Channel Payday

That's the big story from the 2007 CMP Channel Salary Survey. In fact, total pay for all tracked positions in the channel has increased dramatically over the past two years.

The compound annual growth rate for total compensation of executive/corporate managers from 2005 to 2007 was 14.8 percent, for tech managers was 13.7 percent, for tech staff was 16.2 percent and for sales staff was 15 percent. The last time the annual change in pay was measured for these positions, 2004-2005, the numbers were 9.9 percent, 9 percent, 4.8 percent and 11.6 percent, respectively.

Average executive or corporate managers' salaries hit $162,204 in 2007, up from $123,010 in 2005, while average sales staff salaries hit $104,526 in 2007, up from $79,080 in 2005.

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On the technical side of the fence, average engineering or consulting practice manager salaries hit $107,403 in 2007, up from $83,150, while average tech engineer or consulting staff hit $84,816 in 2007, up from $62,800.

"Our payroll is our largest expense and the one that is going up the fastest," said Rick Chernick, the CEO of Connecting Point Computers, a Green Bay, Wis.-based solution provider that has been in business for 54 years. "We are paying people more today than we ever have to retain them. We are well aware of what is going on out there in the market in terms of the competition for talent. The bottom line is every reseller has to look at their top people and figure out how to keep them. It costs too much to go out and find new people and bring them up to speed on the business and your go-to-market strategies."

While there's always sampling error to consider, the fairly consistent rise across all four historically tracked roles (executive/corporate managers, tech managers, tech staff and sales staff) confirms that there has been a significant upward trend in pay across the channel. That upward trend was expected to some degree because of forces observed in the general economy. In the fallout of the dot-com bust, worker productivity had steadily risen for a longer than usual period of time before wages began to catch up. Also, business activity in the channel has been increasingly healthy over the past few years, which would tend to further boost total compensation, including commissions and bonuses, which is the measure of income that CMP Channel has been collecting.

Solution providers say the high salaries are the result of the age-old capitalist supply and demand maxim. They said there is simply not enough strong talent to fill open positions at fast-growing solution provider shops. In fact, solution provider executives admit it has never been more difficult to get good people.

Chernick, for his part, said that he was forced to use a headhunter for the first time in 25 years to bring on board a high-end Cisco IP communications support engineer and an inside support rep. "The market was diluted to the point where we needed to hire a headhunter to get fresh blood," he said. "The local talent pool just wasn't we wanted. So we had to pay for it."

To make matters worse, Chernick said that not only are VARs competing against one another for hot talent, but also with vendors, who have deeper pockets. Those vendor partners are even trying to snatch away hot talent from the very VARs who are carrying the vendor torch.

One advantage solution providers have in competing against vendors for talent, Chernick said, is emphasizing workplace flexibility. "We treat our people good," Chernick said. "We're flexible and value the family. If they've got to go to a soccer game, they can go. If you work for a big company how are you going to do that? You are going to be flying all over the country."

Next: Employee Retention—It's Tougher Than Ever To Keep Talent Employee Retention—It's Tougher Than Ever To Keep Talent
Despite historically large increases in compensation, the No. 1 complaint staff and department managers have is that their total compensation is not competitive. The only type of employee with a bigger gripe is tech managers, who are only slightly more often concerned that advancement opportunities are inadequate. Sales managers in California and the rest of the western U.S. certainly would have a valid complaint about compensation. They get only 82 (West) to 84 (California) percent of the average for all U.S. channel sales managers, whereas most other positions in this region collect well above the national average.

Overall, 96.5 percent of channel managers and staff can find at least one reason they'd consider leaving their companies. Only 3.5 percent said they had "no desire" to leave their companies.

All types of tracked employees stay at one company an average of only 4.7 to 7.1 years, with technical people at the higher end of that range.

So what keeps employees around? To nonmanagerial employees, they want clear, documented goals with measurable standards of achievement. Companies that do so retain their staff 14 to 30 percent longer than those that don't. Simply having a formal review process carries no material association with keeping employees longer. However, while the majority (75 percent) of channel companies have a formal review policy, less than a third provide clear goals for employees and managers.

Staff from all core departments—sales, tech and customer support—stay the longest at companies that contribute to their retirement fund. For managers, having access to college tuition reimbursement and commissions tied to deals/sales are the benefits associated with the longest manager retention.

Chris Case, president of Sequel Data Systems, an Austin, Texas, solution provider, said one of the keys to extremely low employee turnover at his shop has been a "pay for performance" commission culture. "Our employees are rewarded on every single deal. They get a piece of every single deal whether they are a salesperson, engineer, billable guys or managers. They are paid commission at some level. That is our model. We want to make sure people are driven."

Case said the pay for performance culture has kept turnover low at Sequel but he acknowledged employees hold the cards. "From a hiring standpoint, the last year has been an employee market," he said. "That correlates with the drive up in salaries. It's hard to find people and pay them what we want to pay. The pool of talent is a lot smaller."

Pay Premiums
Vendor-specific certifications don't seem to make a large difference in anyone's salary, the survey found, but for tech staff, one or two can increase pay an average of about 1.3 percent. With the third certification, pay increases an average of almost 4 percent.

Overall, experience pays, but for none so handsomely as for sales staff. Those who have been in the industry for more than 10 years make an average of 43.4 percent more than the average salesperson.

The survey also found that an MBA is a good investment for business owners or partners, corporate or executive managers and sales managers. Owners clear about 50 percent more income than average when they have an MBA. For executive and corporate managers, the premium is 35.7 percent. For sales managers, it's 34.5 percent.

All owners, managers and tech staff benefit from a master's degree in a technical field. However, all but the technical people benefit more from an MBA. A graduate technical degree gives tech managers a 16.4 percent pay premium and tech staff a 15.6 percent premium.

Arnie Bellini, who has an MBA from the University of South Florida and is CEO of Tampa, Fla.-based solution provider ConnectWise, said ideally every solution provider owner and entrepreneur should have an MBA, because it helps them tie the business and technical sides of their organizations together. "And it's not until you tie it all together that you can run your own business."

Looking down the road, Bellini sees the high salaries driving more young people into IT careers. That in turn will result in an increase in the IT talent pool and a leveling off of IT salaries. "Salaries are going to come back down to normal increases," he said.