The numbers are in–and nobody's walking away with big money.
According to the results of the 2004 NMHC National Apartment Management Compensation and Benefits Practices Survey, apartment companies are continuing to cut costs in myriad ways, including slowing the pace of company-wide salary increases and reducing short-term incentive and bonus payments.
"For about two years, merit increases have been trending down," says Karen Hollinger, senior director of human resources for AvalonBay Communities in Alexandria, Va. "Increases were cut to 1.5 percent to 3 percent, or zero in some cases. Before 2002, it would have been more like 3 percent to 5 percent."
Slimmer Paychecks While multifamily employees are still getting raises in today's concessionary market, those increases are getting smaller and smaller. From executives to housekeepers, pay raises are expected to slip again in 2005, continuing the trend of the past several years.
Unfortunately for multifamily employees, bonuses aren't making up the difference. This year, the NMHC survey includes a matched-sample comparison that measures yearly changes in both base salary and total compensation for companies that participated in this year's and last year's survey for each of the 34 positions evaluated.
According to the data, average base salaries increased this year (up 3.8 percent), but because short-term incentives and bonuses were generally down in 2004, overall total compensation for multifamily employees rose by just 3.1 percent.
Fewer people are getting this extra money as well. The average number of employees receiving short-term incentives and bonuses in this year's survey fell 5.3 percent. The amount of the payments also slipped, but only slightly, by .2 percent.
This lower bonus trend shows up across the apartment property management employment spectrum. For example, property managers of communities with 300 to 500 apartment units saw their base salaries increase by 4.5 percent, but because of lower incentives and bonuses, these employees reported an average total compensation increase of only 3.3 percent.
Similarly, maintenance managers at same-size properties (communities of 300 to 500 units) received an average base salary increase of 3.3 percent, a figure slightly higher than their overall average total compensation increase of 2.9 percent.
Of course, average actual compensation does vary. Salaries and bonuses for key property management jobs depend on local rental and job markets, so they can vary significantly across the country based on what's happening in those specific cities.
Healthy Employees For many corporations, rising health care costs and insurance premiums have become a significant financial issue. That's the case for multifamily companies as well—the benefits-related results of the NMHC survey follow general business trends.
Medical benefit costs in 2003 averaged $3,271 per multifamily employee, a 34 percent rise over the 2002 average of $2,167.
These are lower than the per-employee costs for comparable positions in other industries as well, according to
P. Jaine Jacobs, survey group manager with Watson Wyatt Data Services, a human resources data consulting firm based in New Jersey. Those figures are $4,678 per employee for general industry employees and $3,840 for the retail and wholesale sectors.
Still, these costs will continue to go up for multifamily companies. In 2004, per-employee health care costs for apartment companies are projected to rise 11.5 percent, a figure very close to national statistics for employers overall. According to a recently released study of randomly selected public and private companies done by the Kaiser Family Foundation and the Health Research and Educational Trust, employer-sponsored health insurance premiums increased by 11.2 percent in 2004. That's down slightly from the 13.9 percent spike in 2003, but it's still the fourth consecutive year of double-digit cost increases.
"It's definitely a concern. Like most companies, we've had increases in benefit costs for the past three years," says AvalonBay's Hollinger. "The implication is very real, because there are other benefits that we would like to offer, such as long-term care or child care. However, we have to adjust our priorities given the medical benefit cost increases."
The unpredictability of medical plan costs adds to the employer burden because they can be difficult to budget, Hollinger says. "As our collective use of medical care and the costs associated with malpractice insurance increase, claim expenses have also increased. These costs are passed along to the employer, and therefore the employee, with very little ability to hold down those increases," she says. "We've examined plan changes in eligibility, prescription drug coverage, doctor office and emergency room co-pays, et cetera, to help in offsetting overall increases in medical plan costs."
Slowing Turnover Even in a "jobless recovery," retention remains one of the apartment industry's greatest human resources challenges, particularly at the property level. According to this year's survey, some of the highest average turnover rates were recorded for key on-site jobs: property managers and leasing consultants. Leasing consultants nearly topped the chart with 70.8 percent yearly turnover.
Such statistics highlight an expensive cost for the multifamily business—the time and money involved in continually recruiting, interviewing, screening, and training new employees, not to mention lost productivity and damaged morale among remaining employees. Perhaps most importantly, departures can damage the crucial relationship between apartment residents and their community staff.
What's the reason for such a revolving on-site door? A real or perceived lack of career opportunity, according to 48.1 percent of survey respondents.
That's an alarming figure and one that should lead multifamily human resources executives to assess the effectiveness of their companies' career development practices and, if lacking, identify how to improve them. Although non-monetary rewards and cash performance incentives together can improve the multifamily industry's human resources development and retention performance, educational opportunities, mentoring, and other development-oriented programs also play a vital role in keeping and challenging good people.
Turnover is an issue for other service-oriented and real estate-based industries, such as retail, as well. Although comparisons between such industries are not fully analogous to the multifamily arena, it is useful to watch the trends in these similar groups. Comparing multifamily retention levels with those of other industries that share like labor pools and employee skill sets can be very instructive.
If the figures are right though, apartment executives have some work to do. The average total turnover for exempt employees in full-time retail work was 24.5 percent, much lower than multifamily stats. And, according to Jacobs, survey group manager with Watson Wyatt, the average total turnover for nonexempt, full-time retail sector employees was 27.1 percent—a number far below the average total turnover rate of 48.2 percent for nonexempt property management employees during the survey period.
Many apartment companies are paying attention. "Turnover is a top priority" at Concord Management, Ltd., in Maitland, Fla., says Bill Pastor, vice president of human resources at Concord. In an effort to boost retention at Concord, Pastor participates in a weekly meeting of various company representatives, including executives, managers, and property-level staff, to discuss Concord's latest turnover statistics and develop new approaches to addressing and responding to the reasons why employees leave.
Placing a high premium on human capital has its rewards. "Saying employees are our most valuable asset and living that belief are two very different things," says Eileen Swensen, president of Tarragon Management, Inc. "We have made a commitment to empower our associates through education, challenges, accountability, rewards and recognition, appropriate compensation and listening. This approach affords us the chance to develop talent, which in turn provides us with the opportunity to promote from within as we grow. "
The approach works. More 30 percent of Tarragon's current management associates have been promoted.
Such progress didn't happen without attention and dedication. Swenson says that Tarragon began to "adjust agendas and attitudes" in its effort to hire the best employees—and to keep them. Executive-level commitment and self-evaluation have been key components of this approach. And they are seeing the results. In a performance that would delight an apartment executive, Tarragon has sliced its turnover from 72.9 percent in 2000 to 30.3 percent in 2003.
–Betsy Feigin Befus (ebefus@nmhc.org) is senior legislative analyst at the National Multi Housing Council in Washington, D.C.
Behind the Survey The NMHC Compensation and Benefits survey, now in its fifth year, is the industry's most comprehensive source for benchmarking multifamily compensation and benefits. This year's report includes data from a record 102 leading apartment firms (11 percent more than last year) covering nearly 50,000 employees in 34 different property management positions. The survey includes:
Average and median compensation data at the national, regional, sub-regional, state, and metropolitan level.
Tenth, 25th, 75th, and 90th percentile compensation data that allows companies to benchmark their own information against their peers.
Data on employee turnover, rent concessions, medical coverage, leave, stock options, bonuses, and profit sharing.
Finally, for the first time ever, the survey report provides employee turnover rates by exempt and nonexempt workers. It also itemizes national compensation data according to the number of apartment units on a property.
This research relies on the involvement and support of sponsoring multifamily companies nationwide. Survey sponsors include AIMCO, AMLI Residential Properties Trust; Archstone-Smith; AvalonBay Communities, Inc.; Concord Management Ltd.; Equity Residential; Fairfield Residential LLC; Gables Residential Trust; SARES?REGIS Group; Trammell Crow Residential; and United Dominion Realty Trust.
For more information about the NMHC Compensation and Benefits survey, or to order a copy, visit: www.nmhc.org or contact the NMHC's LaToya Scott at 202-974-2300.