The skinny on the salary survey

PURCHASING's 2002 salary report on purchasing professionals is based on questionnaires completed by 1,530 of the magazine's readers. Responses were received from purchasing professionals representing a wide spectrum of buying responsibilities, industries and personal backgrounds. Survey forms were included in the July 18, 2002 issue of PURCHASING magazine.

The sample includes a large enough number of respondents in many subgroups and categories to allow meaningful comparisons between different segments of the purchasing profession. The overall statistical reliability for a sample of this size, for dichotomous questions when the results are projected to the population from which the sample was selected, is plus or minus approximately 1.3%.

Note should be taken that the reliability of survey findings diminishes with sample size. This is particularly important to keep in mind when examining the accompanying comprehensive Tabular Report which has been prepared from the survey results, as well as some of the smaller 'cells' of the tables included in this narrative summary. (Percentages and averages based on a small number of respondents are identified by the symbols * and # in this report when the actual number of respondents is not shown with the percent.)

The survey was developed by the editors of PURCHASING magazine, but all responses were tabulated by an independent research firm not affiliated with Reed Business Information. Not all of the data collected is reported in this article. Complete results of the salary survey can be purchased for $500 in U.S. funds. Payment should be made to PURCHASING Magazine, P.O. Box 497, New Town Branch, Boston, MA 02456. Telephone: (617) 630-3799. Credit cards are accepted. The report also may be ordered here.

Bonuses not as generous, but still popular

Slightly less than half (48%) of all survey participants report they receive bonuses as part of their compensation. This is a 2% decline since last year (50.1%). However, when compared to compensation fifteen years ago, bonuses are a significantly more popular form of pay.

Not surprisingly, bonuses are less generous this year than last. Among those who receive them, bonuses are typically equal to 10% of base pay, again a decrease from last year.

Compensation in the form of bonus payments is more frequently reported by senior purchasing executives than by those with less senior positions (e.g., vice president of purchasing, 74%, vs. buyer, 30%); it is also more prevalent in larger-sized companies (58% for companies with sales of $500 million or more versus 38% of companies with sales of less than $15 million).

Financial goals and profitability are the leading factors affecting bonuses, as indicated by 89% of those who get a bonus. A third of those who receive a bonus indicate that cost targets and savings reductions play a role; 22% say cost targets for purchased parts, while 21% mention department cost targets and 1% write in cost savings or reductions in costs. Thirteen percent say quality, either in supplier quality improvements or product quality and warranty claims. Cycle time improvements are rated by 8% as a factor in their bonus.

Individual goals or projects/personal performance were mentioned by 7% as a basis of their bonus. Other factors affecting bonus payments included items such as ontime delivery to customer, inventory reduction, turns, safety, environmental goals, production, discretionary and holiday bonuses.

Those in the top $100,000 club, purchasing VPs and directors are more likely than their lower-paid counterparts to define what their bonuses are based on; they more readily (statistically significantly so) checked financial goals, cost targets, cycle time improvements and supplier quality improvements, as well as individual performance and goals.

More than any other industry, bonuses in the equipment/machinery manufacturing industry are rewarded for meeting cost targets for purchased parts. Twenty-nine percent of these purchasing professionals have cost targets for purchased parts as one of the factors in their bonus.

Purchasing professionals in the computer and related equipment industry (41%), wholesale and service center sectors (40%), financial services (37%), process industries (37%), transportation equipment (34%) and equipment/machinery industry (34%) are more likely to say cost targets or savings play a role in the bonus than those in other industries.

Supplier quality improvement factors were mentioned most by those in the transportation industry (19%) and those in a multi-faceted industry (29%) as well as those dealing with a variety of commodities (26%).

With respect to commodity purchasers and their bonuses, cost targets (particularly department cost targets) for machinery buyers was a big factor; 53% indicate some kind of cost target played a role—38% say department cost targets.

Bonus vs. job title

All else equal, women's pay stills lag

Nearly one-third (504) of the respondents to this year's salary survey are women. This is 5% higher than the proportion of women included in last year's survey. The average annual compensation among female purchasing executives is $50,000. The average salary of women has increased $500 (1%) since the last annual survey.

This year's results indicate a $21,500 gap between the average compensation earned by men ($71,500) and women. Survey results show that in percentage terms, men's average compensation outpaced women's (3% for men versus 1% for women) during the past year.

The highest salary earned by a female respondent to this year's survey is $191,000. She is one of 20 women who reported annual earnings of $100,000 or more to this year's salary survey. This executive is a VP of purchasing, who oversees corporate purchasing for a $500 million to $1.5 billion+ miscellaneous manufacturing company. Thirty percent of her annual compensation is earned in the form of a bonus; she does receive stock options, but at present, their estimated value is zero.

Historically, women in the purchasing profession have been younger and less experienced than men. As we have seen in previous years, women respondents to the 2002 salary survey have fewer supervisory responsibilities, are in charge of smaller dollar volumes, have less frequently graduated from college, are younger than men, and do not as often hold senior level positions as men—all prerequisites for higher compensation. Yet as the tables on the following pages illustrate, even when these factors are taken into account and men and women with comparable experience and responsibilities are compared, the average compensation among women generally appears to be less than the average compensation among men in the purchasing profession.

Salary vs. gender

$100,000 Club

One hundred seventy-eight purchasing professionals report annual salaries of $100,000 or more in response to this year's salary survey. This figure represents 11.6% of all respondents to the survey. It is only a few tenths of a percentage point higher than the proportion of participants in this salary range (11.2%) included in last year's survey.

• The average salary of $100,000+ earners is $135,900, basically the same as last year ($136,300). The highest salary is $340,000; last year the highest salary was $380,000.

• Forty-three individuals, 2.8% of purchasing professionals, earned $150,000 or more, almost identical in percentage to last year (2.7%). Again the $200,000 club is exclusively male—15 of these 16 executives function as either pur-chasing/materials directors or VP of pur-chasing.

• The average age of purchasing's top earners is 49 years, statistically higher than the less than $100,000 group. The youngest respondent to reach the $100,000 club is 32 years old; the oldest is 68.

• The majority of highly compensated purchasing executives have senior job titles, including vice president of purchasing (16%) and purchasing director (42%). Thirty-one percent are purchasing managers and 6% are materials managers. Of those earning $150,000 or more, 37% are purchasing VPs and 53% are purchasing directors.

• Five of eight (63%) of the highest earners work for the largest companies (annual sales over $500 million). Companies with sales of more than $3 billion employ 30%; 20% work at $126 million to $500 million companies. Smaller firms employ 16%.

• Twenty-one percent of this year's top earners hail from the Great Lakes region. The Mid-Atlantic boasts 18% of the high earners and the Southeast is home to 16%; 15% are from the West, 11% from the Plains States, 9% the Southwest and 8% from New England.

• The typical top earner has been employed in purchasing for 18 years.

• Two-thirds of the $100,000+ earners (70%) work at the corporate headquarters of their organizations. Nineteen percent work at the division level. Eleven percent are plant employees.

• Commodities with the largest concentration of $100,000+ earners include: components (19%), metals (15%), electronics (12%), chemicals (10%) and services (10%).

• The biggest industry sectors, miscellaneous manufacturing and process industries, produced the most top earners, (22% miscellaneous manufacturing, 20% process industries).

• Compared to other industries, financial service and computer and related equipment professionals lead the pack in share of the top $100,000 club membership; 30% and 26%, respectively, of respondents working in those industries earn $100,000 or more. Only 6% of those employed at an industrials controls/instruments company receive top dollars.

• The vast majority (94%) of $100,000+ earners have graduated from college. Forty-seven percent hold undergraduate degrees (business, 60%; liberal arts, 21%; technical, 18%; more than one undergraduate degree, 1%) while an equal percent have graduate degrees (MBA, 86%; other graduate degree, 12%; and multiple graduate degrees, 2% ).

• Thirty-five percent of those earning more than $100,000 have CPM (certified purchasing manager) certification, statistically significantly higher than the percentage with certification among those earning less than $100,000. But this is an 8% drop from last year when 43% of the $100,000 club had CPM status. Twelve percent of top earners report being certified in production and inventory management (CPIM) by APICS —The Educational Society for Resource Management (formerly known as the American Production and Inventory Control Society).

• Most $100,000 Club members (90%) receive bonus payments as part of their annual compensation. The average bonus, of those who reported bonuses at this compensation level, is 20% of base salary. Ninety-three percent of the $150,000+ earners received bonuses, with the average being 31% of base pay, 46% of base pay for those earning more than $200,000. Percentage of top executives getting greater than 50% bonus dropped slightly over the past year, from 4% to 1%. As the total compensation rises, the percent that is bonus increases. Club members are better able to articulate the basis for the bonus; although the relative importance of factors among those earning more or less than $100,000 was the same, those higher up on the compensation scale had higher frequencies of each of the reasons for their bonus.

• Fifty-four percent, a higher percentage than last year's 47%, of the $100,000 club are offered stock options; this compares with a mere 13% of lower wage earners being given stock options. The proportion offered stock options evens out at the $150,000 or more level.

• A higher percentage of the $100,000 club members received both bonuses and stock options than last year (51% versus 42%); only 7% were offered neither. Both the average and median value of stock options among top executives dropped in the past year, the average or 'mean' to $81,900, and the median to $20,000. Given the slightly lower bonuses and the increase in both options and bonus, one wonders whether companies are more prone to encourage their top executives with growth-promoting stock options over higher cash bonuses.

• This year's highest paid executive ($340,000) is a purchasing VP at a distribution company. He has a technical degree, but is not certified as a CPM or CPIM . His bonus represents 35% of his $250,000 base salary. His stock options are valued at $100,000.

• Twenty women are included in this year's $100,000 Club. The group ranges in age from 35 to 61 years, and has an average 13 years of experience in purchasing. Although the sample size is too small to make a statistically significant comparison, they are on average younger (47- versus 49-years-old), have fewer years of purchasing experience (16 versus 18 years) and have less supervisory responsibility (five versus 20 subordinates) than their male counterparts. The top female executive's salary is $191,000.

One hundred thousand dollars or more

One hundred thousand dollars or more
(Distribution of purchasing professionals earning $100,000 or more according to commodity)