Salaries 2000: Compensation For Competence

SALARIES 2000
Compensation For Competence

Rising campus salaries and an on-going economic recovery have pushed up the compensation of junior managers. But to keep the plump pay-cheques coming, they will have to constantly upgrade their skills.

By A BT-OMAM RESEARCH PROJECT

For the foot-soldiers of corporate India, the arduous journey up the compensation ladder is closer to being worth all the sweat. The proverbial pot of gold may not be waiting round the next review for these young CAs, MBAs, and MCAs, but chances are that for the often-neglected rung of junior managers-the focus of BT's third salary sweep, covering 100 companies across 14 sectors, conducted by the Delhi-based Omam Consultants-things could look up, albeit marginally.

The average salary for this level-which includes both junior executives with managerial responsibility, as well as front-line officers-in 1999-2000, stands at Rs 2,45,596 per annum for Junior Management-1 (JM-1) or the lower rung, against Rs 1,85,004 in 1997-98. A generous 32 per cent increase. However, for the upper rung, or Junior Management-2 (JM-2), the average compensation package amounts to Rs 3,39,965 per annum compared to Rs 2,83,968 in 1997-98. A relatively modest hike of 20 per cent. Explains Arunav Bannerjee, 41, Associate Director (Human Capital Services), Arthur Andersen: ''What we are witnessing is more of a correction than an increase since soaring campus salaries are pushing up the first-level compensation.''

To that, add the dot.com boom-which has led to a flight of talent from traditional industries-and the overall recovery in the economy. With companies desperate to retain their people and find more to keep pace with market expansion, salaries have inevitably risen.

A BT analysis of the first-half results (h-1, 1999-2000) of 316 companies indicated that half the recovery battle could have already been won. For, according to the study, the aggregate sales of the sample companies grew by nearly 23 per cent. And post-tax profits by 16.62 per cent. Of these companies, 199 actually saw their bottomline grow.

Several key sectors like infotech and automobiles surged, while FMCG and pharma registered modest growth. In automobiles, where sales rose by almost a quarter, the top salaries are a handsome Rs 5,38,380 for JM-1, and Rs 6,65,316 for JM-2. In cement, where the sales growth is a paltry 1.82 per cent, salaries offered are modest too. The minimum salaries in this sector are Rs 1,99,980 for JM-1, and Rs 3,62,064 for JM-2.

The spiralling campus salaries is the second factor that has impacted junior-level salaries positively. Campus data as well as compensation figures available with major recruiters indicate that the entry-level salaries have registered a hike between 25 and 45 per cent, and in some cases even higher. The 1999 placements, in contrast, saw a hike of 32 per cent over 1998 levels. The upsurge, largely led by global consulting firms and investment banks, forced traditional Grade A recruiters like Hindustan Lever and ICICI to revise their entry-level packages by almost Rs 1 lakh.

Asserts Smita Anand, 39, Head (Organisational Change Practice Group), PricewaterhouseCoopers: ''No company can afford to have junior managers who are paid less than its trainees.'' Ignore this, and run the risk of whole-scale attrition. Adds Jagdeep Khandpur, 41, Group Vice-President (HR), BILT: ''There is also pressure to retain managers.''

Another factor is the premium placed on certain hot-skills. This is particularly true of sectors like software, where skills like e-Commerce expertise may be valued highly by potential recruiters, or Web-banking in the banking and financial sector. This, in fact, is expected to be a pronounced trend for middle- and senior-level salaries. Concurs Aquil Busrai, 46, Executive Director (India & SAARC countries), Motorola: ''Increasingly, compensation will be determined by skills, with premium placed on unique marketable skills.''

Yet, a manager's compensation is linked as much to the company's performance as his own. Confirms Santrupt Mishra, 38, Group Director (hr), A.V. Birla Group: ''Compensation almost always reflects the bottomline, save a few hot-skill areas, where returns may be long-term.'' Thus, the maximum salaries for junior-level in the FMCG sector-where net profits, according to a BT study (See Is India Inc.'s Optimism Justified?, BT, November 7, 1999), have risen by 35.13 per cent-are a whopping Rs 10,64,844 for JM-1, and Rs 15,37,856 for JM-2. To understand the phenomenon better, BT presents an analysis of prevailing salary trends in 8 key sectors.

AUTOMOTIVES. A recovery in demand and consequent growth in profit margins (up by 36 per cent for the sample) has made the industry one of the most generous pay-masters at the junior-management level. The average annual salary in the industry stands at Rs 2,70,039 for JM-1, and Rs 3,93,543 for JM-2. However, there is a caveat: the recovery may be strictly demand-led, and the sector could easily have a setback next year. Says B.P. Singh, 50, General Manager (Personnel), Eicher Motors: ''There has been a recovery, which should reflect in compensation much later, provided there is no fresh slump.''

CHEMICALS. A skewed demand-supply situation as far as talent is concerned and the lacklustre performance of the sector has downgraded compensation. The minimum salaries in this sector-Rs 1,16,316 for JM-1, and Rs 1,62,936 for JM-2-are among the lowest for all sectors covered in this survey. Explains Daljit Singh, 44, Executive Director (HR), ICI India: ''Compensation is determined by the buoyancy of the business and availability of talent.''

CONSUMER DURABLES. This transnational-dominated sector springs a surprise by being one of the lowest pay-masters at the junior-level. The minimum salaries offered by this sector is the lowest recorded, a piffling Rs 85,056 for JM-1 and Rs 1,64,220 for JM-2. The rationale? A continuing lack of demand; supply-glut; and a need for a correction in transnational-driven salary levels. Explains A. Rabindranath, 31, Director, William Mercer, a hr consulting firm: ''Demand and, consequently, profitability has not matched expectations in this sector.''

DIVERSIFIED. Companies with diversified business interests are catching up fast, say the survey figures. The maximum salaries offered by this sector stand at Rs 3,05,544 for JM-1, and Rs 4,70,352 for JM-2, making it one of the more munificent ones. The reasons for upward revision: an investment in talent to remain competitive; the use of distinct market benchmarks for each business; and paying for skills even at the cost of internal parity. Underlines Mishra of the A.V. Birla Group: ''We compare ourselves with the highest available benchmark to remain competitive in terms of talent.''

FMCG. Fortune continues to smile on managers in this sector, which has consistently lead the pack in the salary sweepstakes. Average salaries remained high at Rs 4,10,637 (JM-1), and Rs 6,01,482 (JM-2). Apart from good business performance and high campus salaries, what drives compensation in this sector is the need to fend off poachers. Points out Anurag Maini, 37, Regional Manager (hr), Indian Shaving Products: ''Every third manager is falling prey to the dot.com mania.''

PHARMACEUTICALS. This new economy sector remains a consistent performer, on the stockmarkets as well as in the salary sweepstakes. The maximum salaries offered-Rs 3,92,112 (JM-1) and Rs 5,26,008 (JM-2)-makes it the third-highest pay-master in this survey. Aggressive business performance and the entry of transnationals have ensured that salaries remain high, even at the junior level. Says Rajinder Sinh, 43, Vice-President (hr), Ranbaxy: ''We have had to consider industry benchmarks and burgeoning campus salaries and revise junior-level compensation accordingly.''

TELECOM. Like consumer durables, the fortunes of this sector continue to fluctuate, thanks to the lack of growth and the need for a correction. A very generous pay-master to begin with, this transnational-studded sector has had to tighten its purse-strings as evident from its lowly minimum salary of Rs 1,34,472 (JM-1), and Rs 2,19,384 (JM-2). One reason for this could be the absence of change in the basket of skills required, and the lack of big-bang growth. Confirms Busrai of Motorola: ''Except for certain very specialised skills, we believe there is no need for placing a premium.''

SOFTWARE. With a topline growth of 49.54 per cent in sales, and a whopping 80.34 per cent growth in net profits, this sector should have seen salaries going through the roof. Surprisingly, that has not happened. With maximum salaries touching Rs 3,02,532 (JM-1) and Rs 3,92,400 (JM-2), the sector is a generous pay-master, although not the most bountiful. The reason: a plateauing of revenues and a subsequent correction, and a shift towards asset creation in the form of ESOPs rather than cash-in-hand. Explains Aadesh Goyal, 38, Vice-President (HR), Hughes Software: ''The shift in software salaries has been towards long-term wealth creation which does not get reflected in salaries.''

Such numerical trends apart, what will drive junior-level compensation in the years to come? A shift towards performance-driven variable pay from guaranteed compensation has already happened, with performance-pay ranging between 8 and 20 per cent of the overall package at this level. And it's a trend which will only emerge stronger. A shift towards asset-creation and skill-based pay could also happen in most sectors. What is obvious is that the junior manager will have to add value to her company by her performance and the skills that she brings in. And that's the ominous bottomline of the BT-Omam Survey.

-project co-ordinated by Paroma Roy Chowdhury