Key Person Dependency – Why It Stifles Growth & How To Beat It

Cassidy Jakovickas

May 15, 2024

Who are your key people? These are the individuals who play a pivotal role in your day-to-day operations, decision-making, and the overall success of your business. It could be you, as the CEO, or your IT manager or lead salesperson.

Frankly, it can be anyone whose knowledge, skills, or relationships are critical to the success of your company. But what happens when such a key individual is suddenly unavailable or decides to leave?

The loss of such a person would dramatically impact your business because you had grown to be so reliant on them.

This kind of scenario is known as key person dependency.

How key person dependency originates

New and small businesses often don’t have the budget to hire additional employees, so the only option is to rely heavily on one or a few people. In other cases, a particular individual may be highly talented and naturally become the go-to person for various tasks.

In either case, the company eventually becomes overly reliant on that individual. If this person goes on vacation, gets sick, or otherwise goes absent, there is a negative impact on the business.

The risks of key person dependency

The main risk of relying on just one person is that if that person becomes unavailable, those tasks cannot be delegated to anyone else in the company.

Additionally, a person can become too entrenched in their role and be unwilling to try new approaches or challenge the status quo. As a result, this over-reliance can stagnate innovation and growth within your company.

Reduce key person dependency by removing silos

A silo is when only one person has access to role-critical data or understands how to perform a task. On the surface, silos appear to increase an employee’s value. However, silos tie key employees to their desks, making it impossible for them to move into a different role or take a vacation.

As MBS Accountancy has grown, I’ve realized I can’t handle everyday operations and need to focus on strategic and managerial tasks. Extricating myself from operations after doing it for so long, however, has been challenging. But it is possible.

If you’re in a situation where you feel key person dependency is stifling your growth, here is what I’d recommend:

  • Share knowledge and responsibilities among team members: Common methods include cross-training several employees and building standard operating procedures within a company wiki or knowledge base.
  • Make a succession plan for continuity: If a key person can’t continue, a succession plan shows who will take over and what resources they need.
  • Reduce silos by fostering collaboration and communication: silos make it impossible to get anything done. Build a private company wiki or similar library of processes and procedures so siloes don’t suffocate your team.

Processes breed progress

Rather than stifling them, documenting standard operating procedures gives your key people more room for growth, creativity, and downtime. As my management team and I have fine-tuned our SOPs throughout our firm, we’ve noticed that top performers also become our biggest champions for promoting and assisting other departments with, SOP initiatives. It’s a real-life example of an “all ships rise” effect. Make no mistake about it:  When you focus on documenting processes and sharing knowledge, nobody will ever lose.