Much like barely scooting your Ford Model T ahead of the billowing 10-foot-high cloud chasing you at 65 miles per hour southeast across the Oklahoma plains during the Dust Bowl of the early 1930s, compensation levels for supply chain professionals continue to inch up in front of the ongoing pandemic aftershocks.
Some 16 months into the COVID-19 pandemic that dominated 2020 and threatens to push deeper into 2021 and residually linger into 2022, supply chain pros remain inexorably linked to the multiyear crisis. Yet even though unexpected demand spikes for hygienic and personal protective equipment (PPE) and logistics issues surrounding vaccine development and distribution, among other concerns, illuminated the supply chain’s startling fragility, supply chain pros can heave a soft sigh of mild relief as the criticisms and doubts experienced during 2020 didn’t permanently damage the infrastructure so much as light a fuse for change.
While pandemic-related compensation effects may not truly be realized until 2022 or 2023, particularly if little-to-no improvements are instituted from the analysis of the COVID-19 response, the results of Healthcare Purchasing News’ 2021 Supply Chain Compensation Survey once again offer some welcoming takeaways.
For the second consecutive year, the average salary for a Director/Manager of Materials Management/Supply Chain surpassed the six-figure ceiling, according to the survey. Department leaders reported an average annual salary of $105,693, a 4.5% gain above 2020’s average of $101,174, which was itself a larger 7.5% increase over 2019’s statistic. Yes, the growth may be leaner and slower but nonetheless significant.
Meanwhile, Value Analysis Directors/Managers/Coordinators joined the “six-digit club” for the first time, the HPN survey showed. Value Analysis leaders reported an average annual salary of $102,395, a 14.4% jump from the prior year. The question remains: Does that reflect an amplification of value analysis’ importance during times of crisis or merely an indication of differing respondent pools?
More sobering: Of the seven titles HPN routinely surveys every year, only three reported year-over-year salary increases. Purchasing Directors/Managers represent the third title that recorded a rise in salary to $74,659, a more modest 3.9% increase above $71,875 listed in 2020, but still well above the level of inflation. See the chart below for the tally.
Although not illustrated this year, the overall supply chain management compensation composite index (CCI), something of an unscientific salary stew of results derived by the average aggregate salary of all survey respondents) reached an all-time high this year at perhaps one of the industry’s lowest points (courtesy of the pandemic fallout). In fact, since 2005, HPN has recorded 10 CCI increases. Conservatively, if the momentum continues, the CCI should poke through the six-digit milestone within two to three years. This element, while more trivial than statistically significant, measures more of a subjective impression of attitude and direction.
As a continuing customary cautionary caveat, HPN advises readers that survey data and trending perspectives hinge on a variety of demographic elements that include the number and mix of respondents by job title, facility type and location and gender. For example, more senior-level executives who lead centralized integrated delivery network (IDN) operations generally will elevate salary data, while more buyers at community hospitals may push the salary data lower.
Once again HPN monitors five key trending areas, many of which are illustrated in the charts and graphs within this annual feature.
Let’s start with prominence and proximity.
Pandemic punctuation
For the second year in a row, the average annual salary for Supply Chain leaders at the director/manager level exceeded the $100,000 threshold. Granted, this can be attributed in part to cost-of-living concerns and the geographic location and organization type of the respondent. At the same time, the survey found the average annual salary for Value Analysis leaders poked through the $100,000 level for the first time.
Further, more than 61% of respondents said their 2021 salary increased from the prior year – the average being a 3.2% rise – and most respondents (88%, the survey showed) attributed the increase to job performance alone. More than 95% feel rather secure in their positions (51.5% “very secure” and 44.1% “somewhat secure”).
These data seem to indicate a need for and value of the supply chain and value analysis functions during a time of crisis and heightened demand for products and services.
Several supply chain leaders agree.
“There is no doubt in my mind that the pandemic highlighted both the fragility and the importance of the global healthcare supply chain,” Shaun Clinton, CMRP, Senior Vice President, Supply Chain Management, Texas Health Resources, Arlington, TX, told HPN. “I think we will continue to see a trend where salaries will continue to rise – probably not quickly enough – as organizations look to attract top talent in roles now seen as critical to business continuity. It maybe didn’t feel like it every day in 2020, but it really is a great time to be in supply chain!”
Brian Dolan, CMRP, CRCST, LSSGB, Vice President, Resource Management, Bayhealth Medical Center Inc., Dover, DE, remains equally as sanguine.
“The profession will continue to see growth in compensation as the value of the supply chain is continuing to be boosted by new needs in the organization,” Dolan noted. “As the supply chain is seen to be more a strategic asset, and closer ties are illustrated to the IHI quadruple aim, we will see these roles demand higher education, certification, and expertise – thus, compensation increases. The pandemic was a catalyst for some organizations that did not know the value proposition. Still, many were already down the path towards advancing the supply chain to the C-suite. The return on investment and return on quality are significant drivers. As our profession becomes more vocal and assists their hospital administration in seeing the value proposition, we will continue to see escalations in the compensation models used today. Our profession’s identity is still forming and needs continued focus and standardization in practices to solidify our stance nationally.”
Dolan’s organization earned HPN’s 2021 SPD Department of the Year last month.
Value Analysis Evangelist Barbara Strain, CVAHP, Principal, Barbara Strain Consulting LLC, Charlottesville, VA, urges supply chain leaders and pros into action – even amid the pandemic.
“On a personal as well as professional/organizational level, seize the moment created by the pandemic,” Strain said. “Who or what department stepped up, how were problems solved, were new collaborations made, were processes improved? The list is long. For the past year healthcare influencers have been saying, ‘don’t let a good pandemic go to waste.’ Next to clinicians and physicians, Supply Chain, Value Analysis, Purchasing and Contracting have been like the duck holding their head high while their feet are paddling madly to get to where they need to go. New department structures, roles and salaries should be top of mind.”
Still, Mary Starr, Vice President, Member Care, Greenhealth Exchange, who has experience as a hospital supply chain executive and a group purchasing organization (GPO) executive, questions the singularity of something like the pandemic affecting compensation levels, and in turn, points to a duality.
“There likely isn’t a single factor causing either the average salary gains or the feeling of job security,” Starr indicated. “But I think two major factors impacting salary are consolidation and a higher profile/value recognition for the supply chain leadership position. The industry recognizes that real cost savings is not about getting a few pennies off of your gadgets, but instead working with clinicians to calculate costs and quality that are measured by improved outcomes. This approach entails a high skill set, and therefore, requires a higher salary. I also think the same is true for a value analysis position. But I would add that in the future, value analysis will be the area that really stretches skill sets when components such as environmental, social and community impacts are elevated in importance and become more integrated into hospital performance measures.”
Hospital type, general location
Data consistently show that the higher-compensated Supply Chain executives and professionals seem to entrench themselves at larger urban not-for-profit hospitals on either coast, followed by suburban not-for-profit hospitals and then investor-owned facilities with government facilities inserted for good measure. (See the charts and graphs on “SALARY BY REGION” on page 58.) Some of that may be due to for-profit hospitals comprising a small percentage of the overall hospital market. But surely the pandemic plays a role?
Experts remain mixed.
“The larger centers make a more significant investment in the supply chain as its value proposition is more apparent to executives,” said Bayhealth’s Dolan. “Their size allows for the scale of the roles to dictate higher compensation levels. A strong supply chain equally benefits all entities. Still, it appears in the market that larger urban organizations focus more on the supply chain.
“With the shift in focus to nonacute [and] telehealth, the supply chain will focus on more robust distribution networks and tighter controls,” Dolan continued. “This will evolve the necessary expertise for the supply chain professional to think about the continuum of care versus solely [within] the hospital walls. This was always present, but COVID did reflect an increased need to develop critical competencies in these areas. I do not think it will affect the compensation level but will create different roles [with] more focus on procurement/sourcing and distribution/planning.”
Strain acknowledges that generally, the location of the job influences salary more than any other reason. But not always.
“You may move to a different state or region to become Chief of Supply Chain while earning less with résumé/career building in mind or you want a different personal lifestyle experience versus professional job hopping in a more affordable market,” she reasoned. “This has more to do [with] where the care is or transitioning to than where the job is.
“I did not think I would be using the ‘double-edged sword comment,’ but here it is,” Strain continued. “On one hand a shift to non-acute care and telehealth may mean those with the expertise and infrastructure will succeed, which may not be what supply chain is typically known for. On the other hand, this is an opportune time to be the disruptor in your area as a business strategy. This requires the right leader, in the right place, with the right team – new positions, new titles, new skills, which lead to salary reviews.”
Greenhealth’s Starr offers something of a horizontal rationale bisecting a vertical one.
“Generally speaking, for most sectors – not just healthcare – organizations located in an urban setting have higher pay scales,” she surmised. “Additionally, the larger hospitals with more complex supply chains are typically located in urban areas. Therefore, I think it’s a combination of the challenge and the location that attract high performers. And the results of both location and skill set required result in the higher salary averages for these locations.
“As for the for-profit hospital systems,” she continued, “most of these organizations have more centralized supply chains. As a result, the higher-skilled – and therefore, higher-salaried – positions are working at the corporate level with the individual locations having supply chain professionals that execute on the overarching strategy.”
Education, training, certification
Not surprisingly, the higher education attained – including degrees, certificates, skills and strategic thinking – seems to propel the income trajectory. In many cases, experts concur, but it requires patience more than patients.
“I had someone tell me once that the reason why they liked to see someone with a graduate degree apply for a role is that they probably had the discipline that comes with the rigors of education,” observed Texas Health Resources’ Clinton. “I tend to agree with that. And now that Supply Chain programs abound in many universities, there should be encouragement from those of us that have been doing this for a while to the next generation. Certification is important — but it really needs to be in conjunction with a well-rounded education plan. Experience is a great teacher, but it can be a really slow one!”
Starr wonders whether high performers already represent those who seek additional education and certification.
“Education and certifications can certainly enhance one’s ability to perform in a position, but those alone are no guarantee of a better position or salary,” she said. “I think the same salary/position drivers in other industries can be applied here. You need the education or certification to gain the technical or management knowledge, but the ability to measure information and make decisions to move work forward, anticipate and mitigate risk, as well as strong communication and work ethic are critical for success regardless of education.”
Much depends on the organization itself, according to Dolan.
“The organization can set the tone for education,” he noted. “Some organizations do not consider education level in the compensation model unless required for the role. For example, suppose an organization hires an individual with a doctorate into a role that requires a bachelor’s degree. In that case, the compensation level is not immediately impacted by their higher degree.
“Education/certification should factor in as an example of an individual’s dedication to professional growth,” Dolan said. “The organization should develop detailed career progression models that tie advancement to these factors and experience, involvement in initiatives, etc. Certification is a specific example of this as it demonstrates value and commitment for the organization. These must be detailed in a well-constructed career model tied to the organization’s objectives.”
Strain expresses caution about reading too much into the data, however.
“Overall, job descriptions for the types of roles for middle management positions collected by the survey may state ‘must have’ an associate degree to apply with a ‘prefer’ bachelor’s or higher degree,” she said. “If the position has historically been filled with associate-degreed individuals the salary may remain organically lower and influenced by other factors – geography, salary ranges, titles.”
Training and/or certification also vary by type of role, Strain insists.
“Based on personal experience, certain roles require training beyond a degree – laboratory, pharmacy, radiology, physicians, to name a few,” she said. “In turn, some positions require that individuals hold a certification [that] can be accomplished either by taking a prescribed set of curricula or passing a certification exam from a recognized professional organization or federal/state/county other program. Do job descriptions in Supply Chain, Value Analysis, Purchasing say ‘prefer’ or ‘must have,’ and do those with CMRP, CVAHP and other designations get the job and/or earn more?
“A Supply Chain trend that started as a groundswell in the mid-2000s was a deliberate hiring of individuals from outside healthcare who have advanced degrees/training/certifications in Process Improvement, Project Management, Analytics, LEAN/Six Sigma, to elevate how Supply Chain can remove waste and quickly contribute to improving the delivery of care,” she reflected. “These hires come with a salary to assure they stay long enough to affect your business strategy.”
Age, experience, longevity
Logic states that the more experience you gain over time (think age now) and the longer you remain with an organization, the more dollars, influence, perks and power you can earn. Yet, some seem to achieve similar outcomes by hopping around facilities in one segment (provider) or even multiple segments (GPO, supplier).
The consensus? No sure thing either way.
“My experience is that moving periodically is the trigger to higher salary gains,” Starr indicated. “It is unfortunate that strong employees are not rewarded as highly for staying at an organization as they are for moving to another. I think much of this situation is caused by budget or human resource policies related to annual increases. On the other hand, changing jobs too frequently will impact your reputation, and doesn’t allow an individual to demonstrate that they can make big, strategic changes [that] have a lasting impact on an organization’s success.”
Dolan agrees somewhat.
“Salary and compensation tend to increase when you transition roles,” he acknowledged. “Most organizations adopt a standard promotional rate for internal team members. These rates can be significantly lower than those moving to different employers. You can see an offer that is substantially higher depending on the applicant’s role. There may be some variations in internal equity that play into the salary point. Employers want to ensure that hiring someone into a role does not go over a particular percentile within the pay scale, so an applicant does not max out too quickly for compensation.
From a team and organizational standpoint, I would instead incentivize stability and longevity as with transitioning of leaders comes the counter to stable and productive environments,” Dolan countered. “Teams feel it with changing leadership direction. The organization feels it with a shifting tone of the department’s service. A professional may seek alternative employment if their current organization is either not prepared for the role they want (i.e., chief supply chain officer) or held tightly to the compensation manual.”
Clinton, on the other hand, flips the sentiment.
“Personally, I’ve been fortunate enough to be able to get promoted without having to move around,” he chimed. “Which is how I like it. There is a lot to be said for staying put, embracing the hard tasks, and taking a long-term view of your career. Granted, no one should ever have to remain in an untenable situation, but the ability to learn the culture of a place is not something you can do quickly.”
Strain looks at it from economic and human resource perspectives.
“Through personal experience, there is a disadvantage to longevity at one organization either after a certain number of years or when there are economic changes overall, e.g., late 1970s or the 2007-2009 era when recession affected markets,” she explained. “If it is the former reason, when new hires are made into similar roles the salary is commensurately higher. Those who have been in an organization longer can sour the environment, talk behind their back to others or may force them to leave so they can have another go at a salary/title bump.
“Reasons again can be economics,” she continued. “Pay range changes that may not affect incumbents, or the new hire’s salary at their previous place of employment may not be matched, and they settle at a lower value because of the role itself. Also, the education/training/certification qualifications may be equal but the total number of years of experience may account for salary differences within a pay range.”
Strain points to HR policies that can exert pressures on the hiring and compensation process through role and salary assessments they perform based on four factors:
• time frames that fit their organization, state, or federal established schedules
• when there appears to be a disparity in those filling a role
• a new role is required
• a case-by-case basis when asked by a department or service-line management.
“These surveys are customarily performed by geographic region by role type based on the marketplace in which these positions occur, e.g., healthcare,” she continued. “This factor is important when establishing your department organization structure, the roles that will fill out the positions and most importantly what title you give these roles. Employees may feel a vote of confidence and importance by their new title, but if HR cannot find a role match when performing the human resource assessment and can only slot in a close match, you and the employee may be caught in a salary vortex. This could be another pain point that may be influencing the HPN Salary Survey.”
Gender
Men continue to earn more than women across the board, the survey shows, even as the gap between them periodically has narrowed and widened over the decades. One year the survey saw women overtake men, seemingly indicated a barrier broken until further analysis revealed from the survey demographics that more women responded that year than men.
Still, the gender-based compensation gap remains like the oxidation of metal. Experts express frustration on the lingering effects and the lack of any kind of momentum toward parity.
Policies and procedures, regulations and rules can help, but something more meaningful may be needed, Dolan advises.
“Based on my experience, the equity equations that are applied towards the assessment of salary negate the inclusion of gender as a variable for pay rate assessment,” he noted. “The equation is based on years of experience in the positions held – relevant to the role or leadership demonstration/history. The differentiator I can see here is that if we are employing [fewer] women in these roles, their experience acts against them in obtaining fair compensation. Until we push for women in careers in the supply chain, we will continue to see this inequity. [Until] there is a more concerted effort to move women into leadership roles, we will not overcome the gap.”
Starr focuses on the fundamentals – if not the stereotypes – that can drive these decisions.
“I think the gap is caused by more than one factor,” she indicated. “Women often take time out of their career to have children, which puts them behind their male counterparts. Additionally, I think many women either don’t comprehend their worth, or are uncomfortable negotiating on their own behalf. This seems counter-intuitive given that strong negotiation skills are a job requirement here. But negotiating for a piece of equipment versus your own salary is very different. Also, I think some companies have an expectation that women either will not – or do not – command the same salary as a male. I am not saying this is right, or true in all cases, but like so many other cultural inequities, I believe this thinking can still exist and will take a long time to change.”
Clinton yearns for an easy solution to this lingering problem.
“There are so many variables, but I think it will just take desire on the part of leaders to narrow and eliminate this gap,” he said. “There’s no good reason for it to exist, and since so many of our organizations utilize similar benchmarks to determine market rates, it just should not continue showing up as a gap.”
Strain places gender in context of other concerns already explored.
“If the reasons previously discussed account for salary disparity are equal, [then] is gender identity the last frontier?” she asked. “If a person has none of the other elements exerting pressure – location, education, training, certification, longevity, experience, age [then] is unconscious hiring bias the difference?”
Strain cites a February 2021 article in Harvard Business Review1 that refers to the informal recruitment process where a hiring manager has a preconceived short list of up to three candidates that they know or perceive will excel in a job considered as gender dominant. In studies when the hiring manager was asked to make a longer short list of six individuals the list was less gender dominant, according to Strain. “This may make the candidate pool more diverse to hire the best person regardless of gender but is salary still an issue? Yes,” she added.
“If the hiring practices improve gender equity, then salary equity will follow, but according to experts who analyze this trend2, it’s not a sprint but a marathon,” she concluded. HPN
References:
1. https://hbr.org/2021/02/research-to-reduce-gender-bias-in-hiring-make-your-shortlist-longer
2. https://www.aauw.org/app/uploads/2020/12/SimpleTruth_ 2.1.pdf
