Turning Lemons Into Lemonade: How to Embrace New Talent
August 8, 2016
Few people stick with one employer for their entire careers. But it’s common for business owners to feel blindsided when a key person, such as a top manager, CEO, CFO or lead salesperson, unexpectedly resigns. The effects often trickle down the organization, impacting morale and productivity.
A departing manager’s shoes can be hard to fill, especially if the loss was unplanned and the person had established relationships with customers, suppliers and co-workers. To minimize disruptions, a borrower needs to implement a transition plan as soon as the key person leaves to get back in the game. Proactive planning can even breathe new life into established companies, making them stronger than ever.
Prevent further damage
When a key person unexpectedly leaves, the worst responses are panic or anger. A better way to handle the situation is for the owner to first calmly discuss with the individual the reasons for his or her resignation. If the key person feels overworked or undercompensated, perhaps the situation can be remedied. If he or she refuses a counteroffer, at least the borrower will have some ideas on how to avoid losing another key person down the road.
Alternatively, if the key person feels unchallenged, the owner may decide to eliminate the position and delegate his or her responsibilities to other employees, hire a lower-level replacement to handle them or outsource them.
Devise a game plan
Once the resignation decision is final, a formal game plan can help ease the transition. As long as relations remain amicable and retaliatory actions are unlikely, it generally helps to retain the departing individual for two or three months to facilitate the transition phase. Possible tasks for an exiting key person include:
Writing or revising job descriptions. This will help the company draft job listings and evaluate applicants. It also will help the replacement understand his or her role. Even if the company decides not to hire a replacement, an up-to-date job description will make it easier to determine exactly what responsibilities need to be distributed to others — internally or externally.
Evaluating staff. Most owners have minimal contact with lower-level personnel. Knowing their strengths and weaknesses can help them determine whether any current employees may be qualified for the departing person’s position. Promoting from within motivates other employees and decreases the successor’s learning curve — though it’s not always feasible.
Recommending external recommendations. A departing key person may know other candidates who are qualified for the position. The endorsement of a trusted manager is more valuable than an eloquent cover letter and resumé.
Companies seldom find a suitable replacement before the key person moves on. But some departing managers — those that retire or leave to raise a family, for example — may agree to be available for questions or special projects after their two-month notice period expires.
Another option is to hire an outside professional to bridge the gap between a company’s needs and what the departing manager is willing or able to do. For example, if a borrower’s CFO resigns, the company’s accounting firm can be retained to ensure that tax, regulatory and financial reporting deadlines are kept. The CPA can also refer, hire and train a replacement.
Make lemons into lemonade
The resignation of a key person teaches an important lesson: It’s critical for borrowers to safeguard against unexpected losses of top managers before the key person resigns. For example, a company might cross-train management personnel in different departments, require employees to sign noncompete agreements or purchase key-person life insurance policies.
It’s rare for the loss of a key person to drive a borrower out of business. In fact, many companies that experience management turnover wind up with fresh ideas and a renewed business strategy if strong replacement candidates are found. It’s important for bankers to support borrowers through the transition phase. Doing so will reinforce your banking relationship.
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