, the leaders of which are clearly putting the emphasis on the production process, expansion, and competition in the home and foreign markets, needs to get its priorities straight and start developing organizational culture and the relationships between the clients, the staff and the managers. A basic two-fold process, it can be accomplished after the company leaders take the following steps:

Switch from the authoritative leadership strategy to the transformational, charismatic, and democratic leadership strategies (Biech, 2009);
Introduce a new principle of information management into the company, i.e., information sharing, which will promote more trust and cohesion among the staff and the departments of the company;
Promote a new model of organizational behavior based on the charismatic leader’s image created with the help of a charismatic leadership strategy;
Come up with a unique and elaborate job design that will involve such elements as the non-monetary reward system, promotion of variety in work routines, and offering more learning opportunities and opportunities for skills improvement for the staff;
Evaluate the changes in the job satisfaction of the employees, which will have occurred in the company within the next two months (the evaluation could be carried out by distributing surveys among the employees and analyzing the feedback acquired from the given surveys);
Analyze the results and decide whether the new strategy should be continued to be applied or whether more flexible reward system should be used.

Once the measures mentioned above have been successfully applied, it can be assumed that AmeriLife will have a second chance. However, there is one more issue that should be taken into consideration. Often, the compensation package defines the employees’ attitude toward their job, the company, and the effort that they make. Therefore, the current compensation package should also be viewed and, if possible, reconsidered.

According to the current definition of the compensation package, it offers an “uncapped commission-based pay structure as well as performance recognition, reward programs, and incentives” (AmeriLife, 2013). However, in the light of the issues mentioned above, it can be assumed that the compensation package also needs such elements as the opportunities for skills improvement (e.g., training programs, etc.).

Once the company starts recognizing the needs of its employees and the necessity of job satisfaction for a perfect performance, it can be assumed that other issues, including the relationships with the customers, will finally become solvable.

Reference List

AmeriLife (2013). Outside sales representative – insurance agent (senior market). Web.

Biech, E. (2009). The 2010 Pfeiffer Annual: Training. New York, NY: John Wiley & Sons.

Daft, R. L. & Marcic, D. (2010,). Understanding management. Mason, OH: Cengage Learning.

InsideView (2013). Amerilife Group, Inc. Web.

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