How Purchasing conducts its survey

PURCHASING magazine's 2003 salary survey of purchasing professionals is based on questionnaires completed by 1,422 PURCHASING magazine readers. Responses were received from purchasing professionals representing a wide spectrum of buying responsibilities, industries and personal backgrounds.

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 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 2003 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, Newton, MA 02456. Telephone: (617) 630-3799. Credit cards are accepted. The report may also be ordered through www.purchasing.com.

More purchasing pros receive a bonus

Slightly more than half (51%) of all survey participants report they receive bonuses as part of their compensation. This is an increase since last year (48%). However, when compared to compensation fifteen years ago, bonuses are a significantly more popular form of pay.

Bonus is an average 10% of base pay, consistent with results 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., VP, purchasing, 78% vs. buyer, 34%); it is also more prevalent in larger-sized companies (63% for companies with sales of more than $3 billion versus 29% of companies with sales less than $15 million).

Financial goals and profitability are the leading factors affecting bonuses, as 88% of those who get a bonus cite them as a reason. A third of those who receive a bonus indicate that cost targets and savings reductions play a role; 22% mention department cost targets, while 20% say cost targets for purchased parts and 1% report cost savings or reductions in costs. Eleven 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 are mentioned by 8% as a basis of their bonus. Women more frequently cite this than men (13 to 7%). Other factors affecting bonus payments include such items as on-time delivery to customer, inventory reduction, turns, safety, environmental goals, production and discretionary and holiday bonuses.

Those in the $100,000 Club, purchasing VPs and directors are more likely than their lower-paid counterparts to know what their bonuses are based on; they more readily check financial goals, cost targets and supplier quality improvements, as well as individual performance and goals.

More than any other industry, bonuses in the computers and related equipment and energy/mining/utilities industries are rewarded for meeting company financial goals (95% and 94%, respectively). Professionals in the primary metals industry are least likely to see a bonus for meeting financial goals; only 77% do.

Purchasing professionals in computers and related equipment and the process industries (35% and 33%, respectively) are more likely to be rewarded with bonuses for meeting department cost targets. Those in the primary metals and miscellaneous manufacturing industries are least likely to see such a financial incentive (13%, 15%).

Purchasing professionals in the financial and service sector (36%), computers and related equipment (30%) and in the equipment and machinery industries (30%) attribute their bonuses to meeting cost targets for purchased parts. Individuals in miscellaneous manufacturing are least likely to see bonuses for achieving cost targets for purchased parts.

Those in the financial and service industries (27%), transportation (16%) are most likely to mention supplier quality improvements.

With respect to commodity purchasers and their bonuses, most predominantly, office equipment (67%), transportation (60%) and machinery buyers (38%) check off department cost targets as a factor. The number of transportation and office equipment buyers getting bonuses is very small (five or fewer) so the sample may not be truly indicative of these segments.

Bonuses for supplier quality improvements are bigger factors among those buying transportation/freight (20%) and electronics (18%) than among those purchasing other commodities.

Bonus vs. job title

Women's salaries move to close gap

Nearly one-third (447) of the respondents to PURCHASING magazine's 2003 Salary Survey are women. This figure is slightly lower than the proportion of women included in last year's survey. The average annual compensation among female purchasing executives is $53,900. The average salary of women has increased $3,900 (8%) since the last annual survey.

This year's results indicate a $19,500 gap between the average compensation earned by men ($73,400) and women. The survey results show that in percentage terms, women's average compensation outpaced men's (8% for women versus 3% for men) during the past year.

The highest salary earned by a female respondent to this year's survey is $590,000. She is one of nineteen women who reported annual earnings of $100,000 or more to this year's salary survey. This executive is a sourcing superstar who oversees corporate purchasing for a large nonmanufacturing company. She is responsible for more than $500 million in annual purchasing, most importantly in capital goods.

Historically, women in the purchasing profession have been younger and less experienced than men. As in previous years, women respondents have fewer supervisory responsibilities, are in charge of smaller dollar volumes, have less frequently been graduated from college, are younger than men, and do not as often hold as many senior level positions as men—all prerequisites for higher compensation. 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 eighty-three purchasing professionals report annual salaries of $100,000 or more in response to PURCHASING magazine's 2003 salary survey.

• The average salary of $100,000+ earners is $135,000, basically the same as the past two years ($135,900 and $136,300). The highest salary is $590,000; last year the highest salary was $340,000.

• Forty individuals, 2.8% of purchasing professionals, earned $150,000 or more, almost identical to last year (2.7%). Again the $200,000 Club was almost exclusively male —14 of the 15 executives function as either purchasing/materials directors or VPs of purchasing. But, for the first time in the history of the salary survey, a female executive reported the highest salary— $590,000.

• 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 73.

• The majority of highly compensated purchasing executives have senior job titles, including vice president of purchasing (16%) and purchasing director (38%). Twenty-three percent are purchasing managers and 10% are materials managers. Of those earning $150,000 or more, 52% are purchasing VPs and 35% are purchasing directors.

• Five of eight (63%) of the highest earners work for the largest companies (annual sales of more than $500 million). Three-billion-dollar-plus companies employ 31%; 22% work at $126 million to $500 million companies. Smaller firms employ 15%.

• One-fourth of this year's top earners hail from the Great Lakes region. The Southeast boasts 21% of the high earners and the West is home to 15%; 14% are from the Mid-Atlantic; 9% the Southwest and 8% each from New England and the Plains States.

• The typical top earner has been employed in purchasing for 19 years.

• Sixty-three percent of the $100,000+ earners work at the corporate headquarters of their organizations. Twenty-four percent work at the division level. Eleven percent are plant employees.

• Commodities with the largest concentration of $100,000+ earners include: components (17%), chemicals (16%), metals (14%), electronics (9%) and packaging (9%).

• The biggest industry sectors, miscellaneous manufacturing and process industries, produce the most top earners, (19% miscellaneous manufacturing, 21% process industries).

• The vast majority (93%) $100,000+ earners have been graduated from college. Forty-eight percent hold undergraduate degrees (business, 68%; technical, 17%; liberal arts, 14%; associate's degree, 1%) while 45% have graduate degrees (MBA, 80%; other graduate degree, 17% and dual graduate degrees, 4% ).

• 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. Nine percent of top earners report being certified in production and inventory management ( CPIM ) by APICS .

• Most $100,000 Club members (86%) receive bonus payments as part of their annual compensation. The average bonus, of those who reported bonuses at this compensation level, is 19% of base salary. Ninety-two percent of the $150,000+ earners receive bonuses, with the average being 30% of base pay, 39% of base pay for those earning more than $200,000. As the total compensation rises, the percentage that is bonus increases. Club members are better able to articulate the basis for the bonus; although the relative order of factors among those earning more or less than $100K was the same, those higher up on the compensation scale had higher frequencies of each of the reasons for their bonus. Company financial goals are the leading basis for bonus, with 96% of top earners reporting so, followed by department cost targets (31%) and cost targets for purchased parts (29%).

• Forty-seven percent of the $100,000 club is offered stock options; this compares with a mere 11% of lower wage earners being given stock options in 2002.

• Forty-two percent of the $100,000 club members receive both bonuses and stock options; only 8% were offered neither. The average value of stock options among top executives dropped in the past year to $74,000; the median stayed the same at $20,000.

• This year's highest paid executive ($590,000) is a female who has been employed in purchasing for more than 10 years. Working in the nonmanufacturing sector, she is a purchasing VP at a company with sales over $2 billion.

• The second highest paid executive (the top-paid male) earned $390,000, $90,000 of it in bonus compensation; he is a 44-year old materials manager who has been working in purchasing nearly all of his adult life, overseeing 16 people and more than $500 million in purchasing.

• Nineteen women are included in this year's $100,000 Club. The group ranges in age from 32 to 59 years, and has an average 18 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 50 years old) and have slightly less purchasing experience (18 versus 19 years) and supervisory responsibility (10 versus 12 subordinates) than their male counterparts.

One hundred thousand dollars or more

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