Sky's the limit on CIO pay

Opinion

Sky's the limit on CIO pay

CIOpay_150

What makes some CIOs worth seven-figure salaries?

The announcement that Philip Clarke at Tesco and David Burden at Royal Mail will both earn well over £1m this year has led to plenty of speculation about top IT people's salaries.

These high salaries contrast with survey data from the NCC, which suggests a range between £40,000 and £140,000, and from Harvey Nash, which points to average salaries of up to £250,000 for those working in the largest businesses with more than £100m turnover.

One might ask whether the very high salaries at Tesco and the Royal Mail reflect exceptional individuals and circumstances, or whether we can discern a pattern.

It seems likely that IT leaders' salaries are determined in a similar way to those for other disciplines: sector, size of business, remuneration of other top directors, role and impact, and competition for top candidates.

So what is the key to a top salary, and how should an ambitious CIO position themself? 

Primacy of the sector

There is no doubt that the sector will help to determine what the role of IT is in the organisation, and will also set norms for top employees' salaries.

If IT is seen as a key enabler (as it is at both Tesco and the Royal Mail), then the top IT person will be seen as very important both for the running of the business and in transforming it.

And clearly, where the chief executive enjoys a substantial salary (Tesco's gets more than £3m a year), there is also the opportunity for the IT director to be a high earner.

In the public sector, where top salaries are typically in the hundreds of thousands rather than millions of pounds, top IT earners would be unlikely to earn more. Banking pays well; manufacturing less well.

But in certain circumstances,  such as the present NHS initiative, the IT leader may be the highest paid official in the organisation, albeit only temporarily so. Similarly, it is rumoured that the highest paid employee at the Open University is the IT director, because of the importance of IT to the organisation.

Size of business is also important in determining remuneration and is often used as a benchmark by recruiters. The complexity and value of the role will at least in part be determined by the size of the estate in terms of desktops and servers, number of sites and geographical spread.

Although there may be some cultural challenges in supporting colleagues throughout the UK, these are substantially magnified if the far-flung offices are in different continents.

Structure and culture

A further complexity is the number of home workers. The structure and culture of the business also has an effect. Some companies have strong central control, whereas others are more federated, requiring the CIO to work with, and have greater influence upon, local managers.

So we can set the scene for the scale of the IT job, which is determined partly by sector, size and structure of business. But of more fundamental importance is the role of the CIO.

For many (perhaps most) organisations, IT is an essential part of the business infrastructure: it has to work properly at an affordable cost. In such circumstances the IT director will be a senior and responsible manager, and will be paid as such.

But for an increasing number of businesses - such as airlines or banking - technology is at the core of what is delivered to clients, or it may be a key enabler and agent of change. In such circumstances the head of IT will be a part of the top team and will command a premium salary.

Ultimately an IT leader's salary is a reflection of the value put on their particular role, and the difficulty in recruiting to that post.

In many sectors the opportunities are there for the CIO not only to provide a world-class IT operation but also to drive change, facilitate the interaction with clients and to reduce costs. In such circumstances, we should not be surprised if the sky is the limit for those who succeed.

Ben Booth is chairman of the BCS Elite group and chief information officer at Mori

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This was first published in June 2005

 

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