CPOs Are Earning More, But Are They Earning Their Fair Share?

auctions

The good news: chief procurement officers (CPOs) are making more than before – nearly $500,000 per year on average, without factoring into account equity-based compensation.

The bad news: CPOs have a much greater, increasing list of responsibilities associated with the role for compensation that is nearing the rate of inflation.

The Center for Advanced Purchasing Studies and Korn Ferry have updated their CPO compensation study. The findings suggest that average compensation – salary plus bonus – for CPOs has increased to $467,153 in 2014 from $369,556 in 2006, a more than 26% increase. Perhaps what’s most curious is the total number of resources reporting to the CPO increased by an average of 50%, to 490 from 247, during the same timeframe.

But how does CPO compensation compare to chief finance officer (CFO) compensation? Not well, by comparison. Studies by Treasury & Risk found that median compensation – including equity incentives – for Fortune 500 CFOs increased by 21.4% between 2009 and 2010 and 9% between 2010 and 2011, to a total of $5.1 million.

Of course, there is far more to compensation than just the numbers as reported by surveys on partial samples, which can vary from year to year. Consider the following observations:

  • While industry has some importance in compensation – consumer products CPOs make twice the total compensation of utility CPOs, according to the research – what is more relevant is size of organization and the emphasis on procurement generally in the firm
  • More consulting partners have gone in-house to run procurement organizations in recent years than before. Given typical compensation levels within the professional services industry, and the unlikely lateral career changes by these executives, compensation levels inside many organizations for CPOs can now mirror that of consultancies at the partner or senior partner level – between $500,000 to $1 million, or even higher in select cases
  • Anecdotally, incentive compensation, such as stock options or restricted stock, appears to be on the rise for CPOs at certain firms and industries, although this is not reflected in the general reporting

Want to learn how to be a CPO or to be more effective in the role? Read Spend Matters Chief Procurement Officer and turn your attention to the “Research & Insights” section.

First Voice

  1. Peter Smith:

    Is it possible for readers to get hold of a copy of the compensation report?

Discuss this:

Your email address will not be published. Required fields are marked *