The loss of a key person, such as the death of Supreme Court Justice Antonin Scalia, is a critical moment in any organization. His passing sharply increased the temperature of an already highly-charged Presidential election season. It was already forecast that the next President will likely have to opportunity to make at least two and probably three appointments to the bench. What it make me think about was the impact of a Justice’s death on the day to day business of the court.
And that reminded me of you and your business.
Why? Events like this can have a critical, if not fatal impact on your business. Could your business survive your death or permanent disability, or that of key employees?
Regardless of your answer to that question, consider what’s in place to assure that the business will survive you. Is there insurance? A plan? Anything?
Key person insurance isn’t enough
While there is key person insurance available to help subsidize the cost of dealing with these kinds of situations, it often does little more than take care of expenses related to an orderly dismantling and/or sale of the business. Why? Because there was no plan to do anything else.
The real work, if possible, is the work necessary to survive the situation and keep the business running. That’s often the root cause of business failures that occur after an event that prevents the owner from being involved in the daily operations of the business.
Do you have a plan to survive a key person event? Without any instructions from you, could your family and/or your team know exactly what to do to get payroll out this week? A bank will work with you to get payroll out the door, but who can fund the payroll account in the first place?
What about the business that will transpire this week? What about the leadership void you would leave? Does your spouse take over? If so, do they have the necessary written instructions (or a video, or something) to help them get their feet under them in the short term? Have you organized the guiding information they need to take this on for the long term?
Keep in mind that in the early days, they will be trying to do this while suffering through the unexpected and sudden loss of you. This will certainly affect their decision-making abilities and focus, even if only temporarily.
Will there be a battle at the office to see who takes charge? If you don’t have a leadership assumption plan in place, what would happen? If your spouse isn’t ready to lead the company in the short term – regardless of the reason – who should their confidant be? Have you briefed the person charged with getting them up to speed on what’s important and how you make decisions? Is this information in writing?
Is the plan you left in place legally binding?
Key people need access
If you don’t pass on, but something happens to prevent you from having your normal access to business data, paperwork, assets etc or prevents the business from having normal access to you – what impact would that have?
Some events could impact almost any business, like these:
- The owner, operations manager or a key employee has a stroke.
- The owner, operations manager or a key employee leaves without notice.
- The CEO’s spouse is taken to intensive care without warning, and the forecast is that he will be there for months.
For a larger business, international travel is likely – and that opens the door to many more possibilities:
- Any of the items above could happen while an executive is out of the country, adding complexity to an already-trying situation.
- The CEO could be stuck in a situation out of their control that keeps them out of the country for months.
How could this happen? Easy. If the boss is in South America, how will it affect your business if she can’t return for three months? It isn’t much of a stretch for the Zika virus (or something similar) to cause a country to close their borders, or for it to provoke the U.S. to disallow flights from the Zika-borne country.
How would the inability to perform simple tasks like signing checks impact your business? Little things can sometimes become big things when you lose control of them.
Is your business ready?