The financial implications of losing a key person from a business can be disastrous, and the protection industry is well adapted to inject the necessary cash when it is needed. However, there are some less obvious issues that arise on losing key people.
I was dealing with such a company some while ago, David, the sales director of an engineering company had died after a short illness creating a significant cash flow problem for the business. Fortunately the company had a strong balance sheet and they were able to re-finance and weather the financial storm. Key person cover would have obviously helped, but they didn’t have any and were now determined this would not happen again.
However what struck me were the practical and emotional problems that this loss caused.
The first thing that hit the surviving directors was shock and a degree of panic as they had no contingency plan in place. The immediate problem was who would fill in for David. He was the outward face of this company and brought much of the business in. Technically competent he dealt confidently with customers and suddenly his codirectors had to field all these calls, taking them away from their own responsibilities.
They had never had to recruit a sales director before and really didn’t know where to start. In the end it took months of time-consuming searching to recruit a replacement, whilst the business haemorrhaged customers.
The other problem was an emotional one. This was a close-knit business. The directors knew each other’s wives and families well, so the MD felt a responsibility to David’s widow, but he was not a bereavement counsellor and felt totally out of his depth.
These problems were in my mind when we designed our corporate proposition. Bright Grey already offered some of this support on our personal product and we wanted to extend this to the corporate proposition, so we spoke to our third party suppliers to see how we could “corporatise” this feature.
We came up with two key areas. Firstly we extended our RED ARC cover to embrace business protection. So on the loss of a key employee a nurse adviser is appointed to organise qualified professionals to provide a raft of support from bereavement counselling to additional medical support. This takes away the responsibility from the company, yet is seen to be provided by them as a caring company.
Secondly we wanted to plug the gap of the missing key person. We brought on board a company called Working Transitions who specialise in sourcing management staff for businesses. Within 48 hours of losing a key person they will source a temporary manager with the requisite skills and experience in that role. This is a hugely valuable resource, immediately placing a finger in the dyke and allowing the other directors to get on with what they do best and retain customer loyalty. Working Transitions will then help the company source a full time replacement without being under any time pressures.
Both RED ARC and Working Transitions offer additional services such as medical and legal advice, and the whole service is included in the policy at no extra cost.
We sometimes forget that businesses are not just a balance sheet. They are run by people, and although the provision of cash is our main aim, it is just one facet of the support we can offer.
In my training seminars I have often talked about businesses not having a “substitute’s bench” and how cash from a key person policy can supply this. I feel we have now gone one stage better than this by not only providing the cash, but providing the substitute as well.
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