Pragmatic Marketing 2006 Compensation Survey Results with Steve Johnson

FULL TRANSCRIPT OF WEBINAR:

Steve Johnson: Good morning or good afternoon, depending on where you are calling from.

I'm Steve Johnson with Pragmatic Marketing - and this is the profile of a Product Manager.

The average Product Manager is 36 years old. Many have an MBA. They manage three products. They deal with 75 emails a day; 15 meetings a week.

They typically make $93,000 in base plus $14,000 in bonuses. They have a Dell D 610 with Windows XP running Office 2003, IE 6 and 7 and Firefox.

Does that sound familiar? Does sit sound like your typical Product Manager? Does it sound like your role.

In our dealings with Product Managers and managers of Product Managers, we're frequently asked what's the hiring profile or what does the compensation plan look like and how do I motivate Product Managers financially.

That is what we'll be exploring today.

After this presentation, if you'd like a copy of these slides, feel free to send me an email. My address is there on the screen: sjohnson@pragmaticmarketing.com.

I also run a blog at productmarketing.com - click on the weblog. It is news and happenings of interests to products management. Whenever I post a new article there - whenever anyone posts a new article on our website I'll put in a blog-note. You'll also find newsletters and our issues of the magazine, and the ability to subscribe to our magazine.

There's lots of resources there at productmarketing.com including some of the stuff I'll be talking about today - and some of the stuff I'll talking about today is not there so feel free to send me an email and I'll send you this presentation in return.

Product Marketing is known for this framework, and it is a way of articulating the role of product management; the activities we find Product Managers involved in from the strategic to the tactical, from business orientation to technology orientation to go-to-market orientation. We offer courses that drill down on each of these individual boxes in various and sundry ways.

But in working with Product Managers, I like to investigate how much time are we spending in these various activities. That is some of what I want to show you today.

Again, these are the kind of activities we find Product Managers involved in.

The survey itself was conducted throughout most of November and into December. We surveyed over 500 folks; 382 of them came from Product Management roles - Product Manager, Product Marketing Manager, Technology Product Manager, associates and juniors and seniors and that kind of stuff. But 382 responses from Product Management, and primarily responses from the United States; 302 responses from the U.S., 54 responses from Canada, which is a very nice turnout, and an almost statistically relevant group of people from Europe. Beyond Europe and the UK, we didn't have enough responses to include them in the survey because there's just not enough statistical relevance.

What I will be showing you today is numbers and profiles of Product Managers around the world. When we get into compensation specifically, I'll have that broken down by U.S. region as well as Canada and the UK and Europe.

What we are going to look at, is the personal demographics of a Product Manager, the activities and responsibilities they get involved in the department they are in and THAT impact on compensation which is going to be surprising, I think. Finally, we'll touch on compensation which for a lot of people, is the thing they are most interested in, in this presentation. Let's see where we go with that.

Here's your Product Manager: your typical Product Manager is 36 years old and 88% claim to be somewhat or very technical. I think this is a really key point, as we'll see in a few moments. Technology knowledge or at least the appearance of technology knowledge makes a difference.

In our business, understanding technology directly correlates to your take-home pay. We're going to look at some of that as we go along here. When we've run the numbers, in just looking at people who say they are technical - people who say they are technical tend to make a lot more money.

The breakdown across the world of male vs female: 71% of Product Managers are male. We're going to see in a few minutes what the impact of gender is, on compensation. Almost everybody has a college degree, as you can see from t his chart. A good many Product Managers actually have an MBA.

We have a lot of strong university knowledge. What we've found in Pragmatic Marketing, is very little of the college experience can be easily translated to the reality of technology product management.

The stuff we learned in college just doesn't seem to convert nicely. I think mostly what courses we had, if any, in college, were targeted to business to consumer kinds of effort. Most of the customers who get involved with Pragmatic Marketing are doing B to B type marketing and selling, and the techniques are different. Channel is not a variable, for instance. The product is very complex.

So having the college and masters stuff really helps bring us a business orientation but in our business the technology aspect is important as well.

Here are the things we find Product Managers involved in: this is a pretty dense chart. Down the left we have various activities of Product Management. At the top we see Monitoring Development Projects, at the bottom we see Working with Press and Analysts.

I have sorted this by the purple bar, if you can see that, which is - how to put this - the purple bar represents no time spent on this activity. So the converse of that is, if you look at Monitoring Development Projects, fully 80% of us are involved at some point in some way, some number of hours a week in monitoring development projects.

An almost equal number of us are involved in writing Product Requirements. But fully over 80% of us are not working with Press and Analysts and are not doing Win/Loss analysis. So if that metaphor makes sense, at the end of the day what I find - look at the first four things.

We are all of us - most of us - involved in monitoring development, writing requirements, researching market needs and creating sales tools for the sales force. Virtually everybody with a Product Management title is involved in that.

One thing that we see that we are actually not going to see today, is the discrepancy between the title Product Manager and Product Marketer.

As I've said in other articles, titles in our industry are an absolute mess. Many Product Marketing Managers are in fact doing Product Management. We'll talk about that at the end of the presentation. Many Product Managers are doing Product Marketing. The simplest definition of a Product Manager is they write product requirements. That is the artifact that we produce. Yet, a third of us are not producing that.

Instead, a third of the people who are doing Product Management - excuse me - a third of the people who have the title Product Manager - are not writing requirements. And a third of the Product Marketing Managers are writing product requirements.

I guess the important part of this whole diatribe is to write market requirements, we need to research market needs. As you can see, there are more people writing requirements than are researching market needs. It really makes you wonder where these market needs are coming from.

This chart is showing how many of us are spending no time, how many are spending a half day, a full day or multiple days in a week, on these various and sundry activities. Over 50% of us do not visit sites without sales people. Roughly 50% of us go on sales calls. But fully 60% of us don't visit clients unless there is a sales person involved.

Visiting clients is one of the key things that is the source of our requirements. Yet again, 80% of us are writing requirements, and almost 50% are not visiting clients without sales people.

This chart just gives us a view of what are the things that Product Managers are most involved with or are most time-consuming for Product Managers.

We spend a fair amount of time there in the middle writing the specifications. We spend a fair amount of time training Product Managers and writing copy. But if you look at the bottom four, almost 70% of us spend no time creating web content; spend no time measuring marketing programs; spend no time performing Win/Loss; spend no time working with Press and Analysts.

These last four items are probably the ones that we would most equate with Product Marketing or perhaps Marketing Communications. And yet, again, some of us indeed are involved in some of those activities.

These are the activities we find Product Managers spending time on. Here are the relationships between Product Managers and others in the organization.

As I said at the beginning, most Product Managers have responsibility for three products. Those three circles up there at the top of the chart are my attempt to show three products. For every Product Manager, there are some significant ratios. Very often, an executive will say well, how many Product Managers do I need, or how many Product Managers should I have for this number of developers or this number of sales people.

It turns out that's the wrong question. What we find in the survey, is that for every Product Manager, there needs to be a Sales Engineer. The relationship between Product Managers and Sales is less relevant than the ratio between Product Managers and Sales Engineers.

If you're not familiar with this term, a Sales Engineer is a technical resource in the field that goes on sales calls. Or, to put it another way, two people go on a sales call, one of them drives the car and buys lunch, the other one is the sales engineer.

We like to see a one-to-one correlation between Product Managers and Sales Engineers. The other one-to-one is between Product Managers and Development leads.

So rather than looking at how many Developers do I have, therefore how many Product Managers do I need, the ratio is really how many Development projects are we working on. It seems to be that there is a correlation between number of Product Managers and number of Development leads.

The survey also tells us, that for every Product Manager, there's half a Product Marketing Manager. That means that Product Marketing Managers have a responsibility for in fact six products while a Product Manager has a responsibility for three.

I don't know if that means we're understaffed in Product Marketing or appropriately staffed in Product Marketing. But at least in terms of staffing, for every Product Manager we can expect half a Product Marketing person.

We see very few Product Designers - which is so disturbing.
In a presentation we do called Requirements that Work, we talk about the critical role of the Product Designer, and in software at least, we have very few people in a design role in the development group. We have Development leads, we have Developers, but we seem to be missing a Development or Product Designer.

Yet in hardware, well, of course you would have an industrial designer or a hardware designer; you couldn't build hardware without design. Yet we seem to build software without one.

Those ratios tell us, for every Product Manager, we can expect one Sales Engineer, we can expect one Development Lead, and we can expect half of a Product Marketing person, and almost a full MarCom person.

Those are some of the ratios we see in the survey looking, again, around the world, primarily U.S., primarily large enterprise-type, B to B type companies.

I said earlier that technology has a bias that ultimately results in our income. This chart shows the percentage of Product Managers and what department they report to.

In the old days, Product Management was almost always in Development. As of 2001, 20% of us were in Development. What we've seen, and that's the bottom slice of this stacked tower; the bottom of the slice says 19% of us in 2001 were in Development, and now 12% of us are.

You see in 2001, a good number of us - 10% of us - were in Sales, and now we see a smaller number - 8% are in Sales today.

We saw in 2001 that virtually none of us reported to the CEO and nowadays, 33% of us do.

Stepping away from this line for a second, we typically see Product Management in one of four departments. They are in Development, Sales or Marketing or their own department - the Product Management Department - either reporting up through directly to a VP of Product Management or reporting directly to a CEO.

We'll see when we get to Compensation, there's good and bad on this. We'll look at what the departmental impact is. The challenge is, when Product Managers are in the Sales Department, then they become the de facto sales engineers. Their job is to support the sales effort.

When we see Product Managers in the Marketing Department, they tend to become Product Marketing Managers supporting our marketing efforts. When we see Product Managers in the Development Department, we see them become support for Development - doing the gant charts, writing requirements, writing detailed specifications, monitoring the beta program and doing a lot of the development aspects.

So in terms of having a seat at the table - having Product Management reports either up through a Product Management organization, which is the second slice up of the stack, or directed to the CEO, which is the topmost stack, means that we are supporting the CEOs efforts; we're supporting the business effort of going forward rather than supporting the primary objective of the other three departments.

As we'll see, that also has an impact on income.
This chart shows the base salary of Product Managers, which is between $90-98,000 for base salary.

Working from the left to the right, Product Managers who are in the Sales Department, make the least amount of money of any kind of Product Manager.

Product Managers who are in the Development Department make the most amount of money; almost 98,000 as base. The average is there in the middle, in the darker blue. If we're in the Sales Department, we're likely to make the least and strangely to me - I don't have a reason behind this - being in the Product Management Department is actually lower than average. Reporting directly to the CEO is above average.

Then we find again, a lot of people in the Marketing Department, and still a few people in the Development Department. I think this really suggests that being in the Development Department equates to being more technical.

Now that I've said that two or three times, I realize that I don't actually have a chart showing the impact of technology knowledge on salary. That will give me something to work on.

If you're interested, send me an email and I'll send you the results.

The average is a little bit over 90,000 for base but if we are reporting to the CEO or Marketing or Development, we're likely to make more.

Here, finally are the numbers I am playing with.

Across the U.S., the average -- that's the third line from the bottom - the average salary across the U.S. is 93,000 plus 14,000 in bonuses for an overall package of 108,000. Within reason, it's not that much off. Canada is a little bit lower. Europe is a little bit higher. These numbers were requested, at least, to be in U.S. dollars. I asked people to convert from their local currency to the U.S. so that I could have some sort of correlation here.

I've broken this down by region of the U.S., Midwest, northeast and so forth. What's interesting is to look at the huge disparity in terms of the deltas between the maximum and the minimum.

If you look at just the topmost line, in the Midwest, the highest reported salary was 150,000 and the lowest reported salary was 25,000. That is enormous delta. I can't really explain it. It's all within the Midwest. It could very well be the person with the 150,000 was more senior and the person with 25,000 just didn't negotiate well. But there is a huge delta there, it seems to me.

We see similar things in Europe and Canada. The highest number is 200,000 base and the minimum is 50,000 base. There's a humongous delta here.

The most common question I get - I'll give you a second to look over that chart and see the intersection that you're most interested in - the thing I get is people say 'Well, yeah; that was cute and all but how much should I be making' in this particular slice.

So looking at the region of the world you live in, pick a spot where you are relative to the average and if you are making above the average of course that means you shouldn't tell anybody.

What's interesting, is the first year I did this survey, we did not ask male or female. Maybe that's just - I don't want to believe it - but a woman came up to me in one of our seminars and said 'how come you didn't ask the question; I don't feel l'm being paid as well as my male counterpart.'

I didn't want to believe it. But I ran the numbers that year and every year since, and there seems to be this huge disparity between female and male compensation. You can see that here. It looks to me that males make about 10% more than females. But it's not a big enough question. There is another correlation we have to look at.

Scott Selhorst at Tyler Blaine, a consultancy in Texas, ran the numbers differently. One of our favorite bloggers is the cranky Product Manager. There's a link up on our Product Marketing website to her blog as well as to Scott's blog here at Tyler Blaine talking about issues related to Product Management.

The cranky Product Manager looked at my male/female numbers and went ballistic, understandably. Scott drilled further into the data, and said, 'wait a minute; it's not male/female. It's experience.'

The reason females make less money in this industry is the females have less experience. But check this. When females have more experience, they actually make more money.

Looking at six years and beyond in terms of number of years of experience in this industry - females across the board from six plus years make more money. The huge disparity in what may be pulling down all the numbers, is the people who have been in the business for less than a year.

They come in - and I have no reason for this - it could be they come in and they don't negotiate well. Or they are on the rebound from another job. But if they have little experience in the industry, wow; look at the disparity here. An entry level person makes 90,000; an entry level female makes 65,000. But once that initial phase is over, male/female is at least on parity. In fact, the more experience the female has, the more likely it is she's going to be making 5-10% m ore money.

At the end of the day that makes me feel better about our industry; that there is not this wide disparity between male/female. I would think we're young enough as an industry that we wouldn't be carrying some of that baggage around.

So the conclusion of the data here - there's so much data and you can slice it in so many different ways - we focus most of our efforts on looking at what are the connection points between compensation and demographics.

We see that nowadays, Product Managers - more and more of us are reporting to our own organizations distinct from Marketing, distinct from Development. We're seeing fewer people reporting into Sales. We're seeing fewer people reporting into the traditional marketing organization.

I guess the truth is that in most companies today, what we hear is marketing is equal to marketing communications, and product management is carving itself a business orientation which is why we say a product management organization or a Product Manager reporting directly to a CEO.

The way you increase your salary is with experience, education and technical skills. Whether you agree that an MBA is a good thing for your daily operations? It absolutely has an impact in your lifetime earnings.

On our website in the survey write up - again I'd be glad to send you through email -- we show that your basically looking at another million dollars lifetime earning if you have an MBA.

In the short term, being in the business and staying in the business has a direct correlation to your income; the more experience you have, the more money you make.

Saying I am technical and truly being technical also gives you a premium.

People with an MBA, people who stay in the business, and people who embrace technology can expect to earn more money than people who are not technical people who do not have the higher education; people who do not stick with this business in a while.

As my friend, Adele Ravela puts it in her seminar, she said once if you don't love technology, get another job. I'm sure they're hiring at Frito Lay or at Coca Cola. This is a technology job and a technology business. I think to really enjoy the job, we need to love what we do. I think that extends to virtually everybody in the organization.

Here's the activity set that we find Product Managers involved in, in a technical company. There's lots of stuff going on here. Initially Product Managers find themselves on the right-hand side of the chart doing channel support. But the real value to the corporation comes form the left-hand side of the chart. Understanding our distinctive compliment; doing market research; articulating market problems; understanding technology and doing a competitive landscape analysis.

These are the roles we find in Product Management. Some of you may be thinking 'wait a minute, I do Product Marketing.' What's the difference between Product Management and Product Marketing. The real answer, is not much.

In many organizations, the Product Marketing title is doing this whole chart. Or the Product Management title is doing this whole chart. Maybe we've split it up a little bit.

The last thing I want to touch on just for clarification purposes, is the delta between these.

In general, these activities on the left-hand side of the chart, are thought of by most organizations, as product marketing. We have a Product Marketing Manager. These activities on the left, tend to be what are called Product Management.

And yet, having said that, a third of people with a Product Manager title, are writing market requirements. A third of the people with the Product Management title are not writing market requirements. So titles don't work for us.

Instead, we need to look at this set of activities; this chart of activities, and say what are the boxes that I have responsibility for. What this survey has shown us, is the more business-oriented, the more technology-oriented you are, the more likely it is you'll make better money.

The less technical you are, the more you are inclined towards go to market, the less money you'll make. That's what we can really discern from this as it relates to compensation.

These are the activities, again. These are the activities we find Product Managers involved in, in a technology company. If you are the only Product Manager in your organization and you have three different products, guess what. You have the whole chart for each product.

If you are a larger organization, 25 million and up, typically, we start seeing a split between this product management, dealing with technology and business, and this product marketing dealing with sales and go to market.

At the end, we really want to say, what are the activities that you are responsible for. Let's make sure you know what you're responsible for and what your counterpart is responsible for so we don't step on each other, and so that nothing falls through the crack.

If you're seeing this framework for the first time, please let me know that in an email, and I'll send you back a tool that will define all of these boxes and give you some work areas as to ownership, importance and time spent on those areas.

I'm delighted to know that gender is not relevant to compensation in this industry or at least the data doesn't support that conclusion. I'm delighted to see that Product Managers are evolving away from a support role in other groups, and focusing more to being a business role supporting the CEO's efforts of moving the product forward; that we as an industry seem to be getting more mature and evolving closer to the business manager role that we see in consumer goods companies.

With that, I think that I have run out of slides.

Let me open it up to questions and comment.

Questions & Answers

Q: Are these charts are going to be available on your website.

A: Maybe. If you'll send me an email, I will send you these charts. I believe I have them in various forms on our website eventually but if you are anxious for them, send me an email and I'll send you the charts right now.

Q: How do you see salaries for Product Specialists, Business Analysts, Assistant Product Managers, Directors of Product Management and so on and so forth.

A: The real answer is I don't have that granular of data. I asked people which of these titles correlates to your title. As you start getting the variation, it starts falling apart. As I indicate at the beginning, titles are absolutely a mess. What's the difference between associate and a junior; what's a BA vs a product manager.

What we look at, is which of these activities are dominating your schedule. Which of these things do you have responsibility for. Guess what. Many business analysts are in fact product managers.

So we've aggregated the data from various roles underneath whether they are product management title or not. The statistical relevant information I have, is only on Product Manager and Product Marketing Manager.

Q: Can you explain the trend of departments reporting to the CEO.

A: I can't explain it but I could maybe guess. I'm hoping - I don't know how much this is hope or reality - I'm hoping it means the CEO is realizing the business role of Product Management instead of the servant role.

In many organizations, for instance when Product Management is in development, they tend to be the secretary to developers. When Product management is in sales, they send to be the demo boys and demo girls - or as one company puts it - demo monkeys.

When we report to the president, it says we're your business representative at the product level. That's what I want it to mean.

It could mean, and I'd have to slice into the data differently; it could mean we're seeing a surge in the number of smaller companies. Since the dot bomb of 2001, how many product managers went from a large company or at least a large organization whether it had revenue or not, into start-ups.

I wonder if what I'm seeing is a move from a few large companies, where everybody reports into one of the departments, to more and more start-ups with more and more people reporting directly to the CEO because there aren't that many departments to worry about.

Those are my conclusions.

Q: The question of 'are you technical' seems subjective and relative. How does one answer that question to himself or to others.

A: I think the first part, is the answer is always yes, to are you technical. And it is subjective.

What's truly interesting to me - is a good friend, I asked her, are you technical, and she said no, and then explained to me that she was quite technical. She said I don't know how to program in C Sharp but I've written a good deal of this language and that language, and I have my own website - and I ... .she described herself by her actions as being quite technical. But if you asked her, she says she's not.

The point there is, we ask people subjectively are you technical, and many people say they're not when in fact they may be. The comparison is not are you technical compared to development, but maybe are you technical compared to sales.

If you say yes to the question, it's likely your reputation in the company will be heightened as a result.

Q: You emphasize an MBA. He has an MS; Masters in Engineering - Technology Management. Based on the survey results, do you think an MBA would make a significant difference for him.

A: No, I don't really think so. Certainly the idea of the MBA, was if you had a technical undergrad, the MBA was a way to bring engineers and others to wrap what they had learned in a sense of business. And yet, I remember growing up in the 60s with my dad at the dining room table, railing about the latest idiot idea from an MBA and I think the danger of the masters' of business approach, is it seems they do teach how to do spreadsheet management.

The survey says people with masters degrees, specifically MBAs, make more money. Whether that makes them better managers, one could argue. I think if you've already got a masters degree, going back to get an MBA is probably not valuable.

However, coming to a Pragmatic Marketing seminar might very well be valuable.

That was a plug; I couldn't stop myself!

Q: Have you ever attempted to compare the results of this survey to data for product managers in other industries.

A: That's a wonderful question. I have wanted to but I haven't been able to find a source of good data. There may be good data but I haven't found it. I do have some anecdotal stuff and the truth is, Product Managers make 20% more in technology businesses than they seem to in consumer businesses.

Going to social events or encountering product managers outside of the technology venue, I am shocked when I learn how business oriented and how truly skilled in business Product Managers are outside of technology and yet they make 60-65 - on a good day they make 70.

So we're getting a significant increase over our counterparts in other industries because technology seems to matter.

Q: It seems that many companies want a PM to be a subject, matter, expert in their industry or product. Question number 1: Do you see that as true. Question number 2: does that impact salary, and Question number 3, If you're not a subject matter expert, but have an engineering degree and an MBA, how can a PM position himself.

A: Wow. Okay. Let me go back a slide. The data suggests that a technology skill is valued by organizations. So coming out of an engineering side of the house should translate to more income. But how do you do the job if you're not a subject matter expert.

The answer, is you really can't. The trick, is to become a subject matter expert is not as hard as one might think because perhaps the most important box on this entire chart is right here that I am highlighting: market problem.

We have to truly understand market problem. The way we do that is by going out and talking to customers. Let me re-phrase that; by going out and listening to customers.

Sales people and marketing people talk to customers or tell customers what they want customers to know. Product Managers and people who are guiding our development effort, need to have a method - not just one but multiple methods of listening to the market; doing what we call listening posts or setting up on-going ways of hearing from the market.

I think in general marketing departments like to do survey. They are easy to do. It's automated. You get all this quantitative information. But what's missing from a survey, is you don't know what you don't know.

If you're not a subject matter expert, the first step - and frankly even if you are - if you are or if you're not - the first step in a Product Management role, is go out there and see some customers using our product or see customers who aren't using our product but ought to be. Truly understand with your eyes and ears the reality of the market problem and that will give you the subject matter expertise you need to be effective in the role.

At the end of the day, you want to be a subject matter expert, but you don't have to be hired for that.

You have to become a subject matter expert pretty quickly. And the way you do that, is by truly understanding market problem by visiting clients and non-clients and understanding what pain they are suffering that we can solve.

Unfortunately you don't learn that on sales calls. Sales people and product managers on sales calls are too busy selling to listen.

* * *

Steve: The Product Management job is a blast. It's the one job in the company that crosses all the different silos. When you're in Development, your focus is on development. When you're in Marketing, when you're in Sales, your focus is upon that VP's objective. What's really fun about Product Management, and what's fun about the data I'm seeing, is more and more of us are being put in the position of president of the product - being the CEO's eyes and ears at the product level.

We get to work with Development, Marketing, Sales, Tech Support, Finance, consulting services - every area of the organization - I just can't think of any other job I'd rather have other than president.

Forty-two percent of presidents in technology businesses have at one point been product managers. It's a great way to learn to be a president.

I think as much as anything it's a great way because it teaches you to lead rather than mandate. The truth is most product managers can't make anybody do anything. But we can lead; we can show them. Here's the market data; let's build a product that solves this problem and people will dig it. That's a really fun job to have.