In the world of IS management, it's not what you know; it's not even who you know. It's what you're called and where you workThree times in the last two months, Jim Strategist (not his real name) has had overtures from companies hoping to persuade him to come on board as CIO. Not only were all his suitors prepared to offer generous -- one might even say extravagant -- base salaries and performance incentives, two were offering him a $10,000 bonus just to sign on. Needless to say Strategist, currently CIO of a mid-sized Australian wholesale/retailing company we'll call Big Brother and the Holding Company, is tempted by the offers.
Meanwhile the IS manager who reports to Strategist is moving to Chicago, where his income will go up by $60,000. He was offered four positions in the last three months -- three of them outside Australia -- before opting to move to the States. And a potential colleague, a senior IT executive entitled chief operating officer in the large software company which is courting Strategist, receives a base salary of $150,000 but is comfortable in the knowledge that incentives could easily take that up to $280,000 this year.
This and similar anecdotal evidence about the salaries of Australian IT executives highlights the trends revealed by the second annual CIO Salary Survey, based on the responses of some 240 very senior Australian IT executives.
Among other things, the survey shows clearly that salaries are moving up substantially for CIOs and IT/IS managers but stagnating or even dropping for MIS managers and federal government IT executives. It shows more IT executives are finding a significant proportion of their income is now performance-based.
And it shows their income is likely to depend much more on where they work than on the title on their business card.
Meanwhile the experiences of Strategist, a very real person whose name we've changed to protect his highly promising career prospects, is living proof of yet another trend in the movement of IT executive salaries. Strategist was an external consultant to Big Brother and the Holding Company for some years before being approached to join the executive team. The growing trend for companies to woo ex-consultants as their ideal CIOs is apparently helping to drive executive IT salaries up even further in many areas across the board.
This year's salary survey plus our own interviews with recruiting companies and senior IT executives, have highlighted some other fascinating trends in the movement of IT salaries. For one thing, significantly more senior IT executives hold the title CIO than they did this time last year. For another, CIOs in two industries -- manufacturing and construction -- have received much bigger pay hikes than most of their colleagues, and CIOs in the financial services sector are still earning vastly more than their colleagues in lowlier business sectors.
Our survey shows CIOs across the board are now on an average salary of $120,000 per annum -- a $35,000 or 18.6 per cent increase on last year. IT directors now earn an average $110,000-a $10,000 or 4.7 per cent increase on last year. But CIOs in manufacturing have received an average $50,000 wage hike over the last 12 months, moving their average salary from the $81,000-$100,000 bracket up to the $101,000-$150,000 bracket this year. In construction there's been a jump from the $81,000-$100,000 bracket up to the $151,000-$200,000 bracket.
Compare that with survey responses from those in the financial services market and you might be forgiven for thinking salaries in this area have moved little over the last 12 months. For instance last year the average CIO in the insurance area earned somewhere between $151,000 and $200,000. This year the figure remains the same.
Don't be fooled, says IDG Communications research officer Mark Young, the statistical wizard who compiled the CIO Salary Survey. "Although those figures suggests salaries in this sector haven't moved a lot over the year, it could also be telling you that there are now enough CIOs in the insurance industry to provide some justifiable measures as to how much companies are paying these people," says Young. "Until recently CIOs were a bit of a novelty. Now that there are a fair number of people in the insurance industry calling themselves CIOs, there is a little more consistency in the salaries being paid."Korn/Ferry International senior associate Julie Perigo calls it the pecking order, and confirms that those working in finance are right at the top. "That is because they [finance] and other general service organisations are realising that it is more and more a competitive advantage to be really strategic about what their information technology can do. And gradually one is also seeing FMCG-type (fast moving consumer goods) organisations becoming a bit more serious about the packages they are offering.
"I would say by and large, when you go down to manufacturing and resources, they neither want to pay for executive searching nor pay for high-quality CIO types," she says.
That is all very well, but one CIO from a medium-sized company in the resources industry put an eloquent argument about why the discrepancy in pay between finance and other sectors may be considered extremely unjust. "Banks and finances are still way ahead of us as far as salaries go. Does that mean they are overpaid? It's very hard to say who is overpaid and who isn't -- because we've all got grey hair and we all get stressed, and what is that worth?"I think you've got to very much distinguish between the chief information officer or head of IT that has the hands-on role and the ones that have a more strategic role. And that is where you will see quite a gap in the salary packaging, because some roles you see must have in-depth knowledge of X, Y, Z technologies and things like that, whereas I don't know anything about technology anymore.
"However, I am responsible for the delivery of an efficient service to the company and setting the strategic direction for technology in supporting the business and so I would argue that deserves a higher salary because if you get them wrong it can impact on company results. That's why you get rewarded for some of that grey hair," he says.
Another factor pushing up salaries is probably the relatively short periods IT executives are staying with any one organisation, according to Morgan and Banks business manager Phil Tuck. After fulfilling three to five year contracts, their natural inclination is to push on to greener pastures and higher wages.
The Gap Widens
Don't fall off your chairs in shock, but when it comes to fair remuneration, federal government IT executives are being left miles behind their private sector counterparts. You may well think this is ultimately because the Howard government hasn't got clue one about the strategic importance of IT (this scribe couldn't possibly comment). Whatever the cause, the upshot is that where federal government IT executives could expect to earn between $100,000 and $150,00 last year, this year most would be lucky to get more than $100,000On the other hand, public service must have something going for it. None of the three federal government IT executives interviewed for the purposes of this article were in any doubt they could earn substantially more in the private sector, yet none was remotely interested in leaving his current position. "I've been offered a number of contract jobs at roughly twice what I'm getting paid at the moment. I suppose I would prefer power to money, to put it at its most brutal," the IT director for one small federal agency says. At least many senior public service IT people get generous super and a car.
Other losers are MIS managers, who are getting paid about the same and in fact in some cases are not even getting paid as much as they did 12 months ago.
Size Does Count
If you're working for an SME (defined as a company with a turnover of between $25 million and $100 million) you might have won the title of CIO this year but your wages won't necessarily have risen by much. IDG's Young says more SMEs are starting to embrace the notion of having a chief information officer, and this is leading to a consistency not evidenced last year in the way they are being paid.
On the other hand, those lucky enough to be working at companies with revenues of between $100 million and $1 billion have enjoyed a substantial wage hike, with average salaries moving up from the $81,000-$100,000 to the $151,000-$200,000 bracket. While those in billion dollar-plus companies are earning an average $50,000 more than at this time last year.
"One factor is that these people have come to realise that for years, while they were called Strategic IT director, or in some cases MIS manager they were doing this gargantuan task and not being paid enough for it," Young says. "They were dealing with all these management issues that nobody ever brought into the spotlight. Now that the job title CIO is getting some notice, they are expecting to be compensated like the other executives in the building."Another factor, might we modestly suggest, is that last year's CIO Salary Survey proved a potent weapon in the fight for better wages among some cluey IT executives. "I got a whopping great salary rise after I showed last year's salary survey to the board," one grateful CIO told us at this year's CIO Informat conference in March.
Another way to look at is that IT executives in the Top 100 listed companies can expect to be paid significantly more than those in the next 300 organisations, according to Morgan and Banks' Tuck. "As an organisation increases in size and complexity, and its requirements for technology increase, you would expect that that translates into greater remuneration for the people running those departments," Tuck says.
A Rose by Any Other Name
Compared to last year, IT directors are earning masses more than they did last year. Young believes this is because a lot of IT directors are actually CIOs in everything else but name. And since CIOs have been promoting their value to the company in strategic terms, IT directors have felt inspired to push the same arguments -- that strategically, they are at least as important as the directors of finance and personnel.
Across all corporate revenue strands, IT directors are getting paid far better than before. For instance in billion dollar companies they were earning $81,000-$100,000 last year. That has jumped by a staggering $50,000 yet again to put IT directors of billion dollar companies into the $151,000-$200,000 salary bracket.
"IT directors are definitely getting paid more and in some cases they are proportionally getting paid more than CIOs," says Young. "I think the reason for that is that a lot of SMEs perceive more of a need for an IT director than they do for a CIO, but they are still prepared to fork the money out to get someone good."And the benefit seems to have flowed on to IS and IT managers as well, who are also, in the main, being paid far better than last year. Although still seen and valued as techies, Young says, a fundamental management paradigm shift means these people are being also recognised as information professionals. The result is about $50,000 more in the pay packet for the average IT/IS manager.
Performance is the Thing
At least within those companies that value the IT executive function enough to pay an executive search firm to find them the best possible man or woman for the job, there has been a major drive this year towards performance-based remuneration. According to Tuck, executive management within many organisations (that is, the CEO, his or her direct reports and probably even those on the next management level down), is increasingly finding a good part of its remuneration dependent on meeting key performance indicators (KPIs).
"That performance bonus can vary up to 100 per cent of salary in some instances, and it can be handled in the form of shares and options right through to purely a cash bonus," Tuck says. "These KPIs not only consider the performance of the organisation as a whole but the performance of individual departments. It could involve trimming costs out of IT in the business. Some organisations would benchmark how much it would cost per employee in terms of the capital cost as well as the human resources cost of running IT. Obviously there is an incentive then for the CIO to do more with less unless it can translate into an improved bottom line for the organisation."The CIO Salary Survey shows 58 per cent of those responding don't get any kind of a performance bonus at present, 4.6 per cent get more than 20 per cent performance bonus and 10.4 per cent get a bonus of between 10 and 20 per cent of their salary. Expect these figures to increase as boards now resigned to paying high salaries to their IT executives decide these should increasingly be placed under the microscope to ensure the firm is getting real value for its money.
But expect also for IT executives to increasingly move on, if they perceive their salary to be below industry average and where too much of that salary is performance based. One MIS manager in the food industry told CIO has was actively looking for a new position with a better pay package after his company moved him to performance-based remuneration this year. These days pay rises across his company are almost 100 per cent performance based, with his performance objectives including achievement of specific projects; training and a complete technology audit and three-year plan for the company.
Is he being paid enough? "Definitely not." Would he go elsewhere if offered more? "Certainly, In fact I was thinking about it actively. Andersen is looking for consultants in the change management area and they pay considerably more than I get," he saysStrategy Games MatterOne reason for the trend to performance-based remuneration is that some companies are increasingly looking for ex-consultants to come in as CIOs, according to Perigo.
"The people we know that have recruited for CIOs through search would be the ones that take IT very seriously from a strategic point of view," she says.
"These clients are asking us to try to bring somebody over from consulting, so interestingly enough they're having to come up with a kind of salary structure that fits somebody who has come from a consulting field. That is pushing remuneration towards a more performance-based [approach] and it is forcing companies to offer stock options as an incentive as well, because these people are ever more being considered as part of the inner sanctum."Perigo says the trend is to consider the best strategic CIOs to be those with line management experience who have also spent time in the consulting field.
And that demand seems likely to grow, as the skills shortage -- whether perceived or real -- continues to bite.
"I understand there are 190,000 IT management positions short in the USA; 300,000 analyst programmer positions and upwards short in the UK, and that in response the UK government is looking at amending its immigration law," Strategist says. "And that is [consistent with] my observation here: that the skills required are pretty thin on the ground in Australia at the moment. And of course there is a consultant here at the moment who is unabashed about targeting the top 80 IT executives in Australia to take them back to the UK -- money no object.
"All of that is leading me to realise there is a great shortage of IT executives in Australia. It's driving salaries and is likely to keep on doing so," he says.