The success of succession to reduce manager turnover costs; A qualitative study on costs related to manager turnover in a Swedish retail company and succession planning and management success factors to reduce these costs

Abstract: Problem background/Introduction: Many of today’s organizations struggle with securing a high performing manpower due to either a retiring or an increasingly mobile workforce. If a company fails in attracting and retaining their talents, costs related to employee movements - in this study employee turnover costs - will probably increase. Retention of people and promoting the employees’ knowledge, capabilities and talents are becoming ever more important in order for companies to stay competitive. As a solution to the employee turnover problem, Succession planning and Management (SP&M) could be applied. Purpose: To investigate the costs associated with employee turnover, manager turnover to be specific, and to identify SP&M success factors to reduce these costs. Research questions: What are the costs related to manager turnover in a Swedish retail warehouse? What are SP&M success factors for reducing manager turnover costs? To answer the second research question we also ask; Why should SP&M be used to reduce manager turnover cost? Limitations: This case study was performed at one company and in one particular warehouse. The focus was put on three different managerial levels within the warehouse, all other personnel were excluded. The internal corporate data was compiled into lump sums, representing one total cost for manager turnover. Methodology: This study combined a descriptive research with a qualitative research approach. A case study was performed where semi-structured interviews were used as primary data and internal corporate data and previous literature were applied as secondary data. The analysis of the qualitative findings was performed using an iterative and thematic analysis approach. Empirical results: Tangible and intangible employee turnover costs related to manager turnover have been identified. The tangible costs, such as vacancy costs, training and education costs, amount to SEK -15 788. The intangible costs, such as lost knowledge and lost productivity, measure SEK 3 266 667. SP&M is useful to handle resignations, competition for skilled employees, poor career development and manager transitions. The success factors to reduce employee turnover costs are: focus on development, identify talents and key positions, transparency and communication, continuous assessment and flexibility. Conclusions: To answer the first research question, both tangible and intangible employee turnover costs were identified. The tangible costs related to employee turnover are separation costs, vacancy costs, replacement costs and training costs. The intangible employee turnover costs are rework, lost knowledge, stress and lost moral and performance differential/lost productivity/lost sales. The intangible employee turnover costs constitute the major part of the total employee turnover cost, where the total costs amount to SEK 3 250 879 in the case of IKEA. To answer the second research question and the sub question, SP&M is considered useful to reduce costs related to resignations, competition for skilled employees, a lack of career development and poor transitions. Success factors for reducing these costs are a clear focus on development of the process and a long-term and proactive approach to find and retain people. It is crucial to identify key talents and positions to achieve seamless transitions and avoid high costs related to manager turnover. In this process transparency and communication are important, especially when it comes to building strong relationships between the manager and employees in order to guarantee a sound leadership pipeline. By continuously assessing the SP&M processes, a company could easier detect future vacancies and be proactive in reducing turnover costs. Flexibility becomes a success factors as there exists competition for talented employees, even within the company.