With the recent and very sad loss of Steve Jobs from the world of business and product innovation it got me thinking about succession management and how we can ensure our businesses keep working when something happens to us. As someone once said, “It never happens until it happens”. So what can and should we be doing to protect against the unthinkable?
When I first heard the expression ‘key-man-insurance’ I assumed it was something to do with the person who was responsible for opening up the office. To be fair that was a long time ago, I was in my early 20’s and my mind was focused on other things. In all seriousness, it is something that every business should be aware of; the statistics make powerful reading.
Seventy-seven per cent of businesses can identify at least one employee whose loss through death or critical illness would have serious implications on the business’s survival, however, only 13 per cent have adequate insurance in place. Further probing reveals that business decision-makers are more likely to insure against the photocopier breaking down(!) and only 29 per cent of businesses have ever sought professional advice on business protection despite the almost 100 per cent acceptance by business owners that their employees are the most important asset of their business.
I couldn’t say it any better than by quoting the Greek entrepreneur, Sir Stelios, who said shortly after the family’s oil tanker disaster in 1991 off the coast of Italy, “If you think insurance is expensive, try an accident.”
Handing over the reins
‘Succession management’ is the process of making sure that, if any one person isn’t around to do something, someone else or the organisation itself can step in to replace them. In short, you need to have sufficient business and/or personal disaster recovery procedures in place.
Family-run businesses may want to think about bringing in other family members on to the management team to ensure continuity and to protect long-term capital value, even if it’s only for a short time between ‘the event’ and the sale of the business. Alternatively, ensure other key members of staff are trained, retained, empowered, motivated and incentivised to do the job. Any recovery plan should accommodate for a monthly income or overall capital return as appropriate.
Power of attorney
Something often overlooked in the world of crisis planning is the power of attorney. If you die, your executors will deal with your affairs but what happens if you are critically ill? Who signs the cheques, pays the bills, and manages the business formally for you while you recover and until you can resume control. If you haven’t got one then now is a very good time to call your solicitor to arrange for an Enduring Power of Attorney to be put in place.
Keyman insurance isn’t only for the boys in the organisation - key person is of course a more appropriate term. But, whatever we call it, it is something to think about before the unthinkable, or should we say the unsinkable, happens. Could your business survive without you? The reality is most small businesses wouldn’t, but they could if you plan ahead and take the necessary steps to make sure they do.