MARKOV CHAIN EXAMPLE Personnel Modeling
DYNAMICS Grades N1..N4 Personnel exhibit one of the following behaviors: –get promoted –quit, causing a vacancy that is filled during the next promotion period –remain in grade –get demoted
STATE SPACE S = {N1, N2, N3, N4, V} V for Vacancy Every time period, the employee moves according to a probability
MODELED AS A MARKOV CHAIN Discrete time periods Stationarity –transitions stay constant over time –transitions do not depend on time in grade
TRANSITION DIAGRAM V
PROBABILITY TRANSITION MATRIX 1234V V1 = P
MEASURES OF INTEREST Proportion of the workforce at each level Expected labor costs per year Expected annual cost of Entry-level training PDF of passage from N1 to N4
TRANSITION PROBABILITY CALCULATION Start with employee in N1 a0 = [1, 0, 0, 0, 0] a1 = a0 * P a1 = [0.1, 0.6, 0, 0, 0.3] a2 = a1 * P
STEADY STATE PROBABILITIES a0 * P * P * P * P *.... P is singular (rank 4) P is stochastic –rows sum to 1 is the stationary probability distribution N1 is the proportion of the time spent in state N1
COMPUTATION STRATEGY P N1 N2 N3 N4 V Substitute stochastic equation for first component of P Solve Linear System via Gaussian Elimination
...more COMPUTATION STRATEGY Start with arbitrary a0 calculate a1, a2, a3,... will converge to
CONVERGENCE TO
CONVERGENCE IS QUICK
FOR GRINS Changed P N4,V to 0.0 = [0.09, 0.16, 0.23, 0.46, 0.06]
ENTRY-LEVEL TRAINING 12% of the time we are in state V Cost of ELT = –12% –times the Workforce size –times the cost of training
LABOR COSTS Salaries –C N1 = $12,000 –C N2 = $21,000 –C N3 = $25,000 –C N4 = $31,000 Total Workforce = 180,000 Cost = 180K * (C * ) = $3.7B
EXCURSION Promotion probabilities unchanged Allow attrition to reduce workforce –P V,N1 = 0.6 results in workforce of 108,000 How much $ saved? How fast does it happen?
LABOR COSTS
CONVERGENCE TO 75% WORKFORCE (135K)
CONVERGENCE TO 60% WORKFORCE (108K)
BUILDING AN N4 FROM AN N1 CUMULATIVE
BUILDING AN N4 FROM AN N1 MARGINAL