Project manager pay--is it keeping pace?
Concerns of Project Managers
Ronald C. Phillips, PAS, Inc., Saline, Michigan
Particularly in slow economic times, construction and engineering executives need to take a serious look at compensation for the key positions which provide the horsepower that puts revenues in the organizational treasury. If there is any position in an engineering or construction firm that fits this criteria it certainly is the project manager.
Typically living on the road with a suitcase full of job obligations, the project manager's duties include ensuring that the client, subcontractors, vendors, and project personnel work together harmoniously toward a successful project completion. Besides the political and interpersonal skills (and there are many), project managers also must be administratively proficient in finance, scheduling, cost analysis, contracts, governmental agencies, applicable regulations, insurance, as well as being technically competent in understanding the myriad structural and equipment components to be installed. Furthermore, the project manager is the person in the hot seat for making sure the project makes money, sometimes in spite of the contractual circumstances.
ARE PMs UNDERPAID?
Given this level of personal sacrifice, responsibility and career exposure, are project managers paid commensurate with their duties? Probably not, But then I could argue the same case for a number of key positions in the engineering/construction industry. The fact is, project managers, like other professionals, have an established market value for the services they render. Supply and demand will answer that question of value, not philosophical debate. Hence, the more important question, I think, is not are project managers paid enough, but rather are they maintaining their market value within the engineering/construction industry given the major economic adjustments we are currently undergoing?
This question is far more important because project managers are pretty versatile professionals. They can apply their skills in a number of different industries with relative ease. For that reason, project manager compensation is particularly sensitive to cross-industry pay levels. In other words, PMs can industry-hop if the grass looks greener somewhere else. Industry executives, therefore, need to keep a close eye on not only within-industry pay, but also across-industry pay if they hope to keep the talent they need.
Figure 1. Engineering and Construction Increases, 5-Year Comparison
Figure 2. Construction PM Increases as Compared to Increases Nationally
Figure 3. Engineering PM Increases as Compared to Increases Nationally
With that end in mind, this article shows the impact of the economic slowdown on project manager compensation. More specifically, it shows how project manager pay fares within the engineering/construction industry and among professionals nationally. The data used comes from our PAS database of compensation and benefit information as well as data from the American Compensation Association and the U.S. Department of Labor.
A FIVE-YEAR DOWNWARD SPIRAL
Over the past five years, our surveys of consulting engineering and construction firms show a general downward trend in wage increases. Figure 1 compares the wage increase trends from 1989 through 1993 for executives, project managers and craftspeople. Two categories of project managers are shown. The PM engineering figures come primarily from consulting/design firms and the PM construction figures come primarily from contractor organizations. The craft percentages are from our database of non-union craft rates and do not reflect trends in the more highly unionized areas of the country.
From presidents and partners to division managers, executive salary increases have fallen from a high of 6.5 percent in 1989 to a low of 4.7 percent in 1993. By comparison, engineering project managers have gone from a high of 6.75 percent to a low of 4.4 percent and construction project managers have followed the trend with a high in 1989 of 5.85 percent to a low of 3.95 percent in 1993. Construction craftspeople, on the other hand, have gone from 5.3 percent in 1989 to 3.6 percent in 1993.
From the data Figure 1 presents, there is little question that project managers have felt the impact of the general economic slowdown but not disproportionately so within the industry. The next question is, how have project managers fared in comparison to other professionals nationally? For the answer we look to Figures 2 and 3.
Engineering/construction has been in the doldrums for the past several years, but then other industries have experienced slowdowns as well. Consequently, it is important to ask if engineering and construction professionals are hit harder than professionals nationally. The answer is surprising.
As Figures 2 and 3 clearly show, project managers are hanging in there with the lawyers, accountants and candlestick makers, etc., that make up the vast array of professionals across all U.S. industries. (National figures compiled by the American Compensation Association.) In other words, engineering/construction has not as yet been disproportionally hit by the worldwide economic slowdown.
However, note two points about these charts. First, project managers within the construction area are harder hit than those within engineering. Secondly, the trend, while not seriously discrepant at this time, is not good. Construction project manager increases crossed the national base line in 1990 and have been declining at a greater rate since. Engineering project managers crossed the base line in 1992. While it is too early to tell if this trend is likely to continue, it is an important one to watch because it signals that engineering/construction compensation is not keeping pace with professionals nationally:
LOOKING AT REAL DOLLARS
It is a real psychological shock for most of us to go from annual 8 or 10 percent increases, typical in the mid-eighties, to what seems only a few dollars extra today. Given this gap, it is easy to say that our buying power is down. However, the numbers say otherwise, as shown in Figures 4 and 5. Engineering/construction executives and project managers are actually gaining in expendable dollars. Compared to the Consumer Price Index, a fair measure of living costs, project managers, while not exactly stashing away the wealth, are, nonetheless, showing a net increase in real wages.
A thousand dollars in wages in 1989 has increased a real $74 for engineering project managers and slightly less, $61, for construction project managers. Not shown is the situation of construction craftspeople but important as a side note. Craft wages have declined in buying power by 0.2 percent over the past five years. That decline should concern project managers and firm executives alike. It is a trend that cannot continue without negative impact on the industry in the future.
DIRECT COMPENSATION TRENDS
Listed in Tables 1 and 2 are the five-year histories of average base salaries, excluding bonuses, for project managers within engineering and construction services. With the median income of households at $30,126 and families at $35,939, the most obvious conclusion from these tables is that project managers, though they may believe themselves undervalued in the market, are in the upper income brackets of wage earners. A more subtle trend, however, is that project manager average wages are remaining somewhat stagnant. This usually occurs as a result of turnover in positions and may suggest an exodus already of talent to other industries.
Figure 4. Project Managers (Construction) Net Increase per $1,000
Figure 5. Project Managers (Engineering) Net Increase per $1,000
|Table 1. Construction PMs Salary Averages|
|1732 Project Managers||1989||1990||1991||1992||1993|
|Construction PM I||$43,521||$45,061||$47,794||$48,639||$51,303|
|Construction PM II||$52,025||$51,824||$55,797||$56,858||$59,296|
|Table 2. Engineering PMs Salary Averages|
|815 Project Managers||1989||1990||1991||1992||1993|
|Engineering PM (Civil)||$50,417||$51,759||$54,947||$57,053||$57,298|
|Engineering PM (Elec.)||$54,879||$56,914||$62,824||$63,037||$61,461|
|Engineering PM (Mech.)||$55,352||$58,120||$61,847||$61,118||$60,388|
Table 1 shows the five-year history of base salaries for construction-related project managers. Note that the distinction between project manager I and project manager II is primarily in the size and duration of projects. PMI typically handle one or two smaller projects while PM H will manage multiple projects of significant size.
Figure 6. 1993 Project Manager Bonus Allocations
The base salaries in Table 2 are for consulting engineering-based project managers. It is broken out by discipline since there can be significant differences between industrial versus commercial engineering duties. In most consulting engineering firms, the equivalent engineering level for project manager is Engineer VI.
1993 DIRECT PAY (BASE PLUS BONUS)
Figure 6 shows the 1993 average base pay and bonus for each type of project manager. Construction project managers have slightly higher bonus allocations. I believe this difference can be explained primarily by the methods used to determine bonus moneys. Construction bonuses tend to be tied to project profitability while engineering project managers tend to have their bonuses allocated by longevity and firm profitability.
HEADING OFF A BRAIN DRAIN
In conclusion, I return to my initial statement at the beginning of this article. The project manager is certainly one of the key positions in relation to firm profitability. Hence, it behooves firm executives to keep a close eye on the level of reward they are providing these key people. Competent and experienced project managers are an important component of industry productivity and their broadly valued skills make them particularly susceptible to being picked off by competing firms and industries.
The results of this brief compensation analysis indicate that project managers are doing better than some and worse than others during the economic slowdown of the past five years. The general trend, however, is not good and should command executive attention. If engineering/construction project managers fall 1.5 to 2 percent below the national averages for commensurate duties in other industries, there could be a brain drain away from design/construction. The flatness of the average wages nationally may evidence that this trend has already begun.
Editor's Note: We are grateful to Mr. Phillips, who has provided this special compensation analysis for PMNETwork. Should you wish further information about PAS, Inc., and its information services, you may call or write:
75 E. Henry Street
Saline, Ml 48176
Ronald C. Phillips is co-owner and manager of PAS, Inc., a survey research firm specializing in compensation and benefit information for the engineering and construction industry. With major expertise in compensation, organizational behavior, and survey research, Mr. Phillips has published articles in a variety of publications, including The Journal of Training and Development and Utilities Fortnightly. He has a B.A. from Phillips University, D.B. from the University of Chicago, and has done post-graduate work at the University of Michigan. He is a member of the American Society of Training and Development and of the American Arbitration Association.