“Does your institution work independently? Or does it highly depend on some important people or partnerships?”
“Have you ever planned out something that didn’t work out? Or did your colleague leave you hanging in the middle of a project?”
These questions are usually the ones that get asked both in small and big scale situations. In a small scale set-up, sometimes, there are some external factors that affect your planned itinerary for the day.
On a larger scale, company projects fail because only one person solely manages a task. In this situation, what if something happens to that person? What if he gets sick and becomes unable to function? What will happen to the operations of the company? Do you have a Plan B in your business?
Key Man Risk
For ordinary people, ‘key man risk’ is an uncommon term that we don’t hear in casual conversations or anywhere really. We may not know it, but we experience it from time to time. In the business world, the ‘key man risk’ is basically when a task, a project, or an operation is heavily reliant on one person only.
The term ‘Keyman’ is technically a key employee or a team member that is very important and essential to the company, group, or institution. A large chunk of the work is all in that employee’s hands. This means that the absence of this key man or key employee in the operations and task-building would be very dangerous and disadvantageous to a company.
Who Become Key Employees?
For many businesses and companies, the presence of a key employee is also very beneficial. Despite it being risky, there are many things and qualities that companies look for, which is why they can’t help but hire key employees who are:
Most key employees are hired because they are the kind of workers who are very influential, impactful, and significant. These key employees are the people who affect the business in a good way. His or her decisions and tasks positively affect the company’s outputs and performance. Without them, the company wouldn’t just deliver as much.
Companies like employees who look forward to the future. For them, these employees are assets as they are essential in shaping the future of their institution. Usually, employees who become key employees are those who are strategic and creative; those who can come up with ideas that match with the vision and goals of the company.
Companies usually get key employees who have an excellent skill set. These are beneficial to them because they will be working with people who are experienced, capable, and aware. The skilled workers become key employees because, from the perspective of the company, they would not need as much training and they already know how the ball rolls in the business world.
Although having key employees have its pros, of course, there are some downsides to it as well.
The Upper Hand
Key employees have been said to have the upper hand in a lot of areas. Despite owners being the "bigger boss", key employees are almost like bosses in their own ways. This is because key employees do the work which the operations of a business are heavily dependent on.
Any shortcoming, mistake, or error on their part would cause a lot of damage to the whole institution. This is why there's a lot of talk about key employees being under-appreciated especially when they do their parts and tasks excellently well.
I, too, have experienced being caught up in a situation involving the key man risk. Although it can be prevented, it's tough to be in that exact situation. Why? Well, because when you're there, each action you make will be very critical that's why you have to be extra careful.
A little years ago, a friend who is also my client gave me a call and informed that we have a little problem with our operations. Our developer who is one of our long-time partners suddenly became unresponsive to our messages.
This developer is an excellent developer. He’s our sole developer who is very talented and efficient but suddenly stopped doing work and answering our messages.
My team and I were thinking that maybe this person got a job somewhere else, or was currently working on another project. We got worried because we knew that if this developer quits, the company will go backward and we wouldn't have enough funds to hire another developer.
This situation was such an eye-opener to my team and me because it trained us to make wiser decisions and to know which ones are worth sacrificing or not.
The Tips & Tricks
Because this situation is a challenging one especially for those in the business world, I'd like to impart some do's and don'ts when you find yourself caught in problems like this.
First, in your business, it's essential to have a backup plan. It's important to have at least two people handle a project or task. In emergency situations, if one cannot do it, your operations won't be in danger. The principle to follow in this is that even if someone takes a holiday or day off, your business would still run and not move backward. You must have a company that can work despite obstacles or else you would always experience the key man risk.
Yes, you might be thinking of doing this would mean more cash to shell out, but this is better than having to suffer the consequences in the long run. For those who have no financial constraints, I recommend you think twice before hiring someone because we're talking about money here. Always be sure that in every decision, you make wise choices as responsible business owners.
Second, you may not know it, but these key employees may be going through something personal. With this, as business owners or bosses, start getting concerned. They are your workers and partners after all. It won't hurt to ask a little about their day or about how they're doing; in this way, you might also be saving a life. You may have an option to increase the pay of this key employee to start getting back to work, but this solution just makes them a slave of money.
If ever this key employee continues to become unresponsive, in situations like this, you also have the option to hire another developer right away who could replace him. At first, you may feel that it's going to be unprofitable for you. But in this way, you will allow yourself to build a new relationship with more effective people and partners. You have to take in consideration that removing the rotten egg is essential or else it could affect the business. While the damage is not yet very significant, create a solution right away.
Third, in hiring new people, make sure that you have a backup person to contact if ever anything goes wrong. You have to make the process of replacing people as quickly as possible as not to affect your business significantly. Remember to take every experience as a lesson to not happen again. Have important connections and partners where you can have people cover the roles, especially those that would cost you a lot of money.
Always Have a Plan B in Your Business
Always having a Plan B is essential in business to avoid experiencing the key man risk. As people would say: "Lessons that cost you money are often the ones you learn from really well."