by Christian Talbot
Amidst the dizzying array of news stories and creative memes about Nvidia’s CEO Jensen Huang’s fall from grace, one phrase has stood out to me: “key person risk.”
Key person risk is not just something for multinational corporations. It is also a school governance issue—in fact, I have encountered key person risk situations twice, once as a head and once as a trustee. More on those in a bit.
First, a working definition: Key person risk happens when an institution depends so much on one person’s knowledge, relationships, or authority that their departure would threaten the institution’s stability. Risk Management Magazine describes the risks of “leadership concentration.” As fiduciaries, trustees must assess the potential costs—financial and non-financial—associated with the loss of that person.
And when someone seems impossible to replace, succession planning becomes all the more urgent. In fact, every school should maintain two forms of succession plan:
Emergency leadership transition plan. As my colleague Amber Berry likes to say, this answers the “I won the lottery and I’m moving to my private island” question: Who leads—and with what authority—if the head becomes unavailable tomorrow?
Long-term succession plan. This answers a very different kind of question: As the school and its leadership evolve, how does the school prepare for its next head and a successful transition?
The first time I experienced the key person risk, I was a first-time head. One senior leader had a devoted following, and the conventional wisdom was that it was impossible to remove him because it would have devastating effects on fundraising and alumni relations. When this key person triggered a potentially damaging incident, it took 15 months of very careful long-term succession planning to steady the ship—but thankfully the board understood its responsibility and followed through successfully.
The second time I encountered the key person risk scenario, when I was a trustee, things did not go as smoothly. During one board meeting, emergency and long-term succession plans arose as a topic. The head of school resisted. When it was observed that succession plans are a basic fiduciary duty of the board, he relented on the emergency plan, but not the long-term succession plan. The board needed to remove him during the back half of the pandemic when things at the school were already chaotic. It took 18 months to re-establish leadership stability.
These experiences taught me that succession planning can enable a board to make necessary leadership decisions without allowing fear of the aftermath to make those decisions for them.
I hope that boards will recognize in the Nvidia situation a lesson for their schools: a head’s success can make the school’s dependence on that leader harder to acknowledge. Fortunately, succession plans mitigate key person risks and their associated costs.
If your head became unavailable tomorrow, could your board explain who would lead, what they could authorize, and how the school would communicate? If you are uncertain of your readiness for a leadership succession event, this diagnostic can give you a pulse check in less than 2 minutes.
