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.

The relative value of middle management's discretionary benefits, which generally represent about 12% of total compensation, is unlikely to increase. Insurance coverage, profit-sharing plans, and retirement benefits may be revised and expanded, but cash-related compensation will continue to serve as the primary motivator.

Business conditions create ripples in pay decisions. Overall, two out of three smaller companies boosted management compensation for 1982. By company size, the smallest businesses granted fewer -- but more generous -- raises. Average salary bumps ranged from 12.4% among businesses with sales of less than $1 million, to 9% among companies with sales of $5 million to $10 million. However, only 55% of the smaller companies awarded pay raises, versus 70% of the larger companies.

The number of companies that boosted middle-management salaries ranged from 52% of those in the construction business to 73% of the professional service companies. Most raises hovered around the 11% mark, ranging from an average of 9.5% meted by manufacturing companies to 12.9% in the professional services field.

Seventy percent of the respondents to the INC. survey indicated that they made no pay changes that were directly related to business conditions. However, among those who did react to the continued business crunch by modifying management compensation, the strategies went beyond simple salary pinches. Of the 103 companies that indicated shifts in pay policies due to sluggish economic conditions, 38% restricted raises, and 14% waived them altogether. Another 19% imposed management pay cuts, and 6% trimmed their benefits packages. A number cut back on the use of company cars and instituted tighter controls on expense accounts. Beyond these tactics, 1 out of 10 companies also instituted toucher performance standards, consolidated management responsibilities, or deferred hiring decisions.

Besides these insights on middle-management pay levels and practices, the INC. study also reveals several other characteristics of smaller company managers. Four principal points emerge from the survey results:

1. Few middle managers are oldtimers. In most cases, regardless of function, company size, or industry, the average age of middle management ranges from 37 to 41. The oldest are those in manufacturing and marketing positions in complaints with sales of $10 million or more, where about half of the managers fall in the 40-to-55 age bracket. Youngest are operations managers in companies with sales of $1 million to $5 million. More than three out of four of these managers are under 40. They include date-processing managers, four out of five of whom have yet to reach 40.

In terms of experience and seniority, most middle managers have been with their companies less than 10 years and have held their current positions an average of 5 years. Again, those in manufacturing functions tend to be far more seasoned than those in the operations areas.Not surprisingly, the experience of data-processing managers is testimony to recent recruiting and hiring activity among smaller companies. In short, indicating direct entry into the management ranks, the average data-processing manager has spent three years with the company in the same position.

2. Middle managers come in fours.

And chances are, one of them is a woman (see box). Smaller company management ranks average 3 top executives and 4 middle managers. The depth of middle management is directly related to company size. Those companies with sales of less than $1 million, for example, employ an average of 2 middle managers. Companies in the $2.5 million-to-$5 million sales range average 5 middle managers; those in the $5 million-to-$10 million category average 7; and companies with sales of $10 million or more employ 11 middle managers.

The leanest management rosters are maintained by wholesale/retail businesses, which employ an average of four middle managers. Manufacturing companies and service businesses boast the highest number, with an average of seven.

3. Formal job descriptions are few and far between. Contributing to the lack of understanding about middle managers and their roles in smaller businesses is the fact that most companies -- 63% -- have no formal job descriptions for middle management. In other words, in about two out of three cases, organizational structure has simply evolved and management responsibility remains loosely defined.

The lack of formal job descriptions appears unrelated to company size. Least likely to have a clear outline of management responsibilities are companies with sales of less than $1 million. However, companies in the $1 million-to-$2.5 million sales range are better organized than those with sales of more than $10 million when it comes to formal job descriptions for middle management. The number of companies with written job definitions in these two groups is 51% and 46%, respectively.

By industry, the amount of businesses that have spelled out their middle management responsibilities ranges from 28% among wholesaler/retailers to 48% of the construction companies.

4. The accent is on middle-management development. More than 70% of the respondents to the INC. survey indicated that they encourage management training and development. In general, the primary emphasis is on education, ranging from outside seminars to correspondence courses and participation in trade associations. Not surprisingly, the larger the company, the more likely it is that management training will be emphasized.

Among respondent, 84% encourage their managers to attend outside, seminars, 48% endorse college courses, and 40% sponsor membership in professional organizations or societies that offer training programs. Other efforts include inhouse training (11%), active trade group participation (5%), and correspondence courses (3%).

In summarizing the problems of dealing with middle management, respondents cited training as a major hurdle -- second only to motivation. Indicative of their intent to solve the problem, 84% report that their companies reimburse middle managers for job-related educational expense.

WHAT'S A MIDDLE MANAGER?

In most smaller companies, middle management is the only line of management between executives and all other employees. The positions covered in this report therefore include department heads, supervisors, foremen, and other managers who report to a top officer (vice-president or above) and who are generally responsible for one or more subordinates.

While some middle managers have several responsibilities, their titles reflect their chief, if not sole, function. Companies responding to this study provided information on 927 middle managers with 251 titles. The titles were used to identify six major functional groups and 13 sub-groups. Compensation data for each position was tabulated by group. Typical middle-mangement positions within each group include the following:

Note: This table may be divided, and additional information on a particular entry may appear on more than one screen.

Major groups Sub-groups (positions included)

GENERAL MANAGEMENT: Controller

General, division, department, Accounting manager

assistant manager; supervisor; Data-processing manager

foreman. Personnel manager

Service manager (national service,

FINANCE: Controller; accounting, customer relations manager)

credit, finance, audit, business Store/branch manager (station

manager.

manager)

OPERATIONS: Operations, office, Warehouse manager (distribution,

store, branch, data processing, transportation, fleet manager)

personnel, warehouse, plant, land Office manager

manager. Engineering/R&D manager (chief

engineer; technical director;

MANUFACTURING: Engineering, development, design manager)

plant, maintenance, purchasing, Plant manager (plant foreman)

production manager; R&D director. Purchasing manager (purchasing

director, agent; material manager)

MARKETING: Marketing, sales, Production manager (shift, shop

merchandise, advertising, public supervisor; quality assurance

relations manager.

manager; shop, press foreman)

OTHER: Service, parts, bodyship Sales manager (district, field,

manager. counter manager)

PROFILE OF MIDDLE MANAGERS (AVERAGE)

General

Management Finance Operations

1981 total remuneration $27,200 $28,300 $25,100

Base salary 25,000 24,900 22,800

Cash bonus 3,200 5,100 3,400

(% of mgrs. receiving) 87% 87% 81%

Other compensation 2,700 4,100 3,700

(% of mgrs. receiving) 61% 67% 68%

1980 total remuneration $25,000 $26,300 $22,100

Base salary 23,100 23,000 20,100

Cash bonus 2,500 5,300 2,800

(% of mgrs. receiving) 91% 82% 89%

Other compensation 1,500 2,900 1,900

(% of mgrs. receiving) 58% 55% 59%

Age 38 38 37

Years in position 4 5 4

Years with company 7 8 7

Ownership (% of respondents)

$1 None 91% 84% 88%

Less than 5% 7 10 7

More than 5% 2 6 5

Mfg. Marketing Other

1981 total remuneration $29,800 $32,000 $25,700

Base salary 27,000 28,000 24,200

Cash bonus 4,400 6,600 2,500

(% of mgrs. receiving) 88% 91% 75%

Other compensation 3,500 4,000 2,100

(% of mgrs. receiving) 76% 76% 54%

1980 total remuneration $27,200 $27,600 $23,000

Base salary 24,800 24,500 21,700

Cash bonus 3,900 5,800 2,400

(% of mgrs. receiving) 86% 89% 70%

Other compensation 2,600 3,700 1,800

(% of mgrs. receiving) 67% 75% 46%

Age 41 39 39

Years in position 6 4 5

Years with company 9 7 7

Ownership (% of respondents)

None 83% 84% 92%

Less than 5% 12 10 5

More than 5% 6 6 3

The average middle manager earns $25,000 to $32,000, including salary and bonus. While more than 8 out of 10 receive bonuses, salary generally accounts for about 90% of total pay. The majority also receive other compensation, ranging in value from $2,100 to $4,100 and including deferred income and other discretionary benefits. Very few boast equity ownership in their company. Comparison of 1980-81 figures shows salary increases ranging from 8.2% for general management to 14.3% for marketing managers.

PAYCHECKS BY STAFF SIZE: $20,000-PLUS BECOMES THE RULE

Average Total Remuneration

($ thousand)

No. of company employees

Function 1-49 50-99 100-299 300 or more

General management $23.6 $25.1 $35.0 $51.2

Finance 25.7 31.2 30.3 32.9

Controller 28.3 32.8 32.4 32.3

Accounting 22.4 24.4 23.5 30.3

Operations 22.4 28.5 29.6 35.4

Data processing 32.6 27.3 28.6 29.2

Personnel 22.1 15.3 25.0 34.8

Service 24.3 23.5 41.3 45.1

Store/branch 23.4 23.7 36.0 40.1

Warehouse 17.8 20.3 25.8 27.6

Office 17.6 30.1 28.3 -

Manufacturing 25.8 29.7 33.1 41.8

Engineering/R&D 28.9 34.2 42.6 46.5

Plant 25.8 28.8 38.3 37.8

Purchasing 19.3 31.4 26.2 48.4

Production 25.7 26.7 27.8 38.4

Marketing 28.1 37.2 40.1 39.8

Sales 28.5 37.2 40.6 40.6

Most middle managers in companies with fewer than 100 employees earn less than $30,000. The exceptions are those who perform data processing, engineering, or sales functions. Those in companies with more than 100 employees generally fall in the $30,000-to-$40,000 pay range. On average, few middle-management positions, regardless of company staff size, top $40,000. Overall, 61% of the managers earn less than $30,000, 34% make from $30,000 to $49,999, and only 5% top $50,000.

MIDDLE-MANAGEMENT PAY BY INDUSTRY: CONTRACTORS LEAD, SERVICE COMPANIES TRAIL

Average Total Remuneration

($ thousand)

Annual company sales

Wholesale/ Services/

Function Manufacturing Retail Business

General management $29.9 $20.7 $32.1

Finance 27.6 28.8 34.2

Controller 29.1 32.8 30.0

Accounting 17.5 21.4 36.2

Operations 26.1 24.2 25.6

Data processing 30.4 29.6 37.6

Personnel 31.6 24.0 16.8

Service 25.7 24.0 24.4

Store/branch 24.3 23.5 23.2

Warehouse 23.5 19.6 23.7

Office 21.2 20.7 18.0

Manufacturing 30.2 25.6 28.1

Engineering/R&D 36.0 - -

Plant 30.8 22.4 24.7

Purchasing 28.8 27.5 -

Production 25.8 26.2 27.7

Marketing 35.2 31.0 31.4

Sales 35.2 31.3 31.4

Average Total Remuneration

($ thousand)

Annual company sales

Services/

Function Profess. Construction Other

General management $27.7 $33.1 $26.8

Finance 26.7 27.5 27.6

Controller 28.1 30.3 36.3

Accounting 23.9 21.8 20.7

Operations 26.2 23.0 25.2

Data processing 23.6 - -

Personnel 22.0 - 25.4

Service 33.2 31.2 39.9

Store/branch 28.8 38.8 36.5

Warehouse - - 24.0

Office 21.5 14.3 20.3

Manufacturing 29.8 30.9 33.9

Engineering/R&D 30.9 34.0 40.3

Plant - 33.4 32.7

Purchasing - 29.2 -

Production 29.8 30.3 32.9

Marketing 28.9 36.0 26.7

Sales 28.4 36.0 28.5

The highest-paying jobs are in the construction industry, where two out of three middle managers make more than $30,000, on average. Other top-paying jobs include financial and data-processing positions in the service businesses. Lowest pay levels are found in the wholesale/retail industry, where remuneration ranges from $19,600 to $31,300, with an average of $25,600 for all middle managers.

HOW MAY WOMEN WIN MANAGER ROLES?

Women occupy middle-management slots in more than half of the smaller companies that responded to the INC. survey. While 47% of the respondents reported no women in their middle-manager ranks, 53% employ at least one woman manager.

Generally, service companies offer women more opportunities than manufacturing companies. Three out of five service businesses employ women in management, versus only two out of five manufacturers. Not surprisingly, company size is also a factor. The larger the company, the more likely it is that its management ranks include women.

Among the larger companies (sales of $5 million or more), 58% employ women in management roles. Of those, 38% have one woman manager, 4% have two, and 16% have three or more. Among the smallest companies (sales of less than $1 million), the ratio is far less favorable to women. The majority (55%) have no women in middle management.Of the remaining companies, 35% report only one woman with management responsibilities.

No attempt was made to compare the compensation levels of men and women. But women are best represented in the office management functions, which, the survey shows, are the lowest paying (average remuneration: $19,700). However, women have also landed some of the highest-paying management jobs, which include sales and marketing positions (average pay: $32,000).

Women win fewest roles in the manufacturing and service functions, which include engineering and maintenance.

Number Percent of

of women respondents

None 47%

One 34

Two 10

Three 5

Four or more 4

Average.: 1

Function

Office 39%

Finance 24

Sales 19

Marketing 12

Gen. management 9

Personnel 9

Operations 9

Accounting 9

Data processing 6

Production 5

Warehouse 5

Store/branch 5

purchasing 3

Manufacturing 2

Service 1

Total exceeds 100% because of multiple responses.

PAYCHECKS BY SALES SIZE: ENGINEERS EARN TOP DOLLAR

Average Total Remuneration

($ thousand)

Annual company sales

All Up to $500,000- $1 mil.-

Function respon. $500,000 $999,999 $2.4 mil.

General management $27.2 $19.4 $23.6 $27.2

Finance 28.3 22.5 22.1 28.2

Controller 30.7 25.0 24.0 29.5

Accounting 24.1 21.0 22.0 24.7

Operations 25.1 21.0 24.7 22.3

Data processing 30.7 25.5 - 39.9

Personnel 26.9 - 22.0 15.3

Service 26.7 22.5 20.4 23.7

Store/branch 26.3 14.5 26.6 22.4

Warehouse 21.0 17.9 - 20.2

Office 19.7 19.8 16.4 16.7

Manufacturing 29.8 21.2 20.9 28.5

Engineering/R&D 35.0 25.2 20.7 33.8

Plant 29.4 23.2 21.8 27.1

Purchasing 28.5 14.0 - 20.1

Production 27.9 19.6 20.5 30.8

Marketing 32.0 24.5 16.9 29.9

Sales 32.4 24.5 17.0 30.7

Average Total Remuneration

($ thousand)

Annual company sales

$2.5 mil.- $5 mil.- $10 mil.

Function $4.9 mil. $9.9 mil. or more

General management $27.5 $23.2 $34.2

Finance 31.0 27.7 31.5

Controller 31.6 29.4 34.1

Accounting 15.8 25.8 20.2

Operations 23.0 24.6 36.5

Data processing 36.3 23.6 27.4

Personnel 14.0 25.5 32.9

Service 24.6 26.1 38.7

Store/branch 21.0 31.1 46.9

Warehouse 18.4 20.0 27.2

Office 18.8 20.8 35.1

Manufacturing 30.3 30.2 37.6

Engineering/R&D 34.8 40.2 43.7

Plant 26.5 32.2 39.9

Purchasing 34.0 25.7 31.3

Production 28.9 27.2 33.3

Marketing 32.4 34.2 44.3

Sales 33.1 34.2 45.5

Middle-management paychecks do not necessarily keep pace with company size, particularly for general management, accounting, and data-processing positions. Generally, however, the highest-paying jobs are in engineering/research and development, followed by sales and marketing. Lowest on the payroll totem pole are office and warehouse managers.

BEYOND PAYCHECKS: PERKS AT WHAT COST?

% of benefit paid by the company

% of respondents

Benefit offering benefit 100 50-99 1-49

Hospital/medical insurance 97 n1 75 22 3

Life insurance 82 87 11 2

Disability Insurance 55 83 14 3

Profit-sharing 43 95 3 2

Company car 42 88 9 3

Pension 31 79 14 7

Dental insurance 28 79 19 2

Club membership 13 82 15 3

Low-interest loans 10 - - -

Stock ownership (ESOP) 8 - - -

n1 % of the companies providing benefit

Average value of deferred income, options,

other discretionary benefits

Function 1981 1980

General management $2,700 $1,500

Finance 4,100 2,900

Operations 3,700 1,900

Manufacturing 3,500 2,600

Marketing 4,000 3,700

Other 2,100 1,800

Most middle managers are covered by medical, life, and disability insurance. Beyond these common benefits, profit-sharing and company cars are provided by two out of five companies. Dental coverage, club privileges, and employee stock ownership are far more the exception than the rule. Where benefits are offered, 100% of the cost is underwritten by at least three out of four employers. The average value of compensation beyond base salary and bonus ranges from $2,100 to $4,100.

THE FACTS BEHIND THE FIGURES

This report represents INC.'s Second Annual Compensation Survey. It summarizes a national study of middle management compensation levels and policies in a broad cross-section of smaller businesses. The primary research for the report was conducted in June. A four-page questionnaire was mailed to a random sampling of 7,024 INC. subscribers. Excluding undeliverable, incomplete, and late returns (those received beyond a June 10 deadline), the net response rate was 5.4%. Some 377 usable returns were then delivered to an independent computer facility for tabulation and cross-reference summaries.

Confidentiality of all information was assured. No company or individual respondent was identified. The responses represent 377 companies that provided compensation data on a total of 927 middle managers. In 76% of the cases, the information was submitted by a top officer, including chairman, president, or owner/partner.

Located in 40 states and the District of Columbia, the respondents also represent 78 four-digit Standard Industrial Classifications within 11 broad industry categories. The majority are in manufacturing (27%) or wholesale/retail business (27%). Other major groups include service/business (16%), service/professional (13%), and construction (8%). Ninety-two percent are corporations, 5% partnerships, and 3% proprietoriships. Only 6% are publicly held.

The vital statistics of the respondents as a group include the following averages:

Net sales $3,902,000

Net income $162,500

(after taxes)

Number of employees 74

Total 1981 payroll $971,000

Number of top executives 3

Number of middle managers 4

Total remuneration $27,900

Base salary $25,200

Cash bonus $4,200

HOW BIG ARE BONUSES?

No. of company employees

Cash bonus 1-49 50-99 100-299

None n1 15% 12% 18%

$1,000-$4,999 57 64 56

$5,000-$9,999 15 10 14

$10,000-$19,999 10 10 7

$20,000 or more 3 4 5

n1 % of the middle managers, 1981

SALARY INCREASES FOR '82

Percent of

1982 respondents

Increased salaries 64%

Did not increase salaries 36%

Average Size of raise

Industry Increase 1-9% 10-14% 15%+

Mfg. 9.5% n1 54 39 7

Whsle./ 10.6 33 50 17

retail

Service/ 11.0 46 38 16

business

Service/ 12.9 30 37 33

profess.

Construc. 12.2 23 54 23

All respon. 10.8 42 41 17

n1 % of the companies giving raise

Two out of three companies increased middle-management salaries this year. Among those who granted raises, 42% kept the increases below 10%, and 41% awarded increases of 10% to 15%. The average raise was 10.8%

THE 10 BIGGEST PROBLEMS WITH MIDDLE MANAGERS

Percent of

Problem respondents

1. Motivation, defining roles 38%

and goals

2. Training 24

3. Recruitment 17

4. Turnover 9

5. Skills with subordinates 6

6. Communication with top 5

management

7. Quality adherence and 4

accountability

8. Creativity, generating 4

innovative ideas

9. Too many the same age 2

10. Room for advancement 1

(Total exceeds 100% because of multiple responses.)

More than one out of three companies cite motivation as the chief hurdle in dealing with middle managers. Other problems range from training and recruitment to creating opportunity for advancement.