Compensation Analysis 101 2 of 3 Multiple Linear Regression · 2018-04-02 · • Typically,...

Compensation Analysis 101

2 of 3

Multiple Linear Regression

Presenters: Daniel Kuang, Ph.D.

John Piatt

Copyright © 2013 Biddle Consulting Group


Overview of Biddle Consulting Group, Inc.

Affirmative Action Plan (AAP) Consulting and

Fulfillment

• Thousands of AAPs developed each year• Audit and compliance assistance• AutoAAP™ Enterprise software

HR Assessments

• AutoGOJA™ online job analysis system• TVAP™ test validation & analysis program• CritiCall™ pre-employment testing for 911 operators• OPAC™ pre-employment testing for admin professionals• Video Situational Assessments (General and Nursing)

EEO Litigation Consulting /Expert Witness Services

• Over 200+ cases in EEO/AA (both plaintiff and defense)• Focus on disparate impact/validation cases

Compensation Analysis• Proactive and litigation/enforcement pay equity studies• COMPare™ compensation analysis software

Publications/Books• EEO Insight™: Leading EEO Compliance Journal• Adverse Impact (3rd ed.) / Compensation (1st ed.)

BCG Institute for Workforce Development

• 4,000+ members• Free webinars, EEO resources/tools

Nation-Wide Speaking and Training

• Regular speakers on the national speaking circuit


Biddle Consulting Group Institute for

Workforce Development (BCGi)

• BCGi Standard Membership (free)

– Online community

– Monthly webinars on EEO compliance topics

– EEO Insight Journal (e-copy)

• BCGi Platinum Membership

– Fully interactive online community

– Includes validation/compensation analysis books

– EEO Tools including validation surveys and AI calculator

– EEO Insight Journal (e-copy and hardcopy)

– Members only webinars, training and much more…

www.BCGinstitute.org

Copyright © 2013 Biddle Consulting Group 4

Daniel Kuang, Ph.D.Vice President of Legal and Audit Support Services

Biddle Consult Group

916-294-4250 ext. 145

[email protected]

John PiattDirector of EEO/AA – Operations & Customer Services

Biddle Consult Group

916-294-4250 ext. 128

[email protected]


Compensation Series Overview

• Part 1: Compensation 101• Understanding Context of Compensation Analysis

• Basics statistical models

• Compensation Strategies

• Part 2: Multiple Regression• Data Modeling: Multiple Linear Regression

• Part 3: Advanced Analysis Methods• Advanced Data Modeling

• Post OFCCP Directive 307 Analyses

5


Presentation Overview

• Recap of Statistical Models (2)

• Statistical Model: t-test

• Statistical Model: Regression

• Hands-on Demonstrations

6


Statistical Models


Q: What are we looking for in a comp analysis?

A: We are looking for difference in pay. Examples:

– Is there difference in pay between men v. women?

– Is there difference in pay between whites v.

minorities?

– Is there difference in pay between individual race

groups (e.g. whites v. Asian)

8

Analysis Logic


•The t-test is a powerful and simple method to test for

differences in pay between any two (2) groups

•The t-test on tests for “simple differences”. It does not take

into account explanatory factors that may impact

compensation (e.g., tenure, performance, education).

•Multiple Regression is a more advanced and generalized

model of t-test.

–Multiple Regression tests for between group differences after

controlling for explanatory factors

9

t-test


10

•Example 1: t-test perspective

•Average Salary

•Male=$37,500

•Female=$47,500

•Simple Mean Group

Difference=$10,000

•t=2.83, p=0.009

Group Salary($)Male 35,000 Male 35,000 Male 35,000 Male 40,000 Male 40,000 Male 40,000

Female 40,000 Female 40,000 Female 40,000 Female 55,000 Female 55,000 Female 55,000

t-test


•Multiple Regression is a more advanced and

generalized model of t-test.

–Multiple Regression tests for between group differences

after controlling for explanatory factors

11

Multiple Regression


12

•Example 1: Regression perspective

•Adjust Mean Group

Difference=$0.00

•p=1.00

Group Salary($) TenureMale 35,000 1Male 35,000 1Male 35,000 1Male 40,000 2Male 40,000 2Male 40,000 2

Female 40,000 2Female 40,000 2Female 40,000 2Female 55,000 3Female 55,000 3Female 55,000 3

Multiple Regression


13

• Typically, Multiple Regression requires 2-semesters of

graduate-level instruction.

• The actual underlying math and proper methodology is

well beyond the scope of our webinar.

• Setting up and running a regression is EASY.

• Proper set-up and interpretation is DIFFICULT.

• Multiple Regression is iterative

• You must specify a valid model for analysis.

• It is very easy to mis-specify a model and draw

incorrect conclusions: false positives or false negatives

• Please ask for help if you are unsure.

Multiple Regression


The Process

14


Comp Analysis: 6-Major Pieces

There are 6-Major Steps in a Comp analysis

1. Properly defining scope of analysis

2. Data preparation

3. Analysis with and without explanatory factors

4. Evaluate analysis-model validity

5. Interpreting analysis results

6. Computing salary adjustments for hot-spots.

We will go through all 6-Steps with a Live Demo

15


1-Define Scope of Analysis

1. Define PURPOSE of compensation study

2. Scope—Structural

a) Organization

3. What are you going to investigate?

4. Understanding Forces/Factors Driving Pay

a) Explanatory Factors

b) Opportunity, Practice and Policy

5. Understanding Pay Structure and Set SSEGs

a) Pay Analysis Groups (PAGs)

16


2-Data Preparation

1. Data Concerns

a) Missing Data

b) Outliers

2. Code Demographics

a) Focal (Female, Minority) = 0

b) Reference (Male, White) = 1

3. Dummy Code Categorical Factors

4. Tainted Variables

17


3-Analyze Data

1. t-test

2. Multiple Linear Regression

a) classic Regression

b) Pay Analysis Groups (PAGs)

3. Cohort Analysis

18


4-Evaluate Model/Analysis Validity

1. Inter-Variable Correlation Matrix

2. Multicollinearity

3. Interactions

4. Model Explanatory Power (R2)

5. Regression Beta-Weight

19


5-Interpret Results

1. Identify Statistical Significance

2. Interpret Model Stats

20


6-Compute Pay Adjustments

1. IF NECESSARY…

2. Live Demo in Excel

21


Quick Recap

• Statistical Model: t-test

• Statistical Model: Regression

• 6-Steps in Compensation Analysis

22


23

Copyright © 2013 Biddle Consulting Group 24

Daniel Kuang, [email protected]

John [email protected]

Biddle Consulting Group's

Institute for Workforce Development (BCGi)

www.BCGinstitute.org

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Compensation Analysis 101 2 of 3 Multiple Linear Regression · 2018-04-02 · • Typically,...

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