Managing the loss of a key employee

Do your staff-related anxieties betray a lack of ‘readiness’?

Ask a small business owner what worries them most in relation to staff or employment issues and one answer crops up again and again: how would I cope with the sudden loss of a key employee?

Isn’t this a great metaphor for the ‘growing up’ of a small business?  Perhaps the “key employee” concern is actually a symptom of deeper, underlying anxieties that owners experience as they nurture their business from infancy to maturity.  It begs the question: what does it actually take for your business to become bigger than any single person within it?

Indeed, there’s plenty to worry the owner/employer in a small, growing business.  From recruiting and retaining the right staff to staying on the right side of an ever growing number of legal requirements, accommodating progressive working practices in a small team, dealing with discipline, and facing up to tough decisions when tough decisions need to be made.  If you’re like me, you didn’t go into business to handle all this stuff.  Some of us are simply not equipped with the necessary diligence, patience and communication skills.  It took me a few years to realise that the most useful person in my business was the person who managed all these things for  me – but I never looked back.

Whether you’re a startup or an established niche brand, it’s likely you’ve built your own team – like all the best sports teams – around a backbone of key players with appropriate complementary skills.  Often they’ll be your co-founders, or your first “proper” employees – the ones you hired to bring-in the experience and expertise your business needed to maintain that forward momentum. Not surprisingly then, the loss of a key employee – part of the “backbone” of your team – can feel like having your legs kicked out from beneath you.

But hang on – surely “no one is indispensable”?

This slightly odious and over-used cliché perhaps ought to be reserved for use by football managers, politicians, and blood-thirsty sales managers.  Unpleasant as it is (one to avoid in the exit interview), I think it’s actually a useful litmus test for how “ready” your business is to cope with an unexpected disruption.  On one end of the scale, you’re utterly dependent on your key employee and it’s a case of “help, how will we manage?”.  At the other end of the scale, the business has moved on to a different place.  You’ll be sorry to see your valued colleague go, but it will be a hiccough rather than a disaster.  You can and will survive without her.

Let’s pursue this line of thinking further, examining the three stages of dependence on key employees, then identifying the traits of a small business that has matured sufficiently to efficiently handle the loss of a key employee.

Stage 1: RELIANCE

This is where it hurts most.  You’re working in an environment of perpetual change as the business evolves on an almost daily basis.  Decisions are taken on the hoof.  Your “backbone” team may be just one or two others, supplemented with some support staff.  There’s scant opportunity for documenting organisational processes or job specifications – there’s just no point as they’ll be out of date in no time.

Some businesses settle into this stage of development and are successful despite it.  For others, the nature of being a niche multi-channel retailer dictates that processes must be formalised if scalability is to be achieved.  If one of your key staff ends up on parental leave, emigrates to Canada, or falls long-term ill – you’ve got a serious challenge.  Whether on a personal level the circumstances elicit grief, commiseration, or congratulations – on a professional level you’ll be wishing your business was better prepared to ameliorate the significant and sudden impact of such an unforeseen departure.

Stage 2: VULNERABILITY

Your “backbone” of key players has strengthened and your team of support staff has grown – but you’re not out of the woods yet.  You’ve implemented company-wide systems and processes that are accessible and understood by all.  These include procedural manuals, up-to-date filing systems (both electronic and paper), properly administered software usernames and passwords, job descriptions, responsibilities and management authorities – all up-to-date and well documented.

Although no less likely to lose an employee, you’re already better placed to cope with the consequences – at least in terms of training a replacement should you be lucky enough to find one quickly.  And here lies the heart of your vulnerability: finding the right person can be nigh on impossible if you’re located ‘out of town’ (as many of us are), don’t have a big budget to splurge on a headhunter, and haven’t groomed an appropriate deputy from within your ranks.  Few small businesses are so risk averse that they invest in key person insurance.  It’s expensive (until you need it) – and doesn’t do anything to recruit new customers or increase order values.  However, depending on the policy wording and the circumstances, it could cover your recruitment costs as well as some hired help from a consultant or interim manager, giving you a little more time to reorganise internally.  It’s worth remembering too that consultants often have their ear to the ground and are sometimes able to recommend candidates who may not even be looking for a new job.

Stage 3:  MATURITY

Sensible enough not to rely on chance, by now you’ll have take steps to ensure that your business is underpinned by robust general health and sound organisational practice, coupled with a specific plan for replacing key personnel.  Your team may not be any bigger than it was at stage 2, but the momentum of your business will be more consistent, your growth will be more manageable, and you’ll be ready to handle the unexpected in ways that you previously never imagined.

A great example of this would be the rehearsal of certain situations – and we’re not talking about the fire drill (although that’s useful too).  Such rehearsals are particularly important if you’re likely to recruit a replacement from within your business, or merely re-organise responsibilities in order to best match the potential of your existing team.  Build a culture of shared responsibilities within teams by rotating duties, shadowing managers, and using holidays as an opportunity for support staff to practice an increased level of responsibility.  By encouraging a culture of nurturing and mentoring, junior staff members will enjoy a head start should they be required to step up and take on additional responsibilities.

Another example of ‘readiness’ is the business owner who has worked at developing and maintaining their professional network, paying particular attention to individuals they imagine could slot nicely into the business.  If you can name your reserve “backbone” of key staff, even it’s just a mental wish list, you’re more than one step ahead of the game.

There’s no magic vaccine that will immunise your business against the disruption of key employee loss.  It may not happen to you, or if it does, you might be lucky and find a queue of fantastic replacements forming miraculously outside your door.   If the queue doesn’t materialise, the greater the ‘state of readiness’ in your business, the more chance you have of mitigating any adverse impact and unnecessary delays.  Who knows, you might be smart enough to turn this number one challenge into an unexptected opportunity to propel your business forward to the next level.

So here’s a parting thought for you, and one that depends on your personal aspirations for the business:

At what point do you throw yourself into the equation? What if that key employee is you? Wouldn’t it be a testimony to your success if the business could dust itself down and move forward without you?

Article licensed for publication with Creative Commons “Attribution” terms.

First published in Catalogue & e-Business Magazine, April 2010

Tags: key employee management small business Staff