7 Employee Risks That Can Take Down a Business

There’s truth in the old adage “Trust, but verify.” Taking the time from the maelstrom of daily operations for employee risk prevention simply makes sense. Difficult personalities, team disputes, burnout, loss or illness of key employees, competitive threats, customer service issues, financial negligence or fraud may not affect your bottom line immediately, but in the long run they will. These issues are also morale killers. Eliminating these risks altogether is unrealistic, but there are ways to minimize them. The list below identifies some of the most common (and costly) risks and some strategies for mitigating those risks.

#1 Overworking Your Employees

Risk: Fast-growing companies usually have big dreams but operate with small staffs — a recipe for overwork. Overworked employees are prone to make errors and omissions, provide poor customer service and show low productivity. Employees who see overwork as a permanent situation may become resentful, see it as poor management and seek work elsewhere.

Strategy: According to cnn.com, you should be alert to these five signs of burnout: coming in late and leaving early, frequent illness, irritability, apathy and lack of camaraderie. Avoid asking individuals to do the work of many or to work additional hours for long periods. During busy periods, consider offering in-office chair massages one day a week, organizing fun activities or installing sofas and snack bars so team members working overtime can take breaks, blow off steam and get a quick energy boost.

#2 Losing a Key Staff Member

Risk: The loss of a key person can be devastating. In a small company, each person is essential since they often serve as an entire department, performing multiple roles. Key employees may oversee as well as execute. The assistant to the business owner may answer phones and serve as office manager. A sales director may manage day-to-day client relationships as well as oversee production. The loss of that person for two weeks on jury duty may require the business owner to step in, disrupting new business development and hurting future receivables. The damages are greater when key employees resign. Large companies buy key person insurance for top executives, but that often is not feasible for smaller businesses.

Strategy: As soon as possible, institute a buddy system so employees pair up for important projects. If a person is absent, his or her partner is knowledgeable and prepared to assume critical responsibilities and assignments. In real estate offices, agents often work in teams for this reason. If a big deal is pending, you don’t want to blow it because an employee’s vacation is coming up. Building redundancy makes sense when you have a small staff, and even one absentee affects the entire company’s performance.

Incorporate a central customer relationship management system (CRM) so that all staff members have access to client contact information and progress notes. It can be simple off-the-shelf software. This is an efficient way to manage company knowledge so it doesn’t walk out the door even if a key staff member leaves.

#3 Trade Secrets and Client Loyalty

Risk: Each staff member who leaves your organization holds valuable company knowledge, business intelligence and know-how. Your company very likely has proprietary processes, formulas or materials that may be valuable in the marketplace. Your former employee brings that intelligence to his next employer — who could be your competition.

Most important, employees who leave can take your customers with them. In fact, some companies steal employees for just this purpose.

Strategy: To retain your best employees, make sure they are acknowledged, engaged, happy and motivated. Employees want to be learning, growing and advancing to the next level in responsibility as well as remuneration. Address their concerns rather than allowing them to fester. You may also want to consider having your lawyer draft nondisclosure contracts and ask every employee to sign one upon hiring.

Never leave the care of very important clients up to one staff member. It’s a great advantage to have the business owner nurturing main clients. You want clients to be loyal to you and your company, not an employee.

If you and an employee must part ways, an amicable parting is desirable but not always possible. In any case, conduct exit interviews to be certain departing staff members do not walk off with valuable intellectual property, knowledge assets or client databases. In addition to getting valuable feedback from them about your company’s strengths and flaws, you can remind them of the contract they signed stating that company information is not to be shared, although such a contract is difficult to enforce. Most important, terminate departing employees’ access to your computer system immediately upon dismissal or resignation.

#4 Hiring a Young Staff to Keep Costs Down