The InformationWeek Annual Salary Survey

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November 10, 1997

The InformationWeek Annual Salary Survey

Half of all senior IS executives pull in salaries of at least $100,000. Throw in generous benefits pac kages, and we're starting to talk real money.

By Bob Violino and Marianne Kolbasuk McGee

ou've heard the old joke about CIO standing for "career is over." Today, a more accurate translation would be "compensation is overwhelming."

That's the upshot of InformationWeek 's 1997 salary survey, which surveyed 400 senior IS executives during September. The survey finds that CIOs and other top IT executives -- particularly those with strong business credentials -- are enjoying great demand for their services. This, coupled with their growing clout within organizations, is pushing base salaries and other compensation such as bonuses and stock options to new levels.

H alf of the executives surveyed by InformationWeek earn at least $100,000 a year in straight salary; last year, only 42% reported salaries that high. Roughly 30% of those surveyed this year earn more than $125,000, compared with just 22% who reported that salary level a year ago.

When other forms of compensation, such as health benefits, sign-on bonuses, and stock options, are factored in, the sky's the limit. "I remember not too long ago hearing about the first million-dollar CIO, and it was a big deal," says the CIO of a professional-services firm. "Now there are a lot of million-dollar CIOs around-mostly in high-tech businesses and the brokerages-because of stock options."

"CIO salaries are explosive," adds Jeff Leon, managing director of Russell Reynolds Associates Inc., an executive search firm in New York. "There's lots of competition to get people who not only know the business and understand the technology, but also are good leaders."

Survey results and reports from the field show t hat executives with experience in running big-time IT shops are in the highest demand. The shortage of IT talent, which has existed for years in the lower ranks of IT personnel, is now reaching up to the top. "Because of a number of driving factors that are coming together at once, there is a skills shortage from staff level to executive level," says Tom Lesica, CIO of PepsiCo's international business for the last year. Those driving factors include reengineering projects; year 2000 work; enterprise resource planning (ERP) deployments; telecommunications network expansion; Internet, intranet, and Java initiatives; and globalization.

The growing demand for managers' services is contributing to better compensation packages. Looking at median salary -- that is, the figure at which half the survey respondents earn more, half earn less -- executives holding the title of CIO earn an impressive $113,000, according to this year's surve y. They were followed closely by senior VPs of IS, with a median salary of $107,000, and VPs of IS, at $98,000.

Not surprisingly, there's a correlation between years on the job, job title, and pay. While the average job experience for all 400 executives surveyed was 16 years, the CIOs in the group have an average of 19 years' experience. Nearly 45% of the CIOs have worked in the field for more than 20 years.

Another way of looking at this: More experience brings more pay. Those executives in the survey who earn more than $125,000 have worked in the field, on average, for nearly 20 years. Those in the $75,000-to-$125,000 range have worked in the field for slightly more than 16 years. Those who earn less than $75,000 annually have worked in the technology field for fewer than 12 years.

Ironically, while CIOs have worked in the IS profession the longest, they've also worked the shortest period of time at their current job of any senior IS executives-just over six years, on average. They're also more likely than lower-level IS executives to call their jobs insecure. When the CIOs in the survey were asked to rate their job security, 5% called it poor. Among the lower-level IS managers none called their job security poor. Similarly, while fewer than one-third of the CIOs rated their job security as very good, nearly half the lower-level IS managers gave it that rating.

Location and cost of living also come into play when companies are trying to lure job candidates. "The East Coast is very expensive to live in-if you get an offer for a $200,000 salary in New York, that might be the same as getting $290,000 in Kentucky," says Paul Daversa, president of Resource Systems Group Inc., an executive recruiter in Stamford, Conn. "Companies in less-expensive regions are taking advantage of that difference."

The InformationWeek survey supports Daversa's contention. Nearly 35% of senior IS executives working in the Northe ast report salaries of more than $125,000 a year, the highest percentage of executives with that level of pay. In contrast, fewer than 25% of the executives in the South reported salaries in excess of $125,000 a year. Looking at the low end of the salary range, 25% of the executives in the West report salaries below $75,000 a year, the largest percentage in that pay category.

Looking at median salaries, the Northeast rules. There, the median annual salary for all senior IS executives in the survey is $98,000. The Midwestern states followed with a median salary of $91,500. Next came the Western states, at $86,800. Bringing up the rear: the South, with a median annual salary of $84,200.

Similarly, pay varies from industry to industry. The industry sector in our survey with the largest percentage of highly paid executives: computer hardware manufacturing. Nearly 45% of the senior IS executives working for computer hardware mak ers report salaries in excess of $125,000 a year. In retail and wholesale, 32% report salaries that high. They were followed by legal, insurance, and real estate (31% over $125,000) and finance and accounting (30%).

At the other end of the pay scale, the industry with the highest number of low-paid executives is noncomputer manufacturing; there, more than 40% of the executives report salaries of under $75,000 a year.

Bulls Rush In
While the InformationWeek survey turned up just one executive making more than $300,000 a year in salary, executive headhunters say million-dollar packages are enjoyed by several CIOs on Wall Street -- worldwide market drops notwithstanding. "That industry has always been dependent on technology -- it absolutely cannot live without it," says Leon of Russell Reynolds.

The Wall Street pay boom isn't limited to CIOs. "What a top CIO was making two or three years ago is now being paid to the next level [of IT executive] down," Leon says. "A million dolla rs wasn't unusual for CIOs a couple of years ago -- now that's jumped to the $2 million-to-$3 million range for CIOs, while the next level is getting $1 million packages."

This next level includes heads of technology for business units and chief technology officers, whose jobs are often more technical than a CIO's, Leon explains. Some companies have CTOs whose job is synonymous with CIO, while others have both a CTO and a CIO. "The basic paradigm has shifted from mainframe to desktop-centric environments, but a lot of CIOs often don't have the technical background that reflects that," Leon says. "That's often when a CTO is brought in."

But that doesn't mean CIOs are being paid any less -- quite the opposite. Fierce competition for talented and experienced IT leaders is making counter-offers more common than ever before -- and that's leading to higher pay. "Companies just don't want to lose their CIOs and have to replace them," says Beverly Lieberman, president of Halbrecht & Lieberman Associates Inc., an IT executive recruitment firm in Stamford. In fact, Lieberman says that three times in the last 18 months, a candidate accepted a CIO-level job, had a start date, and then at the last minute received a generous counter-offer from their current employer -- and decided to stay. "That would never have happened before," she says.

These counter-offers are often "golden handcuffs" to prevent CIOs from leaving in the middle of an important IT project or initiative, Lieberman explains. These offers are basically raises just to get them to stay, "because companies don't want to go through the pain of finding replacements." She adds, "You may not be a star, but you'll be paid like one. Companies have a gun to their heads -- they're being held up by the marketplace."

Rising demand for IS executives is also resulting in lucrative compensation packages that include perks such as signing bonuses and stock options. In fact, for a lucky few, base pay is the smaller part of the total compensation package. "It's n ot uncommon to see bonuses that are two, three, or four times the base pay" in packages, says Leon of Russell Reynolds.

"Not uncommon" is something of an exaggeration. Actually, fewer than 10% of the executives surveyed by InformationWeek say they receive total benefits worth more than half their salary. Nearly half the executives surveyed say the value of their total benefits package equals just 15% to 40% of their salary.

Signing bonuses are perhaps the most attractive benefit, since executives don't have to do much more to earn them than say yes to a new job. "To entice someone to leave a company, money talks," says Doug Greenleaf, CIO at accounting and consulting firm Deloitte & Touche in Nashville, Tenn. "And money up front talks even more."

Anecdotal evidence shows that signing bonuses work. Says Jim Kinney, VP and CIO at Kraft Foods Inc. and president of the Society for Information Management, an organiz ation of IT managers in Chicago: "I've heard of people leaving their companies in the past six months, and in both cases there was a healthy salary increase but also a substantial signing bonus."

But signing bonuses can also make sense for the business, Greenleaf adds. "It's a lot better from a business standpoint to hire someone at $75,000 and give them a $25,000 signing bonus, than to hire them at $100,000," he says. "It doesn't put the company's whole salary structure out of line."

As companies bid for CIOs, some are getting more creative in their offers. For example, executive recruiter Daversa says a recent package offered to a CIO candidate included a $200,000 base salary, a $40,000 sign-on incentive, a three-year company loan of $400,000 to purchase a house, and stock.

Stock options are becoming a greater piece of the overall package, too, making the value of a company's shares a way of attracting CIOs and other IT executives. Nearly 45% of the senior IS executives in this year's survey sa y they get stock options as part of their total compensation package. "If a senior manager has $1 million worth of stock, and the price is on the rise, the value of the compensation package goes up as well," Daversa says.

Still, four other forms of nonsalary compensation are more common than stock options: health benefits, cited by 93% of the respondents; education and training (cited by 81%); 401(k) retirement-fund match (79%); and performance bonuses (76%). Other, less common benefits are stock plans, sabbaticals, company cars, and day care.

Company size comes into play when it comes to nonsalary compensation. At companies with revenue of more than $1 billion, more than half the executives receive benefits that equal 15% to 40% of their base salary, and more than 20% get benefits that amount to more than 40% of salary. In contrast, at companies with revenue of less than $100 million, roughly 35% of executives receive ben efits in the 15% to 40% range, and only 8% get benefits in the over-40% range.

How are those benefits awarded? Executives say job performance and the success of their companies are critical. Nearly three-quarters of the managers cite personal performance, while 70% mention corporate results as factors in whether they get extra compensation. Only one-quarter of the executives cite market forces as a factor in benefit payments.

One market force that is having an impact on IT pay is the Internet. The Web and related technologies are contributing to higher compensation in the industry, not only because they're creating profitable business opportunities for companies, but also because they are giving CIOs and other IS executives more job opportunities.

"We're going to see a lot of Internet startups that try to pull people out of CIO jobs to become CEOs at their companies," says a CIO at a large Northeast financial-services firm who requested anonymity. "I've been approached. It's kind of appealing, bu t with startups, you never know where they're going to go."

Glad To Be Here
Despite the offers of greener pastures, most executives seem happy where they are. Nearly 65% of the CIOs in the survey rate their total compensation as better than average. Among executive VPs and senior VPs, satisfaction is even higher: Nearly 70% call their compensation better than average. Similarly, most IS chiefs are also pleased with their career choice: Nearly 90% say that given a choice to start their career again, they would still consider IS.

One factor leading to that satisfaction: IS executives are gaining visibility and stature within organizations. While IS leaders have traditionally reported to chief financial officers or chief operating officers, at many technology-savvy companies they're now reporting directly to the highest levels of management. In fact, about 35% of the top IS executives at the 1997 InformationWeek 500 companies report to the chairman, the CEO, or the president -- up from 26% who reported that high in 1993.

IT managers who understand the workings of the business and marketplace conditions are likely to be most in demand. "There is an evolution going on with the job of CIO," says Lesica of PepsiCo. "Technology was the largest factor in a CIO's job before, but this is being coupled with business acumen and communication skills. In order for a company to leverage technology, there needs to be an understanding of the business and a vision of what technology can bring to the business."

Adds Kinney of Kraft Foods, "More is expected of the CIO than just a few years ago. There's also a greater appreciation for the complex and strategic nature of the job, and the more important role the CIO is playing in most business strategies. To attract the kinds of individuals companies are looking for, they're going to be forced to meet the price."

See related story, " Who Did We Survey ?"

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