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Who says money can’t buy happiness—or at the very least, satisfaction?
Nearly 600 ID readers surveyed for our 2007 Annual Compensation Survey cited pay as the most important factor in their job satisfaction, a switch from what we’ve found in previous years. When asked what three factors have the greatest impact on their job satisfaction, respondents ranked salary highest, followed by “a feeling of accomplishment,” and benefits. Last year, accomplishment ranked first, salary came in second, and benefits didn’t make the top three.

What’s more, the majority of respondents said they’re satisfied with their jobs—and most said they’d recommend a career in industrial distribution to others. Respondents reported earning an average $75,000 in 2006, and those with management titles earned more—an average $80,000. In addition to medical and dental insurance, they said they receive a variety of benefits, including 401K plans and pensions, tuition reimbursement and flex time.

All told, 87 percent of respondents said they’re satisfied with their jobs, with the top three reasons ranking as follows: salary, 44 percent; feeling of accomplishment, 40 percent; and benefits, 23 percent. Similarly, 44 percent said higher pay would be the main reason they’d leave their current job if the opportunity arose.

None of this surprises Nancye Combs, a human resources expert and president of HR Enterprise Inc. in Louisville, Ky. Combs works with clients in a range of industries, and advises many industrial and construction distributors in her role as the endorsed HR consultant for the Specialty Tools & Fasteners Distributors Assn. Historically, workers have said that being appreciated and feeling that they’d done a good job were prime workplace motivators, she says.

“So what you’ve found historically aligns with what [others] found for many years,” Combs says. “Interestingly enough, pay now appears to be a major motivator. Seventy percent of people say, 'I will leave my job for more pay.’ Seventy percent say, 'Money is my driver.’”

Combs cites research by firms such as Mercer Human Resource Consulting and Hewitt Associates, and trade groups such as the Society for Human Resource Management. She says the economy is a key reason for the change.

“The weaker our economy gets, the more important money becomes,” she explains. “It doesn’t surprise me at all, that with a weaker economy—or the perception that our economy is taking a hit—that money has become more important.”

Our Compensation Survey highlights the importance of industry pay each year. What follows is a look at how the numbers play out in the industrial distribution sector, with an eye toward trends in compensation, job satisfaction and concerns for the future.

In January, we surveyed a sample of ID readers via e-mail, the results of which were tabulated by an independent research firm. Looking at the numbers, we found that: Owners, CEOs and other top executives earned an average $128,000 last year; sales managers earned an average $100,000; outside salespeople earned $68,000; and inside salespeople earned $45,000. All figures are based on median scores and represent salary plus bonus/commission.

Those figures are in line with other industry studies. For example, the 2006 Cross-Industry Compensation Report by the Profit Planning Group showed that industrial distribution sales managers earned an average

PPG’s study showed higher executive pay, however, with industry CEOs/presidents earning an average $170,000 in 2005.

When analyzing our data, a picture of the typical distribution professional emerges. He (89 percent of respondents were men) is 46 years old, earned an average $75,000 last year, has a college degree, 19 years of experience in the field, and has been with his present company for seven years. He also works an average 50-hour week.

Our study analyzed compensation by region, education level and gender as well. Professionals in the Midwest earned the most, an average $75,000; followed by the Northeast, $71,000; the South, $70,000; and the West, $69,000.

Not surprisingly, professionals with graduate degrees were the highest earners: those with MBAs reported 2006 earnings of $116,000; those with undergraduate degrees earned an average $80,000; and those who’d taken some college courses earned $68,000.

On the gender side, just 11 percent of this year’s respondents were women. They reported earning an average $50,000.

There are no significant pay raises or decreases to report in this year’s survey. By and large, most distribution professionals are on a steady earnings track. (Our survey results represent a margin of error of +/- 4 percent.) The overall average compensation figure dropped slightly this year, however—to $75,000 a year from $80,000 reported last year—and that may have something to do with a trend in sales compensation. Fifty-two percent of this year’s respondents said they are in sales.

“I’m seeing more and more companies asking for recalibration of the metrics used to measure salespeople,” says compensation expert Mitch Harper, a Texas A&M University faculty member who also advises distribution clients on sales issues, business performance and acquisitions. “We’re starting to see a mixture of the measurements, which is causing a salesman now to have to run their territory as a business center.”

Harper says he’s seen a resulting decrease in sales compensation as salespeople adjust to a new earnings structure that includes more areas of accountability.

Though companies are still compensating salespeople with a salary plus commission structure, the variable piece of the pie is changing, Harper explains. Rather than paying commission based solely on sales or gross profit numbers at the end of each month, managers are starting to figure in other factors, such as the accounts receivable cycle and territory growth. They’re also more focused on managing the sales process and improving sales skills.

“We have traditionally allowed our compensation programs to manage our sales forces. If we had a quality salesperson, they were managed by their ability to make money, and they just made more money,” Harper says. “Now, management is saying, 'I have to manage that in a much more proactive way.’ … [Managers] need to identify what takes place in the sales process, and they need to measure and manage that sales process. They also need to build skill sets where we have deficiencies in the sales process. …We’re talking about coaching.”

Harper says he’s also seeing a change in pay patterns. Rather than paying monthly, some companies are beginning to pay their salespeople quarterly, with adjustments made semi-annually. He says he’s seeing the changes at all levels, from counter sales to inside and outside sales.

A change in the business cycle is driving the sales compensation trend, Harper adds. Companies have been focused on improving operations for the last 10 years or so, and now the pendulum is swinging back to sales.

“Lately, we’ve been so operationally focused that we have driven that to some level of optimization,” Harper says. “People are taking a harder look at sales now.”

Regardless of their titles, most professionals we surveyed said they are satisfied with their jobs. And again, pay is a big part of that satisfaction—or lack thereof. Forty-five percent of respondents said they are somewhat satisfied with their jobs; 42 percent are very satisfied; 11 percent are somewhat dissatisfied; and just 2 percent said they were very dissatisfied.

When asked what they like most about their jobs, 41 percent said “the work itself,” and 21 percent cited the challenges involved in their work. Just nine percent said salary, with camaraderie, location, job security, advancement potential, benefits and management support all figuring into the mix.

When asked what they like least about their jobs, money reared its head again. Eighteen percent said lack of management support, 17 percent said salary, 13 percent cited an additional workload, with location, benefits, lack of job security, the work itself and a fast-paced environment rounding out the mix.

Combs says it’s no surprise that pay is a factor in job dissatisfaction, noting that money can be as much a de-motivator as a motivator.

“Especially with [Generation X], money is their scorecard. So money matters from the perspective that that’s how they keep score,” she says. “The other part of the psychology is, if I find out you’re not paying me market price, I feel cheated.”

Combs admits that figuring out what to pay employees is difficult, especially for small companies that don’t have the resources to hire compensation experts. But she says it’s vital that companies get their pay structure in order and examine it at least once a year. Trade associations, local chambers of commerce and large consulting groups such as Mercer and Hewitt are good sources of information, she adds.

Hewitt Associates, for example, publishes a yearly salary increase survey. Once companies have their base salaries established, Combs says they can turn to sources like these to guide their yearly increase structure.

Hewitt’s 2007 survey showed that salary increases remained flat, at 3.7 percent, but noted that employees could make it up with variable pay, defined as performance-related awards that must be re-earned each year. In the last few years, Hewitt has found that more and more companies are relying on variable pay to attract, motivate and retain employees.

Our study leans that way, as well. Seventy-six percent of respondents said that some portion of their income is based on variable pay, up from 70 percent in last year’s survey. On average, distribution professionals said 15 percent of their 2006 income came from variable pay.

Our study showed that benefits are still vital, with nearly a quarter of respondents listing them as important to job satisfaction, compared to 21 percent in last year’s study. When asked which three benefits, besides health and dental insurance, are most important to them, respondents said: pension/401K plans (64 percent); flexible work hours (41 percent); and the ability to work from home (37 percent).

Combs says there are some benefits basics—namely, health insurance and retirement plans. And she agrees that flexibility ranks high today, especially among younger workers. Vacation and paid time off are third on her list.

“Generation X is not like their mom and dad or their grandparents,” she says. “They want to go on vacation. They also want to go to their kids’ recitals and PTA meetings. They want to go to school and talk to teachers—and they want to make no apologies for it.”

Combs also cites casual business dress, an emphasis on teamwork, and sympathetic help with personal problems (through an employee assistance program) as things employees are looking for in today’s workplace.

Other benefits that ranked high in our study were: a company car (35 percent), profit sharing (35 percent), and training (22 percent).

In addition to expectations, today’s distribution employees have concerns about the industry, and their jobs in particular. When asked which one area they are most concerned about, 23 percent said management support, 19 percent said job security, and 19 percent said keeping current on technology. Other issues included mergers and acquisitions, budgets and outsourcing.

The technology piece is key, with 77 percent saying their knowledge of information technology is either essential or very important to their jobs.

Distribution professionals say they also face some distinct challenges at work. Recruiting and retaining employees ranked high, as always, but “lack of management support” topped the list this year. Twenty-one percent of respondents listed company management issues as the toughest daily challenge they face.

In the words of one survey respondent, “[It’s difficult to keep] a balance between customer satisfaction and corporate management demands. Customers are getting more and more cost conscious, and corporate management is demanding higher and higher gross margins and faster payments from customers. I am stuck in the middle, battling both sides.”

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