Question

Compensation professionals in XYZ Company use regression analysis to determine the pay rates of its marketing professionals. There are 4 different marketing job titles in XYZ Company. Compensation professionals use job evaluation points assigned to each marketing job title and a salary survey data. In other words, they regress job evaluation points on the salary data. What does it mean when the R2 value of this regression turns out to be 0.85

Answer 1

Answer: This means that the salaries of their marketing professionals are not closely related to their job titles. In further explanation, this shows that a professional with a higher job title, may be paid a lower salary when compared to a professional with a lower job title.

A 0.85 R-Squared shows that the points are far from the trend lines. From this, we can assume that the marketing professionals are paid base on commission on sales, and not base on job position.

Step-by-step explanation: R-Squared is a measure used in statistics, to represent how much proportion of the dependent variables that is explained by the independent variables. A high value of R^2 shows a very low correlation between the dependent and independent variables, while a low value of R^2 shows that the dependent and independent variables are closely related. The R-Squared value are a measure of percentage value.