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 We'd
like to call it the 5.3 times rule, and it is one of India Inc's
most worrying statistic. To cut to the chase, The BT-Omam Senior
Management Salary Survey 2003, of 100 companies across 17 sectors
puts the average annual salary of a functional head, let's say,
a CFO, or CMO, or CTO, at a little over Rs 29 lakh. CEOs, according
to The BT-Omam CEO Salary Survey 2003 (See Business Today, February
16, 2003), earn approximately 5.3 times that, or Rs 1.5 crore a
year. In effect, CEOs earn some 417 per cent more than their direct
reports.
That, as you may have guessed, is way too much
claim compensation experts, a subset of hr consultants that has
been much in demand in recent years. "Functional heads should
never be in awe of the CEO and pay is something that plays an important
role in this," says Dr Yasho V. Verma, the Head of hr at consumer
goods major LG India. Verma believes that the differential in pay
shouldn't exceed 300 per cent. "The only way to narrow the
gap is to tinker with variable pay." Variable pay has made
its presence felt across India Inc. Only, the gap between CEO and
functional head salaries doesn't seem to be narrowing. Indeed, as
a numbers-shy G.S. Ramesh, the Vice President of hr at passenger
car company Hyundai Motors, admits it has widened. "Increased
competition makes the CEO more accountable," says Ramesh, explaining
the premium that varies from 456 per cent (read that as CEOs earn
456 per cent more than their functional heads) in the case of the
automotive sector to 819 per cent in the hospitality sector.
| What's Happening At The Senior Level |
| After a difficult
year in 2002, search firms have a lot to cheer about. The mood
in the employment market is upbeat. There is a significant demand
for talent and companies are under increasing pressure to retain
top talent. In the past year, hiring at senior levels was mainly
visible in sunrise areas such as IT-enabled services and insurance.
However, current trends indicate a significant pick-up in hiring
across sectors. Even those companies that had significantly
downsized operations have now started hiring. The IT-enabled
services sector continues to be at the forefront of hiring activity
at the senior level. Companies such as HCL E-serve, efunds International,
Prudential, E-serve International, MsourcE, Wipro Spectramind,
AXA, Daksh, and GE Capital International Services have all been
hiring senior executives. IT services and software companies
are also back in hiring mode. In financial services, while there
is almost no demand in the corporate finance and investment
banking businesses, the retail side of the business, with insurance
at the vanguard, continues to hire. Telecom has also seen significant
movement and a spate of senior-level hires. Reliance Infocomm,
Bharti, and Idea have all been very active. The business of
organised retail continues to attract investments and has seen
significant hiring at the senior level. Manufacturing, too,
has shown some signs of buoyancy. And pharma continues to be
a sweet spot. The one sector that has shown almost no hiring
activity at the senior level is fast moving consumer goods.
With the demand for consumer goods remaining stagnant, this
isn't surprising. Still, I'd say the outlook (in terms of hiring
activity at the senior level) continues to be positive. That's
more than you can say about other geographies. |
Still, functional heads are better off than
their #2s. Deputy functional heads-their salaries have been captured
in the BT-Omam survey under the head Senior Management II, or SM
II-earn, on an average, Rs 16 lakh a year. Evidently, the corporate
salary hierarchy is steep.
Trends in Senior Manager Salaries
The continuing trend in senior manager salaries
has been the emphasis on variable pay. It isn't possible to verify
this across sectors, but in general, the proportion of variable
pay to fixed pay is higher in the better companies. In the telecom
sector, for instance, the average proportion is around 22 per cent;
at Bharti, its Head of hr, Jagdeep Khandpur claims, the corresponding
number is 40 per cent. And across sectors, the proportion is higher
for functional heads than deputy functional heads. At Dr Reddy's,
the numbers are 40 per cent and 20 per cent respectively.
More significant, though, is the emerging trend
of paying people in those functions critical to an organisation's
success more than those in others. "We have moved away from
the production age to the marketing age," says LG's Verma.
"The sales and marketing head should be awarded at least 10-15
per cent more than other functional heads." That's only fair.
So, will this year be better for senior managers?
It looks like it will with hikes of between 9 per cent (engineering)
to 18 per cent (FMCG). Still, with the highest average pay post
increase at Rs 64 lakh (for functional heads in the FMCG sector),
the Rs 1 crore-mark seems a distant dream. That's a pity.
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