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ID Salary Report 2014: The Skills To Pay The Bills

Thu, 07/10/2014 - 2:45pm
Anna Wells, Executive Editor - @industrialanna

Welcome, once again, to Industrial Distribution’s annual Salary Report, where we strive to create a clear picture of industry pay rates, workload, responsibilities, and job satisfaction. Typically, we kick off this segment by establishing a bit of context. Before we can truly understand the state of the industry, it helps to know whether relative wealth is growing (or not) amongst the general population.

According to a report in November by CNN Money, median household income fell slightly to $51,017 a year in 2012, down from $51,100 in 2011 — a change the Census Bureau does not consider statistically significant.

But taking a wider view, the report says, “reveals a larger problem: Income has tumbled since the recession hit, and is still 8.3 percent below where it was in 2007.”

The good thing is that, out of the three industrial distribution company job functions we surveyed, all segments show earnings well above the national average for households. Whether things are better off than they were before the recession (or at least even) is harder to determine, as earning power is the more relevant factor. Still, for most, incomes and benefits are headed in the right direction — up. But many will tell you, so is the workload.

Read on for the specific factors affecting compensation, including the satisfaction levels of our readers. Distributed via email, the 2013 Industrial Distribution Salary Report survey again funneled respondents into three separate question pools based on where they identified their specific job functions. The following results are based on three separate sets of data from Executives (Owner, Chairman, CEO, CFO, CIO, COO, President, or VP); Mid-Level (non-sales) Management (Product, Operations, Branch, Purchasing); and Sales Representative/Manager. The split came in at 27 percent executives, 34 percent mid-level management, and 39 percent sales rep or sales management.

EXECUTIVE RESULTS

We typically find the executive level group is a more male-dominated segment, and this year is no different. Ninety-five percent are males, which is consistent with last year’s result (93 percent), with the average age pushing retirement: 40 percent say they are 60+ (See Figure 1). Additionally:

• Most of the executive respondents to this year’s survey represent smaller companies. In fact, nearly 64 percent say their annual revenue is less than $25 million. Only four percent are from the largest industrial distribution companies of $500 million or more in annual sales.
• This group has a lot of education behind it. Only five percent say they have “no college” under their belts. On the other end of the spectrum, 40 percent have a college degree and 31 percent have a graduate degree.

This year’s executive survey respondents tell us their average base salary is around $170K, which is an approximately five percent decrease from the base salary reported last year. This is also a lower number than reported in 2012, and there may be a few factors in play here:

• For starters, one in four executives say they’ve faced either salary or benefits cuts in the last year, whereas one in five said the same in 2013.
• Secondly, the average tenure in the industry continues to shrink incrementally, supporting the idea that executive retirement and succession is beginning to have an effect. In 2012, our respondent group said they’d worked in the industry for an average of 30 years. In 2013, that timeframe shrunk to 28.5 years, on average, and this year it’s down to 27 years.

The amount of additional compensation this group derives from areas like bonuses, 401K contributions, and other additional cash put their average overall compensation package to around $250K annually. Longevity and experience likely plays no small role here, as the average executive has worked for his/her company for 20 years, and have been in their current position for 12 years.

For the executive level group, satisfaction with compensation has remained relatively stable since last year: 84 percent this year feel fairly compensated, compared to 86 percent last year (see Figure 2). For many who elaborate on this, it comes back to a personal investment in the business. Specific reasons for this satisfaction cited include:

• “As an owner, my build is in the equity position of the company, not in salary type compensation.”
• “The business is mine and I am subsidizing it.”

This is the highest satisfaction of any job category, not surprising considering these are the industry’s highest earners. But they’d also tell you that they’re working harder for the money. Seventy-two percent of executive level respondents say the demands of their jobs have increased over last year, and 14 percent said they’ve stayed the same.

Despite increased demands, fewer have received any sort of salary or benefit increase this year. Last year, 47 percent said they did not receive any type of increase, whereas this year that group size has inflated to 51 percent. Of those who received raises, they were more likely to receive a standard increase based on performance: 24 percent said they were on the receiving end of this type of reward. Last year’s group who received what they’d call a “considerable” increase based on performance was also a bit larger than what we’re seeing this year — dropping by five percentage points.

MID-LEVEL RESULTS

The mid-level management group is the most age- and gender-diverse of any in this surveyed pool. In fact, in this title profile:

• 17 percent of respondents are female.
• Over 22 percent are under the age of 40, and 14 percent are 60 and over. The rest of group (63 percent) falls somewhere in the middle. The average length of time these folks have worked for their companies is 13 years, holding their specific position for an average of eight years.

The mid-level management group also represents a shift from the executive group when it comes to company size. In this case, most of the survey respondents (38 percent) come from companies of $500 million or more in annual sales. Only 17 percent come from companies under the $25 million mark, making this the least represented company size in this group.

This group also has a diverse educational background. While eight percent have no college under their belts, 29 percent attended some college, 42 percent have a degree, and 21 percent have a graduate degree. The typical manager in this group supervises five or fewer employees at his or her company (53 percent). That said, nearly one in five supervise more than twenty (Figure 3).

Even though most companies in our annual Survey of Distributor Operations (ID, May/June, 2014) seem to be comfortably out of the recession, citing increased sales and reduced stress around the economy, it’s interesting to note that all three of our job function groups reported increasing responsibilities. The mid-level group is no different, telling us that their job demands are certainly not going down in the past year (Figure 4). Seventy-six percent say responsibilities have increased, and 20 percent say they’ve stayed the same, leaving only four percent suggesting demands have eased. Despite these increased demands, the mid-level group is seeing a relatively stagnant rate of pay over the past three years of our survey. In 2012, the full package – base wage along with additional compensation in the form of bonuses or 401K match – came in around $109K, and in 2013 it was $110K. This year, the average is $107K, a slight decrease, but one that’s within the margin of error.

If some of the folks represented in this group feel like they’re treading water, then it’s no surprise that their compensation satisfaction level is basically the same as last year. An incremental change over 2013, 37 percent say they do not feel fairly compensated. Those willing to elaborate, cited these reasons for why they were less than impressed with their comp plans:

• “My effort and productivity is outpacing my compensation raises/bonuses.”
• “I’m performing multiple jobs and only being under compensated for my title job.”
• “Benchmarking myself against what my peers are making I have observed that I am pretty fairly low.”
• “I have had minimal/no raises for the last 3 years. I feel like I am capped in my present position with no opportunity for growth.”

Despite some of this negative feedback from the 37 percent, it still leaves 63 percent who do feel they are fairly compensated. Said one respondent, “Compensation is not the only consideration in working for a company.

Direction, integrity, philosophies – all are important.” Added another, “A healthy portion of my pay is based on how well my branch performs. I can heavily influence that, giving me the opportunity to earn more.”

Eighty-five percent of survey respondents say they have not seen any salary or benefits cuts in the past year — although most did not in turn see any considerable increases either. Only 12 percent saw a raise they would call “considerable,” and 37 percent said they received a “standard” raise. Nearly 28 percent received no compensation increases whatsoever.

When it comes to opportunities for growth, the mid-level group is fairly mixed about whether they believe they face the prospect of moving up the corporate ladder. Forty-eight percent believe they are faced with adequate opportunity, while 37 percent say no, and 15 percent are unsure.

It’s safe to say that the salaries of this group are well above the average for American jobs, and yet the discord that some seem to be feeling was summed up well by one respondent: “I think lots of folks would do my job for less money, but on the other hand, the value that my skills add to the bottom line are way out of balance with my salary/bonus.”

SALES/SALES MANAGEMENT RESULTS

Last in our review, we look at those who comprise sales roles within their distribution organizations, including those in sales management. Another male-dominated segment, women make up a mere 12 percent. In other specific demographic information:

• The average age is weighted towards the older end, with 64 percent of respondents saying they are 50 years or older. Only six percent, in fact, are under 40.
• Thirty-two percent represent companies with $500 million or more in annual revenue. Fifty percent come from companies of $100 million or less revenue, nearly half of which are companies below the $25 million mark.
• Forty-six percent have a college degree, and an additional 16 percent of the total group have a graduate degree.

The sales group is a unique animal since nearly half work on commission in some way (Figure 5). Of those who responded to the survey, the average base compensation rate (before commission) is $82K – however, there were some very high numbers (likely those who don’t receive commission pay) and some zeros from those who work all-commission. The median base salary was $75K. It’s also important to note that, like the demographic we saw in the executive segment, these individuals are heavily weighted in the 50+ category, meaning the higher salaries would be a reflection of their mostly senior status. Last year’s sales and sales management group base salary was lower ($72K) but also reflected a higher response rate from those who received commission as part of their pay package (55 percent). This year’s commissioned group of 49 percent is the same as we saw in 2012, where the base rate of pay was $79K, or 96 percent of what it is today.

Ultimately, it looks like an incremental shift upwards for this group, likely a reflection of the nominal compensation increases they’ve seen. Only 12 percent described their raise this year as “considerable,” and most described it as “standard” or “a cost of living raise based on inflation.” Thirty-nine percent of all respondents have not received any type of salary increase in the past year. In fact, 12 percent of the total respondent pool said they have faced salary or benefits cuts.

For the sales group, travel is a big part of the equation for some, with 33 percent saying they travel 20 to 50 percent of the time, and 12 percent saying they travel more than 50 percent of the time (Figure 6). This is close to the results last year, with a slight decrease in the number who travel the most. Travel aside, 79 percent say their job demands have increased in the past year, and 20 percent say they’ve stayed the same — leaving a paltry one percent suggesting their responsibilities have lessened.

When it comes to opportunities for growth, the sales and sales management segment is a bit more optimistic than their friends in mid-level management. Sixty-two percent said they feel they are faced with adequate growth opportunities at their companies, an increase of three percentage points over last year (Figure 7).

And perhaps this group is feeling more optimistic altogether, as this year’s satisfaction rating represents the biggest change in any data point over last year. When asked if they feel fairly compensated, nearly 72 percent said yes — compared to 59 percent just last year.

So what’s driving this satisfaction? One respondent elaborated that “With my education (high school), I think I am compensated well. Today you would need a degree.” Another said that the reason they feel satisfied is because their pay is tied to their performance. Added another, “It is up to me.”

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