From: jtkare@ibm.net (Jordin Kare)
Newsgroups: sci.space.tech
Subject: Re: Income of Specialist.
Date: Thu, 02 Dec 1999 23:44:53 -0800

In article <383FCEEF.31F635CF@din.or.jp>, suzukis <suzukis@din.or.jp> wrote:

> Many people in every field must gather to complete space development
> projects. In order to achieve such kind projects, a top manager is
> required to control whole project.
> By the way, is it normal that the  income of a top manager is the higest
> among the all participants ?
> I do not think so. I think there may be higher income of the specialist
> than a top manager,
> providing that this specialist is the most requiered and can affect this
> program.
>
> Is it wrong ?

The answer is "yes and no."  It depends on how you define income.

I'm a space systems consultant, working at a fairly high level (I
typically report to a program manager, deputy PM, or a program chief
engineer). I charge an hourly rate that's perhaps 2.5 - 3 times what I'd
make as a salaried employee, and undoubtedly make more per hour -- as
measured by the checks I receive -- than the people I'm working for.

BUT, my annual taxable income is not spectacularly high, and my "standard
of living" is almost certainly less than that of the PM's I work for.
That's because of two things:

1)  All my overhead comes out of that hourly pay -- not only direct
benefits like medical insurance, but things which are usually hidden in
company overhead budgets like telecommunications  (my montly
telecomm/internet bills are now more than my rent was when I was a
first-year grad student -- and I had a nice apartment then!), professional
expenses (I pay my own way to conferences, and I don't get to bill anyone
for the time I spend reading journals or writing papers), vacations and
sick leave, etc.  Depending on the organization, the cost to a project of
keeping one person working is between about 1.5 and 3 times the direct
salary cost; usually at least 2 times for professionals.  (The 3 times
figure was for a gov't laboratory with notoriously high overhead rates,
but still...). I pay self-employment taxes.

So I charge substantially more per hour than the (hourly) salary of a top
manager, and probably somewhat more per hour than what the manager takes
home in salary and benefits.  But once you count all the overhead and
other indirect charges, I actually cost a project less per hour than a top
manager or (often) even a deputy manager or senior engineer.

Then again, I often work through subcontractors, who add their overhead
charges to my rates, which can push my hourly cost to the project back up
into the stratosphere.  This is true of most non-self-employed
"consultants" who work as employees of consulting companies, and sometimes
of internal company "experts" or "troubleshooters" who work on multiple
projects for short periods each.

2)  I don't work full time.  Consulting work is "feast or famine", and I
may go long periods with no work at all.  Again, this is true for many
employees within corporations or bureaucracies, but rarely true for
(competent) senior managers.  And employees of any type continue to take
home paychecks and benefits when they're between projects, whereas I
don't.  The more highly specialized an expert is, the more wildly his
billable time is likely to vary  (for instance, that 3-fold overhead rate
noted above has much to do with the presence on the payroll of that lab of
many extremely specialized experts in the design and testing of nuclear
weapons, which is not a skill currently in much demand in the U.S.)

So averaged over several years, I take home and get to treat as personal
income a respectable amount of money, but not any more than I could get as
a senior scientist or engineer, and almost certainly less than I could
make as a program manager.

Of course, there are the intangible benefits of being able to work on many
different projects, being my own boss, etc.  There's no way to put a
dollar figure on those.

Specialists who work for consulting companies, or who are internal company
troubleshooters, have stable salaries, but it's my understanding that
they're rarely paid much more highly than engineers or scientists of
similar rank, which is usually less than senior managers.  Their parent
company may charge steeply for their services, though -- more steeply for
less-often-used specialties -- but will often absorb some of the extra
overhead in exchange for the benefit of being able to offer their
customers "one stop shopping" for a wide range of skills. The one figure I
recall being quoted was that one large consulting/special projects company
priced its services based on having its employees "on contract" an average
of 70% of the time.

There are at least four "special cases" that I can think of:

Government/military employees:  Civil service and military pay structures
are artificially limited, so even program managers may not make much
money.  Overhead may also be impossible to allocate to a particular
project. So specialists and consultants who work on government projects
may make more money that the program manager by almost any measure.  (Of
course, the gov't folks get job security, and great pensions.  And often
retire from gov't at an early age and make large amounts of money
afterwards.)

CEO's, corporate troubleshooters, etc.:  Compensation for certain managers
can go through the roof, exceeding any possible technical salary.  This
can apply to "project managers" if, e.g., the project is in serious
trouble and the CEO puts it under his direct supervision, or hires a
superstar manager, "turnaround specialist," etc.  Most of the compensation
is typically not in salary, but in bonuses, stock options, etc.

Equity stakeholders:  This can apply to either project managers or
technical experts -- the project manager may be a founder of the company
or an early employee who was initially paid in stock.  The technical
expert may have been offered a large chunk of stock in lieu of cash by a
cash-strapped startup.  In either case, if the company does well (whether
or not the project succeeds) the effective pay rate can be arbitrarily
high.

World-class authorities:  There are a few technical people, who by virtue
of "superstar" status or absolutely unique skills can command enormous
payments-- sometimes for just coming and giving a lecture, never mind
working on the project.  Gerald Bull of super-gun fame was probably one.
Some Nobel-prize winners are in this category.  Linus Torvald (of LINUX)
is undoubtedly one in the computer world, if he should choose to do
consulting or put himself "up for bid" as an employee.  There aren't many
such in the space technology world, as far as I know, simply because most
projects are too big (and too risk-averse) to  be radically affected by a
single technical genius.   The big bucks are more likely to go to a
superstar manager, as noted above.


The long rant is my take on your question.  I'd be interested in comments
from others in the group who have worked in and out of different
organizations, especially as senior managers.

And since I'm self-employed, yes, these *are* the opinions of my employer :-)

Jordin Kare
Kare Technical Consulting
222 Canyon Lakes Place
San Ramon, CA  94583    925-735-8012

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