Key employee dependency is one of those business risks that rarely gets the attention it deserves. We spend enormous amounts of time looking at sales, margins, wages, cash flow and profit, while some of the most valuable assets in the business are walking around carrying years of knowledge inside their heads.
There is usually one employee who knows how the quoting really works, which customer will accept what price, which jobs always go wrong and which supplier can magically find stock when everyone else says six weeks.
Then there is the operations person who knows that Steve cannot work with Michael, Customer A will only deal with Sarah and the delivery to Newcastle needs to leave before 10am despite absolutely none of this appearing anywhere in writing.
This is key employee dependency and it can quietly become one of the biggest risks in an otherwise excellent business.
Every business wants talented people but allowing important knowledge, relationships and processes to belong entirely to those people rather than to the business is a problem. This is something worth looking at whether you are buying a business, growing one, preparing for succession or simply hoping to take a holiday without receiving 67 phone calls in your week away (something I am very familiar with).
The solution is not to make good employees less important. It is to make the business less dependent on any one of them. Document processes, share relationships, cross train staff and make sure critical knowledge belongs to the business rather than somebody’s memory.
The real test of a business is not how well it runs when everyone is there, but what happens when someone important is not. If one resignation can bring the business to its knees, that person is not just an employee. They are a business risk sitting on the payroll and that risk needs to be mitigated…