The ROI of Succession Planning

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Author(s): Anonymous

Here is some ammunition for HR professionals looking to justify the cost of succession management and expensive benefits packages that can boost employee retention: Research from consulting firm AberdeenGroup shows a direct correlation between executive and middle management retention and companies that have formalized retention and succession programs. (see "Effect of Formal Plans on Mid-Management Turnover," below.)

The majority of HR executives surveyed who reported low annual executive attrition rates (between 1 percent and 5 percent) also work for companies that have a formal retention program (89 percent) and a succession program (84 percent). Most companies with retention and succession plans also showed a lower cost per new hire and a lower cost of separation per employee.

Effect of Formal Plans on Mid-Management Turnover

This is good news, since nearly half the respondents (48 percent) said cost was the major impediment to putting a corporate retention plan in place.

Aberdeen, which classifies companies into three categories-best- in-class, industry average and laggards-says best-in-class companies are more likely to have formal succession and retention plans than their colleagues.

The report notes that corporate interest in retention management and succession planning is growing, as many companies (57 percent) worry about long-term workforce requirements and (61 percent) worry about the cost and disruption to the organization of frequent turnover at the top.

Aberdeen's advice for best-in-class companies: Let your shareholders know you have retention and succession plans in place, concentrate on best practices, identify your top employees and learn what you need to do to keep them, and collect and analyze metrics regularly to evaluate your success.

© Copyright Society for Human Resource Management Apr 2006
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