If you’re a CIO or a CTO, do you know how your compensation package compares with others in your organization – or industry? Some of this data is public, but lots of it is private. But even more interesting than the data itself are the relationships among compensation, competence and outcomes: do you think those who make a whole lot of money are worth it? Do you think they contribute that much more to the organization than you? Is the concept of “meritocracy” at all real? If you’re a C-Suiter or member of the Board of Directors, have you thought about the relationship between performance and compensation?
If you’re reading this you may already be uncomfortable. If you work for a public company much of this data is available. If you track stock ownership and sales you can identify “insiders” and “insider transactions.” Yahoo Finance can be the portal of pain or pleasure, depending on who’s looking. 990 forms are also tough. They report the salaries and benefits of those who work for non-profits, where compensation expectations are understandably low since these organizations are, well, non-profit, only to discover that non-profit leaders make enormous salaries.
Very few professionals hold anyone’s feet to the fire when it comes to compensation rationale. Instead, huge salaries, bonuses and stock awards are treated as aspirational. Who wouldn’t want to make millions of dollars every year?
So what do CIOs and CTOs actually make every year?
Compensation
CIOs and CTOs make a lot of money. Janco Associates reports that:
“Top CIOs Compensation starts at well over $1 million – Janco has just completed its review of the top paid CIOs in publicly traded companies.
“In a review of public records Janco has found that 25 CIOs make over $2 million and the top paid CIO made $17.3 million … most of the compensation for the CIOs come in the form of company stock and stock options.”
Janco also describes the characterisitcs of successful CIOs:
“Both visionary and pragmatic – It is not enough to plan for innovation, the CIO needs to be perceptive and realistic. As an insightful manager, a CIO promotes broad technology agenda to help the business profit from leading-edge initiatives. At the same time as a pragmatist, a CIO deals with the realities of the business. The pragmatist also facilitates the productivity of current IT solutions. The CIO focuses on minimizing cost and maximizing results, in addition the CIO helps to increase the customer and product/service base of the enterprise.
“Focus on ROI improvement of IT – CIOs will find new ways to help customers and the organization profit from how data is used while focusing on managing budgets and processes to eliminate or reduce costs.
“Inspire the enterprise and expand the business impact of IT – CIOs will have proven expertise in both business and technical facets of their role. CIOs will interact with the enterprise and its executive team as enterprise leaders and drive new business initiatives and shifts jointly the other members of the executive team.”
These characteristics set the performance baseline. They’re also aspirational.
An Uncomfortable Correlation
But there’s another side to compensation. If we correlate project failures data with compensation, what do we find? Recall that the vast majority of technology projects fail. Digital transformation fails 70% of the time. McKinsey reports that only 30% of digital transformation projects result in improved corporate performance. There’s failures data everywhere: new technology projects fail at an astounding rate at enormous cost to the companies.
The massive ERP business – projected to be $75B by 2030 – routinely experiences failure, and sometimes famously. CRM projects fail at nearly the same rate. Big data analytics projects also fail at an alarming rate.
If most technology projects fail, why are CIOs and CTOs paid so well? Has the industry just learned to accept failure and pay technology leaders well regardless of their performance or the outcomes of their projects?
Compensation Due Diligence
This is a really tough one. Before we get to technology compensation, remember that compensation due diligence extends well beyond technology management. What happens when C-Suiters really screw up? Are they “punished” or rewarded? What happens when CEOs are “asked” to leave? Golden parachutes are a way of life.
Perhaps the larger issue is accountability. Does the relationship between accountability and performance fade as it climbs the corporate ladder? What about when CEOs are corrupt? A Wharton School podcast with Jesse Eisinger – “Why Corrupt Executives Are Rarely Prosecuted” – is disturbing at best:
“History is rife with examples of wrongdoing in the corporate boardroom, from the early days of the Great Depression to the recent Great Recession. Besides a handful of high-profile prosecutions — think Bernie Madoff — why aren’t more wrongdoing executives in prison?”
Marcus Baram turns a wonderful phrase: “failing upwards: succeed by screwing up.”
Technology leaders are also under the performance/compensation gun. CEOs and Boards of Directors have their work cut out when they compare performance to compensation.
Rationality?
Let’s stipulate that there’s little chance that compensation practices will ever be rational. With that behind us, technology leaders can be assessed empirically. Here are some of the typical KPI-based metrics:
- “IT operations – System uptime, downtime, maintenance events, maintenance costs.
- Cybersecurity – Incident rates, incident response times, average cost per incident.
- Customer service – Technical support calls, technical support response times, customer satisfaction rates.
- The ROI of a software investment, projected vs. actual.
- The impact of projects on IT services.
- Objectives met.
- Deadlines.
- The costs of specific aspects of the project.
- Employee productivity indicators.
- Revenue attributable to new digital investments.”
But do these metrics actually matter? Said differently, will organizations measure the performance of their technology leaders, hold them accountable for their performance and compensate them accordingly? (Or terminate them when they fail?) While there’s very little data about how “patient” companies are about poor performance, given the track record of major technology projects, we can assume that patience exceeds performance.
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