Expert Commentary

Formulas for Success

Jack Bogardus takes a look at the history of Marsh & McLennan and Alexander & Alexander—the individuals, the partnerships, their visions, and their success.

Risk and Insurance History
September 2003

The foundation for the phenomenal growth of principal U.S. insurance brokerages was developed during the early twentieth century. Contrasting the characters and personalities of leaders in two prominent firms—Marsh & McLennan and Alexander & Alexander—is instructive and in many respects mirrors the evolution of other large brokerages.

The Beginnings

Marsh & McLennan (M&M) cites 1871 as its start. However, Henry W. Marsh and Donald R. McLennan did not join forces until 1904, and the company's current name first appeared in 1906 when it operated from Chicago and New York offices. These men positioned M&M to become the world's dominant brokerage.

During 1899, William F. Alexander (W.F.) and his cousin Herbert formed Alexander & Alexander (A&A) in the rural town of Clarksburg, West Virginia. W.F.'s brother, Charles B. Alexander (C.B.), purchased Herbert's interest in 1902, after which the two brothers led the brokerage until W.F.'s death in 1947. Their contributions formed the basis for A&A becoming the world's second largest brokerage in the 1980s.

The compelling characteristics contributing to the success of these four pioneers included significant similarities and obvious differences. Henry Marsh, a Bostonian, left Harvard University before graduating. After briefly working with an uncle at Fireman's Fund Insurance Company in Chicago, he joined the insurance agency of R.A. Waller & Co., a forerunner of Marsh & McLennan. Even at his young age, Henry knew the agency side offered him greater opportunities.

Don McLennan was born in Duluth, Minnesota, and became the family breadwinner at age 14 when his father died. After several clerking jobs, Don worked as a shoe salesman until the day the owner instructed him to double the price of shoes for an Indian client. Don was so outraged he quit on the spot, walked across the street, and was hired by an insurance agency specializing in railroad accounts. He never looked back.

The Alexanders were reared in Charles Town, West Virginia. Their formal education consisted of tutoring by former confederate soldiers at a location where students arrived on horseback. The brothers believed they received the equivalent of 2 years of high school. Because of their father's early death, college was not an option. They were drawn to insurance in part because their father was an agent.

Typical of the period, all four men gained varying degrees of technical insurance proficiency. They made inspections (the Alexanders often traveling by horses), placed business with insurers, and handled accounts. Each had a forceful personality and, except for C.B. Alexander, was a prodigious generator of new business in an era when producers totally controlled accounts they developed.

Henry Marsh and Don McLennan were primarily responsible for winning almost all of M&M's important accounts before 1920. While their personalities and styles contrasted sharply, both had the advantage of valuable social contacts. However, Marsh sold more on the strength of personality and McLennan on contacts and intimate business knowledge.

The Individuals

Henry Marsh. Marsh was small of stature but charming, suave and flamboyant—a natural producer. He enjoyed extravagant entertaining, some of which took place at Warwick Castle, which Marsh leased near London. Most great producers are fearless and Henry was no exception—taking extraordinary risks to produce accounts. For example, early in 1910, he noticed a newspaper item reporting that Theodore N. Vail, president of the American Telephone & Telegraph Company (AT&T), was sailing at noon for London. Without baggage, Marsh boarded the ship and secured a deck chair next to Vail's, then booked passage on the same return trip as his quarry. He developed a relationship with Vail, and M&M was appointed AT&T's broker in September 1910.

Marsh was interested only in large accounts and sometimes remarked "What's the use of shooting hummingbirds when elephants are so much easier to hit." Although some detractors considered him a roué, no one questioned his colorfulness and success. Preoccupied with production to the end, a few days before he died at 83 he said of himself, "If I were only twins, we could do a lot of business."

Don McLennan. An equally effective producer, McLennan was tall, handsome, and an accomplished athlete and amateur billiards champion. He was more conservative than Henry Marsh. Don built his reputation through friendship and insurance skill, forming special relationships with senior railroad executives.

Unlike Marsh, McLennan did not push aggressively for sales; rather, he let them evolve. His relationship with the Armour Meat Packing Company illustrates this. McLennan became a casual commuting friend of P.D. Armour. One day he was summoned to the office of Mr. Armour, who called him a "damn fool" for never discussing the insurance business. McLennan replied that they were social friends and he didn't want to impose on their friendship. Armour countered that every insurance man who called was asked to name the second best insurance agency in the country. Invariably, they answered, "M&M," and he added, "Now I've got to give you my business."

McLennan learned important lessons and established vital relationships by serving on the boards of other companies. His particular management style was to establish policy but avoid details. A 1933 Colliers article demonstrated the esteem in which he was held. In his "Industry's All-American Team," Hugh S. Johnson reported that "the Ulysses of business outside of banking in Chicago is Don McLennan—an insurance man who dreads publicity but is, in my judgment, the most respected businessman in the Midwest."

W.F. Alexander. Of the other three leaders, all of whom had considerably different backgrounds, W.F. Alexander most closely resembled Henry Marsh. Although a tall, spare man with large ears, W.F. dressed impeccably and was a great charmer. He was popular with the ladies, which periodically got him in hot water. W.F. proved to be a dynamic and ingenious leader with a strong, aggressive personality and magnetic presence. Irresistibly attentive to clients and prospects, he understood intuitively when to press for a sale and when to back off.

Although W.F. did not have Henry Marsh's business or social contacts, he became a master at "cold calling" and could talk his way past almost any secretary to get to the boss. According to A&A lore, he once "sweet talked" the secretary of American Airlines' first CEO, C.R. Smith, who then let him wait in the CEO's office until Smith returned from lunch. C.R. arrived to find W F. snoozing on the edge of his desk! From this bizarre beginning, the two became lifelong friends and business associates.

W.F. was responsible for every major A&A account from the early 1900s until the late 1920s. He traveled by all possible means seeking new business around the country. Evidence of W.F.'s talent came from a competitor's CEO who called him the greatest salesman of his time and "the Tiffany of the insurance business." W.F.'s sales ability was comparable to that of Henry Marsh and Don McLennan.

C.B. Alexander. Unlike his brother in most respects, C.B. Alexander was fairly tall, with undistinguished looks. His casual dress reflected the local West Virginia environment. On one occasion, when disembarking a train in Clarksburg and noticing that those meeting him were shocked at his disheveled state, C.B. declared: "Nonsense, this is the way I left West Virginia." Ironically, he was fastidious about his butler's appearance and outfitted him to the hilt in plum and silver livery.

Though not a salesman, C.B. complemented his brother with a thorough insurance grounding and an adept talent for hiring and designating the best individual for a particular task. C.B. was a smart, conservative financial manager—tightfisted some say. He bought only secondhand cars and once, upon learning that A&A's treasurer purchased a new Cadillac, C.B. called in auditors to check the books. Unlike W.F. he preferred small accounts, believing they minimized the impact of lost business.

The Relationships within the Firms

Interestingly, the relationship between each set of partners was not close. With different lifestyles, there was little rapport between Henry Marsh and Don McLennan. They met only on pressing business matters. Personal antipathy ran so deep that Marsh considered giving his M&M stock to Harvard University to ensure that McLennan could never fully control the company. Only an intervention of other senior executives prevented this gift. Although both men contributed enormously to the company's success, the firm also benefited from the fact that Marsh operated primarily out of New York and McLennan was in Chicago.

Similar conflicts between W.F and C.B. Alexander resulted in long periods when, except for serious business issues, they avoided each other. In addition to completely different temperaments, the brothers' relationship was complicated by C.B.'s wife who apparently resented that W.F. had not suffered the tragedies which befell her and C.B. (a daughter died from an accident in a car she had received as a high school graduation gift, and a son was killed in Germany just before the end of World War II). With such tensions between them, it helped that W.F. was in New York and C.B. was in Baltimore.

Their Leadership and Legacy

Considering the four personalities and, in particular, the strengths of each combination, one is drawn to ask: What effect did their leadership and legacy have on their firms' expansion during the twentieth century? By primarily concentrating on acquiring accounts with superior growth potential, M&M and A&A eventually developed the capital which fueled expansion. In addition, their joint strengths facilitated the attraction of talented staff, investment in employee specialization, and wise use of financial resources.

Without their successful formulas, which combined complementary strengths and leveraged intrinsic growth factors, M&M and A&A would not have achieved their twentieth century prominence. M&M would have been a much smaller company than it was when it became publicly owned in 1962. A&A would have been too small to go public in 1969 and would not have been positioned to make the over 200 acquisitions it completed from the 1970s to 1997 when it was acquired by Aon.

Robert Moore has worked with Jack Bogardus for a quarter of a century. Mr. Moore worked for Alexander & Alexander from 1977 to 1995 and served as a senior vice president of Alexander & Alexander Services Inc., as well as chairman and president of A&A Government and Industry Affairs Inc. In 1985 he was elected president of the National Association of Insurance Brokers, and from 1989 to 1993 he served as chairman of that organization's Past Presidents' Advisory Council. He has written and spoken extensively on corporate issues. As The Conference Board's emerging issues coordinator, he identified and responded to the business community's public policy concerns. He is coauthor of School for Soldiers: West Point and the Profession of Arms, which was selected as a New York Times "Noteworthy Book." Mr. Moore earned a bachelor's degree from Davidson College, a master's degree from the University of North Carolina, and a doctorate from the University of Wisconsin. Commissioned a U.S. Army officer, he taught at the Military Academy at West Point and was an associate professor on the graduate faculty at the University of Maryland. He can be reached at 703-759-0233 and through the Web site

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