Module 1--Statistics: Data, Information and Levels of Measurement Flashcards
Why Do Compensation Professionals Collect and Use Data/ Information?
■ Finance and planning
As a strategic business partners, compensation professionals must be aware of how design
and implementation of programs affect the overall company financial statements.
■ Budgeting
* Compensation professionals must be able to read and interpret organizational/departmental
budgets, as program costs to an organization can be significant.
* The compensation department has responsibility for managing a portion of the human capital
budget. By analyzing data/information, they can make effective, empirically sound decisions.
■ Investment management
Interest rates, earning/purchasing power, risk and return factors – Compensation professionals should have a general knowledge of interest rates, earning power/purchasing power and risk and return factors that will assist in decision making for those with investment
policy and monitoring responsibilities.
■ Economic conditions – Organization objectives and available resources will be affected by current
economic conditions.
* Stock price volatility
* Salary budgets
* Interest rates
■ Metrics
* Monitor and measure performance goals – Metrics provide a quantifiable means of monitoring and measuring key performance goals; organizations use them in identifying,
tracking and correcting problems as they occur.
* Measure return on investment – Metrics can be used to measure ROI for proposed and existing programs.
* Incentive plans and payouts – Metrics can be used in developing incentive/ commission plans and in determining payouts.
* Measure outcomes of objectives – Metrics can be used to evaluate the potential success or failure of outcomes relative to an organization’s objectives
■ Modeling
* Modeling provides a way to test data in various scenarios in order to observe potential outcomes. Models may offer a clearer picture of what may occur given different circumstances.
What are Six Compensation Applications?
■ Sign-on bonuses – implementation of sign-on bonuses
■ Pay adjustments – examining the consequences of adjusting pay now versus adjusting pay later, along with cost implications
■ Salary survey data – using salary survey data to price jobs based on the market
■ Pay-for-performance programs – developing pay-for-performance programs
■ Commissions – calculating the budget for commission plans
■ Incentives – determining the target and maximum potential payout of an incentive plan
What are the five Key Questions about the Variable of Interest? **
- What is the variable of interest?
- What is the level of measurement?
- Do the data represent a population or a sample?
- Are the data suitable for grouping?
- Are there any other variables available or under consideration?
What are the Levels of Measurement?
**give us an indicator of our ability to mathmatically manipulatate
■ Nominal
* Information that can only be used to categorize
uses words and numbers as a lable (weakest level). not really much you can do with them
■ Ordinal
* Data that can be placed in a rank order (Likert Scales)
*using # in a RANK ORDER POSITION
■ Interval
* While the zero point is arbitrary, equal and meaningful intervals between points on a scale exist and can be determined.
2 main characteriezed–no true zero, #2 differences between the numbers have meaning Mean, median and mode
■ Ratio
* With ratio scales, a true zero point exists; ratio measurements are meaningful and indicate how much of the quantity is being measured.
two characteristics 1: seos is abosolute
the differences among the numbers in a ratio system hasve meaning.
As long there is an true abosuloe zero, you have a ratio system
Allows the use of virtaull
What are some examples of Nominal Measurement?
■ Ethnicity
■ Military Status
■ Survey Cuts
■ Gender
■ Passport
■ SSN #
What are some examples of Ordinal Measurement?
■ Performance Ratings
*Outstanding
*Above standard
*Standard
*Below standard
*Unsatisfactory
Olympic Medals
Gold, silver and bronze
■ Job Levels
*Individual Contributor
* Supervisor
* Manager
What are some characteristics of Interval Measurement
1 ■ No true zero – There are no true zero points on the scales. Zero is relative and not absoluted
Characteristics of Interval Measurement
■Distances/Differences have meaning – Distances between points do have meaning, for example, the difference between 30-40 degrees F is the same as the difference between 70-80 degrees F.
Great example is temperature measurement: Farehneit and Celsius
Two characteritics of interval Measurement Systems:
■ Ratios don’t make any sense – 80 degrees is not twice as hot as 40 degrees.
What are the characteristics of Ratio Measurement?
Characteristics of Ratio Measurement
■ There is always an absolute zero that is meaningful.
■ Because of this, all fractions, or ratios, between measurements are also meaningful.
■ Measurements indicate how much.
Two characteristics:
- Zero means nothing
- Differences between the numbers have real meaning. You can do any type of mathmatical manipulation
What are some examples of Ratio Measurement
■ Money (amount earned)
■ Number of employees
■ Number of Parts produced
■ Number of defects
■ Turnover
■ Health care premious
■ Pension Benefits
Religious affiliations
Nominal
A list of temperatures in European capitals (in Celsius)
Interval
College class standing (freshman, sophomore, junior or senior)
Ordinal
A list of the ages of your senior managers
Ratio
Political party affiliations
Nominal
Heights of a group of employees
Ratio
Rank order of the heights of a group of employees
Ordinal
Weights of suitcases stored on an airplane
Ratio
Job performance as measured by the number of parts produced
Ratio
Job performance as measured by a rating scale
Nominal
Gender (male or female)
Nominal
Months of experience in compensation
Ratio
Number of previous college-level statistics courses completed
Ratio
Ideal room temperature (in Fahrenheit)
Interval
Anxiety level toward this course on a 10-point scale, with 1 representing very comfortable and 10 representing very anxious
Ordinal
Number of employees in the compensation department
Ratio
Number of employees serviced by the compensation department
Ratio
Why do compensation professionals collect and use data?
A. To support personal agendas
B. To respond to stock price volatility
C. To improve chances of making sound decisions
D. To replace the need for modeling
C. To improve chances of making sound decisions
- A true, absolute zero exists for which level of measurement?
A. Nominal
B. Ordinal
C. Interval
D. Ratio
D. Ratio
- Salary is an example of which level of measurement?
A. Nominal
B. Ordinal
C. Interval
D. Ratio
D. Ratio
- In order to satisfy ordinal level data requirements, you must be able to do which of the following?
A. Have a true zero
B. Have a constant interval from point to point
C. Be able to meaningfully arrange the data in rank order
D. Be able to establish ratios
C. Be able to meaningfully arrange the data in rank order
- Rating employee performance on a five-point scale ranging from “5” (outstanding) to “1” (unsatisfactory) is most likely an example of which level of measurement?
A. Nominal
B. Ordinal
C. Interval
D. Ratio
B. Ordinal
Four levels of measurement:
Nominal = numbers as a label–not much you can do with mathmatically. metric of “mode” is a nominal measurement
Ordinal = connotes rank order of position, you can use “median”, quartiles, percentiles
Interval = 0 is relative/not absolute. Ratio differences among the numbers is where the meaning ensures, mean, average are measures you can use in interval
Ratio = strongest measurement
A true, absolute zero exists for which level of measurement?
A. Ratio
B. Ordinal
C. Interval
D. Nominal
A. Ratio
Salary is an example of which level of measurement?
A. Ordinal
B. Nominal
C. Ratio
D. Interval
C. Ratio
Rating employee performance on a five-point scale ranging from “5” (outstanding) to “1” (unsatisfactory) is most likely an example of which level of measurement? *
A. Ordinal
B. Nominal
C. Ratio
D. Interval
A. Ordinal
In order to satisfy ordinal level data requirements, you must be able to do which of the following? *
A. Have a true zero
B. Be able to meaningfully arrange the data in rank order
C. Have a constant interval from point to point
D. Be able to establish ratios
B. Be able to meaningfully arrange the data in rank order
Why do compensation professionals collect and use data?
A. To replace the need for modeling
B. To respond to stock price volatility
C. To improve chances of making sound decisions
D. To support personal agendas
C. To improve chances of making sound decisions
