Spinnaker Consulting Ltd. Shipbroker Salary Survey Copyright 2002 Spinnaker Consulting Ltd

Transcription

1 Executive Summary the full 34 page survey report is available directly from Spinnaker Consulting. Contact Philip Parry on Two basic types of compensation structure were observed: The Base Salary Structure relies on base salary to provide the bulk of compensation and performance related compensation. The Bonus Structure uses base salary as a minimum or safety net and uses bonus as main source of performance related compensation. The Bonus Structure is an evolving system where individual brokers and negotiate an individual reward structure. Company Size Large Medium Small Positions available Culture: Competitive brokers Corporate Base Base Stable Entrepreneurial Bonus, some Base Bonus, some Base Increasing Paternalistic Base Base Decreasing Principals brokers Corporate Base Base Base Increasing Entrepreneurial Bonus Bonus Bonus Niche market, limited Paternalistic Base Base Decreasing Base Salary Structure is prevailing compensation in system in following types of : Competitive Brokers Corporate Paternalistic Entrepreneurial: Trainees and some mature solid performers with stable revenues but little new business Principals brokers Corporate Paternalistic Traders where freight is a service (not a profit centre trading activity) Page 1 of 9 July 2002

2 Career path in Base Salary Structure Career path-base Salary Structure Director/Manager Move to Bonus Structure Move to principal Sr Broker Move to principal Jr Broker Entry level Years Page 2 of 9 July 2002

3 Base Salary Structure: Comp brokers k per yr Possible bonus Salary 0 Entry-Low Entry-Typ Entry-High Jr Brkr-Low Jr Brkr-Typ Jr Brkr-High Spinnaker Consulting Ltd. Sr Brkr-Low Sr Brkr-Typ Sr Brkr-High Dir-Low Dir-Typ Dir-High Base Salary Structure: Principals' brokers k per yr Possible bonus Salary 0 Entry-Low Entry-Typ Entry-High Jr Brkr-Low Jr Brkr-Typ Jr Brkr-High Sr Brkr-Low Spinnaker Consulting Ltd. Sr Brkr-Typ Sr Brkr-High Dir/Mgr-Low Dir/Mgr-Typ Dir/Mgr-High In the Base Salary Structure, bonus is discretionary. Criteria, although discussed, are not always transparent. Bonus calculations can be complex and may involve qualitative as well as quantitative considerations. Criteria Page 3 of 9 July 2002

4 include individual commissions, business unit performance and company performance. Bonus calculations for most principals brokers and many competitive brokers are based on a percentage of salary. For some competitive brokers, total commissions billed or other mechanisms are used. Bonuses for some competitive shipbrokers were unusually high in 2001, reflecting the strong financial performance of many brokerage in 2000 and 2001, due in turn to strong underlying markets bonuses overall are likely to return to more typical levels if they track underlying markets. Figures in the charts are based on representative levels that are believed to prevail in 2002, based on sustainable earnings historical earnings verified by current market activity. They are intended to guide in structuring systematic compensation plans and individual brokers in forming ongoing compensation expectations. They exclude unusual and one off large bonuses (e.g. one off reward for a big time charter) that would overwhelm salary and ongoing bonus expectations. Detailed discussion is provided in the main report. The Bonus Structure predominates among small and medium size entrepreneurial shipbrokers. Most entrepreneurial brokers will in fact have a mix of Bonus Structure and Base Salary Structure employees. (Indeed, a key challenge for the entrepreneurial shipbroker is finding the right proportion of Bonus versus Base Salary Structure employees.) However, Base Salary Structure employees will tend to be mature, solid performers who have plateaued in the earning potential. New employees and brokers who are progressing in their careers (i.e. the market pacesetters) are likely to be compensated using the Bonus Structure. Page 4 of 9 July 2002

5 Career strategy replaces a fixed career path in Bonus Structure. Bonus Structure: Career strategy Become self -sustaining profit centre Bonus Structure: Resulting characteristics Mobility is high. Obtain targeted incentive package. Improve compensation versus salary structure. Earn more via bonus than via salary approach Maintain and enhance profitability. Negotiate improved, yet mutually beneficial package. Security is low. (But, is security REALLY higher elsewhere?) Benefits provided by self, not employer. Risk is higher, rewards are higher. Career path is flatter, Junior to Senior Broker. Bonus is measure of career progress. Further progress based on taking responsibility for business unit profit and loss. Page 5 of 9 July 2002

6 Compensation summary Junior Broker Spinnaker Consulting Ltd. 20,000-40,000 base salary Low salary bonus example: 20-30% of amount earned above salary and fixed costs High salary bonus example: Bonus starts at 10% of commissions in excess of 3X salary Senior broker 30,000-60,000 base salary Low salary bonus example number one: 20-30% of amount earned above salary and fixed costs Low salary bonus example number two: 25% above 3.5 times salary High salary bonus example: Bonus starts at 10% of commissions in excess of 3X salary Director 50, ,000 base salary Low salary bonus example: 30-50% of amount earned above salary and fixed costs High salary bonus example: Bonus starts at 10% of commissions in excess of 3X salary Employees at this level who are willing to assume higher levels of business risk may be able to negotiate joint venture or other equity-based arrangements. Page 6 of 9 July 2002

7 Summary Position Low Typical High Max bonus Benefits Competitive Brokers/ Base Salary Structure Entry level % Larger Jr. Broker % Larger Sr Broker % Larger Director % max, 30% typical Larger Principals' Brokers / Base Salary Structure Entry level % Larger Jr. Broker % Larger Sr Broker % Larger Director / Manager % max, 30% typical, 10% for Larger high salary Competitive Brokers/ Bonus Structure Jr. Broker % above own salary, fixed costs Jr. Broker 40 starts at 10% of commissions in excess of 3X salary Sr Broker % above own salary, fixed costs Sr Broker 30 25% of commissions in excess of 3X salary Sr Broker 60 starts at 10% of commissions in excess of 3X salary Director % above own salary, fixed costs Director 150 starts at 10% of commissions in excess of 3X salary Details and definitions are found in the main body of the report. Page 7 of 9 July 2002

8 Issues: Companies Companies need to optimise their mix of solid performers and high producers and design their compensation system to provide incentives for each group cost effectively. Key issues for include: Are your salary, bonus, and overall compensation package keeping pace with your competition? Are you sure? Are your fixed costs excessive in poor years? Are you incurring excessive cash outflow and profit drain in good years through over-reliance on bonus payments? Can you attract new high producers and solid performers? Are you providing adequate incentives for retention of high producers? Do you have solid performers with high producer potential? Do you have high producers with superstar potential? Can you honestly say they are better off staying with your company? Or do they need to go elsewhere to reach their full potential? If so, what are the obstacles within your company? Are you prepared to address them? Are brokers being held back by current company structures telling them what they can t do? Are idiosyncratic management styles creating disincentives to retention? Do these idiosyncracies actually contribute to the bottom line? Have high producers or superstars been incorrectly promoted to management positions? Have you examined ways to reward and retain their high productivity while removing them as an obstacle to others? Issues: Brokers Brokers are responsible for their own career development. Every broker should take time periodically for a disciplined and structured review of career fundamentals. Key issues include: Page 8 of 9 July 2002

9 Are your salary, bonus, and overall compensation package keeping pace with your competition? Are you sure? Do you compare yourself with the right peer group? What is more relevant time served or your contribution to the bottom line? Are you maintaining aggressiveness as career progresses? Are you profitable? Do you make money for your company? Are you more suited to a principal? Should you aim for an orderly transition from competitive broking to a principal? Have you negotiated a transparent, enforceable agreement avoiding disputes over bonus calculations? Is your understanding of factors affecting job security the same as your boss? Are you being realistic about how secure your position is? Should you consider buying a private pension, paying for own health insurance, life insurance, etc.? Are you accepting slow career progression due to a benefit programme that you could in fact create for yourself at reasonable cost? Are you in the right size and type of company? Is a large corporate or a small entrepreneurial company the best fit for you? Do you realize the full value of the infrastructure, the brand and the relationships that your company provides? Page 9 of 9 July 2002