IT Employment

Flat pay trend pinches CIO wallets, yet spurs IT innovation

While the pay scale remains flat for CIOs, the belt tightening isn't thwarting IT innovation. The best CIOs are finding IT success despite the tough economic times--and their financial rewards might be just around the corner.

With business the worst it’s been in 15 years, Phil Go, CIO of one of the top 20 construction companies in the United States, said he’ll consider himself lucky if his salary stays flat this year. And as for bonuses: “I would be shocked if we have any,” said the IT leader at the Detroit, MI-based Barton Malow.

According to a recent survey by Chicago-based Fortune 500 executive search firm Spencer Stuart, Go is not alone in his expectations.

“We’re finding that compensation, which rose dramatically in the nineties, has flattened in the past year or so,” said Richard Brennen, head of the Spencer Stuart CIO practice. He attributes the stagnation to the cooling down of the dot-com era, as well as to the general economic slowdown. But he’s quick to point out that outstanding IT executives will still command extraordinary packages and get offered substantial increases as incentives to join a particular company.

Where the big bucks are
The Spencer Stuart compensation study found that most CIOs earn base salaries between $200,000 and $300,000. Of the 818 CIOs who participated in the survey, 80 percent receive annual pay between $200,000 and $300,00. Of that 80 percent, 56 percent were paid in the range of $200,000 to $250,000.

Predictably, CIOs in the financial-services industry earned the highest compensation (base salary plus bonus), averaging $459,123. CIOs in the consumer-goods sector placed second with an average compensation package of $398,456. CIOs in other sectors, including government, education, professional services, and non-profit earned significantly less—an average of $303,212.

Brennen said that the study illustrated that the size of a CIO’s paycheck was linked more to the size of the employer, rather than the company’s location.

CIO salaries didn’t vary significantly across the United States, but overall compensation was slightly higher in the East and Midwest than in the West. Brennen attributed this trend to the practice of many West coast technology companies and dot-coms to pay CIOs with more stock and less cash.

While the Spencer Stuart study indicated a flattening of compensation, another recent compensation study stressed that CIO pay has actually fallen for the second consecutive year due to decreased bonuses.

Janco Associates, a Park City, UT, management consulting firm, surveyed 400 CIOs. According to Janco, CIO compensation was at an all-time high in 2001, with top performers earning a total package of $475,000. In 2002, the figure dropped by $75,000. Janco CEO Victor Janulaitis expects the average to drop another $25,000 to about $375,000 this year.

Janulaitis attributes most of the compensation cuts to across-the-board reductions in corporate bonuses for corporate executives.

“For many CIOs, 20 to 40 percent of their compensation has been performance bonuses,” he said. “So even though many companies have increased the base pay of their CIOs by about five percent, CIOs still have taken a big hit in pay because their bonuses have pretty much disappeared.”

Economics spur creativity
With executive compensation tied ever more tightly to the fiscal health of companies, CIOs have had to “dig down deep,” as Phil Go puts it, and find creative ways to help their companies weather the persistent economic downturn.

“For all practical purposes,” said Go, “we’re not going to launch any large new initiatives. We’ll try to make do with what we have and really try to minimize any new capital investments that we make.”

But that doesn’t mean that the $1.2 billion construction company’s capital investments will go to zero. The goal is for IT to be frugal, but invest wisely in technology that will yield a quick return.

For Barton Malow, that has meant investing in sophisticated CRM tools to help the company analyze how to convert more leads into sales. The company has also invested in distance conferencing technology to increase project team collaboration across the country with minimal cost impact. With initiatives like these, said Go, “The payback period is such a slam dunk. The systems pay for themselves in less than a year.”

For Don Bricker, the director of IT for the Fort Worth Star-Telegram, a Pulitzer Prize-winning daily newspaper with over a million readers, it’s been a struggle to maintain an ever-increasing pace of business with fewer people.

Despite his expectation that his compensation will remain flat this year, Bricker is doing his best to help the publication maintain its nationally recognized reputation in an era of extreme frugality. He’s considering outsourcing activities such as software development, network administration, and support in order to cut costs and increase efficiency. One significant undertaking will be to evaluate the potential cost savings in switching from Microsoft’s product suite to Linux OpenOffice.

“In light of ever-present terrorist threats, I’ll also be reevaluating and revising disaster recovery and business continuity plans,” added Bricker.

The end of the downturn
While the IT focus over the past 18 months has been cost containment rather than business expansion, Spencer Stuart’s Brennen believes that the demand for good technology executives will continue to rise and that the best people are going to continue to do very well. The ”best” are those CIOs who haven’t allowed the current flat pay trend to affect their leadership impact and IT innovation during tough economic times. And for those CIOs, the financial reward could be just a year away.

Janco’s CEO predicts that CIO compensation, as well as CIO hiring, could begin to creep up in the second quarter of this year.

“A lot of IT organizations have cut to the bone over the last year or two, and now they’ll start rebuilding again,” said Janulaitis.
0 comments

Editor's Picks