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2 June 2007
Accurate employee turnover prediction models are critical in the early detection of
unanticipated turnover, giving managers sufficient time to deal with turnover related
management issues. The logit and probit models have been successfully applied to solve
nonlinear classifying and regression problems. However, the feasibility of applying them
to voluntary turnover prediction still has not been sufficiently explored. Consequently, a
numerical example involving voluntary turnover data fmm a motor marketing enterprise
in central Taiwan is employed, and the empirical results reveal that the proposed models
have high prediction capabilities. Accordingly, these two models also provide a promising
alternative for predicting employee turnover in human resource management.
1 Introduction
1.1 Employee turnover
An increasing number of models that accurately predict employee turnover provide early
detection of unanticipated turnover, particularly from high performance employees.
Meanwhile, accurate prediction models also leave managers with adequate time
to deal with turnover related management issues (Morrow. McElroy. & Laczniak,
1999). Generally, two forms of employee turnover exist, involuntary turnover and
voluntary turnover. Involuntary turnover is frequently delined as movements across
organizational boundaries, over which the employee is only slightly affected (Price,
1977), the representation forms of withdrawal from an organization often categorized
with strategy (e.g. downsizing), dismissal (e.g. firing), or policy (e.g. compulsory
retirement) (Campion, 1991). In contrast, voluntary turnover is defined as movements
across organizational boundaries, over which the employee is heavily affected (Price,
1977), the representation forms of withdrawal from an organization often categorized
with absenteeism and lateness (Campion, 1991).
In accordance with the above definitions, involuntary turnover is most often initiated
by organizational changes and institutional constraints, and it is easy to understand the
scope and the affections for the organization. However, employers find it especially
difficult to precisely predict the withdrawal forms, the affection and the timing t)f
voluntary turnover in an organization, such as the number of individuals leaving,
which individuals are leaving, and how individuals are leaving. In other words, the
employers have to understand the damages resulting from high performance employees
leaving, and the benefits resulting from poor performance employees leaving (Dalton
& Todor, 1982; Simons & Hinkin, 2001) as well as the methods of withdrawal used by
International Joumal of Management Vol. 24 No. 2 June 2007 217
departing employees (Morrow et a!., 1999). Tberefore, the voluntary turnover modeling
methodology and novel prediction approach have attracted considerable attention during
recent decades. Mobley (1977)firstproposed structural models for representing employee
turnover: job dissatisfaction —> thinking of quitting —> intention to search (for a new
job)—> intention to quit-> (voluntary) turnover. Based on this brief mcxlel of voluntary
tumover, job satisfaction is an indirect link in initialing actual voluntary turnover (Muller,
Boyer, Price, & Iverson, 1994; van Breukelen, van der Vlist, & Steensma, 2004).
Researchers also added organizational commitment as an intervening variable to explain
the outcomes, stay intentions or tumover (Inverson, 1992; Muller, Wallace, & Price,
1992; Price, 1986). In addition, numerous empirical research studies have suggested that
greater organizational commitments imply greater intent to stay, i.e., lower voluntary
turnover (Lincoln & Kalleberg, 1996; Muller et a!., 1992; Price, 1986; Somers, 1995).
prediction: Dow and Endersby (2004) compared the mtiltinomial logit model (MNL) and
the multinomial probit model (MNP) for analyzing voting choice in the United States
and France, and found that the simpler logit model i.s frequently preferable to tbe more
complex pro/j//regarding multi-party elections. Therefore, the/o^'//and/?ra/?f7 models are
highly suitable for application to employee voluntary turnover qualitative choices.
This investigation employs the negative relationship between performance and voluntary
turnover to construct the employee leaving prediction model. Two conventionally
adopted statistical forecasting approaches, tbe basic (binomial) logit and basic (binomial)
probit models, are employed to compare their prediction performance. The rest of this
paper is organized as follows. Section 2 introduces the proposed logit and probit models.
Section 3 then presents a numerical example involving a motor marketing enterprise
in Taiwan to demonstrate the predictive capacity of the proposed model. Conclusions
are drawn in section 4. .
2 Model specifications
2.1 Logit model
This study assumes that the state S., for each employee observation, appears absolute
certainty in the turnover prediction models. Thus, let S^ = 1, when an employee has left
the organization, i.e., voluntary turnover; in contrast, 5.^0, when an employee remains
in the organization, i.e., non-turnover. The turnover variable S is modeled directly as
the dependent variable in a model using the logistic function, represented as Eqs. (1)
and (2), respectively,
exp(/Jc) 1
P(S.= ,turnover) = ^ ^' = -— (1)
normal distribution functional form (i.e., with unit variance and zero mean value) is
employed in this section. Therefore, when an employee voluntarily decides to leave,
let S- = 1; otherwise, in contrast, 5. = 0, when an employee decides to remain, let
S- = 0. The turnover variable S is modeled directly as the dependent variable in a model
of the form as Eq.(3),
(3)
e'''"dx (4)
where O() denotes the cumulative standard normal distribution function, and is defined
as Eq.(4); jf. is also represented as the job-performance of each employee / for the turnover
variable; ^are the estimated variable coefficients o(\heprobit model.
Equation (3) is once again estimated by MLE via the training data set of lurnover/non-
turnover. The values of variables coefficients. /3 . are also calculated for eacb technique
as the log odds ratio using the estimated probability of that teehnique. The estimation
is easily performed using any software with a probit regression routine. Finally, the
prediction values of turnover variable S^ can also be calculated from Ihis probit model,
being eitber voluntary turnover (S = 1) or non-turnover ( 5 . - 0).
Both the logit and probit models guarantee that the estimated probabilities are between 0
and 1. However, no compelling theoretical reasons exist for either model being superior,
or more suitable in specific situations. Further details can be found in Greene (2003).
where T denotes Ihe number of prediction periods; D takes the value 1 in Ihe event of
voluntary turnover and 0 otherwise; P is the model derived probability for employee
/. If the value of QPS is near 0. it implies an accurate model.
International Journal of Management Vol. 24 No. 2 June 2007 221
This study employs the classitication table and QPS to examine how the prediction model
performs. Meanwhile, the proposed models are implemented by statistical software,
SPSS for Windows 10.0 version. Some useful statistics, Cox and Snell R , Nagelkerke
R~, MeFadden R and the Chi-square test, are also introduced in the numerical example
for reference.
3 Numerical example
3.1 Data set and research structure
The sample was comprised of 150 professional employees drawn from a motor marketing
company located in the central Taiwan, which has operated since 1992, and has an annual
business volume of 300 million NTD and over 2(K) marketing specialists. Due to missing
data (item non-response), Ihe useabie sample size was 132. All participants had direct
responsibility for motor marketing, motor maintenance, and held the minimum of an
associate degree for sales. Attitudinal data were gathered from a questionnaire survey
that was distributed and collected on Ihe intranet web-site. Respondents were given
the opportunity to complete the questionnaire during their work time and were asked
to provide their employee personnel numbers to allow access to their personnel files.
Confidcniialiiy of all information collected was assured and maintained. The response
rate to the survey was 88 percent. The sample was 83 percent male, 3 percent Aborigine
and 15 per cent Hakka, and had a mean age of 31.7 years old.
In this investigation, the data set is used to demonstrate the forecasting accuracy of
the proposed models. The data contained a total of 132 marketing specialists and their
voluntary turnover status for 2003. The variables included in this study are composed
of two distinct subsets. The first subset, represents the antecedents of turnover from
theory and researchfindings:job-performance (mainly assessed by motor sales volumes
in 2003), organizational commitment and job withdrawal intentions (Meyer & Allen,
1990; Mobley, 1982; Mowday, Steers, & Porter, 1982). The second subset of variables is
composed of non-work influences on turnover and includes: age, number of dependent
children, and race/ethnicity (Aborigine, Hakka, and Han). Although turnover is usually
influenced by work and non-work factors, turnover research has concentrated primarily
on work-related variables (Mobley, 1982; Mowday etal., 1982). However, it is interesting
to see that some non-work antecedents of turnover were consistent with a time-based
variable which had some relationship to work and family. For example, age is a time-
based variable that affects one's job mobility and one's stage in the personal and family
life-cycles. Similarly, number of dependent children is a non-work influence of turnover
that is linked to life-stage and job mobility. Finally, race in Taiwan has been shown to
infiuence expectations about job-performance. Due to the stigma of being a minority.
Aborigine (2 per cent of total population, see Taiwan Government Information Office,
2005) and Hakka (28 per cent, see Taiwan Government Infonnation Office, 2005) in
Taiwan often have diminished expectations about their job-performance. During several
thousand years, these Aborigines and Hakka lived in isolation in the plains, coastal,
and mountain areas of Taiwan. Because of subsequent migration, ihe Aborigines and
222 International Joumal of Management Vol. 24 No. 2 June 2007
Hakka in the coast and plains were progressively assimilated by immigrant groups,
and now most identifiable aboriginal tribes are limited to less accessible regions in the
mountains. Aborigines and Hakka sometimes viewed by tbe Taiwanese mainstream
culture as lacking in loyalty, passion, and responsible. Therefore, race can be viewed
as a non-work influence of turnover tied to relationsbips between race and turnover.
Tbe research structure of this investigation is shown in Fig. I.
3.2 Prediction procedures
The data set is divided into two parts, the modeling data set (containing employees one
to 100) and the testing data set (containing employees 101 to 132). The modeling data
set is used to test the logit and probit models. The testing data set is not used for either
model building or selection, and is used for estimating model performance when applied
to future data. Table I lists the different data sets for this example.
Since the logit and probit prediction models include the explanatory coefficient
variables (constant item and job-performance), /3 , requiring estimation via the MLE
procedure, the Maximum likelihood estimation procedure can be employed to determine
the free parameters for the logit and probit models. Table 2 lists tbe results of these
coefficients for each proposed model. For the logit model, the explanatory capability
exceeds 50% (the Nagelkerke R^ is 0.529); the two estimated coefficients 0Q and /?,
are also statistically significant, and have values of -0.206 and 2.343 respectively. For
Figure 1 Research structure of voluntary turnover
Age
Annua motor
j sales volumes 1
< 1
Gender
Job-performance
Race
Organization
committee
International Joumal of Management Vol. 24 No. 2 June 2(M)7 223
tbe probit model, tbe explanatory capability also exceeds 50% (the Nagelkerke's R' is
0.521); the two estimated coefficients ^^ and ^j are also statistically significant, and
bave values -0.112 and 1.361 respectively.
Table 3 summarizes the prediction accuracy during tbe training stage for each proposed
model. For the logit model, the success rate for predicting individual employee turnover
is 87.3%. In contrast, the success rate for predicting non-turnover is only 57.8%, and
the total rate of correct prediction 74%. The QPS is 0.1829. For the prohit model, the
rate of correctly predicting individual employee tumover is 89.1%, however, the rate of
correctly predicting non-turnover is only 51.1%. Finally, the QPS is 0.2976.
I
Table 1 Various data sets for the logit model and probit models
Logit / Probit models
Data periods 1st-132nd
Training data periods Ist-lOOth
Testing data periods iOlst-132nd
Logii Probil
model model
Explanatory Estimated Stand p-value Explanatory Estimated Stand p-value
variables coefficients error variables coefficients error
(A,and^,) (^oand/?,)
Constant -0.206 0.041 0.000** Constant -0.112 0.020 0.000**
Job- 2.343 0.437 0,000** Job- 1.361 0.228 0.000**
performance performance
Model Chi-square p-value 0.000** Model Chi-square p- 0.000**
(d.f.=l) value (d-f.=l)
• Cox and Snell/;- 0.387 Cox and Snell/?^ 0.382
Nagelkerke R^^ 0.529 Nagelkerke/;^ 0.521
McFadden R~ 0.372 McFadden;;- 0.365
224 International Journal of Management Vol. 24 No. 2 June 2(M)7
From a statistical perspective, the model Chi-squarc te.sts are signilicant for both these
two models, but the logit model is superior to the probit model in terms ot explanatory
capability (the value.s of Cox and Snell /?', Nagelkerke v and McFadden R' are slightly
better than {)^'S-probit model). However, during the testing stage., the classilicalion test
(Table 4) indicates that the prediction performance of the logit model equals that of the
probit model. Therefore, the Quadratic Probability Score (QPS), as given by Eq.(4). is
employed to demonstrate the prediction accuracy of these two models. As mentioned
above, the minimum values of QPS indicate that the deviations between aetual and
forecast values are very small. The comparison results demonstrate that the prediction
accuracy ofthe logit model is superior to that o{ ihc probit model (in bolh Ihe training
and testing stages).
the lime required to take care of their children, such that modeling could easily explain
their decision making. It suggests that gender or the numher of children are factors
affecting one's turnover decision in an organization. Finally, turnover might not always
he the result of a rational, ordered sequence hased on careful consideration of allernalivc
opportunities (Lee & Mitchell, 1994), but rather might he driven hy work attitudes such
as organizational cnmmilment. More generally, if the organization is designed for high
performance, then one would expect turnover hehavior to occur more rapidly and/or
without full consideration of its immediate personal consequences. The perception of
the organization committee and individual expectationa are the most important factors
to understand in order to explain, and to predict the withdrawal hehaviors of high
performance employees. In table 4, it was also found that twelve employees (located in
the grid with "predict as turnover" and "actual turnover") determined turnover perhaps
because this motor marketing company violated some aspects of the performance honus
policy during the hard-market exploration-period in 2(X)3. Almost all of the Top 20
sales managers (in this case is twelve employees including three regional managers,
four project managers, and five senior specialists) decided to leave the organization
after Lunar New Year. This case reveals that an organization committee mainly affects
high performance employees' investments in an organization, even if the committee
was more than they expected. If this kind of committee fails, they will find it difficult
to believe any important committee of this organization. Maybe job withdrawal is the
best policy for them under this kind of situation. In this sense, commitment reflects prior
behavior, while joh withdrawal intentions are future oriented.
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