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.

 


CBB Community Business Grants

Do you feel fully on top of the business-side of running your organisation? You might be delivering outstanding social impact, but are you confident that your business practices are fit for purpose?

We work with hundreds of not for profit organisations and we see first hand the challenges of juggling the operational realities of delivering community services with the management and planning needed to run a purpose driven business. We know that many organisations do not have the time – and sometimes don’t have the in-house skills – to invest in adequately planning ahead, managing corporate functions, and continuous improvement.

As part of our commitment to reinvest some of our own funds into supporting the sector to build its business capability, we are offering a series of Community Business Grants in 2019/20. Grants will be offered on a staged basis through 2019/20 and will take the form of pro bono consulting projects in areas such as understanding your market opportunities, and financial management.

The first round will open to applications soon. Sign up for news and updates on our Community Business Grant program here, including announcements as rounds open, and access to the grant guidelines.

For any queries on our Community Business Grants contact consulting@cbb.com.au.

Jane Arnott
General Manager, Consulting and Business Services
Email: jarnott@cbb.com.au
Phone: 1300 763 505

 


Three simple truths to strengthen your organisation for change

Thinking for Change: part three

Previous blogs in this series:

Part 1: Playing with the rules 
Part 2: Finding inspiration

If you’ve been anywhere near a business blog in the last month or so, you’ve probably seen some predictions for the year ahead. While we can’t be sure which predictions will come true, one thing is certain: change will come. When it does, how will your organisation adapt? Will it respond to chaos in “firefighting mode”, or with intention and grace? Continue reading…


Reflections from 2018 Governor’s Leadership Foundation Scholarship recipient

There are many benefits to working and volunteering in the not for profit sector. A feeling of working for a higher purpose, a calling, the satisfaction that comes with an alignment of values. Yet one thing NFPs often struggle with, compared to our more affluent corporate cousins, is finding sufficient funding to train and develop staff. Which is why I felt incredibly privileged and blessed to be a recipient of a half scholarship from CBB when I was accepted into the 2018 Governor’s Leadership Foundation Program.

Continue reading…

Takeaways from Better Boards conference 2018

The Better Boards conference 2018 was on the theme of customer-centric governance. Inevitably, as a conference for not for profit boards, there was also broader discussion about boardJane Arnott presenting at Better Boards Conference 2018  performance and behaviours. Here’s our top takeaways from Better Boards conference 2018

Customer centricity

  1. Employee experience determines customer experience: a recurring theme from conference speakers (including our own session) was that employee engagement is the pre-requisite for high quality customer experience. Unhappy, uncommitted, disengaged employees cannot deliver high quality customer interactions. This message was neatly summarised by Charles Weiser of Optus and Campbell Page “Your customer experience can never be higher than your employee experience”.

Continue reading…


The characteristics of social entrepreneurs

Over recent months we’ve spoken to a number of social entrepreneurs and innovators, and observed some in action. In last month’s blog we talked about what established organisations could characteristics of social entrepreneurslearn from innovators, this month we’re reflecting more on the personal, leadership characteristics of social entrepreneurs. These are some of the common themes we’ve observed. Continue reading…


What can established organisations learn from social entrepreneurs?

social entrepreneursIn recent months we’ve been engaging with a range of social entrepreneurs and sharing some of the learning from their experience in our Foreword articles. This month we will distil some of the themes that have come through from an organisational perspective, and consider how they can be deployed in established organisations. Next month we’ll look at some of the characteristics and behaviours of innovative leaders. Continue reading…


The Bread and Butter Project: turning inspiration into a viable social business

Turning a personal passion into a viable social business might start with an inspirational story but it certainly won’t end there.

Bread and Butter

For Paul Allam, founder of Sydney’s Bread and Butter Project and the Bourke Street Bakery, the inspiration came from a visit to the social business Mae Sot on the Thai-Burmese border and a project led by nuns to train and employ refugee women to bake bread to sell into the local community, which included a significant NGO presence. Continue reading…


The power of partnerships

Major change may be initiated or catalysed by one person, but it’s rarely achieved or sustained through lone effort. Just as we learn as managers and leaders that we need to shift from personally delivering the goods to doing through others, so social innovators need to progress from a personal commitment to new product or methodology to building partnerships, networks and collaborations to effect change.

Bringing people on board

Continue reading…


Innovating through process

‘Our enterprises aren’t innovative in themselves, but it’s the process of empowerment.’
Louise Nobes, KiK 

When we think of innovation, we are probably inclined to think of digital technology or other ‘new and improved’ versions of everyday products, but innovation isn’t just about product, it’s also about process.

After 15 years as a social worker, working with young people in Adelaide’s northern suburbs, Louise Nobes was frustrated by the lack of impact – young people were ‘just as disengaged, just as unemployed’. Young people who were feeling that they weren’t good enough just couldn’t access employment through normal routes. Necessity (or perhaps it’s frustration) is the mother of invention, so Louise developed an approach that put young people front and centre to develop their own businesses (and jobs) based on a model that brings together Continue reading…