Jane Kimberlin is one CIO with recent firsthand experience of the UK CIO market, having taken over the running of IT for Domino’s Pizza this May. She agrees their incredulity was well founded, although the mega-salaries that do exist are often the exception to the rule, particularly in terms of base pay.
“People are putting more emphasis on the performance-related aspects of pay packages – they can make competitive targets and expectations clear,” she says.
Her comments reflect the picture painted by Alistair Russell, the National Computing Centre’s (NCC) leader of its CIO Connect ‘Impact’ programme. Russell describes an active recruitment market, but one with much variation in the levels and mixture of remuneration packages. “Top IT salaries have been on a level for the past few years, whereas salaries in the rest of the IT sector are dropping,” he says.
The findings of this year’s NCC salaries and employment trend survey back this argument up. It reported the average rate of increase in total annual salary for this sector was 3.7 per cent. This rate has been the consistent for the past three years in comparison with UK government figures for the economy as a whole during August 2004-5, overall average earnings increased by four per cent.
But 18 months after the MIS UK straw-poll that its respondents had cause to eat their words (although not literally one hopes) with the news that head of IT at retail giant Tesco earned £2.2m last year. As an example that seemingly bucks current trends, they could however, be forgiven for foreseeing how the mega-salary of Philip Clarke, Tesco international operations and IT director, could be possible. Tesco’s financial results for the year ending 31 March 2006 revealed his salary grew 23 per cent from the previous year and included short and long-term cash and share bonus, director-level rewards.
Tesco director of media, John Church comments that despite sharing success in the online business company-wide with strictly performance-related benefits, “Philip has a much bigger job than IT. He’s also international director, and we now have more sales space outside the UK (58 per cent) than we do inside”.
It also emerged in the same week that Tesco’s Clarke hit the headlines that NHS IT director general, Richard Granger earns £285,000 a year according to his pay band, despite taking a pay cut from his previous private sector role.
The Department of Health, was forced to reveal the sensitive information by the Information Commissioner in May, after it attempted to block any response to a Freedom of Information Act request to make the salary public. But Russell is quick to put both Clarke and Granger’s salaries into context against an otherwise flat market.
“Stories of massive CIO salaries have been exacerbated by the recent story of the private-sector Tesco guy at £2m and the public sector NHS guy at £280,000,” he said. “Both are pretty grossly over-exaggerated for UK CIOs.”
He says the average current annual CIO salary is between £150,000 and £250,000 in the private sector, with the public sector earning on average a little less. His explanation also goes some way to explaining how mega-salary exceptions, the likes of which Tesco and the NHS paying out, are possible against the backdrop of a stagnating market. “The whole departmental area of IT is working much more at integrating with the requirements of the business,” he added. “This has led to more packages being linked into business change and targets, as opposed to plain service provision.”
For example, Tesco’s headline-grabbing generosity was not without good reason, as Clarke’s package was earned in the course of the retailer making £2.25 billion in profits, boosted by over £1 billion in online sales.
Clearly, there are those companies who are willing to pay if technology-based revenue generation can contribute nearly half the yearly profit. Kimberlin said: “I found the market relatively buoyant, although not flooded with vacancies. And I think IT salaries are being paid in line with the responsibilities of the role and the targets of the business, which varies by sector. Ultimately you pay for what you get.”
While she agrees basic salaries have not necessarily increased greatly, she points out performance-related incentives may not play to every individual CIO’s strengths: “Bonuses may not necessarily change the way a CIO does anything.” Kimberlin points to the fact that salary is only one out of the 15 individual criteria she factored into her own final job choice.
Despite the disparity between even the highest of private and public sector salary examples, the Domino’s CIO also said a public sector job “wasn’t something I would’ve ruled out”. She adds: “It would have appealed to the instinct in me that would like to give something back to the society I live in.”
Keith Riley, who currently works for a FTSE 250 company as an interim IT director, agrees that his peers have not been put off public sector roles entirely because of the lower pay scale in comparison to the private ones.
Riley, who was CIO for DIY retailer Wickes until recently, cited the high level of interest raised by Department for Work & Pensions vacancies advertised this year for the implementation of the Jobcentre Plus IT scheme, for example.
“I haven’t been in the market myself since the end of last year, but the current picture I have from talking to other CIO contacts and various headhunter and recruitment firms, is that the market is relatively buoyant,” says Riley.
“Incentive elements seem to have become a bigger part of salaries overall, both at CIO and senior IT management levels. But I would say that pensions are being talked about and considered more than ever before.
“More senior managers certainly are considering a move to the public sector because of the final salary pension certainty versus the uncertainty of incentive schemes.”
Simon La Fosse, director of the CIO practice at recruitment company Harvey Nash also observes there has been a increase in packages. “As regards bonuses at senior IT pay levels, if you’re getting anything less than 50 per cent in stock or cash, I’d say you were probably being sold a bit short. There are a bunch of CIOs earning £60,000-plus managing a small team of around 30 people with a mid-sized budget, while others are earning £140,000 and more,” he says. “The best are earning £200,000-plus.” La Fosse also adds that CIO pay scales can vary widely from sector to sector, but will generally pay in line with the perceived strategic importance of IT to the business.
“There are some sectors that value IT more than others and pay more accordingly,” he said. “But behind the question of what salary increases CIOs are seeing is the fact that salaries for really good people have definitely increased.”
He says retailers like Tesco are following more IT-dependent companies, in financial services for example, that have traditionally paid their CIOs more. “A recent example of a mid-level investment bank looking for a European divisional CIO was offering £500,000 including back-end packages to manage what was not a very huge team is very good,” said La Fosse. “And this kind of company is looking for candidates with the credibility, interpersonal skills and an understanding of the business that will enable them to have a mature conversation about aligning IT with business goals at board level.”
Roland Jones, IT director of UK multiplex chain, Vue Cinemas, says his view of the market is that it is certainly stronger nowadays than it was two or three years ago. But he also notices the remuneration mix has changed.
“I think the market is relatively strong,” he says. “But while performance-related pay packages have always been there, maybe it’s possible to argue that basic remuneration packages have not risen, but that perceived pay increases are made up of larger performance-related bonuses now.”
But Jones points out the most lucrative senior-level IT career development path tallies with key skills needed to progress beyond CIO status to more business-focused roles, like COO and head of logistics or supply-chain.
“Anyone would look to these kind of roles as technology becomes more key within a business. Whether this is realised by all boards and companies yet is perhaps not the case,” he says.Cathy Holley, partner at CIO headhunter Boyden UK, said: “Retail is a great example of a very dynamic, cost-conscious sector. But, in general, those that understand IT is a huge lever for generating value will clearly pay for the best. I would expect a base of £150,000 and a bit more in bonuses as reasonable.”
Value to business
Holley points out that paying £200,000 a year for a CIO whose VoIP project saves the company £500,000 on its communications bill for example is clearly demonstrating that value.
She suggests measuring the financial value of CIO talent “as a pyramid. Some employers want top-level skills with the wow factor in terms of leadership and management skills. Technical skills are secondary.
“The top one per cent is excruciatingly hard to find, and the layer below that, that are reasonably good, tend not to stay in a job longer than three years. But clearly, if a company values its IT, it will pay for it.”
At least the lack of movement within CIO pay levels since MIS UK last looked should be of some consolation to those who could not countenance a £2m wage as possible little than just under two years ago – before Tesco set the bar.