NMIMS Centre for Distance and Online Education
Course: Decision Science
Internal Assignment – September 2025
Examination
Student Name: Neville S.
Program: MBA (Distance Learning)
Subject: Decision Science
Roll No: ___________________
Batch: ____________________
Submitted to:
NMIMS School of Distance Education
Q1. Evaluation of HR Team’s Decision to Use Median Salary
Introduction
In organizational reporting, compensation data is one of the most sensitive indicators of
equity and fairness. The way in which salary information is presented can influence
employee morale, external reputation, and perceptions of transparency. Apex Corp, a mid-
sized technology company with 150 employees, faces this challenge when preparing its
annual HR report. The issue arises because the presence of a small group of highly paid
executives (₹40–₹50 lakhs) inflates the mean salary to ₹12.8 lakhs, which does not
represent the reality of the majority workforce earning ₹4–₹10 lakhs. The HR team
proposes reporting the median salary of ₹8.2 lakhs, considering it a more realistic figure of
employee pay. As consultants, it becomes essential to critically evaluate this choice from
statistical, communication, and governance perspectives.
Concepts & Application
1. Statistical Appropriateness – Mean vs Median
- Mean (average) is calculated by dividing the total salary pool by the number of employees.
It incorporates all data points but is heavily affected by outliers. In Apex Corp’s case, five
executives earning disproportionately high salaries skew the mean upwards.
- Median is the midpoint of the salary distribution. It is robust against extreme values and is
more representative of the "typical" employee salary. At ₹8.2 lakhs, it better reflects what
most employees actually experience.
- Since the company’s salary data is right-skewed, median is statistically the more
appropriate measure of central tendency for internal communication.
2. Impact on Communication Goals
- Positive for Employee Morale: Presenting the mean salary of ₹12.8 lakhs may lead junior
and mid-level employees (earning ₹4–₹10 lakhs) to feel undervalued, perceiving
themselves as below average. The median, on the other hand, aligns with employee realities
and avoids dissatisfaction.
- Employer Branding: From an employer branding perspective, median salary
communicates fairness and inclusivity, supporting the company’s positioning as an
equitable pay provider.
- External Stakeholders: Investors, job applicants, and regulators may also view the median
as a more accurate measure of how the majority of employees are compensated.
3. Organizational Transparency & Risks
- While median is more representative, reporting only the median may be perceived as
selective disclosure. Stakeholders might interpret it as an attempt to mask executive pay
disparities.
- To balance fairness and transparency, companies such as those listed on ESG indices often
disclose multiple metrics:
• Mean salary – captures overall salary pool
• Median salary – reflects the experience of a typical employee
• Pay ratios – e.g., CEO-to-median employee pay, which provides clarity on internal equity
- Omission of the mean could potentially invite criticism, especially if transparency is a
stated organizational value.
4. Illustrative Example
If 145 employees earn salaries clustered around ₹8 lakhs and 5 executives earn ₹50 lakhs
each, the total salary outlay disproportionately raises the average, but does not represent
what 96% of the workforce earns. A box plot or histogram of this distribution would show a
sharp right tail, visually demonstrating why median is the more accurate measure for
employee pay.
Recommendation
- Report both mean and median salaries. Median should be highlighted as the
"representative salary" of a typical employee, while the mean should be disclosed alongside,
with an explanation of why it appears higher.
- Add supporting metrics such as pay distribution ranges (25th, 50th, 75th percentiles) and
ratio of executive to employee pay.
- This dual reporting not only reflects statistical accuracy but also demonstrates
transparency, reinforcing the company’s credibility with both employees and external
stakeholders.
Conclusion
The HR team’s decision to use the median over the mean is statistically justified because the
salary data is skewed by a small group of high earners. The median provides a realistic
picture of typical employee earnings and prevents negative perceptions among the
workforce. However, from a governance and transparency standpoint, median should not
be the only figure reported. A combination of mean, median, and supporting pay equity
indicators will strengthen communication, align with best practices, and help Apex Corp
project itself as an equitable and trustworthy employer.
References
1. Levine, D.M., Stephan, D., & Szabat, K.A. (2020). Statistics for Managers Using Microsoft
Excel. Pearson.
2. NMIMS Decision Science Course Material.
3. McKinsey & Company (2023). Compensation benchmarking and pay transparency
practices. Available online.
4. Investopedia (2024). Mean vs Median: What’s the Difference?
