4 Strategies to Mitigate Key-Person Knowledge Risk
As a leader, it’s essential to ensure you are not relying on a few select team members to complete critical financial processes. While these employees may have substantial knowledge and skills within your organization, doing so increases your business’s key person knowledge risk, especially if these team members leave unexpectedly without documented processes. Relying on key individuals within your company can significantly threaten your business’s productivity, profits, and operations.
Generally, key person knowledge risk is higher in small to mid-sized companies. However, large organizations can also be susceptible. Companies must be mindful of this threat and be prepared with strategies to reduce their risk.
Ways to mitigate key-person knowledge risk
1. Identify if your business has key person dependency
Before you can work on reducing any risk, you must first look internally to understand who on your team may be a “key individual.”
Consider what critical information these employees may know that no other employee does. Draft a list of potential key players in your business and consider what would happen if they left without providing documentation on their role.
You may also want to consider the following questions:
- Who knows where essential information is stored?
- Is there an employee with extensive knowledge about their job, organization, and industry?
- Who do you depend heavily on to handle and resolve problems that arise?
2. Document procedures/policies
Once you’ve identified “key persons” in your company, work with these employees to document the essential procedures and policies they are responsible for that are vital to your company’s operations. Consider documenting tasks that are owned by these individuals daily that others may not have the insight on their own to complete.
Create playbooks or step-by-step guides that outline what knowledge is needed to complete these tasks and the steps to accomplish them. You should ensure that these guides are detailed enough that someone who has no knowledge of the job can follow the steps and finish the assignment successfully.
Whether you face an unexpected employee leave or need to confirm job duties are handled during vacation time, creating playbooks will ensure important operational tasks are completed efficiently. Review these documents with your leaders and implement regular updates to keep playbooks current.
3. Cross training
Educate and upskill your current employees in the organization. Ensure necessary knowledge is shared across a few select employees, not to have it all live with one team member.
Training multiple employees in other business areas is also beneficial, even if no open roles are available across these departments. Empowering your team to work in other business areas will significantly lower risk levels as team members can step in where needed. Additionally, they can support any new hires you bring in. You may also want to consider implementing work shadowing opportunities for employees.
4. Utilizing fractional financial firms
Consider partnering with an outsourced financial firm like Part Time CFO Services. These organizations naturally transfer knowledge internally and have dedicated processes and procedures to ensure another team member can step in when needed. By outsourcing your financials, you’ll put securities in place to ensure that regardless of the state of your internal workforce, your finances are handled by a team of experts with the experience to keep your business running efficiently and help you increase profits.
The team at Part Time CFO has extensive experience helping companies across Canada better manage their financial processes. We implement customized strategies geared toward your company’s financial priorities. Reach out to us today to schedule an introduction!
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