People Disasters and Business Continuity

by | April 2, 2010

When we think of disaster recovery for business, images of earthquakes, fires, and floods come to mind.   Thoughts about losses of expensive equipment, inability to access important data, and getting people to work and product out the door become overwhelming.   We take comfort in the fact that we have property and casualty insurance and start to feel a bit calmer.

Natural disasters, where physical damage occurs to business assets making delivering to customers virtually impossible, are frightening to business owners.  Surprisingly, though, the potential impact is not frightening enough to drive significant planning efforts.  My sense is that this is due to the comfort offered by insurance and the feeling of helplessness to stop the effects of the disaster.   Amazingly, though, some basic planning can make an incredible difference.   I’ll let our business continuity experts address these planning steps throughout the month. 

I want to focus on how “people disasters” can also stop a business’ operations in its tracks.  People disasters are much more common in business and can be addressed through contracts, insurance, and creative planning.   If a person is critical to the functioning of the business, the company should consider what would happen if that person was no longer involved with the company.   Death, disability, voluntary departure, and involuntary termination are the most likely departure scenarios.  In each of these scenarios, the company must find a way to replace the key employee.  Planning allows the company to do so quickly and cost-effectively. 

To address the risk of death, the company may elect to purchase life insurance on the employee.  The proceeds of life insurance provide the company with cash to replace that person’s function in the business.  If that person is an owner, it may also contribute to the buy-out of the ownership interest. Disability can be more difficult as insurance can be very expensive.  The company should, though, have a disability policy in place to address compensation in long-term disability scenarios.

The company needs to be especially concerned with the protection of its intellectual property when an employee leaves the company, either voluntarily or involuntarily.   A contract with confidentiality, non-solicitation and, in some cases, non-compete provisions should be in place from the initial date of employment to help the company protect against the loss of proprietary information upon the departure of an employee.   

In all “people disasters,” a company must be prepared to pull another resource in to replace the departing employee.  Cross-training should be core to the business’ everyday operations.  This simple step not only makes internal functions smoother but also allows for an immediate response to a people disaster.

By taking a hard look at the critical people in your organization, you can quickly understand where your business may crack in a “people disaster,” and put in place plans to seal it up quickly to stay on course with business as usual.