The Washington Post recently ran a story where a reader wrote in to ask about concerns of the recent death of the business owner.
Reader: I work for a very small luxury travel agency that was already suffering due to the covid-19 pandemic. The owner of the company recently passed away, and we are heartbroken and completely freaked out. No one has been named next in command, and his family wants nothing to do with the business. We don’t even know if we’ll be paid out from the accounts. Also, quite a few trips are still booked in the coming months for clients who have zero idea what’s going on, and we don’t know what we’re allowed to tell them. We want to help ensure our travelers still get to go on their trips, but of course we can’t work for free and will eventually need to find other jobs to pay our bills.
Can the company continue without its owner? What is the standard next step when something like this happens? It’s weighing on our consciences, and we know the owner would never have wanted to leave these customers high and dry.
The two paragraphs written by the reader are packed with questions. So, let’s break it down.
Dealing with the Employee’s Emotions
The unexpected death of the business owner triggered fear and uncertainty for every employee. They are naturally asking themselves, “What’s going to happen to me and my family?” It is a natural human response as individuals worry about how the shocking news will impact them.
The grief and uncertainty will most certainly have a negative impact on the business at all levels. Quality issues or worker accidents may increase. The administrative departments may show increased errors, customer service issues, and a lack of follow through. Executives may make rash and poor decisions or become paralyzed by indecisiveness.
No Successor Named
Considering the family does not want to be involved, unusual behavior among the remaining leadership team becomes a real concern. The sudden change may lead to overly ambitious behavior and greed to become the next leader.
Aggressive behavior to increase power and influence is a natural reaction for some to feel more secure during a period of uncertainty. Unfortunately, this behavior leads to confusions and mistrust among associates causing detrimental effects in the business operations.
Customer Issues, Employee Turnover
Grief is the natural first reaction to a business owner’s death. Once employees come to the realization that the business is under a significant transition, questions start to arise. The reader lays out several major issues at hand.
Customers are in the dark about the business owner’s death. They are now concerned the services promised will not be delivered and the employees will be forced to deal with the backlash. Customer issues combined with the instability of the business will most certainly lead to employees questioning their own career path and looking for the next available opportunity. A mass exodus of employees further weakens the business and chances of survival.
Transitions are difficult. We know only a small percentage of businesses transition from one generation to the next. In this scenario, this will not be the case. Owners fail to plan because they are wrapped up in the immediate needs of the business, often discounting the issues that may arise from their sudden death.
Aside from a detailed succession plan, business owners need to have a key person insurance policy in place. The policy is usually owned by the business, which pays the premium. Covered key employees can include C-Suite executives, leading sales associates, heads of departments, or highly specialized personnel.
The key person insurance specifically covers individuals in a business who are crucial to the business operations. The policy provides the business with an infusion of cash if an insured key employee dies, regardless of cause or place of death. The funds help compensate for revenue lost because of the death, pay off debts, or buy out surviving shareholders’ interest from heirs and finance costs of a new employee search or training program.
In the Washington Post article, many of the issues would have been alleviated if a key person insurance policy were in force. Proper planning would have reduced uncertainty and fear and provided an environment of continued assured leadership. The reader’s response would still have concerns but not to the extent of what was laid out.
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