Executive Pay for GCs – how does your compare?

I recently joined a great organization – Construction Financial Management Association CFMA [www.cfma.org] made up of people who do the work I most love – slice and dice the numbers for construction in multiple ways. Although  the target market for the organization is “construction financial professionals” who tend to work for large accounting firms or as controllers and CFOs of large, multi-million and multi-national, corporations, I’m finding valuable information for use with remodelers.

The March-April 2009 issue of the association magazine, Building Profits, has an interesting article entitled “2009 Contractor Executive Pay.”  I was interested to learn the following facts based on their survey.

“As of February 2009 the annual unemployment rate for construction jumped to 21.6% (the highest rate in the past 26 years).”

“The CPI [consumer price index] ‘for the 12 month period ending December 2008 rose 0.1 percent. “

HOWEVER, the article goes on to say that the CPI for both energy services and grocery store food prices rising 6.6%, “the largest since 1980.”  [Note:  energy services and grocery store food prices are not considered in the standard CPI because they have been considered by the government for over 20 years to be too volatile!]

“Construction pay increases have never been less than the CPI in the past 26 years”

The article continues by defining the average pay for 6 positions at the end of December 2008.  I’ve excerpted liberally from the article to give you an idea of primary job descriptions and salary ranges for executives of large commercial contractors.  Compare these job descriptions and salaries to yours as well as to those in your company.

  • Board chair is considered the company’s senior officer responsible for overall business strategy and objectives.  The average base pay was $285,000 plus an average bonus of $295,000 for a total of $580,000
  • CEO/President is responsible for day to day operations.  The average base pay was $230,000 with an average bonus of $215,000 for a total of $445,000.
  • Executive VP has second in command responsibility for day to day operations at an average base pay of $192,000 with an average bonus of $164,000 for a total compensation package of $356,000.
  • Senior VP has responsibility for one or more divisions of the company for an average base pay of $169,000 plus an average bonus of $112,000 for a total of $281,000.
  • VP of Operations functions as day to day administrator of a major ‘operational work segment’ such as commercial work.  The base pay was $142,000 with an average variable pay (performance based?) of $104,000 – both totaling $246,000.
  • VP of Finance has total responsibility for accounting functions at an average base pay of $148,000 plus an average bonus of $84,000 for a total package of $232,000.

Another interesting portion of the article defines the relationship between levels of pay at various levels of responsibility.   Over 9 years, the average VP of operations, or general manager, has earned a base pay equal to 62% of that of the CEO, while the Senior VP has earned 74%.

Last, but certainly not least in this ‘pay for performance’ economy, bonuses as a percentage of base pay have fluctuated over time, spiking in 2008, to over 57%, up from 42% in the 23 years prior to 2007.

My point in publishing the results of this survey is twofold:

  1. To share an interesting concept that there are established heirachies of pay as well as bonuses between different executive job descriptions; and
  2. To allow you to compare your pay over the past few years with those in the larger construction world.  I believe that the greater risk taken by remodeling companies justifies greater margins.  Perhaps not 50% or 60% as I saw a year ago, but at least 30% and rising in relationship to customer satisfaction and company maturity.

How does yours compare?

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