Cristiano Ronaldo is a legend of the modern football era. Controversy has however followed him at this World Cup – at 41 years old, should he have started each of Portugal’s games? And was the manager too weak to withdraw him? With Portugal exiting to Spain, a debate now rages on whether they could have progressed further without him.

Yet this dilemma is not just confined to Portugal. It affects every SME in the form of “key person risk”. For organisations of < 1,000 employees, whether the owner or otherwise, relates to a “star” individual(s) deemed to be indispensable – without whom, operations would be significantly disrupted, or could even cease to function.

These star players take different forms, but invariably capture at least one form of specialisation:

• Technical: This may relate to an engineering or technological element that constitutes a company’s IP. An example is a highly-regarded AI engineer leaving Google for Anthropic, without whom any competitive moat faces erosion.
• Relationship: Someone who holds significant influence over decision-makers at key revenue accounts, regulators, or other critical third-parties. Their loss represents a material risk to revenues or in sustaining day-to-day operations.
• Cultural – Maximus from Gladiator: This is someone who has won “hearts and minds” across their team, function, and maybe organisation. This applies irrespective of their job title. This person informally serves as a critical decision-maker – their opinion can mobilise the masses regardless of C-suite initiatives.
• Cultural – Patronage: Retains the complete confidence of the owner or C-suite irrespective of merit. Often someone who was “there at the start” or enjoys a longstanding relationship with key stakeholders. They can prove effective at disrupting, stalling, or frustrating initiatives unless aligned with their personal views.

Each of these stars represents a different management proposition – but where getting this approach wrong can prove costly.

How does this cost SMEs US$ millions?

Though seemingly inconsequential, there stars ultimately can represent obstacles which left unattended, can metastasize into graver problems of financial consequence. Examples of where this proves costly:

• Preventing a sale of the business: Should the star be the owner(s) or select employees with no incentive to remain post-acquisition, this can fundamentally undermine any price attainable, and/or introduce long-dated earn-outs. It may simply prove uneconomic to sell subsequently.
• Frustrating change: Maintaining the status quo may be deemed more important than responding to competitive changes, and the opportunities represented by technological modernisation. This can lead to revenue growth stalling or declining, whilst costs continue to rise unabated, damaging cash flow.
• Hindering expansion: If existing stars retain existing competitive advantages (e.g. a stranglehold on key revenue accounts), the willingness to attract new accounts or enter new markets may prove diminished – especially should this distract from maintaining these existing relationships. This limits revenue growth.
• Silo-ing knowledge: Stand-out technical capabilities may result in such information remaining captive, rather than socialised amongst the wider organisation. This can stifle innovation and responsiveness to market conditions – enabling competitors to steal a march and undermine market share.
• Encouraging a “nodding donkey” culture: A star may galvanise an organisation for the worst, increasing toxicity and destroying an environment where a broad church of perspectives can be harvested. This creates an environment of fear that harms discourse. This not only reduces revenues, but with inadequate systems, can give rise to serious internal audit issues, and even fraud.

How can we avoid these pitfalls?

This centres on prevention – of which it is never too late to take action. This is where introducing systems and objective forms of measurement becomes important.

To begin, technology and analytics play an important role. The quality of technology systems used, and the organisational processes that inform them, can ensure that knowledge is catalogued, categorised, and shared amongst functions. Though there are risks to manage with this (i.e. leaking of information), this provides a platform where insights are shared and institutionalised.

Analytics can help especially in mapping informal networks beyond those observed (e.g. network analytics), along with objectively evaluating the quality of talent and depth. Undertaking periodic surveys of staff morale make it easier for these processes to quickly translate such feedback into insights and actionable next steps. These also need not be extensive: in “the happy index”, the owner of Timpsons, one of the largest cobblers in the UK, asks employees each week, on a scale of 1-5 whether they are “happy”. Collected over time, this provides invaluable insight into underlying morale and cultural dynamics.

A lot of work however rests within HR and organisational design. Evaluating existing talent, succession planning, and wider talent acquisition endeavours all form key constituents to addressing these matters. If done correctly, this can mitigate not just these issues from developing, but also the cost of remediation once these problems are recognised.

Conclusion: to play, bench, or exit

We must recognise that stars are ultimately defined as such for a reason. But as one commentator described Ronaldo, despite recognising his brilliance, that “time catches up with us all”. An organisation that genuinely is able to grow, can take individuals that are indispensable and transform their capabilities into something that can be socialised amongst everyone. Otherwise that company leaves itself held hostage – a little bit like the current debate we see over Ronaldo’s inclusion.