Breaking The Bottleneck - Episode 1: The Hidden Cost of Indispensability
This article is Part 1 of "Breaking the Bottleneck," a multi-part series on the risk of dependence on key individuals and organizational resilience.
In this episode, we explore the hidden cost of indispensability: what key person dependency is, why it affects 72% of organizations, and why it is costing you much more than you realize.
The next episode, "Why Your Best Talents Are Burning Out," will be published shortly. Follow the Author or ONUS Advisory on LinkedIn so you don't miss the next chapters.
Does your organization have a silent time bomb?
It makes no noise. In most cases, you don't even notice it exists. But when it explodes, the damage is devastating. The bomb is a person. In fact, often more than one.
He is the person who knows things that no one else knows. He manages relationships that no one else manages. He makes critical decisions for the business.
And if they leave, whether due to resignation, illness, or any unforeseen event, the organization comes to a standstill.
This phenomenon is called key person dependency. And according to research, it currently affects 72% of organizations.
What is Key Person Dependency and why it matters more than you think
The risk of dependence on key individuals is the organizational vulnerability that arises when a company is critically dependent on one or a few individuals, whose absence would compromise operations, strategy, or fundamental relationships.
It seems simple, but the manifestations are complex. And the consequences are severe.
Key Person Dependency takes different forms depending on the context:
In the CEO's office: the founder is the only one who makes strategic decisions. Nothing happens without his approval. The teams (and sometimes even the board) panic if he takes two weeks' vacation.
In Sales: the best salesperson generates 40% of turnover and is the only one to have personal relationships with key customers;
In Operations: a manager with 12 years of seniority knows every process, shortcut, and exception. When she is absent due to a prolonged family emergency, tickets pile up.
In Engineering: the CTO designed the entire system. No one else truly understands its architecture.
In Finance: the CFO manages all investor relations and knows every detail of the agreements;
In Retail or Banking: a single advisor has all customer relationships for a key product.
None of these people decided to become indispensable; it happened gradually.
During crises, they took a step forward, worked harder, and learned more than others.
And now the organization is at a standstill.
The scale of the problem
You might think that this is a problem typical of small companies, or a startup issue, or something that only affects young, under-organized, or resource-constrained organizations.
You would be mistaken.
72% of companies have at least one employee whose sudden departure would have a significant impact on operations. That's almost 3 out of 4 organizations.
This includes Fortune 500 companies, mid-market companies, small businesses, non-profit organizations, and public entities.
The problem is not limited to a specific sector, company size, or particular stage of growth.
The three costs that nobody talks about
When discussing dependence on key individuals, attention is almost always focused on one aspect: what happens when that person leaves.
But the real cost of Key Person Dependency is much broader. In fact, there are three distinct costs that most organizations do not recognize.
Cost 1: Direct replacement cost (6–9 months' salary)
Let's start with the most obvious aspect: if a key person leaves the company, you have to replace them. According to the Society for Human Resource Management (SHRM), the average cost of replacing an employee is equivalent to 6–9 months of their annual salary.
This figure includes: recruiting, interviews, hiring, training, and lost productivity while the position remains unfilled, but the cost varies greatly depending on the role:
Entry-level roles: 30–50% of annual salary
Mid-level roles: 125–150%
Highly specialized or executive roles: 200–400%
Therefore:
Losing a $150,000 specialized engineer means $300,000–$600,000 in replacement costs.
lose a CFO worth $250,000? $500,000–$1,000,000
Cost 2: the hidden cost of discontinuity
But the replacement cost is just the tip of the iceberg. The real cost is what happens while you are searching for and installing the replacement. During this period:
Decisions slow down dramatically: without the key person, urgent decisions are postponed. Strategic shifts are delayed. Opportunities are lost.
Projects come to a standstill: if the key person was managing critical initiatives, those projects stop. Deadlines are missed. Deliverables do not arrive.
Customer relationships suffer: if the key person was the main contact for an important customer, that customer suddenly finds themselves "orphaned." They sense the discontinuity and start looking around.
Team morale plummets: people who relied on that figure become anxious. Stress and mistakes increase. Quality declines.
New hires are unable to get up to speed: the knowledge that should have been documented has not been. Those who should have trained them are no longer there. New arrivals have to fend for themselves, taking months longer than necessary.
From a financial perspective, this often translates into delayed revenues, lost deals, and/or increased churn.
A KPMG study found that the loss of a key IT figure at a large international bank caused a significant delay in resolving a major system outage, resulting in hundreds of thousands of dollars in losses.
Cost 3: the psychological cost
This is the cost that no one measures, and it is the most damaging in the long term: when a person becomes indispensable, something changes on a psychological level—for them and for the organization.
For the indispensable person:
She feels trapped: "If I leave, the company will suffer. So I can't leave."
She experiences chronic stress: she is always "on." She is never able to truly disconnect.
Overworking to the point of burnout: high performers are particularly vulnerable when they become indispensable.
Loses autonomy: career stalls because she remains stuck in her current role.
Paradoxically, you may experience low engagement despite being a top performer because you are always in emergency mode.
For the organization:
Innovation slows down: the key person is always busy putting out fires, has no time to think strategically, and the organization stagnates.
Others stop growing: if one person always solves critical problems, others do not develop skills but become dependent on that person, fueling the cycle.
The risk increases: Key Person Dependency is a huge risk for investors, buyers, and insurers. Many due diligence processes explicitly evaluate this aspect. If you are raising capital or planning an exit, it becomes a valuation issue.
Culture deteriorates: when one person is the bottleneck, the organization develops a culture of waiting, decisions slow down, and frustration grows.
Three scenarios: how Key Person Dependency manifests itself
Dependence on key individuals does not manifest itself in the same way everywhere. Let's look at three real-life scenarios that show how this risk emerges in different organizational contexts.
Scenario 1: the corporate function (example: Finance)
Gianna is the VP of Finance at a company with a turnover of €50 million and has been working there for eight years.
She designed all the financial processes. She manages all investor relations. She is the only one who truly understands the complex accounting structure of international operations.
When the CEO asked her to take two weeks off, she didn't really do it. She said she would "check her emails every day," but ended up working 10 hours a day from the beach and her hotel room.
When an important client asked a detailed question about the contract terms, only Gianna could answer. It took 48 hours to provide a response, because Jennifer had to dig through old emails and Excel spreadsheets on her smartphone and could only access her computer late at night or before her children woke up.
Gianna is seriously considering leaving (and the stress is starting to take its toll). If she did, the entire company would be exposed:
no one would know how to manage investor relations
the quarterly reporting process would be in crisis
international tax compliance would become a real risk
The CFO knows this is a problem and has tried to document processes and knowledge, but documentation always seems less urgent than daily crises, and so it never happens.
Scenario 2: the retail branch
Marco has been working as a small business consultant in a retail bank branch for 5 years and is the longest-serving employee in that branch. He has strong relationships with around 200 small business customers.
Customers turn to Marco specifically for credit products, business advice, and managing their relationship with the bank.
When Marco takes a day off, his manager tries to cover his clients, but the clients know that Marco is their point of contact. So they either wait for him to return, or they get annoyed and start looking at other banks.
When Marco is sick for a week, the branch continues to operate, but not at full capacity: financing procedures slow down and new business does not come in at the normal rate.
Marco is trapped. He can't leave without feeling guilty towards his clients.
His manager knows that Marco generates about 30% of the branch's revenue and is essential to achieving the agency's goals. So even though Marco is clearly under stress, there is no pressure to do cross-training and no succession plan in place.
Scenario 3: the startup (the founder)
Alex is the founder and CEO of a Series A fintech startup with 35 employees.
He makes all strategic decisions, manages all investor relations, and is the only one who truly understands the product roadmap and how all the pieces fit together.
When Alex is ill, no one knows who to turn to for urgent decisions. Do they wait for him to return? Or do they decide for themselves, risking critical misalignments?
When an investor calls with concerns, only Alex can respond. If Alex is in a meeting or unavailable, the investor waits.
Alex works 70 hours a week. He can't delegate because he's the bottleneck. He can't take real vacations. He can't take a step back to think strategically because he's always immersed in operations.
The co-founder is frustrated: he sees the problem, but doesn't know how to solve it. The board is nervous: they know that if Alex leaves or burns out, the company will be highly vulnerable and the capital invested will likely go up in smoke.
The paradox: indispensability creates vulnerability
Here is the central paradox that many organizations fail to see: being indispensable does not make you more secure. It makes you more vulnerable.
The indispensable person is trapped: they cannot leave without feeling guilty, they cannot take time off without feeling stressed, they cannot grow toward new opportunities, because they are stuck in their current role.
An organization that depends on one indispensable person is also vulnerable: it depends at least in part on the health, commitment, and availability of a single person. If that person falls ill, is recruited elsewhere, or simply burns out, the organization enters into crisis.
This is why Key Person Dependency is not just an HR issue, but a strategic risk.
Why it happens, and why it is often not the person's fault
Before discussing solutions, it is essential to understand how organizations create dependency on key individuals. In fact, this is rarely intentional. It usually happens because:
In crises, the most capable people step up: when the business is in trouble, the most competent person works harder, learns faster, and solves the problem. They become the hero again and again and again, until they become the only one capable of handling that type of situation.
Documentation is postponed: during the growth phase, documenting seems to slow things down. "It's quicker if I do it myself" becomes the norm. Over time, knowledge becomes concentrated in a single person.
Cross-training does not happen: the key person is always busy and does not have time to train others. And the organization does not make cross-training a priority because, in the short term, that person "keeps things going."
Processes are not standardized: when processes are unclear and non-standard, individual judgment becomes crucial. People who are familiar with exceptions and nuances are needed. And those people become indispensable.
The organizational structure is not designed for redundancy: there are no overlaps or backups. A single person is responsible for each critical function.
This is not a failure on the part of the indispensable person but, as seems evident, a failure of organizational design.
What you need to know before proceeding
Key person dependency is a real problem affecting 72% of organizations. Losing a key person can cost 6–9 months' salary in direct replacement costs alone, plus hidden costs related to:
operational discontinuity
lost revenue
organizational damage
But there is good news:it is preventable and treatable.
In the next episodes of this series, we will explore:
Why your best talents burn out and the underlying psychological dynamics;
The three real main causes of Key Person Dependency, and why generic solutions do not work;
Specific solutions for different organizational contexts (startups, mature low-tech companies, mature high-tech companies);
A 90-day operational playbook to follow to remedy Key Person Dependency in your team or company.
But first, you need to recognize the problem in your organization.
Reflection: Where does your key person dependency manifest itself today?
Before moving on to the next episode, ask yourself:
Is there anyone on your team whose sudden departure would disrupt operations?
Is there someone who always seems stressed? Who works nonstop? Who can never really switch off?
Are there critical processes that only one person fully understands?
Are there any customer relationships that would suffer if a specific person left?
Is there a decision maker whose approval is required for most important decisions?
If you answered yes to even one of these questions, Key Person Dependency is already present in your organization, and it is costing you more than you realize.
Would you like to assess the risk of key person dependency in your organization?
If you recognize signs of dependency on key people and want to better understand your specific situation, I offer a free 30-minute call to:
analyze your Key Person Risk level
identify the areas of greatest vulnerability
clarify where to start in order to reduce risk
Fill out the form to schedule an exploratory call:
In the next episode of the series
The next episode, "Why Your Best Talent Is Burning Out," delves into the psychological dynamics of indispensability and explains why high performers are particularly at risk.
Follow me on LinkedIn or subscribe to ONUS Advisory updates to be notified when the next episode is released.
About Francesco Malmusi
I am a founder and C-level operator with 20 years of experience. I write about innovation and management techniques, and help CEOs, founders, and senior managers navigate critical moments of organizational scaling. key person dependency is one of the most common and most underestimated organizational risks I encounter in my work. Whether you are in a startup, a structured company, or in an intermediate phase, it is very likely that this risk is already affecting your organization. If you want to talk about it, connect with me on LinkedIn or fill out the form above. I'll be happy to have a chat, ask you some tough questions, and let you know if I can help.
