Recession takes toll on distributorships

THE NTEA’s 2002 Distributor Employee Compensation Report revealed pretty much what was to be expected: The economic downturn has negatively impacted the compensation levels and fringe-benefit programs provided by distributors. The report, with a total sample of 1,986 firms and 7,927 branches, showed that compensation levels for the top management team were largely stagnant between 1999, when the last cross-industry study was done, and 2001. According to Albert Bates, Ph.D., president of the Profit Planning Group of Boulder, Colorado, and compiler of the report, the typical increase in compensation was zero in 2001 for the chief executive officer and chief operating officer of the typical distribution firm. The typical increase was 3% for the other two executive positions, chief financial officer and chief marketing officer.“Interestingly, the challenge in compensation was not felt outside the executive suite,” Bates wrote. “For all of the management and administrative positions covered, ranging from human resource managers to clerical personnel, compensation increased. The largest increases were associated with operating employees, specifically warehouse employees, truck drivers and office/clerical personnel. Despite the widespread discussion of layoffs, competition for operating employees remained strong.”Most of the significant changes took place in fringe benefits. For example, there was a 30% increase in the typical monthly insurance premium for a family from 1999 to 2001, going from $461 to $600.Bates said distributors took four actions: (1) traditional indemnity programs continued to disappear; (2) among virtually every type of insurance program offered, the employer-paid percentage of the premium dropped from 85% to 80%; (3) the annual deductible per person increased sharply from $250 to $300; and (4) the co-payment increased for several types of insurance.There also was a dramatic shift from sales-based commission plans to gross margin-based ones.“Clearly, in a time of price pressures, management was making an effort to compensate the ability of the sales force to maintain margins,” Bates wrote.Employee turnover was 20%, a figure Bates called “disturbing.” He concluded that “clearly, there are serious costs associated with employee retention that are not being measured on the income statement.”There also was an increase in the use of more restrictive combined vacation/sick leave programs and a decrease in the use of flextime, which he said was “not surprising.”To purchase the report, call 1-800-441-NTEA, e-mail ([email protected]) or visit www.ntea.com to download an order form. Volume I is a printed report that provides data from the participating NTEA members, and where appropriate, comparisons to the cross-industry sample of firms. Volume II, provided on CD-ROM, details compensation practices of the cross-industry sample broken down by sales volume categories as well as specific geographic areas. The cost is $100 for NTEA members and $200 for non-members.

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