Running a small business has many perks . . . but it also has a few risks and one of these risks is key man dependency. In terms of risk management, what does key man dependency actually mean and how does this affect you?
Key man dependency is when one of your team members is solely responsible for something and there is no back-up plan. This could mean the techie stuff, the accounts or the copywriting and there is no-one in the business to call upon to do the same skills. So, if that key man disappears… your business would collapse in a heap.
Here’s 3 of the best risk management strategies we know to combat key man dependency:
This means you teach someone else in the business to carry out the same tasks. This is useful for holiday leave, any cover and if your key man decides to leave suddenly. This is also called succession planning.
Which is basically making sure you have a contingency plan if one of your key men (or women!) should get hit by a bus!
- Identify Out-Sourcers
The disadvantage to cross-training is that a key member tends to be specifically trained in one area, so another staff member might not get as good results. Picture the copywriter trying to do accounts . . . it could get messy. So although it is good to cross-train in basic skills, another solution is to identify out-sourcers who are specifically trained in your key-man area. These people tend to work on contracts.
A key risk management strategy is making sure you have some out-sourcers on tap you can turn to in busy periods or as a short-term stop gap should your key man get sick, take a holiday or have a baby!
One of the best risk management tools I know is also the simplest. It’s called having a system! So this means getting your key member to systematize as they go along. Whatever they are doing, get them to make notes along the way and then record these notes in a central place where everyone can access them.
For example, if your techie person has a system around the launch of a new product, get them to transfer this system into a ‘How to Guide’. So if an out-sourcer has to come in unexpectedly, they have a check-list to work off.
Risk management is one of those processes a business tends to ignore until it’s too late. So to avoid risk in your business, try out some of the above strategies to minimalise your key man dependency.