The median paycheck for an industrial distribution professional was $65,000 last year — that's up from $62,000 in 1999. That figure is expected to rise by five percent this year — to a median $68,000. That's according to Industrial Distribution's most recent Compensation Survey (formerly known as our Salary Survey), conducted over the summer.

While those figures reflect a steady rise in industry pay in general, there's much more to the story. A closer look reveals that many incentive-based employees — mainly those in sales and management positions — anticipate flat or decreased earnings this year. In fact, just 41 percent of this year's respondents actually expect their pay to rise. The rest anticipate either a flat year (36 percent) or a decrease (23 percent) in earnings.

Those results aren't surprising to some industry watchers. While the economic slump is taking its toll on distributors of all kinds, many sectors began experiencing the slowdown a year ago. As a result, the dramatic pay increases of recent years have subsided and discretionary bonuses given to employees have softened, says Al Bates, president of the Profit Planning Group, a financial consulting company based in Boulder, Colo.

"Discretionary bonuses are going to be pitiful this year," says Bates, adding that bonuses were down last year at many distributorships and they may be non-existent at some companies as 2001 comes to a close. "I think outside salespeople, in particular, are anticipating that there will be less volume and they'll make less money because of that."

Outside salespeople responding to our survey expect to earn a median salary of $60,000 this year, which is even with the earnings they reported for 2000. Inside salespeople predict a three percent decrease, to a median salary of $34,000, as compared to $35,000 in 2000. In addition, most CEOs and presidents responding to our survey expect their paychecks to be 13 percent lower than last year — $100,000, as compared to $115,000. The economy is likely the prevailing factor in those predictions. However, compensation — especially for salespeople — has been under close scrutiny in distribution circles across the country over the last few years.

For instance, Joe Thompson, executive vice president of the National Assn. of Hose and Accessories Distributors, says he's had more requests from members for compensation data recently. The implication is that firms are attempting to evaluate what they're paying their employees and perhaps implement new compensation policies.

"It appears that more companies are trying to ... establish policies within their companies relative to compensation issues," Thompson says. "Companies of all sizes are trying to make sure they have something they can put in writing."

Postage-paid surveys were bound into the June and July issues of Industrial Distribution. The surveys asked readers for information on their total yearly earnings in 2000 — including bonuses and commissions. To track changes in compensation levels, we asked for earnings information going back two more years, as well as for anticipated, year-end 2001 figures. Our results are based on 212 completed surveys returned to ID by August 3, 2001. The surveys were evaluated and tabulated by Cahners Research . All figures reported here represent the survey's median score, which represents the midpoint of the data.

The respondents to this year's survey fell into several categories. Twenty-six percent identified themselves as outside salespeople, 18 percent as CEOs/presidents, 15 percent as inside salespeople, 13 percent as branch managers, and 12 percent as sales managers. The rest were classified as "other" — product managers, purchasing managers, systems administrators, credit managers, warehouse managers, logistics personnel, etc.

A look at the overall results gives us a picture of the "typical" distribution professional. He (92 percent of the respondents were male) is 46 years old, has a bachelor's degree, 19 years' experience in the industry, and has worked for two distributorships. He earned $65,000 last year and expects to earn $68,000 this year. His total household compensation in 2000 was $85,000 and is expected to be $95,000 this year. In addition, 58 percent of the respondents characterized their companies as general line, while 42 percent said they work for specialist firms. (We define a specialist as a company at which 50 percent or more of total sales is contributed by a single product category.)

We also evaluated responses by job title. CEOs/presidents earned a median $115,000 in 2000, while sales managers earned $109,000, outside salespeople and branch managers made $60,000, and inside salespeople earned a median $35,000. Those figures can be compared to results from other industry compensation reports. For instance, Bates' Profit Planning Group conducts a Cross-Industry Compensation Report every two years. Results for 2000 show that the typical CEO/president earns $140,000, outside salespeople earn $47,000, inside sellers earn $31,000 and branch managers typically earn $60,000 a year.

In addition, Thompson provided results from NAHAD's 2001 NAHAD Operating Performance Report , which shows that outside salespeople in that sector typically earn $52,000 a year, inside salespeople earn $31,250, and outside sales managers typically earn $75,000 a year.

We also asked respondents to tell us the region of the country in which they live and work. Results show that 37 percent are from the Midwest, 26 percent from the South, 22 percent from the East and 14 percent from the West. Taking a closer look, ID professionals in the Midwest report the highest earnings — a median $69,000 in 2000. Workers in the East come in second, with a median $65,000, while those in the South report a median yearly income of $61,000 and those in the West a median $60,000.

Total household income in the four regions ran a bit differently. Respondents from the East reported the highest total household income for 2000 — a median $99,000. Respondents in the West reported a median $82,000, while those in the Midwest earned a household income of $80,000 and those in the South reported a median $78,000.

Factors like age and experience were also evaluated. As would be expected, the oldest workers make the most money. Respondents aged 51 to 60 earned a median $75,000 in 2000, while 41 to 50 year-olds earned $63,000 and 31 to 40 year-olds earned $60,000. The same goes for experience. ID professionals with 31 to 40 years' experience earned the most in 2000 — $83,000. Those with 21 to 30 years' experience earned a median $68,000, while those with 11 to 20 years under their belts brought in $62,000 and those with one to 10 years' experience earned $51,000.

A few years ago, we started asking respondents whether or not their earnings are tied to their knowledge of technology. Our goal was to discover whether or not the industry was seeking and rewarding workers with skills in information systems, software programs, the Internet, etc. Twenty-three percent of respondents this year answered yes to that question, while 77 percent said no.

Taking a closer look, younger workers were more inclined to answer yes. Thirty-three percent of workers aged 31 to 40 said their compensation is tied to their knowledge of technology, as opposed to 16 percent of those aged 41 to 50 and 19 percent of those aged 51 to 60.

While it's unclear just how much weight distribution employers place on information technology skills, other studies show that such skills are in high demand across the country. Management consulting firm Hewitt Associates released a study over the summer showing that IT employees with "hot skills" — those in short supply and high demand — are earning sizeable pay raises despite the cooling economy. The "hot skills" identified in the report include talent with PeopleSoft (Application Development, Production Services) and SAP (Basis Infrastructure, Application Development, Production Services.)

Hewitt Associates surveyed 198 companies, reporting data on nearly 42,000 employees with hot skills, and found that the median increase for base pay during the last 12 months was 7.5 percent, while the median total cash increase (annual base salary plus bonuses received during the year) was more than six percent.

"Although the economic slowdown has impacted the job market, there is still a significant need to recruit, motivate and retain the best and brightest talent regardless of industry," said Teresa Guelich, IT consultant for Hewitt Associates. "However, in the IT field especially, the scarcity of hot skilled employees means that pay and/or perks need to be as competitive as possible."

We started this report by talking about the decreasing paychecks many incentive-based employees may experience this year. Incentive compensation has been a growing issue at companies nationwide. Many firms have implemented programs to reward all kinds of employees — not just salespeople — based on meeting individual, group or company goals established from year to year. To track that trend, we asked respondents to tell us, first, whether or not they receive incentive compensation and, second, how that compensation is determined.

Twenty-three percent of respondents said they do not receive incentive compensation. Of those who do, 35 percent said that pay is determined by company or branch profitability, 26 percent by company or branch sales/volume performance, 24 percent by individual sales/volume performance, and 16 percent by individual profitability. (Some respondents indicated that their incentive pay is based on a combination of those factors.)

We also asked respondents to tell us what would prompt them to leave their current jobs. While most respondents indicated that they are happy with their jobs, if they were to leave the main reason would be to earn more money — 29 percent. Twenty-six percent said retirement would be the reason they'd leave their job, while 15 percent said they are uneasy about their company's future. Other respondents expressed the need to be more challenged, the desire for better benefits and too little opportunity for promotion as reasons to leave.

For now, the slowing economy may keep employees from acting on those feelings. Belt-tightening at many distribution firms this year has resulted in lay-offs, pay cuts and a reduction in fringe benefits. Industry and economic experts agree that the tight job market has slackened a bit. However, like Hewitt Associates' Guelich, they say it's important for companies to concentrate on retaining and developing the talent they already have.