Not only are big bonuses a thing of the past, but so are over-inflated base salaries. Or so goes the big takeaway from Specialty Consultants' 2008 Home Building Compensation Report. The recently released study showed that salary ranges were scaled back for a number of management positions across business silos.
Division presidents in particular saw their fixed compensation shrink. For example, in 2008, division presidents at companies generating more than $100 million in revenue could expect a base salary between $155,000 and $235,000. In 2006 and 2007, that division president would've been looking at a base salary somewhere between $172,000 and $248,000.
"What we are seeing is that these base salaries are pulled into line," said James McGuire, a managing director for Specialty Consultants, an executive search firm.
During housing's boom times, the competition for top talent drove companies to increase base salaries in an attempt to attract and retain the best division presidents. WCI Communities, Pulte Homes, and The Ryland Group, among others, became notorious for giving out the fattest, McGuire said. Consequently, as the market has slowed, management teams have been downwardly adjusting base salaries to realign them with slower market conditions.
And while performance bonuses and base salaries have diminished, so have the number of division presidents. Many public builders have exited less profitable or secondary markets, leaving many management teams scrambling to find ways to redeploy their divisional leadership. As a result, a lot of people who had been in division management slots have been pushed back into sales and construction management, in some cases, or have been pushed out.
"A lot of people have had to take steps back," McGuire said. "And a lot of times your old role isn't there, so you've got to take a step out."
While heads of construction and land acquisition/development are feeling the biggest salary pinch, company's financial players' paychecks are holding up through the downturn as companies rely more on these people to manage the balance sheet. Salary ranges for CFOs at larger companies--those with revenues over $50 million--increased since 2006 and 2007. Whereas before they would have targeted a salary between $132,000 and $222,000, their average salaries are now falling between $150,000 and $230,000.
The same held true for controllers at larger companies. Their 2008 base salary ranged between $135,000 and $180,000 versus $126,000 and $156,000 a year or two ago.
Because executives have been concerned with revenue generation throughout the downturn, McGuire said that the most popular talent search has been happening in the field of sales and marketing. "Builders want people who can get out there and be hands on and train and manage good salespeople," McGuire explained.
While overall compensation packages have slimmed down because of smaller bonuses, that need for effective sales and marketing leaders has propped up salaries in the field, particularly at smaller home building organizations. In fact, vice presidents of sales and marketing at companies that generate less than $50 million in revenue have seen their fixed compensation rise from between $82,000 and $128,000 in 2006 and 2007 to between $85,000 and $135,000 in 2008.
For McGuire, all this has added up to a big divergence in compensation. Gone are the days when there wasn't much cushion between one level of management and another, where superintendents could make six figures with bonus, he explained. With various regional and divisional management structures eliminated and variable or performance-based compensation a shadow of its former self, ranks have been more clearly defined by the size of their paychecks.
For a more thorough look at compensation numbers and trends, contact James McGuire at Specialty Consultants for the full report at JMcGuire@specialtyconsultants.com.