Business skills will mean rich pickings

2 October 2002
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03 October 2002

Inflation-busting salary rises are continuing for purchasing and supply managers, but they are getting smaller. Robin Parker examines where pay in the profession is likely to go from here

What is a purchaser worth? For a profession in constant transition from its traditional support role to a more strategic one, it is increasingly hard to say. Not least for senior managers coming to terms with the changing nature of the role.

The latest Purcon salary survey puts pay for the average purchaser at about £37,000 a year. But pay is rising more slowly, up 6.2 per cent in the year to August compared with 8.6 per cent in the year to March.

Jerry Smith, director of Purcon, blames uncertain market conditions, aggravated by the Enron and WorldCom accountancy scandals, which have put salaries at risk as firms cut back. The threat of redundancy, and a potentially longer stretch of job hunting, hangs over even the most senior purchasers.

But Smith doesn't think pay has hit a ceiling. Rather, the previous growth was unsustainable. He points not only to last year's more buoyant economy but to purchasing's growing profile, which he believes reached a peak as wider supply chain stories such as the foot and mouth crisis hit the headlines.

A recent survey from CIPS and The Reward Group found that purchasing directors' pay rose by 123 per cent in the past decade, more than for other support functions such as HR, finance and sales.

Mike Campbell, director of business development at CIPS, says that in difficult economic times, with margins squeezed at every turn, professional procurement is needed and recognised even more.

In theory, the market forces of supply and demand - the very lifeblood of procurement - should determine salaries. Many purchasers argue that the huge sums they save their organisations should be recognised proportionately in their pay packets.

This happens to some extent: the CIPS survey found that about a quarter of all purchasers receive bonuses. But these one-off payments for good work generally do not account for the full strategic benefits procurement can regularly bring.

It is hard for anyone to know if they are paid enough, so such surveys are a useful barometer. Most companies understand each function's seniority and pay accordingly. But this is not always so and the purchasing community has to market its skills and value if it is to command higher salaries.

The extent to which pay recognises purchasing's strategic function has been hotly debated on SM's letters page recently. There is particular concern in the public sector, constrained by strict pay grades, about disparities between the expected cost-cutting skills purchasers can bring and the relatively low salaries they are offered.

Five-figure flak

This happens even at senior levels. When the Department of Health halted the selection process for a commercial director to oversee NHS purchasing, it was criticised in procurement circles for offering a five-figure salary for a job that could save millions of pounds of taxpayers’ money, when a new IT director was on considerably more.

There should be plenty of room for pay to rise further as new opportunities appear. Purchasing skills are in growing demand in areas as diverse as outsourcing, travel management, mergers and acquisitions, security and corporate social responsibility.

Greater involvement in areas that directly affect business success ought to force senior executives to think in a more supply management-orientated way. Those who share this mindset are more likely to understand and reward purchasers.

Sir Nick Scheele, president and chief operating officer at Ford Motor Company in the US and a former purchasing manager himself, calls purchasers “a strategic weapon” for companies to produce bottom-line savings and therefore gain a competitive edge.

As Scheele points out, the accounting scandals have forced companies to look at corporate governance. This focus could offer purchasers an unprecedented opening. Roy Ayliffe, director of professional practice at CIPS, has called for purchasers to be included in the government’s proposed revamp of regulations on choosing auditors.

The next wave of pay rises will largely be dictated by growing the relatively small band of purchasers who can demonstrate these commercial skills and bring their experience to ever wider parts of the organisation.

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