What Managers Make

Insiders and outsiders alike have never been quite sure just who smaller company middle managers are, let alone how much they make. While trade groups and industry publications have focused on specific functions, national data on middle-management compensation in smaller companies is virtually nonexistent.

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In most cases, the smaller company middle manager is a department head, supervisor, or other manager who reports to a top executive. Based on an INC. study of more than 7,000 smaller enterprises, the average middle manager is a male in his late thirties who joined his company about eight years ago and has held his position for almost five years. Besides his base salary of $25,200, he earns a bonus of $4,200 but reaps few benefits beyond basic health-care coverage. The brighest factor in his 1982 pay picture was a 10.8% increase in salary.

Modest is the word that best describes middle-management pay levels in smaller companies. Counting base salary and cash bonuses, most middle managers earn from $25,000 to $30,000. The average is $27,900. Add the value of other compensation, including discretionary benefits, and the average total compensation package for middle management amounts to $31,400.

These and other figures emerge from INC.'s Second Annual Compensation Survey of more than 7,000 small businesses in the United States. The results, based on responses from more than 375 companies employing more than 925 middle managers, reveal the standards behind current management pay practices. The chief conclusions drawn from the INC. study are summarized in the tables on the following pages. They show that:

Bigger companies do not necessarily dole out fatter paychecks. While compensation for manufacturing and marketing positions generally relates directly to company size, begger does not always mean better pay for managers in other functional areas. For example, general managers in companies with sales of only $500,000 earned more last year than their counterparts in companies with sales of $5 million. Accounting managers in companies with sales of less than $2.5 million made more than those in companies with sales of $10 million. And dataprocessing managers in companies with $1 million to $2.5 million in sales came out ahead of counterparts in many companies that are 10 times larger.In fact, they chalked up a average total remuneration of $39,900, compared with $27,400 earned by data-processing managers in the largest companies.

A similar pattern emerges when figures are analyzed by size of work force. Total remuneration for accounting managers in companies with 50 to 99 employee averaged $24,400 in 1981, compared with $23,500 earned by those in companies with 100 to 299 employees. Total compensation for data-processing managers in the smallest companies (1 to 49 employees) averaged $32,600, compared with $29,200 for data-processing managers in the largest companies (300 or more employees).

Pay scales are tipped by industry and function. Overall, there are few differences in industry pay level. Across all industries, the average total remuneration for all middle managers ranged from $25,600 in the wholesale/retail trade to $29,700 in manufacturing companies. When management pay is also measured in terms of function, however, some businesses emerge as consistently more generous than others.

Middle managers in the construction industry are the highest paid smaller company managers, chalking up average total pay of more than $30,000 in two out of three positions covered by the INC. survey. Manufacturers and service businesses rank second, with one out of three management jobs topping $30,000. At the bottom of the pay scale are wholesale/retail businesses, which generally bless only finance and sales managers with pay levels of $30,000 or more.

Interestingly, a comparison of the highest-paid and lowest-paid positions by industry and function shows that branch managers in construction earn top honors (average total remuneration: $38,800), followed by data-processing managers in the service businesses ($37,600), and chief engineers in manufacturing concerns ($36,000). Lowest paychecks overall are earned by office managers in the construction industry ($14,300), personnel managers in service companies ($16,800), and accounting supervisors in manufacturing ($17,500).

Cash constitutes the biggest chunk of the pay package. Salaries and cash bonuses add up to more than 85% of the total compensation of smaller company managers. More than three out of four companies (79%) provide bonuses and, of those, 97% pay cash. (The remaining 3% offer stock bonus plans.) Last year, the average management bonus ranged from $3,200 for general managers to $6,600 for marketing managers, up from $2,500 and $5,800, respectively, in 1980.

While more than four out of five middle managers receive bonuses, business conditions apparently created a few minor shifts in bonus distribution last year. Fewer general and operations managers reaped bonuses, while finance managers saw their average bonuses shrink from $5,300 to $5,100.

Middle-management pay, like executive pay, is tied directly to performance and results in most cases. Two out of three smaller companies base their bonus payments on company profitability -- the bottom-line results that directly reflect management performance. Another 30% also tie bonuses to department performance, while 15% cite company sales and individual effort as criteria. Only 5% award bonuses solely on the basis of executive discretion.

Fringes offer few frills. Health-care coverage is almost universal among management benefits. Beyond typical medical, life, and disability insurance, however, perquisite packages are highly conservative, if not limited. Profitsharing programs and company cars are the most popular noninsurance perks, followed by pension plans. However, in each case, availability depends on company size. For example, among companies with sales of less than $5 million, only two out of five provide profit-sharing or company cars. Only one out of four offers pension benefits. In the $5 million-to-$10 million sales range, however, more than half the companies offer profit-sharing and company autos, and one out of three provides a pension plan.

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