Why Relying on A Few Key Employees Can Be Risky

Oct 15, 2022

Sharon: Good morning. This is Sharon Heller, and I’m here with Steven Kohnke from Denver Business Coach. Good morning. Steven.

Steven: Morning Sharon, how are you doing this morning?

Sharon: I’m good. I’m good. I’m eager to hear our topic for today.

Steven: So today, as you know, we’ve been talking about some of these crucial conversations that are coming out of some research that we did some qualitative research, asking business owners in the area where they’re strong, where they’re weak, and hopefully, we can help them with some ideas and overcome some of these areas.

Steven: But the conversation that we’re having today is when business owner, and the business itself, becomes heavily reliant on one key employee in order to do operations. And what that does ends up putting the business more at risk.

Sharon: All right, so can you give me a little bit more of an explanation of what does that really means and maybe even an example?

Steven: Yeah, absolutely. So as I mentioned, it’s putting your business at more risk, and at Denver Business Coach that’s what we’re really looking at, how to mitigate the risk of your business, and that increases the value. Value and risk have that inverse relationship in building a business looking to scale.

Steven: And when you have, heavy reliance on the key employee, which happens when they’re rock stars for one, they’re that utility player, they can do a bunch of different things. And what ends up happening is the owner relies on them to just do, “Hey can you do this marketing piece? Oh, hey, can you read this financial document?” Those are two very different jobs.

Steven: What ends up happening is that employee has this mismatch of different positions because they’re capable of doing that. Those are great people to have on board with you, but eventually, and the longer that goes on, the heavier at risk your business is going to be, because you’re going to start putting more stuff on them and start relying on them quite a bit.

Relying on Key Employees is Risky

Steven: And why is that so risky? If that employee becomes incapacitated in some way, or they quit, your business is going to suffer greatly because you’re scrambling around trying to figure out what are all these holes that this person was filling, and how can I find the right people or do it myself. And then things just kind of start spiraling after that.

Steven: So that’s really something to be looking at, are you over time slowly putting out more responsibility for this person?. A way that I look at is, I’ll use a sports analogy, I hesitate because sometimes I don’t like using sports analogies, but on this football team, everyone has a different position and the team itself wouldn’t be able to score points unless each individual held their position and did it right.

Steven: And the analogy I draw there is, if one of the offensive linemen decided I’m going to be a quarterback for this play, it wouldn’t pan out very well. Because they’re not trained in that way, they don’t know how to do it, and things just start kind of falling apart. So I usually use, like, that sort of football analogy here.

Sharon: That’s a good analogy in this discussion. Interesting, though, because we all want those rock stars employees, we need them. And how do we then go about kind of mitigating the risk of having these star employees, and how to have them kind of be advantageous to our business versus putting our business at risk?

Steven: Yeah, that’s a great question, because everyone wants, exact, everyone wants that rock star to be able to help them grow their business and scale their business. I’m not saying don’t find those rock stars. I’m saying have them help you, but also keep in mind that this is not a long term strategy. This is not how you scale a business.

Steven: There are two people that can be together in a business and everyone kind of has a role. But as you grow, you need to be able to figure out what is the actual strength of this person. Just because they can read financial statements and can create financial documents and do that piece, that still might not be their specialty.

Steven: So understanding where the strengths and weaknesses are of those rock stars is going to be key, because you want them to trend more towards that strength and then delegate weakness, or have that sort of system in place, that’s “OK. Next on the list is we need to get a bookkeeper” for instance. Using the financials example there while you can focus on sales. because that is your specialty.

Steven: So understanding ahead of time where the strengths are, and having that road map of, OK, you’re the key employee and you’re wearing this hat, this hat, this hat. Let’s work on getting this hat off your head, and then we can work on this hat, getting off your hat, and then it’s just moving closer, closer, closer to that strength. So that’s really just having that plan, and being aware of it is going to be key to making sure that that doesn’t happen long term and over time.

Sharon: Really good points. Great discussion this morning, Steven. Anything you want to share in closing?

Steven: Yeah, if there are any business owners out there that feel that they are too heavily reliant on one or two employees, I encourage you to go to DenverBusinessCoach.com and reach out to us. One of our coaches would be happy to have a conversation with you on that. And I’ll provide some examples and some strategies to help you “de-risk” your business.