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Are you Getting Enough?

Are you Getting Enough?

The annual CIO Salary Survey has a habit of throwing up a few surprises. This, its third year, is no exception, with the findings out of sync with the experiences, or at least claims, of management and recruitment consultants.

The survey was conducted among Australia's senior IS executives across the public and private sectors and elicited 332 responses. While salary packages vary considerably by industry, size of organisation, seniority and responsibility level of the role, the biggest single bracket that respondents fell into (30.9 per cent) was $101,000 to $150,000 a year. However, 41 respondents (11.8 per cent) say they earn more than $150,000, with two (0.6 per cent) more than $450,000. When those surveyed were asked what they earned a year ago, only 27 (8.7 per cent) earned more than $150,000 a year, and none more than $350,000. According to Peter Hind, manager User Programs at IDC Australia, these figures show that organisations do appreciate the value of IS, given that a large proportion of respondents fall into the top 1 per cent of salaries in the country. However, what stands out in the survey for Hind is that in 206 cases (63 per cent), there was no bonus- or performance-related component in their overall salary package. "This is quite striking, given the high business expectations and the poor delivery record of IT projects, especially in the current business climate of tying salary to achievements and outcomes," he says.

Much of this is at odds, though, with what recruitment consultants had to say when CIO magazine contacted them. They all agreed that CIO remuneration very much depends on industry and size of organisation. However, in some cases they quoted significantly higher salaries than in the survey as being the norm. They also reported a strong trend towards bonuses based on company profitability and individual performance, along with share options, in accounting for a significant proportion of a CIO's overall package. For example, according to Stephen Lennard, a director with Hamilton James & Bruce -- in the financial services industry sector, which he says is leading the race in CIO and IS executive remuneration -- there has been some increase in base packages over the last 12 months. However, most of the increase has come in the form of bonuses or share options. Performance-oriented remuneration is also becoming more prevalent across all industries, he claims. "A CIO in a large financial services organisation would currently receive $300,000 to $400,000 in base salary plus bonus plus share options," Lennard cites as typical. "[The extras] vary considerably, but bonuses could be up to 50 per cent of the base and share options could be anything."At the bottom end of the scale come government, heavy engineering and manufacturing, Lennard says. Again, remuneration depends on size, but in a large organisation, he says, a CIO is typically on $200,000 to $250,000 plus a bonus of up to 40 per cent. This is in contrast to the overall median range in the CIO Salary Survey of $151,000 to $200,000. Tony Rossano, a senior associate with Korn/Ferry International's Advanced Technology Group, a executive placement firm, also says that in most cases executive remuneration throughout a company is linked to overall business performance. "Few leading organisations offer just a base salary for their upper echelons," Rossano says. "The package would consist of base, bonus and stock options, and that's not just the case for IT." In addition to the size of the business, Rossano finds that CIO remuneration specifically is also linked to the extent that IT pervades the organisation, its role in value creation, the scale of the operation being managed, and whether the company is publicly listed.

Again, Rossano finds that IS executive salaries vary greatly, but that CIOs are likely to earn less than CFOs or the head of operations, for example. In large organisations, where IT is critically enmeshed, a handful of CIOs can expect a total package in the range of $500,000 a year. Others, he says, can expect a more modest $250,000 to $350,000. In fact, he claims that no one he speaks to would get out of bed for less and Korn/Ferry would not even conduct a search for one where the package on offer was less than $200,000. "Some CIOs can name their price, and organisations are becoming more flexible, depending on the individuals and what they can offer," Rossano says. According to Rossano's associate in the Advanced Technology Group, Kim Macdonald, there is also an emerging understanding that remuneration for people in IT is a little different than in other areas of business. First, the vendor side of the IT industry has traditionally paid better than the user side, and if CIOs are dissatisfied with their lot they can switch over. Second, a lot of people in consulting and project roles are doing better than CIOs in terms of money, especially if it's a mission-critical project. This, he says, is enticing CIOs of medium-sized organisations into project management roles in large organisations. Once there, it can be difficult to entice these CIOs back into line roles.

At the second level of IS executive -- typically those who report into the CIO -- Lennard, says infrastructure managers are in huge demand and can earn anything from $150,000 to $300,000, again depending on industry sector and size of the organisation. Rossano agrees and says that those who are a level below the CIO tend to earn more than $180,000. Location also plays a big part.

According to Lennard, Melbourne salaries are typically 5 per cent to 10 per cent lower than those in Sydney, although Rossano claims that increasingly people in Melbourne are getting paid the same as those in Sydney. As Sydney is a much more expensive city in which to live, he says it's hard to attract people from interstate without a big increase in salary. Meanwhile, Lynn Cochrane, managing director of Brisbane-based Leaders IT Recruitment, says that the head of IT in a user company in Brisbane can expect a base salary of $100,000 to $150,000, with "the rest at risk", based on the organisation's revenue and the individual's performance. However, while Queensland has a growing software engineering industry, Cochrane admits there are few big end users outside state government -- which may want top people, but when it's paying only at the level of $120,000, it struggles to get them. Nor can CIOs necessarily name their price in the Sunshine State.

"Clients do have to pay candidates who have a combination of technical and management skills more than they want to. But for traditional CIO roles you can take or leave what's on offer. There's a good supply of local candidates, migrants and interstate applicants," Cochrane says. Indeed, according to Cochrane, there is much else other than salary to attract people away from the bigger cities. "[Queensland] is not generally recognised as a place to establish your career; but, rather, people want to come here," she says.

"There's still time to do business in a nice way, it's not so cut-throat, and it's easier to establish relationships. The cost of living is also significantly lower, from housing through to everyday bills, and the food is fresh. Family people are considerably better off in terms of quality of life, and we don't have much trouble attracting people." The CIO Salary Survey found that those with the title CIO or IT director (6.6 per cent and 11.5 per cent respectively) generally earn considerably more than IS managers and IT managers (8.8 per cent and 32.6 per cent respectively), with very little difference between CIOs and IT directors. Of the recruitment consultants, only Lennard believes that what you are called can make a difference to what you earn. "I think the CIO title reflects the importance of the position to the organisation and where it sits. That's not always the case, but it often is," he says.

CIOs and other IS executives should remember, however, that the CIO Salary Survey is based on their own responses and those of their peers and that many recruitment consultants are somewhat akin to real estate agents in their propensity to embellish what they have to offer. Graham O'Neill, director of marketing and business development for Hay Pacific, which undertakes a lot of work in reward consulting, also warns people in IT to "subscribe to a survey based in reality". "The information that recruitment consultants receive comes from a point in time when individuals are changing positions and reflects less what the individuals are paid and more what they would like to be paid. The difference ranges from a tad higher to a damn site more," says O'Neill, who did, however, express surprise at CIO's finding that most IS executives are not in a bonus or pay-for-performance scheme. Hay Pacific has a policy of not releasing its own figures on pay scales. However, according to O'Neill, given that IT is a hot skills area, there is significant concern in the business community about how to hold on to talented people. Where the IT role has a clear link to the current and future direction of the business, it puts a premium on IT people, he says. "Like a lot of senior roles, IT is highly specialised and organisations look for leadership skills and technical know-how, which at a senior level is all to do with business strategy," O'Neill says. "As with other executive roles, once into them a handful of incumbents carve out their individual market value and get on to head-hunters' lists."Up to 10 years ago there used to be a brain drain to Australia, especially from the UK, with IT managers being enticed here by the promise of a higher standard of living. Since then the tables have turned. According to Lennard and Rossano, Australia rewards its CIOs relatively poorly compared to the UK, US and even Asia -- particularly in terms of non-cash components -- and consequently is losing many offshore. O'Neill agrees, but also finds that, at the top end of IT, organisations are potentially moving into a global labour market. In effect, companies may have to look overseas to find someone to give them the competitive edge they need, but will have to offer them a package comparable to what they can earn at home. This will consequently have a positive impact on salaries here, at least from a CIO's point of view. Lennard, though, feels that bringing in CIOs from overseas companies has had very mixed results. "Often we bring in mediocre CIOs at high salaries, when local CIOs could do just as good a job, if not better," he says. "I think the quality [of candidates] has improved over the last few years, and the CIOs in this country are just as good as the CIOs in any other country. In some ways we are ahead of the game."So, are Australian CIOs getting what they deserve? "When I talk to CIOs, few of them complain about being underpaid," IDC's Hind says. "The usual complaints are about the unrelenting demands of the business and an increasingly IT-literate user community which doesn't understand the complexities [of major projects]. They have so much to do and time is their scarcest resource. It's a very challenging job and I think they earn every penny they get."Australia's Most Wanted Regardless of how much CIOs are or should be paid, year 2000 expenditure is pushing demand for IT executives "through the roof", says Grant Montgomery, managing director of EL Consulting Australia.

EL produces a monthly index of executive recruitment, based on a count of job advertisements in the Saturday editions of the leading capital city newspaper in each state, the Northern Territory and the ACT. The index covers five categories of executives: finance, engineering, management, information technology and marketing. It is prepared using a comparative average to a base date normalised to 100 to smooth out seasonal peaks and make comparisons between categories valid. Despite a fall in the April index (the latest at the time of writing) for IT executives to 1221, demand is still more than twice the national average of 591. "There is always a shortage of supply [for IT executives], which is virtually irreparable," Montgomery says. "The biggest demand is probably in the finance and banking arena, particularly in medium and large organisations. Half of the total Australian demand for IT executives comes from NSW, followed by Queensland, which is three times that of Victoria and two-thirds that of NSW." Many would no doubt dispute Montgomery's assertions on geographic demand. However, at the CIO level, Rossano says Y2K is not causing a great movement of incumbents and consequently demand is not as high as one might expect. "IT executives don't want to pick up [another company's] headache and their companies want them to stay still," Rossano reflects.

While Lennard agrees that demand for CIOs is generally strong, this is not so true in financial services, even though it's the highest paying industry sector. Due to mergers and acquisitions, there are fewer such CIO positions available, he says, particularly in Sydney. "The average tenure of a CIO these days is three years. Demand continues to be for business-oriented managers of technology as opposed to technical managers," Lennard concludes.

Welcome to the Boardroom

To whom do you directly report?

Title

CEO/Managing Director 40.5%

General Manager 16.9%

Chief Financial Officer 27.0%

CIO 1.2%

IT Director/Manager 3.7%

Corporate Services Director/Manager 6.7% Chief Operations Officer Operations Director/Manager 1.5%Side-stepping PerformanceWhat percentage of your current salary if any is performance based? (eg. bonuses paid for achieving set goals)Salary Current One Year Ago None 5.5% 68.7% Less than 3% 7.6% 7.4% 3% to 6% 6.1% 6.7% 6% to 8% 2.4% 2.1% 8% to 10% 4.9% 5.5% 10% to 20% 10.4% 7.1% More than 20% 3.0% 2.5%Respondents by StateIn which State is your organisation's headquarters?State ACT 4.8%NSW 34.9%NT 2.1%QLD 14.2% SA 6.3% TAS 1.5% VIC 21.4% WA 14.8%

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More about EL ConsultingExecutive RecruitmentHamilton James & BruceIDC AustraliaIT PeopleKorn/FerryLeaders IT Recruitment

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