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Poisson Distribution

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Knowledge about a company’s rate of employee turnover is an important information that mangers need to determine. Whether the turn over was voluntary or not, it is important to know the reason behind it and how it affects the business’ bottom line. The Poisson Distribution is a discrete random variable distribution that can be used to calculate the probability of the number of events occurring over a given interval (Anderson, Sweeney, Williams, Camm, & Cochran, 2015). The formula below can be used to calculate the annual turnover of employees.

f(x) = μx e -μ / x!

f(x) = the probability of x occurrences in an interval μ = expected value or mean number of occurrences in an interval e = the number of annual employment turnovers
(Anderson, Sweeney, Williams, Camm, & Cochran, 2015)

For example, if a company has 500 employees and an average of 10 employees leave and are replaced annually, we can determine the probability of 15 employee turnovers.

Therefore, if, μ = 10, x=15, & e= 2.71828

Then, the probability of having 15 employee turnovers is 0.03472 or 3.4712%.

This percentage can help determine the turnover cost of the company and how it affects internal management. Employee turnover can increase cost due to employee training and possible disruptions of operations (Mayhew, n.d.). Therefore, management should determine the reasons behind these voluntary or involuntary turnovers.

Anderson, D.R., Sweeney, D.J., Williams, T.A., Camm, J.D., & Cochran, J.J. (2015).Essentials of statistics for business and economics. (7th ed.). Stamford, CT: Cengage Learning.

Investopedia. (n.d.). Poisson Distribution. Retrieved from http://www.investopedia.com/terms/p/poisson-distribution.asp

Mayhew, R. (n.d.). Employee Turnover Definitions and Calculations. Retrieved from

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