September 27, 1999

Companies Are Willing To Pay For Performance

By Laura Chabrow

erformance-based compensation for IT executives--usually cash bonuses, stock options, or both--is increasingly common because it motivates executives to focus on business goals. According to the InformationWeek National IT Salary Survey, 55% of senior IT executives receive performance bonuses as part of their compensation, while 34% receive stock options.

The financial sector has a strong pay-for-performance mentality, says James Smith, chairman and CEO of Webster Financial Corp., a Waterbury, Conn., banking and insurance company. "We get paid to produce results that benefit our shareholders." Webster offers its senior IT executives bonuses and stock options based on achievement of the company's overall goals and individual goals. Depending on performance, total incentives for Webster's IT executives can exceed 100% of base pay.

Incentive pay has caught on outside financial companies, too. AlliedSignal Inc., a $15 billion manufacturer of aerospace and other advanced technology products, is expanding its use of performance bonuses as part of its effort to focus senior IT executives on translating business strategy into an IT strategy. "We are training our information system executives to become business leaders," says Julian Kaufmann, the Morristown, N.J., company's corporate director of organization development and information-systems human resources. CIOs of AlliedSignal's business units receive bonuses based on meeting specific cost-saving targets, project completion, and the quality of the business results.

Other findings from InformationWeek Research's National IT Salary Survey:

• Nearly two of every three respondents are satisfied or very satisfied with their total compensation package.
• Companies pay a premium for senior IT executives holding a master's degree in business administration. MBAs typically earn annual base salaries that are $16,000 more than their counterparts with bachelor's degrees and $8,000 more than those with Ph.D.s.
• Recruiters have contacted 70% of the surveyed CIOs and 75% of VPs and directors within the past 12 months; however, only 9% of CIOs and 11% of VPs and directors are actively seeking new jobs.
• The median longevity of CIOs at their present companies is four years. VPs and directors have a median tenure of five years.

Return to main story, "CIOs Focus On Business."

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