BUSI 410

Business Analytics

Module 25: Store24 (A) – Managing Employee

Retention

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Last lecture

• Forecasting (time series analysis)

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Case Study – Store24 (A):
Managing Employee Retention

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Store24 (A):
Overview

• Why does the CEO want to increase store-level

employee retention?

• What evidence support the CEO’s claim?

• How could we quantify tenure’s impact on

profit?

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 Store24 (A):
Management tenure
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.43886921
R Square 0.192606184
Adjusted R Square 0.181545994
Standard Error 80882.48017
Observations 75

ANOVA
  df SS MS F Significance F
Regression 1 1.13924E+11 1.13924E+11 17.41437 8.19313E-05
Residual 73 4.77564E+11 6541975599
Total 74 5.91489E+11     

  Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 245496.2904 11906.39321 20.61886299 3.63E-32 221766.8833 269225.7
MTenure 680.3475122 163.0335432 4.173052359 8.19E-05 355.4221337 1005.2729

• Is management tenure a significant driver of

profit? 5
 Store24 (A):
Crew tenure
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.257678895
R Square 0.066398413
Adjusted R Square 0.05360935
Standard Error 86974.62024
Observations 75

ANOVA
  df SS MS F Significance F
Regression 1 39273902780 39273902780 5.191812 0.025620297
Residual 73 5.52215E+11 7564584566
Total 74 5.91489E+11     

  Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 258178.4418 12814.36225 20.14758415 1.53E-31 232639.4551 283717.429
CTenure 1301.738743 571.3001546 2.278554859 0.02562 163.1391934 2440.33829

• Is crew tenure a significant driver of profit?

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Store24 (A):
Discussion

• Q: Given our results so far, is it safe to conclude

that both manager and crew tenure are significant
drivers of store profits?

• A: No, because in each regression, the one driver

may be taking credit for both tenures.

• Q: What should we do then?

• A: Multiple regression
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 Store24 (A):
Management and crew tenure
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.465617551
R Square 0.216799704
Adjusted R Square 0.19504414
Standard Error 80212.7404
Observations 75

ANOVA
  df SS MS F Significance F
Regression 2 1.28235E+1164117274037 9.965253 0.000151155
Residual 72 4.63254E+11 6434083722
Total 74 5.91489E+11     

  Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 236950.6698 13124.73155 18.05375363 1.93E-28 210786.996 263114.34
MTenure 619.8419633 166.696072 3.718395736 0.000394 287.5394217 952.1445
CTenure 810.128697 543.2186344 1.491349239 0.140238-272.7578445 1893.0152

• Are both tenures significant drivers of profit?

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Store24 (A):
Discussion

• Q: Why was crew tenure a significant driver on

its own, but not any longer with management
tenure?

• A: Crew tenure is correlated with management

tenure, and took credit for it in simple regression.

• Q: Given our results so far, is it safe to conclude

that crew tenure does not driver profit?

• A: No, we are missing other drivers… 9

 Store24 (A):
All drivers
Regression Statistics
Multiple R 0.798690203
R Square 0.637906041
Adjusted R2
Standard Error
0.594015864
56965.492
• Are both tenures significant?
Observations 75

ANOVA
  df SS MS F Significance F
Regression 8 3.77314E+11 47164266962 14.53414 5.38241E-12
Residual 66 2.14174E+11 3245067278
Total 74 5.91489E+11     

  Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept 7610.041452 66821.99424 0.113885279 0.909674 -125804.3731 141024.46
MTenure 760.9927338 127.0856393 5.98803089 9.72E-08 507.2580711 1014.7274
CTenure 944.9780259 421.6874239 2.240944293 0.0284 103.051929 1786.9041
Pop 3.666606265 1.466307821 2.500570625 0.01489 0.739028275 6.5941843
Comp -25286.88666 5491.93698 -4.604365774 1.94E-05 -36251.8925 -14321.88
Visibility 12625.44705 9087.619601 1.389301886 0.169411 -5518.570694 30769.465
PedCount 34087.35879 9073.1961 3.756929577 0.000366 15972.13849 52202.579
Res 91584.67523 39231.28297 2.334480759 0.022623 13256.89244 169912.46
Hours24 63233.30716 19641.11429 3.219435834 0.001994 24018.55766 102448.06

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Store24 (A):
Discussion

• Q: How could crew tenure become a significant

driver again?

• A: Notice R2 increases from .22 to .64. Without

the new drivers, much unexplained variation
clouded the effect of crew tenure, making it
insignificant. With the new drivers explaining
more variation, the effect of crew tenure becomes
clearer.

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Store24 (A):
Discussion

• According to the full regression, what is the

value of an additional month of manager/crew
tenure?
– Manager: $761, Crew: $945

• Q: Does this mean a month’s experience of a

crew member is more valuable than that of a
manager?

• A: No! The crew tenure figure is for store

average (always remember the exact definition of
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Store24 (A):
Discussion

• Q: The CEO wants to know how much of store

profit variation is explained by crew experience.
What measures this?
• A: Incremental R2 (or coefficient of partial
determination) of a driver: full regression R2
minus R2 with all but this driver
• Distinguish among three concepts
– Coefficient measures how a driver impacts the
outcome
– P-value is the likelihood that this impact is actually
null
– Incremental R2 measures the incremental 13
Store24 (A):
Incremental R2

• Variables: • Incremental R2
– MTenure – 19.7%
– CTenure – 2.8%
– Pop – 3.4%
– Comp – 11.6%
– Visibility – 1.1%
– PedCount – 7.7%
– Res – 3.0%
– Hours24 – 5.7%

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Store24 (A):
Discussion

• Q: The COO thinks that increasing tenure of a

junior manager may have a larger impact on
profit than increasing tenure of a senior manager.
What does this mean?
• A: Manager tenure drives profit in a non-linear
way
• Q: How could we perform a quadratic
regression?
• A: Create a variable “MTenure2”

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 Store24 (A):
Non-linear regression
Regression Statistics
Multiple R 0.83201845
R Square 0.692254701
Adjusted R Square 0.649643813
Standard Error 52919.07157
Observations 75

ANOVA
  df SS MS F Significance F
Regression 9 4.09461E+11 45495638585 16.24596 1.42761E-13
Residual 65 1.82028E+11 2800428136
Total 74 5.91489E+11     

  Coefficients Standard Error t Stat P-value Lower 95% Upper 95%

Intercept -28623.23088 62989.9041 -0.454409818 0.651048 -154422.7548 97176.2931
MTenure 1753.665182 315.8797984 5.551685137 5.62E-07 1122.809669 2384.52069
CTenure 1003.38569 392.1129088 2.558920321 0.012837 220.2821444 1786.48924
Pop 2.958978357 1.378070727 2.147189036 0.035513 0.206781097 5.71117562

Comp -26892.2414 5123.784549 -5.248511357 1.8E-06 -37125.14565 -16659.3372

Visibility 21215.25224 8814.576554 2.406837369 0.018942 3611.327447 38819.177
PedCount 39664.45026 8587.933523 4.618625675 1.88E-05 22513.16285 56815.7377
Res 85095.10255 36494.87265 2.331700219 0.022827 12209.80972 157980.395
Hours24 55046.38717 18405.25987 2.990796521 0.003927 18288.54538 91804.229
MTenure^2 -4.944138362 1.459268577 -3.388093486 0.001199 -7.858498924 -2.0297778
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Store24 (A):
Non-linear regression

•  

• The latter term confirms that the positive

marginal impact of manager tenure on profit
diminishes with experience

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Store24 (A):
Discussion

• Q: What employee retention program would you

recommend to Store24 management?

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Today’s assignment

• Last call for final exam conflict and extended

time requests!

• Homework 5, due on 12/5

• Will post practice exam solutions on 12/5

• Review Parts III on your own before final review

session

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For next class

• Final review
• Bring your laptop for course evaluation

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