InformationWeek

Annual Salary Survey: Holding Pattern

The chief information officer job is more demanding, and pay hasn't kept pace.
Still, technology managers are getting better raises than other executives

By Scott Leibs
Issue: 5/2/94

Wall street laid another egg, interest rates are ballooning, and hundreds of thousands of American workers have learned that reengineering is just another word for nothing left to lose. With all that, relatively flat salaries for technology managers have never looked so good.

Regardless of whether you manage information systems or have these managers reporting to you, InformationWeek's annual salary survey of top information systems executives highlights their dilemma. Whi le they're required to do more for the organization, in most cases their pay hasn't increased.

The facts are clear enough: Salaries for CIOs changed little from last year. In fact, there's indication that the median salary has actually declined slightly. Nearly as many IS executives this year as last reported that their salaries remained flat compared with the recent recession-plagued period of 1992 to 1993, and fewer boasted of double-digit raises or of cresting the $300,000 compensation barrier.

But this holding pattern says more about the economy than it does about the importance of the information systems function. In fact, evidence suggests that IS executives continue to fare better financially than many other corporate officers. While the survey found a 5% pay raise typical for IS execs, recent studies conducted by Robert Half International, an executive placement and employment firm in Menlo Park, Calif., found the pay of CFOs and controllers at large corporati ons increased by only a percent or two during the last year.

To get a bead on IS salaries, in March InformationWeek and market research firm BestTel Inc. of Lake Success, N.Y., surveyed the top-ranking IS executives at the 500 largest U.S.-based publicly traded companies; respondents' companies have an average revenue of $4.8 billion. Responses were received from 131 decision-makers representing some 20 industries. Manufacturing topped the list, totaling 28% of respondents; financial services was second, with 23%.

Skills In Demand
Nearly 65% of the respondents are VPs or CIOs, while 25% are directors or managers of corporate IS. By tenure, the typical respondent has been an IS professional for 22 years. More than half have earned a four-year college degree, 28% hold an MBA, 13% have earned other types of master's degree, and 3% hold doctorates.

Some technology positions are hot right now, while others are losing steam. As companies move to new technologies and emphasize areas such as client-server computing, global networks, programming, and object-oriented systems, positions in these areas are in high demand. Sony Corp. of America in New York found that a project to move key applications from mainframe systems to client-server networks has created a difficult-to-fill need for people with relevant database and client-server experience. "We've been looking for some time for people with the right applications development and database experience," says John Hayes, VP of IS. The search is made more difficult, he says, "because we don't want to distort our salary structure by offering people with some skills far more salary than people with different but related skills."

Building a good staff while staying within budget is never easy, but IS leaders who make the grade are themselves well-positioned to escape the flat-salary trap. "For the CIO with the right skill set, compensation remains strong," says Beverly Lieberman, president of Halbrecht/ Liebe rman Associates Inc., a Stamford, Conn., recruitment firm that specializes in CIO placement. Mobility helps, too: Lieberman says that CIOs who change employers can usually expect a 5% to 15% pay increase with each move.

Incentive pay for CIOs is increasing, says Richard Wonder, national director for IS in Robert Half International's New York office. "You can't look at salary alone," he says. "You have to look at stock options and other forms of compensation, which are increasingly tied to performance."

Pay And Perks
The InformationWeek survey finds that most CIOs get a range of non-salary compensation, often tied to either corporate or individual performance. Recruiter Lieberman says it has become much more common in the past 12 to 18 months for new CIOs to sign employment contracts that peg incentive pay to specific performance targets. Such contracts have also become prevalent for key positions below the CIO level, including VPs of architecture and telecom, Lieberman adds.

Mich ael Simmons, former CIO of the Bank of Boston, agrees. Simmons, ousted from his high-profile, high-paying job last December following a management shake-up, says he has since examined nearly 30 offers and notes that contracts are now the norm. "CEOs want a certain comfort level," Simmons says. "Good people don't come cheap, and a specific contract may make the hiring process easier on both parties."

Looking for your own contract? Simmons advises negotiating one in which the employer pays more if you part ways early with the company, but less as time goes on. "A new CIO is often brought into address complex issues,'' Simmons explains, "and the situation may be emotional and political. If it doesn't work out early on, you can't blame the CIO entirely, hence a bigger buyout figure is justified. But the longer the CIO holds the job say, a year or two years the more the company has a right to expect results, and the terms of the contract should decline over that period."

The title of CIO often comprises seve ral different functions. These can range from managing a staff to designing information infrastructures to guaranteeing that traditional IS services will be reliable and economical. Those responsibilities often overlap, especially when a company is making a major commitment to new technologies. When that happens, IS leaders must find the right balance between corporate strategy, technologies, new staff, and the critical issue of retraining existing staff.

Just ask Robert Menar, senior executive VP of operations for Carter Hawley Hale Stores Inc. in Los Angeles. He's in the market for what he calls "a lot of young turks who can think through the old paradigms." Menar has identified some 20 core technologies that are vital to the retailer's future, including point-to-point videoconferencing on its own network and using radio devices to improve customer service on the floor.

"Why have salespeople stand by the register when we could give them some sort of notebook computer so they can walk around and talk t o customers?" Menar asks.

To build a staff adept at leveraging these new technologies, Carter Hawley Hale will retrain existing staff and take advantage of an annual 5% turnover rate to bring in new blood. "We haven't had much trouble hiring people," Menar says. "All the recent layoffs from corporate downsizing has produced a deep talent pool."

Those who find themselves in that pool would be well-advised to swim in certain directions. When asked by InformationWeek to name the positions in the highest demand, CIOs pointed overwhelmingly to any and all jobs associated with client-server computing. "Virtually all our new hires are in the client-server and Unix areas," says James Gray, group VP for IS at retailer Service Merchandise Corp. in Brentwood, Tenn. Gray believes this shift poses challenges to managing the payroll. "The people we hire to deal with emerging technologies tend to be younger, so that makes their compensation somewhat lower," he says. "But it is moving up very fast."

Gray adds that t he need to offer competitive salaries to people with the right skills mirrors a larger challenge in managing the IS budget: ''We're under a lot of pressure to keep costs down for the conventional parts of IS that serve a utility role. "Nonetheless, Gray's department is being encouraged to invest in new technologies and the people who make them work to keep Service Merchandise competitive.

Other positions in high demand include IS "architects," people who can design a company's overall information infrastructure; global networking managers; telecom managers; people experienced in reengineering, particularly in porting mainframe applications to client-server and other networked environments; and what some analysts call "line CIOs" or "DIOs," divisional information officers who oversee all aspects of IS within a business unit.

Beyond IS
The InformationWeek survey also revealed high demand for members of advanced technology teams that explore new technologies and their applicability to business problems. Yet another hot area is end-user support, which mirrors the growth of corporate computing beyond the IS group.

CIOs also say they're looking for people with strong general business know-how. For example, Northeast Utilities in Hartford,Conn., recently created a position that combines an understanding of IT with marketing and customer-service skills. The position, called director of client services, was designed to improve the partnerships between the company's IS group and its business units and to boost the performance of the IS department by increasing its contact with the rest of the company. "The job calls for many non-traditional IS skills as well as lots of savvy," says T.O. Dixon, VP of information resources.

Carolyn Boyle, a senior VP and CIO at CNA Financial Corp. in Chicago, agrees. "Finding people who can manage technicians but who aren't technicians themselves is important but difficult to do. That's a tricky mix of skills." Boyle says the task was even more complicated w hen company pay scales made it difficult to offer more money to people with skill sets that were suddenly in demand. "Then the company faced reality," she adds, "and we now offer the salaries we must to get the people we need."

The issue of acquiring new skills is a sensitive one within IS today. With companies downsizing, moving to new technologies, and reining in the payroll wherever possible, many IS employees are quickly acquiring new skills to stay employable.

They have to scramble: An earlier InformationWeek survey on technology budgets , found that nearly half of all CIOs expect to cut staff in '94, compared with only 20% last year. The result a surplus of people in the job market can make deciding whether to invest in retraining or simply hire new people with relevant skills a tough call.

Robert McDowell, VP of consulting service for Microsoft in Redmond, Wash., believes that "making an investment in retraining can really pay off." Several of Microsoft's corporate client s have focused heavily on retraining prior to rolling out new technologies. By doing so, McDowell notes, they "have gotten a much larger payback than if they had just forced people to sink or swim."

"We've had mixed results on retraining," adds Gray of Service Merchandise. "In many instances, the people who go out and acquire new computer skills on their own seem to do well." Gray says that while the company's relatively late move away from mainframes has created what he calls "a pent-up eagerness" among his staff to learn more technical skills, he fears about one-third of the staff won't be able to make the transition due to both attrition and staffers' inabilities to keep pace with new technologies.

Tough Game
Executive recruiter Lieberman takes a hard line on retraining, saying "people in their 40s and 50s who don't have these new skills are basically out of the game.''

She adds that some of these older workers will go on to consulting, particularly in the area of legacy appli cations, while others may be hired by large outsourcing vendors who need people with mainframe experience. But, Lieberman warns, IS employees who wait to learn new technologies run a large risk of drifting into the stagnant end of the labor pool.

At every level of technology management, the key is real-world success. "A lot of people claim they can run reengineering projects, and they've done a lot of homework," says Wonder of Robert Half, "but not that many have actually seen it through from start to finish and made it work."

So when analysts say IS staffers are acquiring skills because they recongnize the level of competition on the street and the need to change to keep up with it, they could just as easily be talking about top IS executives.

Even when salaries do begin to move up again, companies will only pony up the big money for executives who can prove they've boosted the bottom line.

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