Measures of central tendency (a.k.a. mean, mode, & median)


By Sharon McKnight, CCP SPHR
Sr. Editor, Compensation.BLR.com

Finding the middle ground is important for a lot of things, and for a lot of reasons, including salary data. For example, when researching salary data, it’s important to know whether you’re looking at the mean, the mode, or the median. All three are measures of central tendency but they’re not all the same thing, much less the same number.

Measures of central tendency are indicators of the center salary in a list of salaries. They represent the most typical value and they provide information about other points within the set of salary data. They help compensation professionals to make sense of the raw salary data but they do not, however, provide information about how dispersed the data are.

Mode

Mode_ChartThe mode is the most frequently reported data point. To find the mode, organize the list of salaries by rank, lowest to highest. Next, count the number of times each data point is listed. The data point that is listed the most is the mode.

Easy, right? But what if there are two data points that occur the most often? For example, instead of 29,000, that last salary amount was 28,000? When two amounts are represented equally, the data is bimodal.

Median

Median_ChartThe median is the middle data point in an ordered list of salaries. It is the point at which, in an ordered distribution, an equal number of data points are above it as well as below it in the list. If the list has an even number of data points, and the two middle numbers are not the same, you split the difference to get the median amount for the data set.

Mean

The simplest of the three, the mean, is the average of all the data points—the sum of all the data divided by the number of data points. Finding the mean does not require that the data be in an ordered list.

Mean_chartUsing the data charts shown above, the mode is 25,000, the median is 25,000, and the mean is 25,334. All very close to the same number but which is the right one to use when setting a salary range? In this case, any one of them is a valid mid-point for your salary range. If the list of data points included significant outliers, however, the mode or median might be the preferred choice for your mid-point.

Generally, you’re not going to have so many data points when researching salary data but you should have 3 or more to insure adequate market representation when setting the mid-point of a salary range. A simple formula can be used to calculate the min and max for your salary range once the mid-point is determined.

Advertisements

18 responses to “Measures of central tendency (a.k.a. mean, mode, & median)

  1. Good day! I could have sworn I’ve visited
    this site before but after going through many of the
    articles I realized it’s new to me. Regardless, I’m
    certainly happy I found it and I’ll be bookmarking it and
    checking back frequently!

    Like

  2. This is an excellent articles! I am swept away by your
    presentation and unique opinions. I agree with so much. I’ll keep coming back for more very good posts.

    Like

  3. I found simply the information I already searched all over the place and
    simply couldn’t come across. What a perfect website.

    Like

  4. I just put the link of your blog on my Facebook
    Wall. good blog without a doubt.

    Like

  5. Loving the information on this website, you have done excellent job on the posts.

    Like

  6. First off I want to say great blog! I had a quick question which I’d like to
    ask if you do not mind. I was interested to know how
    you center yourself and clear your thoughts prior
    to writing. I’ve had difficulty clearing my mind in getting my thoughts out there.
    I do enjoy writing however it just seems like the first 10 to 15
    minutes are lost just trying to figure out how to begin.
    Any ideas or hints? Thank you!

    Like

  7. I could not resist commenting. Perfectly written!

    Like

  8. You really make it seem so easy with your presentation but I find this topic to be really something that I think I would never understand.
    It seems too complicated and extremely broad for me. I’m looking
    forward for your next post, I will try to get the hang of it!

    Like

  9. Excellent write-up, I’m a frequent visitor of your blog.

    I love reading your articles.

    Like

Please share your thoughts.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s