Features

ISM's 2007 Salary Survey

Author(s):

Lindsey Yentes
Lindsey Yentes is a public relations associate for ISM.

May 2007, Inside Supply Management^® Vol. 18, No. 5, page 34

Overall, compensation in most categories within the industry continues to escalate at a healthy rate.

It's payday at the office. One by one, little white envelopes are dropped off at the desks of your coworkers. This ritual is one that is sure to intrigue even the most noncurious of your colleagues, who can’t help but wonder how their paycheck stacks up to yours. Just what are other supply management professionals making? And do managers really know if their employees are being paid competitively? Education and experience in supply management surely play a role in salary differences, but how much of a difference? A gap also remains in the paychecks of men and women, but is this gap closing? And what about credentials: Are those letters after your name fattening your wallet?

One simple way to get a clear picture of salaries in the supply management profession is to look at the profession's average gross salary for 2006. According to ISM's 2007 Salary Survey, based on 2006 salaries and benefits, the average salary for 2006 was $88,380. This indicates a positive trend for supply managers, as these numbers display a 13-percent increase over last year's average salary of $78,470. By job title, this breaks down to an average of $61,645 (an increase of 8 percent from last year's survey results) for those with a title of purchasing agent, buyer, senior buyer, planner or purchaser; $87,676 (up 9 percent from 2005 salaries) for those with a title of manager; $124,948 (up 4 percent from 2005 salaries) for directors; $185,343 (up 17 percent from 2005 salaries) for vice presidents; and $247,685 (up 54 percent from 2005 salaries) for chief procurement officers. Perhaps the need for skilled supply management professionals is driving the competitive increase in salaries.

Besides the averages, the numbers can be broken down even further by taking a look at the variables that influence pay, such as experience, education, annual spend, gender, total gross revenue and the size of the company. All of these work together in determining salary. Discrepancies in pay can be the result of a number of different factors that vary from person to person, from job to job and from organization to organization.

Not surprisingly, managers want to retain the best and the brightest employees. The more experience a person has, the heftier their paycheck. The experienced supply manager who has been in the profession at least 11 years can expect to make approximately $19,000 more than a new coworker fresh out of college. For those who are new to the profession (work experience of two years or less), the average salary is $68,588, while those with 11 to 20 years of experience earn an average of $87,553. Those with 21 or more years of experience earn an average of $103,337.

Education and Credentials Bring Higher Salaries

As expected, some salary increases can be achieved through education or certification. It's no surprise that the supply management professionals with the highest salaries on average also have the highest level of education. Those with a doctorate degree are making an average of $130,578, while professionals with just their high-school diploma make about half that — $63,237. Those with a master's degree make six figures as well, averaging about $116,420. It also appears that those college all-nighters paid off for those who attained a bachelor’s degree. Respondents with a bachelor’s degree earn an average salary of $84,516.

But how does the type of degree these professionals hold play a role in the numbers on their pay stub? Technical degrees earn supply management professionals the most significant pay, averaging $120,038. Supply management degrees are also proving to be fiscally rewarding, averaging $111,128. Other degrees, such as liberal arts or business-related degrees, earn their diploma holders approximately $87,000.

If another degree is not in your future, perhaps an additional credential is an option. On average, Certified Purchasing Managers (C.P.M.s) are taking home $90,302, while their counterparts who don't hold a C.P.M. take home $86,910, a difference of nearly 4 percent. While the number of C.P.M.s is rising, there is yet another qualification on the horizon: the Certified Professional in Supply Management (CPSM), which is designed for supply managers, and will be offered by ISM beginning in 2008. The new qualification title means that individuals who are responsible for a wide range of spend areas within their organizations will have a title that reflects their growing importance to the entire supply operation. Salaries will likely rise for future CPSMs, much as they are now with the C.P.M. designation.

Salaries Can Reflect Annual Spend Responsibility and Revenue

Another variable in the salary comparisons of supply management professionals is the level of fiscal responsibility placed upon the individual. As the annual spend a supply manager is responsible for increases, so does his or her salary. For supply managers responsible for an annual spend of under $11 million, average compensation is $67,060. Compensation increases to $74,949 for those responsible for $11 million to $39.9 million in annual spend; to $94,953 for those responsible for $40 million to $100 million in annual spend; and to $138,430 for those responsible for more than $100 million in annual spend.

Likewise, companies with higher gross revenue are paying their employees a higher salary than companies with lower revenue. For companies whose gross revenue is lower than $500 million, their supply management professionals make an average of $75,480 or less. For the companies whose gross revenue falls within the range of $500.1 million to $10 billion, supply managers make an average of $90,116 to $93,892. Finally, supply management professionals working for companies with more than $10 billion in revenue bring home approximately $103,486.

Room for Improvement in the Gender Pay Gap

Gender appears to be another factor that impacts the numbers on your pay stub. While in 2005 the gender gap among supply management professionals mirrored the rest of the nation at approximately 31 percent, the gap increased in 2006. This year's survey indicated that men make 38 percent more than women.

One of the possible explanations for the large pay gap between men and women, as shown by the results of this survey, is that a greater percentage of the males reported the presence of factors that traditionally lead to higher pay, such as education. Nearly 85 percent of the male respondents reported that they held a bachelor's degree or higher, compared to just 61 percent of the women. Also, in terms of job title, a greater percentage of men hold the higher-level positions. Just 40 percent of the women reported that their position was that of a manager or above, compared to 61 percent of the men. These two factors alone can account for much of the overall pay gap between genders.

Broken down by gender, it appears that the gap can be narrowed somewhat by education. A comparison of average salaries among those with a bachelor's degree shows that the gender pay gap is reduced to 22 percent. The gap is also reduced significantly among respondents with higher-level job titles. For example, men with a title of manager earn 15 percent more than their female counterparts, and men with a title of director earn 12 percent more than their female counterparts. Perhaps these positive signs will lead to further gains in pay equity in the future.

One startling statistic is the difference in pay between men and women based on years of work experience. The average salary for the male supply management professional with 11 to 20 years of experience is $99,854, while his female counterpart earns an average of $69,588.

"In this day and age, it is shocking to see such a discrepancy between the salaries of men and women," says ISM CEO Paul Novak, C.P.M., A.P.P. "Gender should not be a factor at all."

Overall Compensation Bolstered by Bonuses and Stock Options

Bonuses and stock options also play a role in an employee's income. Bonuses, included in the salary figures, were earned by 61.7 percent of all respondents. On average, bonuses received were $16,118, which was representative of 13.5 percent of total gross salary received. The highest bonus reported was $154,000. Once again, the gap in gender was demonstrated by the comparison between men and women: 66 percent of men earned a bonus, compared to just 55 percent of the women.

If your own annual bonus was lacking, perhaps a company stock option helped make up for it. For our survey respondents, 15.6 percent earned stock options, which were not included in their salary figures. The average estimated dollar value of the stock options received was $25,412. The highest stock option reported was $600,000.

Although it is obvious that there is a wide range of incomes when it comes to supply management, most professionals believe that their pay compares favorably to the pay of their colleagues. Respondents were asked how their overall compensation compares with their peers in other functional areas in their organization who are at similar levels in terms of work experience, responsibility, education and so on. Almost two-thirds said that their salaries were "roughly the same" or higher than their peers. This breaks down to 48 percent who felt their salaries were "roughly the same," 16.9 percent who believed that their salaries were "slightly higher," and 1.5 percent who thought that their salaries were "much higher." Of those who stated that their salaries were lower than their peers, 28.6 percent believed that it was "somewhat lower," and 5 percent claimed that it was "much lower."

Compensation May Vary, But Job Satisfaction Is Most Important

Although salary is one vital aspect of employment, job satisfaction was ranked as the most important factor in overall satisfaction of a career. Wages placed second, and work environment came in third. The remaining factors, in order of importance, were pension/retirement plan, health-related benefits, insurance-related benefits and bonuses. (See sidebar below.)

As ISM's 2007 Salary Survey confirms, the compensation for professionals in this industry can vary considerably. While the pay gap between men and women is substantial, the salaries continue to increase year after year for experienced supply management professionals. And if you're looking for a way to increase your salary, an extra certification might aid in beefing up that paycheck. Supply management professionals are well-aware of the concept of supply and demand. For the skilled professional (whether male or female), there are progressive employers out there who recognize quality and are willing to pay for it. For the savvy employer, you must compensate competitively to retain the best and brightest in the field.

To contact the author or sources mentioned in this article, please send an e-mail to author@ism.ws. For complete results, visit the ISM Web site: www.ism.ws. Select Tools/Career Center.

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