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Supply Chain News: Purchasing and Procurement Professionals - How Does Your Salary Measure Up in 2017?

 

Annual ISM Data Finds Procurement Compensation up a Solid 5% in 2016

 

June 6, 2017
SCDigest Editorial Staff

The Institute of Supply Management is out with its twelth annual salary survey for procurement professionals for 2017 (based on 2016 data), and with a decent if not great economy and a reasonably tight job market in the supply management field, the numbers once again look pretty good.

Supply Chain Digest Says...

Manufacturing saw an average of almost $117,00 in salaries, nearly $125,000 in the retail sector, and $104,000 in whoesale companies.

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As reported in ISM's Inside Supply Management magazine, the average compensation for all participating supply management professionals was $115,440 in 2016, an increase of 5% compared to the average found for calendar year 2015 of $109,961. Those figures relate to total compensation, including salary and various bonus programs.

That increase is down from the significant 7.9% rise seen in 2016 over 2015, but represents a solid improvement in compensation year over year nevertheless.

 

Base salaries saw a smaller level of increase, at 3.9% for 2016, down a bit from 4.1% reported in last year's report.

The data set is sizable, so these numbers have some credibility. A random sample of names in the ISM database (including both members and non-members) was selected for the survey. As many as six email invites were sent to solicit participation.

In the end, about 3000 valid survey responses were achieved. SCDigest will note there might be some upward bias in the survey respondents, as it would seem a person might be more likely to participate if they felt good about their pay and recent changes in it versus those less happy with their situations.

That could bias the average compensation numbers up, but since the same mythology has been used each year, the numbers for changes in 2016 over 2015 shouldn't have validity.

The report gets right to it, offering the chart below on average compensation by level in the organization, from CPOs and equivalent positions down to supply management newbies. (Note: in all the charts, the red bars are for men, the dark blue for women, and the light blue for all respondents combined.)

As can be seen, CPOs averaged about $259,000 in salary compensation (bonuses are beyond that base salary). Interestingly, in a continuing trend over the several years, women CPOs earn much more than men, although that only holds true at this most senior level. At all other levels, women earn a bit less than men.


 

Source: ISM

At the director level, the average salary was about $153,000, and at the manager level, about $109,000 - interestingly both numbers about flat with last year's report. For new ("emerging") procurement professionals, the average was a still fairly healthy $83,000.

66% of respondents received a bonus for 2016 (up from 64% in 2015). The average bonus was $22,900, or 19.8% of average base salary (basically flat with the previous year). So, if the 20% or so average bonus holds true at the CPO level, that would add another $52,000 to total compensation at that level, or a total of $311,000 between salary and bonus

But that doesn't include the value of any stock options (which is not easy if even possible to measure when awarded). The survey found just 11.5% of respondents received stock options in 2016, the same percentage as in 2015, with the average dollar value of stock options awarded coming in at $33,360. The median value of stock options awarded was a more modest $14,378. Of course, many privately held companies simply do not offer stock option programs.

As usual, life is always better at the top: The top 5 percentile of options had an average value of $250,730, though that was down 31% compared to $364,344 in 2015.


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The article also shows a strong correlation between achieving various certifications and average salary. Supply management professionals with no certifications had on average salaries of $108,000 in 2016, as shown in the chart below, those with ISM's Certified Professional in Supply Management (CPMS) certification average about 10% more, at $118,000. (Again, light blue is total responses, red for men, dark blue for women.)

 

Source: ISM

Those with the Certified Purchasing Manager (CPM) averaged even more, at over $124,000.

Of course, association does not equal causation. It could be more talented and ambitious supply managers who would make more money than average generally are also more likely to get certifications. And/or, those same people are likely to have risen higher in the organization, where salaries are higher.

As usual, average compensation in procurement varies greatly by what business sector a company is in. As seen in the graphic below from ISM, average salaries were above $151,000 in information-related companies like publishing and entertainment, versus just $86,000 in the agriculture sector.

 

Manufacturing saw an average of almost $117,000 in salaries, nearly $125,000 in the retail sector, and $104,000 in wholesale companies.

 

More details on the 2017 procurement salary study can be found at the ISM website.

SCDigest will note that this data conflicts with a report released in 2015 by CAPS Research, an arm of ISM, which found that on average total average compensation for CPOs was a whopping $464,756, consisting of $287,151 in salary and an average bonus of a nice $180,002. (See Just How Much to Chief Procurement Officers Make? A Lot.)

Those CAPS numbers are well above the compensation figures from the ISM survey.

Our only thought is that CAPS Research tends to focus mostly on large companies, where salaries and bonus would tend to be higher, versus perhaps a more broad base of large, medium and smaller companies in the ISM data.

Any reaction to these ISM compensation numbers? Do they seem accurate? Let us know your thoughts at the Feedback section below.

 

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