New data reveals big differences between similar C-suite jobs. How best to mind the gap.
The paycheck certainly looked impressive. So did the new title. But after being promoted to chief human resources officer at a large retail chain, Mary began to wonder how she stacked up with other colleagues in the industry. In all, she was earning $435,000 in base, bonus and long-term incentives. Sounds great—until you compare her compensation package to those of others in her field.
For as long as there have been companies with people who gossip, workers have found ways to get an idea how their pay compares with colleagues in their organization. The transparency only grew when Internet sites offered some clues on how pay outside the firm measured up for specific jobs. But many of the numbers floating on the Web rely heavily on information from employees or lack details across sectors and field.
Pulling select reward information from a pool of 20 million employees, a new Korn Ferry database takes a different whack at the comp issue—and sheds light on key slots in the C-suite and other top-level jobs in different industries compared to each other. Called Executive Snapshot, the database reveals salaries for the 25th percentile, median and 75th percentile for a single job among executives in the same company size and industry, along with a breakdown in bonuses and other compensation. The most revealing news: the gap among peers.
For her part, Mary, in our hypothetical example, might expect that her pay stacks up well since she works at a fairly large brand. But her compensation puts her at only the 25th percentile among CHROs in her industry among retailers of similar size. She’s making almost two-thirds the median ($725,000) and about half the 75th percentile ($887,000) in the large-chain retailer category. But she’s far from alone. For a CFO at a large industrial business unit, pay at the 25th percentile is almost $750,000 less than pay at the 75th.
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Some of these differences can of course be explained by the complexity of the business and job, as well as the number of direct reports. But many other factors affect C-level pay. For starters, employers often have a compensation framework that acts as a baseline. “Most companies start with a compensation philosophy, a point of view that is comfortable for them, so they can pay enough to attract good talent without overpaying,” says Scott Kingdom, vice chairman of Korn Ferry and former head of its Global Industrial practice. Increasingly, loyalty doesn’t appear to be part of the calculation; Kingdom says—and the figures suggest—that long-tenured executives who come up the ranks into a C-suite position tend to be paid less than those who have moved from company to company.
To be sure, all salary databases have some limits to their scope and figures can become outdated quickly—especially in the age of the global economy and digitalization. The total figures are also skewed by bonuses and long-term incentives, where each company’s philosophy and strategy also come into play. General counsels in an agribusiness have relatively small long-term incentive on average (as little as 10 percent of base) compared to, say, the chief operating officer of a professional services firm, whose incentives may match or exceed base salary.
Still, imperfections aside, total comp data opens the door a bit on how companies treat C-suite roles whose responsibilities vary within the same sector and especially across industries. When the chief marketing officer occupies a traditional marketing role, the compensation gap tends to be narrower: for a mid-sized consumer durables company, total direct compensation at the 25th percentile ($319,000) is about two-thirds of the pay at the 75th percentile ($484,000). But in other companies and industries, the job can carry greater commercial responsibilities and higher expectations for driving revenues.
“The amount of money paid to CMOs in retail, technology, financial services and luxury/lifestyle businesses tends to be more than for consumer goods and industrial products companies,” says Caren Fleit, a senior client partner and leader of Korn Ferry’s Global Marketing Officers practice. Still, even that is changing: an industrial company, for example, may pay well above the median for a CMO to help lead a business transformation to become more customer-centric, Fleit adds.
In the end, the obvious question is whether executives can leverage all this information to boost their pay. What is in their control? “The easiest way to grow your salary is to grow your company,” says Bob Wesselkamper, global head of Rewards and Benefits Solutions, Korn Ferry. Interestingly, this approach may improve not only the extrinsic rewards, but also the intrinsic ones—the satisfaction of helping the company achieve its purpose. Look past monetary rewards alone, says Nicholas Pearce, clinical associate professor at Northwestern University’s Kellogg School of Management, and track “the degree to which your daily work is aligned with your life’s work and purpose.”
Can companies use the data to shortchange employees on pay? Potentially yes, but not likely, say comp pros. “In this, capitalism is brutally efficient,” Kingdom says. “You cannot attract and keep an A player with B money.”