Compensation Compensation Trends & Negotiations Trends & Negotiations

August 2007August 2007

Whitney TaylorWellPoint, Inc.

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Water Cooler Water Cooler SpeculationSpeculation

• Bet I could get $10,000 more if I left Bet I could get $10,000 more if I left my company and went somewhere my company and went somewhere else!else!

• Are you in the 80%?Are you in the 80%?

How do you really know?How do you really know?

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Should I Stay or Should I Should I Stay or Should I Go?Go?

““Instead of counting on a new Instead of counting on a new employer to make us happier, or employer to make us happier, or more successful, let’s keep in mind more successful, let’s keep in mind that to a large extent a job is what that to a large extent a job is what WE make of it!”WE make of it!”

Price Pritchett, New Work Habits for the Next Millennium.Price Pritchett, New Work Habits for the Next Millennium.

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Compensation – What is Compensation – What is it?it?

• Base SalaryBase Salary• Paid Time Off (PTO), Paid Time Off (PTO),

Holidays, Vacation, Holidays, Vacation, Sick Time, etc.Sick Time, etc.

• 40 Hour Work Week40 Hour Work Week• Home Office/Home Home Office/Home

Office Set UpOffice Set Up• Part Time Part Time

Schedule/Job Sharing Schedule/Job Sharing • PensionPension• 401(K)401(K)• RelocationRelocation• Stock OptionsStock Options

• Sign-On BonusSign-On Bonus• Performance Based Performance Based

BonusBonus• Employee Stock Employee Stock

Purchase PlanPurchase Plan• Insurance – Health, Insurance – Health,

Dental, Vision, Short & Dental, Vision, Short & Long-Term DisabilityLong-Term Disability

• Healthcare & Childcare Healthcare & Childcare Reimbursement Reimbursement AccountsAccounts

• Car allowanceCar allowance• Training, Professional Training, Professional

DevelopmentDevelopment• Travel Perks or Travel Perks or

RequirementsRequirements

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Salary Budget TrendsSalary Budget Trends• ““2006-07 Salary Budget Survey 2006-07 Salary Budget Survey

reported an actual average total salary budget increase of 3.8% for all employee categories.”

• Consumer Price Index (CPI) rose 3.5%Consumer Price Index (CPI) rose 3.5%• ““92% of employees are expected to 92% of employees are expected to

receive an increase in base pay”receive an increase in base pay”

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Salary TrendsSalary Trends• Pay rates for average salaried exempt workers Pay rates for average salaried exempt workers

will increase 4% while cost of living index will increase 4% while cost of living index increased 4.1%increased 4.1%

• Employers are moving away from pensions and Employers are moving away from pensions and stock options and are offering more incentives stock options and are offering more incentives tied to individual contribution and company tied to individual contribution and company performance performance

• In 2005, 36% of largest US companies offered no In 2005, 36% of largest US companies offered no traditional pension, only a 401(K) plan (Watson traditional pension, only a 401(K) plan (Watson Wyatt)Wyatt)

• ““Globalization pressures are forcing companies Globalization pressures are forcing companies to focus on improving their cost structures to focus on improving their cost structures making purchasing managers the new unlikely making purchasing managers the new unlikely corporate rock starscorporate rock stars.”.”

• Purchasing Managers will earn the highest raise Purchasing Managers will earn the highest raise in 2006 (9.35%)in 2006 (9.35%)Business & Legal Report, Inc. 2006 Exempt Salary Survey. Career Business & Legal Report, Inc. 2006 Exempt Salary Survey. Career

JournalJournal

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Recruiter/Employer Recruiter/Employer PerspectivesPerspectives

• 60% leave room for negotiations in first offer60% leave room for negotiations in first offer• 30% say final offer30% say final offer• 10% say it depends on candidate 10% say it depends on candidate • 4 out of 5 recruiters are willing to negotiate 4 out of 5 recruiters are willing to negotiate

(Society for Human Resource Management) (Society for Human Resource Management) • Few job seekers ask for moreFew job seekers ask for more

Loeb, Marshall. MarketWatch. Loeb, Marshall. MarketWatch. www.careerbuilder.comwww.careerbuilder.com

• Base salary drives other aspects of Base salary drives other aspects of compensationcompensation

• Impact of title on salary – organizations are Impact of title on salary – organizations are flatteningflattening

• We are negotiators/buyers for our companies; We are negotiators/buyers for our companies; therefore, it should be expected and accepted therefore, it should be expected and accepted that we WILL negotiatethat we WILL negotiate

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2005-06 Salary 2005-06 Salary Averages Averages

NCMA NCMA 20052005

ISM ISM 2005 2005 DataData

ISM ISM 2006 2006 DataData

NCMA NCMA 20062006

Avg Avg Salary + Salary + BonusBonus

$82,000$82,000+ $3,500+ $3,500

$78,470 $78,470 + + $12,483$12,483

$88,380 $88,380 + +

$16,118$16,118

82,000 + 82,000 + $3500$3500

Avg MenAvg Men $90,000$90,000 $88,662$88,662 $98,550$98,550 90,00090,000

Avg Avg WomenWomen

$75,000$75,000 $66, $66, 032032

$71,307$71,307 $74,000$74,000

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Impact of ExperienceImpact of ExperienceNCMA NCMA 20052005

ISM ISM 20052005

ISM ISM 20062006

NCMA NCMA 20062006

<5 Yrs<5 Yrs $53,000$53,000 $65,38$65,3899

$67,18$67,1811

$53,000$53,000

6-10 Yrs6-10 Yrs $70,000$70,000 $67,99$67,9966

$76,62$76,6233

$70,000$70,000

11-20 11-20 YrsYrs

$85,000$85,000 $77,18$77,1877

$87,55$87,5533

$85,000$85,000

21+ Yrs21+ Yrs $98,000$98,000 $95,90$95,9000

$103,3$103,33737

$100,00$100,0000

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Impact of EducationImpact of EducationEDUCATIOEDUCATIONN

NCMA NCMA 20052005

ISM ISM 20052005

ISM ISM 20062006

NCMA NCMA 20062006

Without Without collegecollege

$66,000$66,000 $59,971$59,971 $63,237$63,237 $68,000$68,000

BA/BSBA/BS $78,000$78,000 $79,368$79,368 $84,516$84,516 $76,000$76,000

Master’s or Master’s or HigherHigher

$70,000-$70,000-$81,000$81,000

$99,373-$99,373-110,222110,222

$116,42$116,420-0-130,578130,578

$81,000-$81,000-$78,000$78,000

Average w/ Average w/ CertCert

52% higher52% higher

$100,000 $100,000 (CPCM)(CPCM)

$83,172 $83,172 CPMCPM

$ 90,302 $ 90,302 (CPM)(CPM)

$102,000 $102,000 (CPCM)(CPCM)

2003 poll conducted National Organization for Competency Assurance 2003 poll conducted National Organization for Competency Assurance (NCOA) as reported by Louise Wehrle in “How Much is Certification Worth?” (NCOA) as reported by Louise Wehrle in “How Much is Certification Worth?” Contract ManagementContract Management. May 2004.. May 2004.

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Title Salary BenchmarksTitle Salary BenchmarksTitleTitle NCMA NCMA

20052005ISM ISM 20052005

ISM ISM 20062006

NCMA NCMA 20062006

Chief Chief OfficerOfficer

N/AN/A $161,082$161,082 $247,685$247,685 N/AN/A

VP, EVP, VP, EVP, SVPSVP

>$120,0>$120,00000

$158,256$158,256 $183,343$183,343 $127,00$127,0000

DirectorDirector $115,00$115,0000

$120,401$120,401 $124,948$124,948 $ $ 115,000115,000

Manage/Manage/SupvSupv

$89,000$89,000 $80,519$80,519 $87,676$87,676 $90,000$90,000

Buyer, Buyer, SeniorSenior

$69,500$69,500 $57,081$57,081 $61,645$61,645 $70,000$70,000

ConsultantConsultant N/AN/A $112,100$112,100 $112,100$112,100 $102,00$102,0000

Stock Stock OptionsOptions

N/AN/A $29,087$29,087 $25,412$25,412 N/AN/A

Titles apply to contracts, subcontracts, procurement, purchasing, sourcing

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Impact of ResponsibilityImpact of Responsibility

Spend ManagedSpend Managed Average SalaryAverage Salary

<$11M<$11M $67,060$67,060

$11-39M$11-39M $74,949$74,949

$40-100M$40-100M $94,953$94,953

>$100M>$100M $138,430$138,430

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Impact of Company SizeImpact of Company Size

Company RevenueCompany Revenue Average SalaryAverage Salary

<$500M<$500M $75,480$75,480

$500M-10B$500M-10B $90,116-$93,892$90,116-$93,892

>$10B>$10B $103,486$103,486

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Impact of LocationImpact of Location

Median SalaryMedian Salary NCMA NCMA 20062006

ISM 2005ISM 2005

District of District of Columbia; Columbia; Baltimore, Baltimore, MDMD

$90,000-$90,000-95,00095,000

$103,036$103,036

TX, CA, CT, TX, CA, CT, GA, IA, MA, GA, IA, MA, MD, NJ, NY, MD, NJ, NY, OH, VAOH, VA

$90,000-$90,000-100,000100,000

>$80,000>$80,000

AR, OK, SCAR, OK, SC N/AN/A <$60,000<$60,000

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Variable PayVariable PayMore organizations (79%) are using variable pay•Sign-on bonuses 69%•Referral bonuses 65%•Spot bonus 45%•Retention/stay bonus 35%•Pay above market 30%•Part time employment w/ benefits 28%•Stock option program 24%•Market adjustments/increase to base salary 64%

2006-07 Salary Budget SurveyISM Reports •61.7% receive bonuses•15.6% receive stock options

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Paid Vacation Paid Vacation BenchmarkBenchmark

• >1 Yr Service – 10.2 Days>1 Yr Service – 10.2 Days• >3 Yrs – 12.1 Days>3 Yrs – 12.1 Days• >5 Yrs – 14.7 Days>5 Yrs – 14.7 Days• >10 Yrs – 17.4 Days>10 Yrs – 17.4 Days• >15 Yrs – 19.1 Days>15 Yrs – 19.1 Days• >20 Yrs – 19.9 Days>20 Yrs – 19.9 Days• >25 Yrs – 20.6 Days>25 Yrs – 20.6 Days

Averages reported for “White Collar OccupationsAverages reported for “White Collar OccupationsU.S. Department of Labor, U.S. Bureau of Labor Statistics. National U.S. Department of Labor, U.S. Bureau of Labor Statistics. National

Compensation Survey: Employee Benefits in Private Industry in the Compensation Survey: Employee Benefits in Private Industry in the United States. March 2006.United States. March 2006.

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US Median Household US Median Household Income 2005Income 2005

AsianAsian $61,094$61,094

WhiteWhite $50,794$50,794

HispanicHispanic $35,967$35,967

BlackBlack $30,858$30,858

USA Today Snapshot, December 2006

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Personal Compensation Personal Compensation AnalysisAnalysis

• Step 1 – Internal AnalysisStep 1 – Internal Analysis• Step 2 – External AnalysisStep 2 – External Analysis

– CompanyCompany– IndustryIndustry

• Step 4 – Set Realistic GoalsStep 4 – Set Realistic Goals

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Internal AnalysisInternal Analysis• Develop spreadsheet of salary, bonus, Develop spreadsheet of salary, bonus,

stock options, benefitsstock options, benefits• Quantify current benefitsQuantify current benefits• Prioritize benefitsPrioritize benefits• Quantify overall spend managedQuantify overall spend managed• Analyze your contributions as savings - Analyze your contributions as savings -

be realistic! be realistic! • Define future role, title, responsibility Define future role, title, responsibility

you are seekingyou are seeking

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External AnalysisExternal AnalysisCompanyCompany• RevenueRevenue• IndustryIndustry• LocationLocation• Research company benefits online and ask HR Rep or Research company benefits online and ask HR Rep or

other employees likelihood of benefits (work at home, other employees likelihood of benefits (work at home, job sharing, part time, increased vacation, flex job sharing, part time, increased vacation, flex scheduling, etc.)scheduling, etc.)

• Research tax implications (traveling jobs, work at Research tax implications (traveling jobs, work at home)home)

IndustryIndustry• Do homework, know industry averages and where you Do homework, know industry averages and where you

fit in (salarycalculator.com, salary.com, fit in (salarycalculator.com, salary.com, careerinfonet.org, jobstar.org, professional careerinfonet.org, jobstar.org, professional associations)associations)

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Set Personal GoalsSet Personal Goals

• Discuss locations and life styles/cost Discuss locations and life styles/cost of living with familyof living with family

• Define salary ranges for locationsDefine salary ranges for locations• Determine base and variable pay Determine base and variable pay

rangesranges• Prioritize benefits and trade offsPrioritize benefits and trade offs

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Negotiation TipsNegotiation Tips• Delay salary conversations until you fully understand Delay salary conversations until you fully understand

rolerole– Practice responding “competitive market salary,” Practice responding “competitive market salary,”

“help me understand salary range or midpoint,” or “help me understand salary range or midpoint,” or provide a range and state that your actual is TBDprovide a range and state that your actual is TBD

• SSS: Sucky Salary SurpriseSSS: Sucky Salary Surprise– Offer is greater than 20% off; respond with surpriseOffer is greater than 20% off; respond with surprise– Seek to understand variable paySeek to understand variable pay– Ask how they determined the salary; offer Ask how they determined the salary; offer

benchmark data benchmark data – Discuss a more senior titleDiscuss a more senior title

• BallparkBallpark– Thank you; I need a few days to fully consider your Thank you; I need a few days to fully consider your

offeroffer• MSBS:MSBS: Maybe I should be in SALES! Maybe I should be in SALES!

– Over targetOver target– Understand expectations, deliverables and confirm Understand expectations, deliverables and confirm

ability to meet theseability to meet these

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Negotiation Tips Negotiation Tips (Cont’d)(Cont’d)

• Re-visit your priorities to leverage benefits, quantify Re-visit your priorities to leverage benefits, quantify and determine trade-offsand determine trade-offs

• Be creative in offering solutionsBe creative in offering solutions– Ex. Enthused about the possibility of working for X; Ex. Enthused about the possibility of working for X;

however, I’d like us to however, I’d like us to work togetherwork together to … to enable me to to … to enable me to feel comfortablefeel comfortable

– Some solution ideas that I’ve briefly considered include Some solution ideas that I’ve briefly considered include (mention one at a time; wait for response so you understand (mention one at a time; wait for response so you understand likelihood):likelihood):

1.1.Sign-on BonusSign-on Bonus2.2.Additional vacationAdditional vacation3.3.Performance based bonus Performance based bonus 4.4.Stock OptionsStock Options5.5.Work from home 2 days a weekWork from home 2 days a week

• Women – Remember you are representing your Women – Remember you are representing your colleagues, department, company, customers and colleagues, department, company, customers and impacting trends!impacting trends!

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Communication TipsCommunication Tips• Convey enthusiasm/intrigue without clear Convey enthusiasm/intrigue without clear

intentintent• Be confidentBe confident• Be tactful – may help confirm you’re worth itBe tactful – may help confirm you’re worth it• Request additional clarification re cost of Request additional clarification re cost of

living differential, bonus, benefits, travel, living differential, bonus, benefits, travel, etc.etc.

• Establish timeframe for responseEstablish timeframe for response• It’s not what you ask, it’s the way you ask it!It’s not what you ask, it’s the way you ask it!• Your negotiation style will reflect how you Your negotiation style will reflect how you

work with suppliers and team memberswork with suppliers and team members

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Communication TipsCommunication Tips• Once offer is made, don’t feel obligated to Once offer is made, don’t feel obligated to

respondrespond• Be appreciative and ask for time to considerBe appreciative and ask for time to consider• Don’t reveal happiness or disappointmentDon’t reveal happiness or disappointment• Get all offers (including revisions) in writingGet all offers (including revisions) in writing• Obtain full understanding of benefits and Obtain full understanding of benefits and

quantify their value (expected bonus, stock quantify their value (expected bonus, stock options, etc.)options, etc.)

• Be courageous, ASK FOR MORE!!!!Be courageous, ASK FOR MORE!!!!• Review written offer in detail before responding Review written offer in detail before responding

or signing; make sure everything is documented or signing; make sure everything is documented correctlycorrectly

• Once signed, do not go back to bargaining table – Once signed, do not go back to bargaining table – done deal!done deal!

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Internal NegotiationsInternal Negotiations

• Do research, use benchmarksDo research, use benchmarks• Quantify contributions to bottom lineQuantify contributions to bottom line• Make sure your accomplishments support Make sure your accomplishments support

strategic objectivesstrategic objectives• Focus on performance-based pay Focus on performance-based pay

arrangementarrangement• Negotiate if/then milestone Negotiate if/then milestone

accomplishments with agreed to changes accomplishments with agreed to changes including datesincluding dates

• Variable pay is sometimes easier to accessVariable pay is sometimes easier to access

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Walt Disney - LeadershipWalt Disney - Leadership

““Courage is the main quality of Courage is the main quality of leadership, in my opinion, no matter leadership, in my opinion, no matter

where it is exercised. Usually it where it is exercised. Usually it implies some risk–especially in new implies some risk–especially in new undertakings. Courage to initiate undertakings. Courage to initiate something and to keep it going–something and to keep it going–

pioneering and adventurous spirit to pioneering and adventurous spirit to blaze new ways, often, in our land of blaze new ways, often, in our land of

opportunity.”opportunity.”

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SourcesSources• Avery, Susan. “Purchasing Compensation: How to negotiate a higher salary.” Avery, Susan. “Purchasing Compensation: How to negotiate a higher salary.”

July 14, 2007.http://www.purchasing.com//index.asp?July 14, 2007.http://www.purchasing.com//index.asp?layout=articleprint&articleID=CA645821layout=articleprint&articleID=CA645821

• Capell, Frances. “The Biggest Raise at the Mid-Management Level in BLR’s Capell, Frances. “The Biggest Raise at the Mid-Management Level in BLR’s 2006 Exempt Salary Survey: A Big Surprise. www.WorldatWork.com. June 14, 2006 Exempt Salary Survey: A Big Surprise. www.WorldatWork.com. June 14, 2006.2006.

• Institute for Supply Management (ISM) 2006 Annual Salary Survey (2005 data Institute for Supply Management (ISM) 2006 Annual Salary Survey (2005 data from 1,223 respondents)from 1,223 respondents)

• Keller, Walter S. “Ten Commandments of Salary Negotiations.” Keller, Walter S. “Ten Commandments of Salary Negotiations.” Careerjournal.com sponsored by WSJ.comCareerjournal.com sponsored by WSJ.com.

• Loeb, Marshall. MarketWatch. Loeb, Marshall. MarketWatch. www.careerbuilder.comwww.careerbuilder.com• National Contract Management Association Annual Salary Survey (2005 data National Contract Management Association Annual Salary Survey (2005 data

from 2,572 respondents and 2006 data from 4,482 respondents) from 2,572 respondents and 2006 data from 4,482 respondents) http://www.ncmahq.org/publications/docs/salarysurvey2006_ExecSum.pdfhttp://www.ncmahq.org/publications/docs/salarysurvey2006_ExecSum.pdf

• Supplier Selection & Management Report, published by Institute of Supplier Selection & Management Report, published by Institute of Management & Administration, Inc. (IOMA) October 2004Management & Administration, Inc. (IOMA) October 2004

• Wehrle, Louise. “How Much is Certification Worth?” Wehrle, Louise. “How Much is Certification Worth?” Contract ManagementContract Management. . May 2004May 2004

• U.S. Department of Labor, U.S. Bureau of Labor Statistics. National U.S. Department of Labor, U.S. Bureau of Labor Statistics. National Compensation Survey: Employee Benefits in Private Industry in the United Compensation Survey: Employee Benefits in Private Industry in the United States. March 2006. States. March 2006.

• Yentes, Lindsey. “ISM’s 2007 Salary Survey.” Yentes, Lindsey. “ISM’s 2007 Salary Survey.” Inside Supply ManagementInside Supply Management. May . May 2007.2007.

Whitney TaylorWhitney Taylor

WellPoint, Inc.WellPoint, Inc.

972-234-1828972-234-1828

Whitney.taylor2@wellpoint.coWhitney.taylor2@wellpoint.comm