Excessive Turnover

Turnover Concerns

The employees of both firms were notified last week of the possible purchase and some employees may leave in anticipation. Assume employees turnover has a Poisson distribution with an rate of 2 per week. Excessively high turnover could be a disaster for the profits of any acquisition. If the observed turnover level [or higher] is less than 3% likely, this must stop the purchase as too risky. Last week, EnviroCare experienced 4 departures while GoGreen experienced 5.

Two Plots of the Distribution

Interpretation

• For the plot on the left, x gives turnover and y gives the probability of that value or lower. The probability of zero (or fewer) is 0.135. The probability of one or fewer is 0.405.
• For the plot on the right, x gives turnover and y gives the probability of everything above that value. So the numbers are, from left to right, The probability of one or more is 0.865. Two or more is 0.594. Three or more is 0.323. Four or more is 0.143. Five or more is 0.053.