When it comes to planning for a key person, one of the most common questions I get asked is “What makes a person a key person?” This really is the fundamental question. Not every person on your staff is a “key person,” so how can you know the difference? There are a few questions to help you benchmark and distinguish between a “key person” and the rest of your staff. Consider a person that you think might be a key person and then ask yourself these questions as it relates to them.
Do They Make My Life Easier?
As a business owner, you would likely say most of your employees make your life easier. Quite frankly, some just make your life harder, as we all know! But as a business owner, you also know there are one or two who really take things off your plate that no one else could handle. Whether it is because of their unique skill set, their work ethic, or their overall commitment to the vision, some are just more engaged and more important than others.
Consider, for example, an operations manager who handles things that you haven’t considered in months or possibly even years. What about a salesperson who drives 20% or more of all revenues without causing any problems. What about the project manager who oversees multiple projects, keeping them efficient and profitable with minimal oversight from you?
For those who very clearly make your life easier, it is likely they could be considered a “key employee.” If you’re still not sure, move on to the next question.
Will I Lose Money?
Businesses have many defined purposes, but one thing they all have in common is they need to be profitable. Certain people have a significant impact on profitability. This second question is designed to help you determine the potential cost as it relates to the death or disability of a key person.
With some key people, this may be more obvious than others. For example, the necessity of the salesperson becomes very obvious. However, the operations manager’s impact on the bottom line isn’t as clear. In most cases, when you consider a key person, you will see at least some impact on your bottom line. If you see it clearly, you know you have a key person, but if it’s still not clear, apply the third and final question.
How Much Time Will I Lose?
Every business owner knows that sometimes, it’s harder to connect the efforts of a given individual directly to the bottom line. Sometimes their impact is more indirect. The operations manager we discussed earlier is the perfect example of this. The work that they do to take things off of your plate is certainly driving profitability because you’re free to drive more sales and close more deals. They could also be creating efficiency levels that allow projects to be finished quicker. The same thing goes for the hypothetical project manager. They are efficient, and their hard work and management skills are likely saving you (and others) time on each project they work on.
Because of human nature, most business owners don’t like sitting around and considering these costs. But it’s important that you do it and make sure your business is protected. As a rule of thumb, if you answer two out of these three questions in the affirmative regarding a given employee, that person is likely a “key employee.” Once you have done that, it is important to make sure your business is protected against losing them. That’s where we can help you. If it’s something you know you need to do, make some time and we will make it easy for you.