Good things come with big packages

Home Channel News, Oct 23, 2000 by Kaylene Pena

NATIONAL REPORT -- A tight labor market coupled with the explosive growth in the number of home improvement stores has retail wages on the rise, according to the latest findings of an annual compensation survey.

According to the 2000 Multi-Outlet Retailer Compensation Survey conducted by New York-based human resources consulting firm William M. Mercer, retailers in general -- and home improvement dealers in particular -- are willing to pay higher salaries and broader benefits to retain and attract employees.

The study compared the salaries of various store and corporate level positions among 13 retailing segments -- including building/hardware/home improvement, apparel/accessories, gas/convenience, electronic/appliance, grocery/supermarket and specialty retail. Results of the survey showed that not only are employees in the hardware segment getting better compensation packages than in the past, but the packages are better than most of their colleagues' in other retail sectors.

The study looked at 57 positions among 119 retail organizations, involving 318,264 employees. It found that the median annual base pay for building/home/hardware store managers is $61,500, more than twice that of apparel/accessories store manager's annual median base pay of $30,000.

"We increased the salary to get people in the door," said Shawn Abeam, director of public relations at 84 Lumber, where store managers make between $48,000 to $100,000, not including performance-based incentives. The prooriented lumber and building material retailer, which operates nearly 400 units nationwide, recently added $2,000 to the base salary of its management trainees, and also offers a myriad of perks and incentives to attract and retain its employees, including trips, merchandise such as bicycles and camcorders and tuition programs.

"We're experiencing tremendous growth right now -- we're scheduled to open 30 new stores this year," Abeam added. "It's our ability to offer a management-trainee candidate his or her own store within two years that has been our most attractive feature."

Not surprisingly, of the companies that is most responsible for the burgeoning number of new stores -- Home Depot -- said that its median store manager salary was above the survey's mark. The retailer's compensation package is always changing, partly due to the labor market but also because of changes in the cost of living and industry standards, according to spokesman Jerry Shields, who declined to provide specific figures.

But Home Depot, like other successful, publicly held retailers, has an additional weapon in its compensation package: stock options. At its annual meeting in May, for instance, Lowe's shareholders approved a new employee discount stock purchase plan. Adopted by the board of directors in December 1999, the plan allows eligible employees to purchase stock for 85 percent of its market value. According to the proxy statement distributed prior to the meeting, the stock purchase plan was drafted specifically with the intent of "assisting in recruiting and retaining the services of employees with ability and initiative."

While the growth in salaries and compensation is being driven by larger, expansion-oriented chains, the effects are beginning to be felt by smaller dealers as well. Salaries at 64-unit AGO Hardware, based in Farmington, Mich., are below the survey median, according to Bob Dunlap, director of operations. But the retailer has been forced to increase compensation packages and has increased the frequency at which it offers pay increases to existing employees.

"We have changed because of the market," Dunlap noted. "We raised the ceiling of our introductory offer. It was too hard to get people at the old rate."

According to Steve Gross, lead employee compensation consultant for Mercer, ACO's situation is becoming more common as the tight labor market has shifted the balance of power from the employer to the employee.

"The labor market has gone from a seller's or employer's market to a buyer's or employee's market," he said. Gross said he anticipates that the balance won't return to the employer unless there is a recession. Even then, other changes that retailers have made to make their companies more attractive -- such as employee's expectations about the workplace environment -- may be permanent. "Once you give people a positive work environment with things like flexible schedules, better training and treat them well, they won't go back to being subservient," Gross said.

Not all companies, however, have felt the pressure to increase their compensation packages.

"For us, salaries are based on the sales of the store," said Bruce Riedle, treasurer of RP Lumber, a 22-unit dealer based in Edwardsville, Ill. "You'd pay a guy one price if his store does $10 million and a different price if the store sells $2 million."

The Mercer study also found that managers responsible for fulfilling the particular mission of a specific retail segment are the ones who receive higher salaries, often even higher than their counterparts in other segments.