2005 Salary Survey: Applause, please
Thanks in part to huge bonuses, purchasing compensation takes big jump
By Susan Avery -- Purchasing, 12/8/2005 2:00:00 AM
| UPDATE:Click here to access the 2007 salary report , including salary by job title, sertification, organizational unit, experience, company size and other criteria. |
At long last, top management is recognizing the value of purchasing—by rewarding buyer performance with big fat bonuses.
Results of Purchasing magazine's 25th annual salary survey show purchasing compensation—compensation and bonuses—soared 12% in 2005 to an average of $78,500. That jump comes in a year in which paychecks for most other professionals rose a mere 3% to 4%, if at all.
Bonuses for meeting company financial and profitability goals helped boost purchasing salaries in 2005: More than 60% of purchasing professionals responding to the survey received bonuses amounting to more than 10% of their base pay for the year.
These figures fly in the face of raises other professionals are receiving which generally are keeping pace with inflation. An increase of 0.9% in the Consumer Price Index for the third quarter is expected to result in the annual inflation rate coming in at around 3% for 2005.
Purchasing's higher salaries are a strong indicator of the growing number of companies that place value on the profession's contribution to the organization at keeping competitors at bay. A survey of chief procurement officers (CPO) conducted earlier this year by IBM Business Consulting Services demonstrates the importance of purchasing to corporate performance in today's intensely competitive marketplace. According to the study, businesses now view buyers as industry-experienced, qualified professionals.
And everyone seems to want a piece of the action. Purchasing professionals who think strategically are in short supply nationwide. From his vantage point, Kevin Rohan, director of procurement recruiting for J.P. Canon Associates in New York, N.Y., has seen placement activity for skilled purchasing professionals increase by 66% in the past 18 months. Six years ago, his firm placed a director of purchasing with a starting salary of $115,000 plus incentives in the New York area. Today, a similar post pays $170,000, plus incentives. (For more stories on purchasing recruitment, please go to www.purchasing.com.)
25 years of data
The average annual compensation of purchasing professionals responding to the 2005 salary survey is $78,500 a 12% increase ($8,400) over last year's average ($70,100). This year's median salary—that point at which half the survey respondents receive more compensation and half receive less—is $69,000. That's $6,000 greater than last year's median ($63,000), a 10% increase.
Results of the 25th annual salary survey reflect the range of purchasing professionals who make up the readership of Purchasing Magazine. Annual compensation of this year's respondents range from $20,000 to $400,000. Purchasing received responses from men and women filling all job titles from buyer to purchasing vice president. Respondents represent every region of the country, every commodity, and every industry. Additional highlights of this year's report are:
• Purchasing professionals' average compensation has increased 134% since the magazine first conducted the survey in 1985, and 58% over the past 10 years. Average compensation in the 1995 salary survey was $49,700. The change in median compensation over time is consistent with the change in average compensation—60% over 10 years, 126% over 20 years.
• Three of five of survey participants (60%) receive bonuses as part of their annual compensation, higher than ever before. Average bonus is 11.9% of base pay.
• Senior executives—including purchasing vice presidents and directors, materials managers, commodity managers, and purchasing and supply chain managers—are the most likely to receive bonuses. More than half of respondents filling these titles received a bonus as part of their compensation package.
Senior executives generally receive bonuses that represent a greater proportion of their overall compensation than bonuses received by less senior employees. Purchasing and supply vice presidents and chief purchasing officers (CPO) typically receive a bonus that averages 26% of base pay while buyers and senior buyers typically get bonuses equal to 7%. Consistent with seniority, bonuses are most common among purchasing executives with the greatest supervisory and dollar volume responsibilities.
Sixteen percent of salary survey respondents receive stock options, a drop from last year and more consistent with previous years' data. The average value of these options is $53,300, including the 7% of respondents having stock options with no or negative worth. Last year stock options appeared to be offered more among the younger population and least prevalent among the oldest purchasing professionals, although their value is related more to other factors than age. This was not the case this year; with the exception of the youngest and oldest respondents, stock options were fairly evenly offered between respondents aged 25-60 years.
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Click here for detailed charts of survey results for the following criteria:
Average salary of job title, by industry (thousand $)
Average salary by job title, commodity managed (thousand $)
Salary by industry
Salary by job title Salary by experience Salary by commodity Salary, by company size (annual sales) Salary by purchasing responsibility Cities with the highest average salaries Cities with the lowest average salaries |
Benchmarks
Purchasing magazine's analysis of salary according to job title spans a range of $112,500 from lowest to highest. Average compensation for buyers is $47,100; average for purchasing or supply vice presidents is $159,600. The highest paid respondent is a vice president in miscellaneous manufacturing who earned $400,000. (Please see the $100,000 Club sidebar below.)
A purchasing executive's professional responsibilities serve as a benchmark of his or her compensation. As dollar-volume and supervisory duties increase, so does income. The break point for higher than average earnings in this year's study is more than $25 million in annual purchasing responsibility. Survey respondents responsible for less than this typically report compensation close to average or less than the average for the profession as a whole; those who purchase at this level and above enjoy better-than-average salaries.
Similarly, as supervisory duties increase, so does average pay. Salary survey respondents without supervisory responsibility earn less than average salaries; the percentage of employees with managerial responsibility increased over last year (57% in 2005 versus 52% in 2004).
The best-compensated commodities for purchasing executives, according to survey results, are information technology ($100,300), services ($96,500) and transportation/freight ($92,200).
Industries reporting the highest average purchasing salaries are: computers and related equipment ($94,500), communications equipment ($88,700), energy/mining/utilities ($88,300), financial and services ($87,800) and electronics ($84,200).
As always, the age threshold for better-than-average compensation coincides with the average age of the profession. Average age of survey respondents is 46.2 years; the average salary among respondents 41-50 years-old is $81,700.
Also consistent with previous salary survey results, longevity bolsters average compensation in the purchasing profession. Average purchasing salaries increase in step with length of employment. Moreover, purchasing executives don't begin earning higher-than-average salaries until they've been in the profession for more than 10 years. Prior to this milestone, average compensation is less than the average for the profession. The average tenure in the field is 16 years.
Stepping stones
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Click here for a detailed chart of survey results on "Salary by Education."
Click here for a detailed chart of survey results on "Certification's Impact on Salary." |
Seventy-three percent of all respondents to this year's survey have a college degree or certificate. College graduates fill the highest ranking purchasing positions, have the greatest purchasing responsibilities, work for the largest companies and generally earn the highest average annual compensation. Business degrees and graduate MBA programs are stepping-stones to higher salaries. However, the change in average annual salary among college and non-college was close to even (13% to 11%, respectively).
Twenty-four percent of respondents are Certified Purchasing Managers (CPM). As in the past, CPMs have higher average compensation than purchasing professionals not certified. This year's average compensation for purchasing executives with certification is $88,600; the average for those without certification is $75,300. Commodity managers, supply chain managers and purchasing/materials directors are more likely to be certified than other purchasing professionals. CPMs, on average, have four more years of experience than those who are not certified.
The American Production and Inventory Control Society (APICS) granted CPIM certification-certification in production and inventory management—to 6% of the purchasing professionals responding to this year's salary survey. The greatest incidence of CPIM is among materials managers; 18% of materials managers hold this certification. Vice presidents of purchasing/supply (12%), commodity managers (12%) and supply chain managers (10%) are also more likely to have this certification than other titles. The average compensation of CPIM-certified professionals is $97,100; for those who are not certified, it is $77,200.
Bigger is better
Salary survey respondents who work for bigger companies tend to earn higher compensation. The threshold for average and above compensation is $126 million to $250 million in annual sales: Purchasing professionals employed by companies having more than $125 million in annual sales report better than average compensation; those working at smaller firms are more likely to receive less than average pay. Overall, a difference of $48,000 separates average compensation of purchasing executives employed at the largest and smallest companies.
There is also an employment gap between men and women with respect to company size. A higher percentage of women are employed at smaller firms than men (52% women vs. 39% men); 43% percent of men are employed at firms with sales over $500 million, whereas 28% of women work in companies of that size.
When pay is examined according to organizational unit, the average compensation for purchasing professionals working at the divisional level is close to those at the corporate level. The average compensation for purchasing executives working at their company's divisional offices is $86,800, whereas the average pay for purchasing professionals assigned to corporate headquarters is $83,900. A higher percentage of those working at the corporate level are working for smaller companies than those working at the division level. Plant locations offer purchasing men and women the lowest average compensation of the three organizational assignments ($61,100).
Regionally, with the disclaimer that the sample was small (25), Canadian purchasing professionals had the highest average compensation, $83,400; provinces within Canada were not compared. However, variation among regions is not high. Range of average pay varies by less than $10,000 between the lowest and highest-paying continental U.S. areas. The Mid-Atlantic, West, noncontinental areas and the Southwest are within a few hundred dollars of each other (i.e., Mid-Atlantic, $80,900; Alaska, Hawaii, and Puerto Rico, $80,500; the West, $80,400 and the Southwest, $80,000). Lowest average salaries are seen in the Plains states ($74,300).
Men continue to report higher average compensation than women ($85,900 versus $62,200). This year there is a greater increase in compensation for men than for women (18% vs. 12%).
How Purchasing conducts its survey
Purchasing’s 2005 salary survey is based on questionnaires completed by 1,839 magazine readers and Website visitors.
Eight hundred fifty-four subscribers filled in the magazine insert or printed the survey off the Internet and mailed it in; the remaining 985 respondents completed the survey on www.purchasing.com. Those who responded to the survey on the Web came to the site: 1) as subscribers to the magazine asked to go to the site to fill in the survey, 2) through a news brief that ran in one of the magazine issues or 3) a mention in one of Purchasing’s online newsletters such as SupplyAlert.
The magazine received responses 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 margin of error is plus or minus approximately 2.3%.
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.)
Purchasing conducted the survey sample this year by collecting mail and Internet responses due to a declining number of mail respondents over the past few years. There are some demographic differences between the groups. Average age and experience are statistically higher among those responding by mail than among those filling it out on the Internet (47 vs. 45 years of age, 17 vs. 15 years of experience).
The editors of Purchasing Magazine developed the salary survey, but an independent research firm not affiliated with Reed Business Information tabulated the responses. Not all the data collected is reported in this article.
Changes to the survey this year
For classification and comparison purposes, Purchasing Magazine segments survey respondents into their levels of rank-senior management, middle management and junior staff. Senior management, making up 16% of the sample, includes purchasing and materials directors as well as vice presidents and chief purchasing officers (CPO). Middle management makes up nearly half of the sample and holds titles such as purchasing manager (29%), commodity manager (7%), materials manager (6%), and supply chain manager (3%). Those who wrote in other (4%) on their survey forms are included here too. Junior positions, those best described as buyer, senior buyer and purchasing agent (written in) constitute 31% of the respondents; 15% are buyers or planners, 14% are senior buyers and 3% are purchasing or senior purchasing managers.
The most frequently named job title is purchasing manager: Twenty-nine percent of the respondents are employed as purchasing managers.
Purchasing Magazine made changes in the categories of job title this year. Purchasing agent (12% last year) is not a listed category, but 3% of all respondents wrote it in under "other". Commodity manager is cited under "other" by 2% of the purchasing professionals last year. With the aid of it being a listed response, 7% describe themselves as such this year. Three percent of respondents are supply chain managers—another "new" title this year.
On the Internet
Fifty-four percent of purchasing professionals responding to Purchasing magazine’s 2005 salary survey completed the questionnaire on the Internet, generating data and sending it electronically to be merged with the mail data. Purchasing collected Internet data from July 20 through September 1, 2005, with the last several hundred responses coming in on August 30 and 31, after Hurricane Katrina hit, and possibly in time to impact respondents with the already rising gasoline and energy prices. Purchasing’s use of the Internet to collect survey responses allows for more immediate publicity to remind purchasing professionals to complete the survey, with the end effect of increasing the return rate.
Forty-six percent mailed their questionnaires back to Purchasing; most of this group pulled the insert out of the magazine, but about 11% or 12% of these respondents printed the survey off the Internet (before respondents could complete it on the Internet., fill it out on paper and mail it back).
Overall, there are not many differences in the profiles of the people responding by the different methods. The most notable difference, also seen last year, was the slightly older age and experience of the "mail-back" respondents. They were on average about two years older, and with two additional years experience. There were more respondents in the 41- 50-year-old category that responded on the Internet; more purchasing professionals in the 51-60 and over 60 categories mailed back their responses.
In terms of purchasing experience, the Internet was heavier with people who had 7-10 years experience, while the over 15 years group, particularly those with more than 25 years of experience resorted to the older mail method. The other consistent feature was that the "no answer" percent was slightly higher on the Internet questionnaires. On the region question, this was significantly more pronounced because on paper questionnaires, the postmarked zip code was used if zip code was unanswered.
There are some other "statistically significant" differences. Five percent more of the Internet respondents do not have a college degree. And, as noted last year, more of the mail respondents with college degrees had a degree in business or an MBA than did the Internet respondents.
Metals commodity purchasing staffers were slightly more likely to respond by mail (29% vs. 24%). And since a third of the metals buyers are from the Great Lakes region, it makes sense that more of the mail respondents were from the Great Lakes area. There was also a bigger concentration of mail respondents from the magazine’s home base, New England. But the Internet took a lead in terms of respondents from the West and Canada.
Tale of the tape
| Average | Median | |
| Salary | $78,500 | $69,000 |
| Age | 46 | 47 |
| Years experience | 16 | 15 |
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SOURCE: PURCHASING |
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Complete results of the 2005 salary survey can be purchased for $500 in U.S. funds. Click here to order online or payment can be made to PURCHASING Magazine, 225 Wyman St., Waltham, MA 02451. Telephone: (781) 734-8203. Credit card orders are accepted.
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