Key Person Insurance was originally developed to cover for situations where a director or key manager would suddenly become gravely ill or die since this:
1. Left the business needing to hire a competent stand-in fast while a long-term replacement was found; and also sometimes
2. Left the business having to buy out the share interest of the departed director - a very substantial cost to a small company.
Obviously, the sudden illness or death can't be ameliorated by money.
But the KPI at least spared the company and the departed's family the additional financial stress were it not in place.
That is the usual situation.
But what about this scenario - which sadly is not so unusual in a business world with an elegant sufficiency of family firms:
A family business is run by 2 or more siblings (A, B,..) - all offspring of the original founding owner. It runs acceptably well for a decade or so after the transition to management by the siblings. But then it becomes apparent to customers, employees and eventually (and so belatedly) by the other directors that director B is an alcoholic. Not a so-called "functioning alcoholic" but really a clearly non-functioning one.
Alcoholism is an illness, a serious one, and an illness necessitating removal from normal work demands until at least some degree of self-awareness is restored along with a functioning capability.
My question is therefore: do standard KPI policies cover the above eventuality ?
If not, can a KPI policy be tailored to cover for such eventualities ?
I ask this as I have observed a family firm in such a mess and asked myself why can't they legally, medically or financially remove the afflicted director before his antics (e.g. not quoting prices to get a customer to commit blindly to an order, forgetting discussions, meetings, samples, drawings, requests, disappearing for days with no known whereabouts, etc) destroy the firm's customer base ?
1. Left the business needing to hire a competent stand-in fast while a long-term replacement was found; and also sometimes
2. Left the business having to buy out the share interest of the departed director - a very substantial cost to a small company.
Obviously, the sudden illness or death can't be ameliorated by money.
But the KPI at least spared the company and the departed's family the additional financial stress were it not in place.
That is the usual situation.
But what about this scenario - which sadly is not so unusual in a business world with an elegant sufficiency of family firms:
A family business is run by 2 or more siblings (A, B,..) - all offspring of the original founding owner. It runs acceptably well for a decade or so after the transition to management by the siblings. But then it becomes apparent to customers, employees and eventually (and so belatedly) by the other directors that director B is an alcoholic. Not a so-called "functioning alcoholic" but really a clearly non-functioning one.
Alcoholism is an illness, a serious one, and an illness necessitating removal from normal work demands until at least some degree of self-awareness is restored along with a functioning capability.
My question is therefore: do standard KPI policies cover the above eventuality ?
If not, can a KPI policy be tailored to cover for such eventualities ?
I ask this as I have observed a family firm in such a mess and asked myself why can't they legally, medically or financially remove the afflicted director before his antics (e.g. not quoting prices to get a customer to commit blindly to an order, forgetting discussions, meetings, samples, drawings, requests, disappearing for days with no known whereabouts, etc) destroy the firm's customer base ?
