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Diagnosing The Workplace: Not Just An HR Podcast
Diagnosing The Workplace: Not Just An HR Podcast
Are You At Risk From The Business Law Of The Linchpin?
In this episode, we investigate The Business Law of the Linchpin, which is when The dependency businesses create on a single person or position for stability and growth puts the business’ sustainability at risk.
Our prescription for this episode is to take a hard look at your organizational structure and the norms in place around things like workload, standard processes, and customer retention. You may unknowingly have a linchpin putting you at risk.
Past Episode Referenced:
Season 3 Episode 2: What Are Common Stumbling Blocks To Business Growth?
Season 2 Episode 24: How Can We Get A Better Handle On Workforce Planning?
You can reach out to us to talk more about organizational assessments, just reach out to us at info@roman3.ca or through our LinkedIn page at https://www.linkedin.com/company/roman3
Don't forget to sign up for our New Quarterly Newsletter that launched this fall!
About Our Hosts!
James is an experienced business coach with a specialization in HR management and talent attraction and retention.
Coby is a skilled educator and has an extensive background in building workforce and organizational capacity.
For a little more on our ideas and concepts, check out our Knowledge Suite or our YouTube Channel, Solutions Explained by Roman 3.
Breaking down everyday workplace issues and diagnosing the hidden sickness, not just the obvious symptom. Our hosts, James and Coby.
[COBY]:Did we lose a patient?
[JAMES]:No, that's just my lunch.
[COBY]:Hey, thanks for joining us. I'm Coby, he's James. And let's get started with a question. Are you at risk from the Business Law of the Linchpin?
[JAMES]:Okay, so first off, I think, let's clarify a little bit. What we mean by the Business Law of the Linchpin is that very often businesses will find themselves, they'll inadvertently create these scenarios or situations where they've ended up creating a dependency on a single person, a position, client, technology, or some other aspect of their business. And this happens really organically as businesses grow, especially in kind of the key person and key client areas. So what I think, I want our conversation to focus on is really kind of diving deeper into what the Business Law of the Linchpin is, what it looks like in each of those different areas, and ultimately what can you do about it? How can you protect yourself from falling into this trap of the business law of the linchpin?
[COBY]:Yeah, so this is a topic that you may sound familiar to you listening if you've heard some of our past episodes. So we did an episode kind at the beginning of our third season, you know, that we talked about kind of common stumbling blocks that business businesses fall into. And, we kind of refer to the stumbling blocks as kind of the five threatening truths of business. And this is one of them. The business law of the lynchpin. And really? Yeah, like, like James said, it's really about, you know, when we have these kind of like crucial aspects of our business that we don't properly protect or provide. almost like whether it's redundancy or systems or processes around these really vital pieces, and by not preparing them or not insulating those aspects of our business, it puts our stability and sustainability at risk. And yeah, it can be a few different things. There's lots of different ways that we can create linchpins. But I think for this conversation we'll probably kind of stick to more the people type of linchpins, because that's kind of our forte. but again, it's something that we need to be aware of the dangers to kind of come from having a linchpin in your business. And it can look like when it's a person, it can look like what happens if we over leverage that person or we overstress people, and kind of the risks of having people that are so essentially vital to the operations of a business that we haven't again like any kind of protections around that. If bad things were to happen, like the old if you hit by a bus type of scenario, but more realistically, if they were to burn out or if they were to get picked up or swooped in by another company and they were to leave. There's lots of things that can happen that could cause you to lose your linchpin.
[JAMES]:Yeah, it's, I mean we see the key person piece playing out in a number of different areas from both from an employee. But the business owner themselves can be the linchpin. Right. They can create a dependency. The organization can depend on one person and that can be the business owner. Which sounds counterintuitive in terms of, well, why is that a problem if I am the business owner? Why is it a problem that my business relies on me? Well, it's not a problem that your business relies on you. It's a problem if your business relies solely on you. If you've created a situation where all of the knowledge, all of the vision, all of the understanding of how the different aspects of the business, works, if that all corporate knowledge rests with one person regardless of who they are, it puts the business itself at risk. We see kind of the key personal the employee side of thing. probably more just as commonly, if not more commonly, especially in early stages of business growth, it tends to show up very prominently in like sales roles where you have some, a high performing person who is out there hustling and driving a lot of business towards you, which is phenomenal. If you're in that situation, congrats, that's a good place to be in. But the challenge comes with how much of the sales process is process related. How much of it is the individual? Are the contacts, stored in the person's phone or are you actually implementing proper, procedures to ensure that things are stored in A CRM, you know, is a relationship based and you know, this one person carries all of the key relationships for your entire business. That is a risk. So really what we want to get at is understanding the business Law of the linchpin is really understanding and mitigating risk. It's not that you've done anything inherently wrong. It's that it's putting your company in jeopardy if something were to go wrong.
[COBY]:Yeah, and that's just it, because, I mean the idea of kind like the going back to, of the business actually why don't we move in and just start dig into the business owner, business leader as the linchpin scenario. Just toeah. So the first thing we do want to talk about is what do you do when the leader or the owner is a linchpin themself. And I mean I think we should kind be a little bit clear too that if your business rests on you because you're a solopreneur or you have a very, very small team and you know that's a bit of a different scenario. You know, when you are the business is okay when you're small but if you have you know like 5, 6, 20, 46, 80 staff and you are the business, that's a much different scenario to be in. Yeah, right. So the idea of just if business were, were to, if something were to happen and you can no longer lead the business, how big of a devast devastation, you know, are you creating with that if a scenario and.
[JAMES]:It doesn't have to necessarily like it's not even the life threatening hit by the bus type of thing, stuff happens in our personal lives that can cause us to have to step away from our business for a period of time. Is your business able to operate without you?
[COBY]:Right.
[JAMES]:This is also from a valuation standpoint. If you're building your business as something that you, as an asset that you want to be able to sell as part of your retirement strategy, then it can't rely on you anyways. You need to start thinking about the processes that you're putting in place to ensure that the business can operate without you yourself, involved in it. That's the how a business becomes viable for acquisition. but even aside from that, like I've seen this happen in situations, especially with chronic entrepreneurs, who you know, they started a business, it's successful, they start a second business, it's successful, they just, they are constantly creating. It's a wonderful problem to create for yourself. But what ends up happening is oftentimes these companies will end up being interrelated. Right. Because it's the same type of skill set, same type of interest. They identify a new market, they create a new company to address that new market. But interrelations between the various companies that they have. The problem is if only one person, if only the business leader is the only person who actually understands how all of these different aspects work together, that's a substantial risk. If you're relying anytime the business itself is relying heavily on one person to maintain operations and you're not relying on process, on tools, on resources, on strategy to keep things going. You're potentially putting yourself at risk.
[COBY]:Yeah, and you're right. It's important to say that these are, aren't only, you know, things you need to be worried about if someone were to be hit by a bus. But I mean, you know, it's the idea. There's lots of reasons why a serial entrepreneur who's doing really, really well is in pic of health and isn't, you know, doesn't have bad luck to kind of have something catastrophic habit to them that they may have to step away from their businesses.
[JAMES]:Well, even if you're incredibly successful in building multiple businesses, wouldn't it be nice to be able to take a vacation? There's the hate to take a month off and have your business not fall apart around you. So there's, there's that type of. It's not only a risk mitigation in terms of if something catastrophic happened for your own mental health and continued, support, being able to take some time away and enjoy the fruits of your labor is a huge benefit.
[COBY]:But I mean even things like, you know, if you were to have a child and you needed want to take parental leave or. A lot of entrepreneurs, you know, that have kind of, kind of mid career are also in the sandwich generation where they have their aging parents and they have to dedicate more time to them. So I mean there's lots of, there is lots of life out there that can keep a serial entrepreneur or an experienced successful entrepreneur from being able to show up at their office or at their work every single day.
[JAMES]:Yeah.
[COBY]:And that's just a reality, right?
[JAMES]:Yeah. And it's really what we want to get at is helping you to plan for these eventualities because these things are, something is going to happen. Nothing goes according to plan, perfectly and plans need to be able to change. So if you're planning for kind of this continued growth, constantly, building and building and building, you also need to take the time to build the structure that supports that. Right. If you haven't built the foundation, then you can't. If the foundation's weak the walls are going to be weak, the roof going to be weak. Right. You need to grow uninhibited is not necessarily a good thing. Growth planned for is wonderful.
[COBY]:Yeah. I think we talked about, in the episode where we talked about kind of the five threatening truths where we referenced the Law of Linchpin, we talked about kind of a story of like an entrepreneur that we know who has multiple businesses that are kind of all interrelated, very highly technical and that kind of stuff like that. And this person, man, I don't know when they ever sleep. but like they do. So they do such a great job building this successful business with lots of people that really enjoy working there. And it's a very positive environment. They're doing so many things right. But it's just the exact situation of not planning for life puts you at risk. Whether that is anything health related or anything family related or just your own mental health and your own burnout that, you know, it's the idea of like, you know, this person has multiple, three or four businesses that they kind of lead themselves and they do have like, you know, people in each business that kind of is their main person in that business. But no one sees the whole picture. No one holds all the stuff together. Without that person, there's a good chance there would be a massive crumbling potentially. We're talking like 60, 70 people across the different businesses. Like a huge catastrophic problem for so many people. If this person were to be burned out, one burned out employee, you could set fire to three companies all at once. Right? There's a big problem with that.
[JAMES]:Well, and that's just it. I mean, they have done a really good job of, building some independence from each individual company. like they've got people that they've empowered, within each of the individual companies who if something were to come up, they are fully capable of managing that aspect. But the way that this person wants to continue to grow and develop new companies and to expand the, reach and the services of all the companies that they own, there's only one person who understands that. Right. There's only one person who sees the big picture who can carry that forward. And that's not uncommon to have one visionary. Yeah, right. One person who's able to do the vision casting. But where the challenge lies is if that's never articulated, if that vision is never shared with anybody else and it's just held in the head of one individual or even if that is the business owner. So like they, you're right, they've done an excellent job in many, many areas and they've, you know, grown several successful companies, each of them individually profitable. Together they are collaboratively quite profitable. But now it's time to look at not only how do we make each of these companies resilient, how do we create some resiliency for what we are building for in the future?
[COBY]:Yeah. So if you're listening to this and you're wondering, okay, this stuff makes a lot of sense. Sounds like good advice. But how do I know if my role is that vital? Like if I've created a linchpin for myself? This, it's hard to see it when you're in it.
[JAMES]:Yeah.
[COBY]:And one piece of advice we often give to people when they kind of ask that question, like when should I be concerned about creating a linchpin? Is we kind of say, well, most entrepreneurs, most business owners have life insurance. Right. And we kind of say, you know, if, when you're going for your life insurance, likely someone talked to you about like key person, key employee, key role I believe is actually the language, about that concept in your life insurance where it's like, you know, you have to identify kind of key roles. So that way you know whether you need to increase your life insurance on that one person or whatever it is. If you're in, if you've had that discussion with someone in the life insurance world and you're like, yeah, I've identified some key roles, this or that, then you have identified a linchpin in that aspect. Usually it's you as a business owner, but I mean that's something that there, there's already a structure in place to identify that key component. So I mean it's not like we're saying this is a new thing that we've invented. We're saying this is just a different way they talk about the same thing. And if you identified that then you know who the people probably, hopefully are.
[JAMES]:Yeah. And that's not a bad scenario at all. But I think it, it can be even easier than that. If you feel that you don't, do not have the ability to take time off from your business, then you've created a linchpin for yourself either in your own mind and that just needs to be sorted out, or legitimately you have taken on so much that the business cannot operate without you there. If you, if you own a business and you feel like taking spontaneously going away for a weekend or a week, will shut your business down, then you are a linchpin.
[COBY]:That's a really good point too. Yeah. Again, I think this is something that most people kind of conceptualize. I think we had some really good points to what to look for. And again we're going to talk about later on what do you do about how do you resolve some of these things. But I think it's a pretty good overview of the business leader. Like we said, a very common aspect of this Linchpin concept. But let's talk about one that's a little bit less easy to see, for the individual business owner, but probably we see it way more than we ever should. And that's when the linchpin is a key staff person. So someone who is not ownership or sometimes not even in management, someone that, you built a business is built on. And there's not really any type of ownership or skin in the game that's holding them in their position. And that's one of the risks that we often go in to try and identify early on to avoid a catastrophic problem from happening and bringing a business down from the inside.
[JAMES]:Yeah. And we've seen this with prospective clients. We've seen this with clients, where. And the one that always springs to mind is the salesperson. where a generational business, I think its third generation hit some really big growth milestones, like ended up within, over the past kind of six months before we were meeting with them, ended up almost doubling their monthly recurring revenue, which huge boost, more sales than they've ever had before, led to huge growth opportunities for them and really rested on the success of one role, a sales position salesperson who was a phenomenal relationship builder. they were able to, like, they met people. Well, they, they were crushing it in their role. They were highly effective. They were very personable clients, loved dealing with them. They were a unicorn. Right. They're the type of person that you hope and pray you end up bringing into your business because they are a game changer. But what the company was not prepared for was the challenges that come with that growth. And how do we turn a unicorn into something repeatable? Right. How do we take what this bottled magic that this person has and create processes from that? How do we ensure that if this person leaves, we don't lose all of those relationships, all of those clients, all of that increased revenue that is allowing us to do all the things now that we've wanted to do for the last decade. Right. So we've seen this specifically in that case. And that's the one that always brings to mind because they had such a huge and tangible impact on the growth of the business in a very short period of time. And everybody was celebrating, which you. Yeah, absolutely. You want to be celebrating that person, their accomplishments and what it means for the business, but you also have to recognize the inherent risk.
[COBY]:Well, and that was what is when they were telling us how excited, how great news this was and how big it was going to be. And they Were just so excited for all this stuff. They were a little put off by our kind of subdued, like, concern, because we're like, yeah, that is great. You should be very proud of yourself. You should be very, very encouraging. But, but let's, you know, let. Let's not lose sight of how you got there and how if you want to stay there, you need to put some stuff into actions now. Because, I mean, this salesperson held all the relationships. Her phone was where all the contact information lived. They didn't have a cr. Anything like that. It all lived on her, like, on her device. I mean, we said, you realize that your entire cash flow, your future sales, all your stability kind of lives and dies with her ability to show up here every day or want to stay here or want to stay in this role. That's the other thing, too, is that when our high performers are, you know, even if we treat our high performers well and we'll get to what happens when we don't, but we treat high performers well and we acknowledge them and everything like that, sometimes they're not as motivated to stay in the role that success they are. You know, we're all kind of conditioned to climb the corporate ladder.
[JAMES]:Highly ambitious people are highly ambitious.
[COBY]:Yeah. So it's a matter of kind of saying, okay, great, you know, do you, you know, if she wants to get promoted because she's earned it, what do you do? Right? So do you have a plan for how to, like you say, recreate that bottled m magic for her to lead others to do it? Because, I mean, just because she was a killer salesperson does not mean she can manage other people to become killer salespeople.
[JAMES]:yeah.
[COBY]:On her own, with no help and no support.
[JAMES]:The ability to do something does not guarantee that you can teach others how to do it. Just look at virtually any university professor. Not that I'm still bitter 25 years later, but.
[COBY]:No, not that at all...
[JAMES]:But no, you're right, because there's a number of things at play with the key person, right? One, celebrate that person's success and do everything you can to hold on to them because they are gold m. But you need to prepare for the eventuality that either they. Their career aspirations may change, their family situation may change. There could be a hundred external factors that could cause them to maybe move or change their expectations. They really good people who are really good at their job also tend to get poached. Right? They may end up with, because of the success that they've had, they May end up getting really enticing offers to help continue to grow their career. Right. It's not taking anything away from the incredible work that the individual has done. They need to be supported, they need to be celebrated, they need to be compensated and they need to be shown that they are valued and that you value them for who they are and what they bring to the table. But that does not negate the fact that you still have a responsibility to the business to mitigate risks. And that person being a linchpin is a risk.
[COBY]:Yeah, exactly. So it's one of those things where when someone like this is why we kind of go into organization and we're like wow, the thing that you're really excited about is also a huge risk. And it something that you just kind of need to like take a step back and kind of see the reality of it. But again that's probably like the best case scenario what happens. But we've got another example of the kind of the opposite end. So there was a company that we worked with a number of years ago and they were a fairly, fairly successful company and they were decent size and everything like that. these an impact on kind of their region and they had this long serving employee and like, you know, this long serv employee was kind of who you thought of when you thought of this organization and like this business. And it was like it wasn't anyone else. It was almost like oh, you know.
[JAMES]:If this one, they were the one involved in the community, they were the one like building relationships. They were, I mean the business apart from them was largely internal operations. They were really the, there were a couple other people but they were the primary person out there being the face of the business in the community.
[COBY]:Yeah. And what this person was able to do was they were able to generate a lot of cool partnerships, a lot of interest and a lot of new growth opportunities. And so what the organization would do was when this person, this key person would generate some kind of new avenue or a new market segment would often the company would hire someone to look to manage that section. And what was happening and was that the new people brought in, unbeknownst to this key person were being paid more and had better and were provided for far better than this long term staff. Because sometimes we don' like the most dangerous linchpin is the one that we don't know because they're there every day. They're just part of the kind of, they're just part of the organization and they're part of the fabric.
[JAMES]:Fabric of the business. Yeah, absolutely.
[COBY]:And we just, we almost like, we don't see them because they're almost like camouflaged by all that's kind of around them and often they haven't had a pay raise in a long time and their workload has increased kind of subly or gradually and their impact is something that you don't really notice because you almost, you take them for granted.
[JAMES]:And that's the key with this piece is that what happened in this scenario is the person found out like eventually the people who were hired, ended up being hired and reporting to this individual who found out that who got dumped with managerial responsibilities for the first time with no increase in salary or thank you. Just ah, hey, you're going to take care, you're going to be responsible for these people. Since you know the project so well, since you know the players so well, how does that make an employee feel who dedicates years to the success of a business to the point where they're able to hire new people because of all the cool things that they've done, but the new people are brought and it's not the new employees fault that they brought in at a higher salary. But so you now have new people joining the organization as a direct result of your work who are getting paid more than you while they report to you. Like it is incredibly insulting.
[COBY]:Yah.
[JAMES]:And as they found out, a massive liability, a massive risk.
[COBY]:Yeah, absolutely. Because the thing was that, you know, again the, when this kind of all kind of came to light that there was like, you know, they had been put into a managerial position without being promoted to a managerial position. And the other managers who had the set report to them were making close to twice as much as they were. And this kind of all kind of came to light because the person was such, they were such a grinder, they were such a hard worker and they truly believed in the mission of the organization and all the stuff that the audition was to do and they loved the work. But it kind of like dawned on them like wow, like you know, this is kind of where they're at and they kind of, kind of realize that, you know, that when you know, new customers or partners or vendors or anybody wanted something from the company, they came to this person first. They were like the main contact person. The main they were to in the eyes of the community abroad, they were the essential component to the business.
[JAMES]:They were the business.
[COBY]:They were the business. Even though they weren't owners, they weren't any like that. They just been around for a long time. And so this was, this was an event management company. And the thing is, is that, you know, like, like the reputation was anyone can help plan events, anyone can do with those kinds of events. You know, anyone has the tools, attempt whatever it is. But the reason why you went to this specific company was because for this person.
[JAMES]:Yep.
[COBY]:But this person was overworked, they were underpaid, and they were unappreciated, had the entire organization resting on their shoulders and nobody really put any real thought into what does that mean for the stability and the sustainability of this business.
[JAMES]:Yeah. And it doesn't have to be that drastic for it to be a linchpin. Those types of scenarios, are present in a lot of small businesses. The linchpin happens very organically. It happened very organically in the sales position. It happened very organically in this event management business. It happens because we don't take the time to take a step back, plan, put some structures in place and supports to make sure that the people who are doing the work have what they need to be successful.
[COBY]:Yeah, exactly. And that's the whole idea is like when we, and this is kind of the idea when're too focused in our business every day of we often get blindsided by the threats that are not in the narrow tunnel vision that we have in trying to stay in the business every day. And that's problematic.
[JAMES]:So yeah, and that's, that's small business life. For a lot of small business owners, it's by necessity you are working in your business. But to grow and to protect yourself, you need to be able to take a step back, get out of the weeds and stop working in your business and start working on your business.
[COBY]:Yeah, absolutely. All right, so let's talk about one more type of linchpin that we commonly see. and I mean there's a bunch of other ones, but this one's really important to dig into a little bit. And that is when the lynchpin is a key client or a key contract.
[JAMES]:Yeah. And it's funny because just like the unicorn salesperson, you wouldn't inherently think of this as a threat, as a bad thing, to have. So what we mean by kind of, having one key client, one key contract. We've worked with a lot of small businesses and one of the things that, that we often evaluate is kind of where their contracts or where their client based lies. Because we get really worried if we see more than like 40% of a, company's revenue coming from any one contract or company. It puts an awful lot of pressure on maintaining that. And well it's 2025. We've seen what can happen with global disruptions into trade. there's no guarantees that those long, even long term, long standing contracts are going to be around forever and businesses end up almost relying on them for way too much. We've seen it with a lot of different companies. One of the things that I have to give a showout out to is working with Michelin Canada years ago like they recognize this. They intentionally try to support a lot of small businesses in their supply chain which good for them because it helps build the local economies around their plant which in anyways they've got a really great mindset around local supply chain supporting small businesses and they have policies around, you know, their suppliers can't have m. The Michelin contract cannot be more than 40 to 60% of the business' entire revenue. If it is, then they actually help to will encourage the company to look at other business development opportunities because they don't want these businesses relying solely on them because they can't guarantee that the contracts are going to be around for the next five years, 10 years, 20 years. Right. The business needs to be successful not only because they have one contract, but it's a very common place to be for a lot of solopreneurs especially and a lot of small businesses to you get into somebody like m working with Michelin or you get a big government contract that can set you up as a small business that can be a game changer for you for the next however many years that contract in place. But what we see is people resting on that.
[COBY]:Yeah, those things are so transformative. Yeah, but they but again I guess maybe the story is James, we're just always pessimists. Maybe that's all this is. Everyone's always optimistically excited about all these cool, these unicorn employees and these growth opportunities and these great contracts and we're like, well Mr. Pessimism here says you're putting yourself at risk. But the reality is when you have these transformative contracts or clients that set you up and you're like, you can make bank just off this one piece that is so exciting, that is so transformative, it's such a big deal. But again the natural consequence is you basically tied, while that's 60, 40% of your business, you've tied that, your business'success to that one thing. And again global Supply chain, anything like that. I mean we had a client recently who they relied on government funding from, through one of their programs to be the essential component of their cash flow. And this was an American company. So I think, you know, where relying.
[JAMES]:On a government subsidy.
[COBY]:Yeah.
[JAMES]:Prior to 2025 was secure.
[COBY]:Yeah, exactly. Yeah. Then all of a sudden all these government subsidies and funding programs and these elements were gone. And the business is really teetering in a very precarious position right now. But I mean that's what happens when we don't kind of diversify the way that we stabilize our businesses. Right. And I mean another good example is, remember there's a business that I remember the owner at second generation business know when he inherited from his dad, he inherited the business with this massive contract with this huge organization that was nearby. And they, their purchasing of this high end product was substantial and annual.
[JAMES]:I think it was like 80% of their total revenue or something.
[COBY]:I think it was like at least 80%. But, but because of the nature of this big purchaser, this big client, that, that they could rely on the stability of that. But all so, and this business has been around for, well again it was generational generation. It's been around for 30 years or so. But I mean, you know, like the owner has no real interest in business development. everything's kind of same old, same old. Like you know, it's almost like you rubber stamps the invoices and just kind of like, you know, everything's so reliable, so consistent and that's amazing. Until it isn't.
[JAMES]:Yeah. And the big thing here is we're not saying that you should not pursue these massive contracts because they are transformative. They will help you achieve things in your business at speeds you otherwise would not be able to. Right. You have to make hay while the sun's shining.
[COBY]:Absolutely.
[JAMES]:But you also need to recognize that these massive opportunities come with some inherent risks associated with them. So your job as the responsible business owner is to mitigate risk. You can't eliminate it entirely, but you can take steps to begin to mitigate the risks, to your company. Whether it's from a key individual, whether that's you yourself are putting, you know, your company relies too much on you, or whether your company relies too much on a single massive client. It's still' not inherently bad, it's inherently risky.
[COBY]:Yeah, absolutely. So I think let's move right into. Okay, so I think we've scared people enough. what can we do?
[JAMES]:Especially if they're watching the Video. Oh.
[COBY]:So we sh. Also kind of mention there are other things kind of briefly that we should just kind of. You know it's not just about people and clients. You know, sometimes it can be technology pieces, it can be. There's all kinds of different stuff. It's not just people side of it. But we only want to focus on this one area. But we just want to kind of say we haven't listed the only three linchpins.
[JAMES]:There are this non exhaustive list.
[COBY]:Yes, exactly. So I just kind of to want to highlight value that before we move on. But yes. So James, what can we do about it?
[JAMES]:So let's start again with the business owner. So if you are, if you're the owner of a growing business and you're recognizing that you're stuck doing a lot of the daily things just to keep the business running, what you need to do is you need to build a team around you. You need to start empowering people to take things off your plate. You need to delegate. You need to build a team. You need to build a, what we typically refer to as a senior leadership team. If this is possible, if it's not possible for you, then you're probably still in the early growth stages, right, where you're still reliant on doing all the work yourself and you probably have a small team. But you need to find ways to start offloading some of that, those responsibilities, whether that's through fractional support, interim support, whatever that may be. We've talked about these different strategies before. Let's take the the more common example of the business owner that has a lot of irons in the fire and has a lot of things going on like the scenario that we looked at earlier. The best thing that that person can do is to take those people who are kind of empowered to make decisions within each individual business and turn it into a collective ah, leadership team. I would probably do a little bit of restructuring with, with the advice of an accountant, to create a parent ah, company that's responsible for all for those things and have those actually be employees of the parent company but responsible for the individual companies within their domain. Then the business owner takes that visionary role where they and may be leading one of the companies, and continues to cast the vision forward. Then they're able to share that with their leadership team and share the responsibility so that it's not about making other people do all the work. Although that's one of the benefits of being the boss. you should take Advantage of that if you can. It is about making sure that no one person is the only one who sees the whole picture. So if you from a leadership, from a business owner perspective, you need to build a team around you and what that looks like is going to be different based on your specific situation. But there are ways of accomplishing that. You need to find those people who you can empower to do the day to day work so that you can continue to focus on building your business. Continuing to grow the operations in a way that does not create these types of liabilities.
[COBY]:Yeah, yeah. So this could look like your leadership team that you build could be you as the owner, maybe the heads of each of the individual companies or the individual divisions or departments. but also maybe an executive assistant whose job it is to know the business, all the businesses as well as you do and maybe even the chief of staff. Like roles that are about seeing the big picture, that are both seeing kind of the needs of all the people involved and kind of the intricacies that. And honestlys like having someone that knows the business as well as you do. All of it. Yeah, but I mean, which might just be nice to have someone you can talk to that fully gets what you're talking about. Right. Like wouldn't that be nice?
[JAMES]:Well, I mean a that is a legitimate benefit of having a strong leadership team is having people who while not necessarily peers. They understand enough of the picture that you can share your concerns or your frustrations with I mean it's not that type of structure is not that dissimilar from a large corporate ah. Entity with multiple departments or divisions. Right. to create, taking what could be individual silos which we see in a lot of corporate structures as well, but ensuring that they're coming together to. So that those companies or those divisions or those departments don't remain siloed that they're communicating that they understand not only the specifics of their responsibilities but how what they do also impacts these other areas and helps to drive the entire vision and mission forward.
[COBY]:Absolutely. Yeah. And when possible, as the leader, owner, whatever, you try and get as much get away from the weeds. Get the weeds as much as you possibly can. Right. Because I mean again if you hit that point, you need to stop being a working employee or at least limiting your daily work in the business and kind of being there, working on the business, seeing the bigger picture and st. You know, if you're the owner you might be st you love doing. You know, that's in the business. I mean, y. Yeah, that's the benefit of both being the boss. You could keep as much as you want, but ideally you want somebody who's steering the ship that. But isn't steering the ship alone. You want it. You want a first mate. Right.
[JAMES]:Yeah.
[COBY]:So. Yeah. All right, so let's move on to the, what do you do about you having key staff for staff?
[JAMES]:It's a bit of easier answer, honestly. it's about creating processes and structures around them. Creating. So let's look at, the first scenario that we talked about with the salesperson who was just phenomenal. Right. It's going to be really hard to recreate that person. But you can recreate the process, right? You can, you can ensure that the work that they do is captured somewhere that, your client list does not land solely rest in that person's cell phone. Right. You need to create some systems and some structures around how that work gets done. Not limiting what that person ‘doing but making sure that again, all of the information, all of the success does not rest on one individual. With somebody like that as well, I would also start to try to put a team around them. If I had somebody who was that good at sales, I would probably bring in a junior person to work with them, to learn from them, to try to recreate. And I mean everybody, especially in sales, it has to be authentic. It has to be true to that person. But there's still a tremendous amount of that. somebody can learn from watching and experiencing and being trained and coached by a very skilled salesperson. right. So I would start in those types of. It's all about mitigating the risk and the risk first you have to identify what the risk is. Then you need to put strategies in place to ensure that you're mitigating that. So if the risk is loss of client list, then you create systems, CRMs, tracking to ensure that you have all that. If the risk is that you. If this person's leaves you have no sales person, then, you know, in sales it makes a lot of sense because they're generating more revenue than, you're spending on their salaries. So bring another person in to work with them. Should be very feasible if you have an exceptional sales person. So don't use that as an excuse.
[COBY]:anything too though, like just one thing that might not hurt to take a little bit step back is that sometimes when you have that kind of major growth, one of the things, like in an example, one thing we often recommend Is okay, if you're seeing this excellent growth and you're seeing this excellent process going in place, One of the things that might seem a little bit kinder intuitive, but it's very good idea is to have an organizational review, have someone kind of come in, look under the hood and kind make sure that you're built for sustainable growth. Because if you've seen a big growth like this and you haven't identified that this one person is a linchpin, having someone come in and kind of say, let's look at everything, how everything operates, that's maybe how you find this linchpin or another linchpin or multiple ones. But like having someone kind of third party can come into review to find these linchpins and find the missing gaps around processes or all the other kind of pieces, like saying, oh my gosh, you realize everything's on this person's phone. these are important things that you're going to want to know. So I mean it's a little bit of a step backwards from what you were saying. But I think it's important to know if you're not too sure if you have this key staff or you're thinking you might, an organizational review is probably a great way to verify that.
[JAMES]:And that's a good point because I mean in this exact scenario, the one of the unintended consequences of this person's success was, I mean, yeah, it's great that their sales nearly doubled, but they were manufacturing a product and they didn't have like. So is the company actually ready for that type of growth? Can you deliver on the promises that this salesperson has made? Right. So yeah, you're right. That type of rapid growth needs to be investigated, not investigate it as to why and how, although that is important. But can we actually deliver on it? Do we have the structures and supports to make this sustainable rather than just a flash in the pan?
[COBY]:Yeah, yeah. So just kind of tie off this one. I want to go over our time, but I mean you want to make sure that like you said about if you able to kind of TR train juniors to kind of get caught up orever having a strategy around that kind. The talent acquisition, talent mobility strategies can be very helpful. You want to do things that reduce burnout risk, like I said, and give them a team, but ultimately you want to make sure that you're treating them well enough to stay and also stay healthy and keep delivering. So those are kind of all the things that you're going to want do too. Now the last one is about what you do when linchpin is a key client. And I think broad answers is diversify.
[JAMES]:Yeah, I mean, it's this is the easiest one to answer, not the easiest one to do.
[COBY]:The hardest one to do.
[JAMES]:Well, it really depends on what your skill sets are like. If you are not somebody who enjoys business development and sales, it makes a lot of sense why you, are comfortable relying on one big contract. It's, it'easier and it's more comfortable and it's satisfying to land those big contracts. But, you need to mitigate the risk. You need to diversify. You need to, hey, if you've got a great contract like that, take some of the profits and invested in somebody who will do the business development for you.
[COBY]:Yeah, absolutely. Because, I mean, what you want to really do is you don't want to reduce the amount of money you're bringing in by limiting your contracts. You want to reduce the, the proportion or the percentages of your profit of your cash flow, of your revenue that is based on that single contract. So if you bring in a contract that's all of a sudden 80% of your overall revenue, you're going to want to reinvest that money back in. So that way you're making some more money in other areas that at the end of the day, it's actually going to only be 50% or 40%. So you're making a lot more money by reinvesting and that you're not relying on that one contract. And that's pretty much going to be the best way to do that.
[JAMES]:Yeah. Diversify business development.
[COBY]:Reinvest.
[JAMES]:Reinvest structured growth.
[COBY]:Yeah, absolutely. Okay, so I think I'll just juip into a quick summary. anything else you want to add?
[JAMES]:no, I think I'm good.
[COBY]:All right.
[JAMES]:Didn't even get too ranty this time.
[COBY]:Surprising. So the question was, are you at risk? From the business law of the linchpin. So how we define the Business Law of the Linchpin is the dependency the businesses create on a single person or position for stability and growth that puts the business sustainability at risk. And this can look like a few different things. It can look like what, happens when the business leader is a linchpin and that the owner, founder is so integral to the organization that the organization can't survive if they were to take a vacation or if they were had to take a leave of absence or anything like that. And it can be major, a major problem when you look at things like burnout risk, because again, one burned oed employee being that leader could be what sets the entire company on fire. what happens when it's a key staff. So these it be like sales managers or kind of like account managers or any type of, you know, like, vital role to the organization as far as being able to kind of stabilize the revenue or anything like that. There are people in our organizations that we rely on, and sometimes the better the employee is, the bigger impact they have, the bigger of a risk it creates. So identifying those can be very vital. Or it could be when the linchpin is a key client, when you have a company or so you have a contract or you have a client that is such a large portion of your revenue that if they were to drop you as a customer, then it would be the end of your business. These types of things are problems that come up when we have success. And it's something that we need to realize that there's a cause and effect of a successful company and successful, people and successful customer acquisition models that we have to be able to understand both sides of. So what we can do about it is we can start to build a team around us, empower our employees, make sure that we're able to put systems and processes into place and diversify the way that we, gather customers and the way that we do our businesses. There's lots of great strategies that can be done, but sometimes it might take a third party to actually see the picture. Especially if you're so focused on working in the business that you forget about the reality is what happens if you don't work on the business. All right, yeah, so that does it for us. For a full archive of the podcast and access the video version hosted on our YouTube channel, visit Roman3.ca podcast. Thanks for joining us.
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