Key Employees: Replacing the Irreplaceable
Your key employees are valuable assets of your company. Like other tangible assets, your business needs to be protected against the loss of their services due to an untimely death.
What losses might your business experience with the untimely death of a key employee or a business owner who is also a key employee? Resulting business losses might include:
· Time and dollars needed to find, hire, and train a replacement.
· Reduced company productivity due to other employees being distracted.
· Lost business opportunities.
· Lost suppliers or customers.
· Loss of bank credit.
· Low employee morale.
Who are your key people?
Who, besides yourself, are your key people? The following criteria may help define “key” people:
· High salary: Indicates a high value put on the employee.
· Decision-making power: Employee helps control the direction of the business.
· Frequent direct client contact: These people maintain a substantial power base due to customer relationships that the business depends upon.
· Crucial position: Certain positions are crucial to the business depending on its type; for example, engineers, production management, product development, or sales.
· Special talents: People with special knowledge or unique talents that are difficult to replace.
The business is more than just the business owner.
The success of most businesses depends on more than the expertise or ideas of the business owner or owners. What started our as a “one-man” shop has grown into a mature business as more people joined the enterprise.
Some of these people are “key persons” who are as critical to the day-to-day and long term success of the business as the business owner.
Much business planning is devoted to dealing with the business owner and what would happen if he or she dies prematurely or becomes disabled. But what about the other key persons? A loss of a key person can be catastrophic to a business if there is no plan in place to deal with his or her replacement.
Having a contingency plan in place is good business planning and shows that the business owner recognizes the contribution of the key persons.