For a business to grow the following advice must be heeded: “Create an environment people want to be part of.” At least that’s the philosophy of Scott Firestone, area president of Arthur J. Gallagher & Co.’s Los Angeles office, based in Glendale. Started as a family operation in 1927, Gallagher is now the fourth largest insurance brokerage and risk management services firm in the world. It employs more than 8,000 people and has operations in the United States, Great Britain, Australia and Bermuda. Its headquarters are in Itasca, Ill. In 1984, the company adopted a body of shared values, now known as “The Gallagher Way.” Featured values include “fear is a turnoff,” “leaders need followers” and “never ask someone to do something you wouldn’t do yourself.” This year alone Gallagher has made about a dozen acquisitions, most recently obtaining Midwestern-based companies Strategic Health Plans Corporation and Spanjers Insurance Agency. Firestone became a Gallagher area president in 2001, after it acquired a small firm called MDM of which he co-owned, grew and served as president. “I’m the poster child because, here I am, I merge a company, and now I’m running their largest office in the company.” Before excelling in the brokerage industry, Firestone worked on the carrier side for Hartford Insurance Company. He believes the experience gave him an advantage. “Working with all these various brokers in the Los Angeles area, it (was) just so easy to differentiate the quality, and how these people are serving their customers, so, when I was fortunate enough to go on that side, I had a head start.” Question: Give an overview of Gallagher. Answer: To be honest with you, it’s such a complex business. First and foremost, for your average reader, we do everything from homeowners’ insurance to complex insurance for offshore oil rigs. So, in the world of insurance and risk consulting, there’s nothing that we don’t do. We have a third party claims administrator. We have what they call a wholesale side of the business, but, in the purest sense, if it looks and smells like insurance consulting whatsoever, we do it. We have loss control engineers on staff. We have claims consultants on staff. We do actuarial work. We allow clients to own their own insurance companies. In the world of insurance consulting and brokering, which is placing insurance for clients, there’s nothing we don’t do. And there literally isn’t an insurance company that somewhere we don’t represent. That’s a really important point. Most agents and brokers, they only represent a few insurance companies. Q: How did Gallagher end up in Glendale? A: Well, when we merged our firm, about half the people were in my company at the time, which was in downtown Los Angeles, and half of the people were in the current Gallagher Los Angeles office, which was in Woodland Hills, and bringing the two cultures together, we consulted with our HR department and corporate and also with our leasing agent to (determine) where we thought we could attract people from all different areas of the city that weren’t currently with us. We wanted to pick a place that was somewhat centrally located to the freeway and the transit systems, obviously. The train station proximate to Glendale that was very convenient for many in the outlying areas. And we really liked the sense of being part of a community as well. We’re really pleased to see the development that’s taking place. One of our clients Caruso is building the Americana brand down the street. (Moving to Glendale) also allowed us some expansion opportunity. Most of the landlords downtown won’t build in those options. And, while all of our other competitors have chosen to consolidate downtown, we think it’s just an absolute important decision that we ended up in Glendale, and we’re committed to being in the Valley. We’ve been able to have firms merge with us. We’ve been able to create an environment where the best people in the business were calling us. We really typically don’t use recruiters. I mean the best people in the business were saying, “Hey, we want to be part of your company,” and that’s really what it’s about. Q: Discuss your company’s performance. A: As a company we’re thrilled with five percent organic growth in a market where premiums are coming down dramatically. The good news in our business right now is most clients’ premiums are dropping rapidly, well below any of the forecasts. The reason for that is that the insurance companies’ results themselves over the last three years have been record breaking. I mean, the best results ever in 75, 80 years since they’ve been keeping track, 100 years. What’s good for our clients is that the business is healthy. Their costs are going down. We’re able to increase our growth from the standpoint of working on our market share. Q: Chart the company’s growth. How did it become the fourth largest insurance broker in the world? A: It started with a family that had their own brokerage. They went public. Basically, Bob Gallagher, Pat Gallagher and John Gallagher created an environment father, son, nephew where the best people in the business wanted to be part of it, and those of us that go to sell our business like I did have a lot of choice. There’s countless analyst supplier buyers out here, so you to say to yourself, ‘if I’m going to merge my people and my culture into a business with somebody else, I want to be there.’ So how has Gallagher grown? Gallagher’s grown the same way our Los Angeles office has. They’ve created an environment where the best people in the business, the best firms in the business, the best intellectual talent in the business want to be part of it, and, you know, nothing happens until we sell something, so, we’re either convincing somebody to join us as a client, convincing a colleague in the business or industry to join us, and when they do, the clients follow because in our business, like in any professional service business, clients have a choice as to who they want to do business with. Q: How has the insurance landscape changed? A: The challenges are how do you help a sister client navigate through the changing marketplace, consider changing insurance companies? How do we help them as consultants establish what risks they want to have and not have? How much risk should they bear because all risks are never insured 100 percent, so, as the business marketplace changes, as technology comes in, as companies go international, as the world becomes more of a global economy, how can we ramp up as quickly as possible, from an intellectual standpoint, with the people that are part of our organization educate them, reeducate them, invest in education, attract new people to the business. How do we keep our intellectual knowledge and talent up to speed with the changing economic climate of the world? We have clients that are virtual businesses doing billions of dollars, and all their manufacturing is done in 72 different countries worldwide. The interdependency you have a plant in India go down how does that affect U.S. operations? And where does insurance start and stop? It used to be, 15, 20 years ago, that most U.S. businesses were pretty locked up in the U.S. Their manufacturing was here. Maybe they distributed a few products. There really wasn’t cross partnerships with a lot of different operations around the world. Today, whether it be via supply side, distribution side, staffing side, most companies are truly international. They have operations around the world. They have partnerships around the world. They have people around the world. Q: How does insurance legislation, pending or in existence, affect your operation? A: We’re in a 100 percent disclosure environment. We’re one of the few firms out there that discloses 100 percent of the monies we make on a client’s insurance policies and that’s really, truly rare for our business. Most buyers have no idea what they pay their agent or broker. And our businesses have all been to a consulting practice. Most agents and brokers are really resisting this change, but, if you just think logically about it, there’s really not a professional service out there where there’s not disclosure of what your compensation is, what are you doing for the money, whether that’s embedded in the premium or whether the client chooses to pay you a fee. Q: Talk about Gallagher’s acquisitions. A: Once you’re part of a bigger team, there are more resources to pull upon. I can tell you unequivocally that the service that my clients have available to them are unparalleled to what I could provide them at my other firm. We have lawyers on staff. We have actuaries on staff. We have engineers on staff, and what’s interesting about our business is what you pay us is the same thing you pay that small agent without the same resources. SNAPSHOT: Scott Firestone Title: Area President, Arthur J. Gallagher & Co. Age: 37 Education: Bachelor of Business Administration, Southern Utah University Most Admired People: All of the men and women that have served our country or that are serving our country. Career Turning Point: When we (MDM) merged our firm with Gallagher in 2001. Personal: Married with two sons and a daughter.
