Are supply chain salary spikes shortchanging potential?

HPN: Will you share your thoughts about the compensation progression overall against the backdrop of everything that has happened in the industry within the last decade? Does the growth reflect something in the profession or something else? Why?

Bob Simpson, President/CEO, LeeSar, Fort Myers, FL, and HPN editorial advisory board member

Supply Chain executives have been poorly compensated for many years compared to their counterparts in private industry. Private industry has always realized the value of the supply chain to the bottom line. It is only in the past few years that healthcare has realized its value. We really need some kind of shakeup in compensation to get these leadership positions well into the $200,000 base salary [range]. Supply Chain is being asked to do more and more without receiving the compensation to go along with the added responsibilities. The actual title may not fit with all the added areas we are being asked to manage.

Jean Sargent, Principal, Sargent Healthcare Strategies, and HPN editorial advisory board member

I believe the gap has widened between the Supply Chain management and staff who have remained loyal to a single institution and those who have moved to other organizations. Mergers and acquisitions have also played a part in the gap between the senior leaders and the day-to-day operations management and staff.

Tom Hughes, Executive Director, Strategic Marketplace Initiative (SMI), Scituate, MA

I would think that within the last 10 to 15 years we have gone from 4,000 to 5,000 freestanding hospitals to 500 to 600 healthcare systems. Because of this consolidation, some of their Supply Chain executives with titles of Vice President or Senior Vice President are responsible for billions of supply chain cost. I personally know that some of these executives are making $400,000 to $600,000, and a few even higher.

Joe Colonna, Vice President of Supply Chain, Piedmont Healthcare, Atlanta, and HPN editorial advisory board member

I am assuming that these salaries are an average across each category? It would be interesting, especially in the executive roles, to break out salaries for people who came from outside healthcare from those who grew up through healthcare roles. I would not be surprised to find that those who came from outside healthcare have an expectation of a higher salary, while those who have grown up in healthcare have a lower expectation. I think we may find this to be true of the people who are hiring for these roles as well.

John Mateka, Director of Business Operations, Consolidated Service Center, McLeod Health, Florence, SC, and HPN editorial advisory board member

It appears the wage is growing as are more senior positions. Healthcare is an unusual industry. They tend to like to keep parity among levels of management, CEO, CFO COO excluded. This means Directors, VPs and Managers typically all fall into the same range. Thus, as more and more Supply Chain folks become VPs, etc., and assume expanded roles with more responsibilities, their pay goes up.

Are they earning enough or simply earning what they’re worth? Why?

SIMPSON: These positions are not being compensated for what they are worth, and the industry should work with an independent evaluation group to determine the true value of these positions.

SARGENT: This is a complicated question. Pay is very inconsistent. Pay for a go-getter that is skilled and has many years of experience may not be what it should be based on the type/size of hospital. The expectations of the supply chain vary as widely as the salaries.

HUGHES: That’s a great question. I don’t know the answer, but I think the question itself suggests that it’s not just the scope of responsibilities but also the “talent” necessary to pull it off successfully.

COLONNA: “Enough” is a relative term. I believe you should receive compensation that is equal to the value you bring to the organization. A Supply Chain executive should bring much more than the ability to “save money” but should be seen, like any other executive, as part of the team that is driving a greater strategy and should be compensated equal to the other executives. Similarly, other roles within Supply Chain leadership teams should be recognized and compensated accordingly.

MATEKA: I believe they are earning a reasonable and attractive rate.

How much do these numbers reflect the importance of Supply Chain as a service profession as well as an integral component of hospital and patient care operations?

SIMPSON:These numbers do not reflect the true value of these positions. I believe a great question would be, How much added responsibility have you taken on over the past three years and how were you compensated for it?

SARGENT:The numbers do not equate to the importance of the position in regards to supporting patient care.

HUGHES: Many CEOs, CFOs and COOs do not understand nor appreciate the value of supply chain or what its potential can bring to the healthcare system. That’s partially because they did not get a course in supply chain in their health care administration program.

COLONNA: I will say that much of this is driven by the goals of the larger organization. If Supply Chain is simply seen as a transactional department, and the expectations of the senior leadership team is the same, compensation is likely to be lower.

MATEKA: Supply Chain finally is recognized as a significant component of operations and the bottom line. CFOs COOs and CEOs are seeking talent and abilities to manage a larger swath of the service piece, to help customer satisfaction — both patient and physician — and remove costs out of the system

We continue to find the compensation gulf between male and female supply chain executives, leaders, managers and professionals remains large — and consistently wide. Short of addressing fairness, how justifiable is that mindset, given all the bright minds doing great work in the field?

SIMPSON: There are no excuses for the large gap between men and women’s compensation. We evaluate our compensation packages annually, and they are gender-blind. [These results are] sad, very sad.

SARGENT:I find it interesting that there are many great female supply chain professionals who are recognized by the industry as such; however, their pay does not reflect their value in the same manner as their male counterparts. For example, Karen Hippensteel was president of AHRMM in the 1980s [1985-1986] breaking into the men’s club, and is revered as a change agent. Mary Starr was the youngest president [1999] in addition to being female. I do not believe there is justification for anything less than equal pay for equal work on all levels of any industry.

HUGHES: Unfortunately, this is a problem for many supply chain organizations. From my perspective, 12 years ago SMI membership was made up of about 5 percent females. Now it’s over 30 percent. That’s a huge change! I hope that this improvement will go a long way to narrow the gap.

COLONNA: I was raised by a single mother, and for most of my career I have worked for and with many highly qualified female leaders. When I recruit for positions, the gender of the individual plays no part in my consideration. So while I am not ignorant of the gender gap, I am perplexed by it. Also, more and more, the salaries for positons are dictated by H.R. guidelines, J.D. standardization and automated systems. So, while clearly there are still differences, it would seem that it would be harder to justify your decision to pay one qualified candidate less then another. I am wondering if this is not just a function of salary differences but also a hiring gap.

MATEKA: Healthcare is somewhat unique relative to H.R. and recruiting. It simply is a matter of what the market will bear, or what will it take to secure a qualified candidate in your respective geography. To that end, men are harder to recruit, thus are receiving slightly higher pay. What a recruited employee makes is generally based on what he or she needs to take the job — regardless of gender. It’s market-based. Experience plays a major role in wage determination in healthcare as well. Someone with 15 years of experience may be offered 75 percent of the pay grade where someone with only five years of experience may be offered 25 percent of the pay grade, regardless of gender. Thus with women just coming in to the leadership roles, they have less experience.

What other noteworthy trends did you spot among HPN’s results and what makes them significant?

SIMPSON: Supply Chain executives are out-growing their titles and base compensation packages, and this will continue to be the case during the near future.

SARGENT:We have all seen that the talent pool is limited, which drives the salary. We are keeping ourselves in this salary range due in part to the large number of us who have worked our way up through our organization with limited increases, and that we have not done a good job in mentoring those to replace us as we retire to take the department to the next level.

HUGHES: Commercialized supply chain function or getting out from under the not-for-profit budget restrictions imposed by human resources is very exciting. So as you increase revenue and profitability you can attract top talent with competitive salaries.

COLONNA: What is interesting is that two roles show a reverse gap — “O.R. Materials Manager/Business Manager” and “Value Analysis Director/Manager/Supervisor/Coordinator.” I think this reflects two areas where many leaders come from — Nursing and Nursing Leaders. We value the expertise and background of nurses in these roles, and while not all nurses are female, it is a profession that has been majority female for decades. I think that this is an area where the need to pay accordingly for expertise is more important than biases.

MATEKA: I believe we will see a greater migration of physicians into the leadership role of Supply Chain officers. They will be in a position to be over both drugs and supplies along with technology and equipment. They will have procurement talent, such as pharmacy, technical and logistics professionals to handle the tactical stuff, and they will drive the strategic.