Key person risk – Is your organisation vulnerable?

If your business depends on you, you don’t own a business – you have a job. And it’s the worst job in the world because you’re working for a lunatic!
– Michael E. Gerber

Organisations can live forever, but people cannot. In the UK, the oldest not for profit organisation is said to be King’s School, Cantebury which was established more than 1400 years ago in 597.

There are many factors that contribute to the longevity of an organisation and one of them is ensuring that key person risk is mitigated.

An organisation has key person risk when it is highly reliant on one individual or individuals. Whilst employees with unique skills and knowledge are an invaluable resource to have, what happens when they leave? A simple test is to ask yourself, how would the organisation operate without that person? On one extreme, a one-person organisation simply would not exist if that person stopped working for any reason. And whilst key person risk may not always result in the organisation ceasing, it may cause serious pain. If not properly managed, the loss of a key person can result in a productivity downturn and a decrease in profits, as well as effect the confidence of other employees.

If your organisation has key person risk, the question arises as to whether or not you want the organisation and the services it provides to outlive the working life of that key person. If the answer is yes (it usually is!), then you must mitigate all key person risk. This can be done by developing systems and processes, automating workflows and cross-skilling staff.

A first step is to take stock of the key individuals in your organisation and assess whether those people may be a “key person risk”. Senior roles are often the first to come to mind, but ensure all key roles and responsibilities are reviewed, even the unsung heroes of the team, who other employees turn to for assistance and support. In many cases, it could well be someone in an administrative or assistant role who does more in and around the organisation than you realise. It is only when they leave that their true role and responsibilities become obvious.

Once you have identified any employees that pose a key person risk – and it may even be you – the next step is to look at your current systems and processes. In order to mitigate key person risk, you must develop or introduce new systems and processes that are independent of a particular person and can be executed by any appropriately trained person within the organisation.

Consider your current business model and structure. Are there individuals within your organisation that are the sole holders of important knowledge and relationships? Spread that knowledge through cross-skilling. Not only will the sharing of information and skills help to nurture teamwork and cooperation, but it will enhance the talents of employees for the long-term benefit of your organisation.

Succession planning is also important, particularly if you identify a senior member of your team as being a key person risk. And if you are aware that they are planning to retire in the near future, then you need to start looking ahead… Having them mentor another member of your team may be a great way to make the key person feel appreciated and valued, but also allow them to share the high-level knowledge they’ve acquired through years of experience.

The effectiveness of your efforts to mitigate key person risk can be easily tested by removing the key person from the organisation for a trial period, either whilst they are on leave or secondment. Did things fall apart as feared, or did the rest of the team step up with a “can-do, business as usual” attitude?

If you can identify employees who pose a key person risk to your organisation, and you’re not sure how to tackle it, get in touch with our team. CBB has several consultants with experience in processes mapping and the streamlining of organisational systems and processes to help you mitigate key person risk.

For an obligation free consultation, please contact us on 1300 763 505 or email consulting@cbb.com.au.