I know some questions like this one have been asked, but of course I think mine has a unique element that I would like to get the forum’s opinion on.
I work with compensation data. One data point we look at is an individuals compa ratio or % to market. This is calculate by taking the individuals annual salary and dividing it by the Market Average (market average is unique to each position)- resulting in a percentage.
Example. John makes $80,000. His market average is $100,000. John’s compa ratio is 80% to market.
Sometimes you want to know the compa ratio for a group of people. It could be a deaprtment or it could be grouped by job level across departments (e.g. what’s the average for all people in IT or what’s the average for all managers in all departments).
It is generally accepted that you should not take a group of compa ratio %s and add them up and do a straight average. Instead you are supposed to add up all of the base salaries, add up all of the market averages, and divide the two resulting numbers to determine the groups compa ratio.
I get the weighted average discussions. But in this case, the individual compa ratio % doesn’t represent a certain count of the whole. Instead, it represents the relationship. And compa ratios tend to hover between 80% and 120% as those are common enforced pay ranges for a postion - you don’t want anyone to far below the average or too far above the average.
So what do you think of this scenario? I’m fine to agree with methodolgy 2 where you add up salaries and market averages, but I have difficulty explaining why you want to do that instead of just taking an average of the individual %s. Doesn’t using this mehtodology actually make a job that pays more money have more influence over my result in a way I might not want it to? But again, trusted sources say you should do it that way.