Global CIO: Why CEOs Must Tie CIO Pay To Customers And Growth - InformationWeek

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Commentary
9/12/2009
04:04 PM
Bob Evans
Bob Evans
Commentary
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Global CIO: Why CEOs Must Tie CIO Pay To Customers And Growth

If 40% of your compensation were tied to customer experiences, wouldn't that tend to sharpen your focus on customer outcomes? It's an idea whose time has come.

Last year, CIO Michael Harte earned $2.8 million at Commonwealth Bank. This year, 40% of his total compensation—based on $2.8 million, that would be $1.12 million—will be tied to customer satisfaction.

So I'll bet you $1.12 million that Michael Harte is one CIO who'll be focused more than ever before on Commonswealth Bank's customers: their experiences with the bank, the quality of service they're getting, the variety of options at their disposal, the seamlessness they perceive across multiple channels, the level of transparency they demand, and, of course, their sense that the bank's online services are always available.

Harte's boss says such a deeply personal incentive "helps focus the mind on a daily basis," says Harte's boss.

I think a whole lot more CIOs should pursue similar pay packages that help "focus the mind on a daily basis" because forward-looking CEOs will soon be seeking to clarify the priorities of their chief information officers away from technology operations and management and toward customer-centric growth, performance, and excellence.

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That shift is imminent, and the Commbank experience is particularly impressive because from the outset the company is extending it well beyond its highly paid CIO Harte to what he calls the bank's entire "supply chain"—including IT vendors—that's assuming responsibility and accountability for the customer experiences on which the bank's ultimate success or failure depends.

So for Harte and a growing percentage of his IT team, that means skin in the game to the tune of 40% of total annual compensation, and for Combank's IT vendors it means the same type of innovative and high-impact shift away from often-arcane SLAs to entirely new types of contracts based on the experience and satisfaction of the bank's customers.

This is an utterly brilliant move by Commbank, and it's one that should become the norm for CIOs across all industries because it blows away the counterproductive back-office haze behind which many IT organizations have hidden for far too long, and it connects CIOs and their teams with customers and technology, instead of just to the technology.

As AustralianITNews.com reported late last week:

Executive general manager Nick Holdsworth said KPIs encourage better performance by giving employees and contracted companies a stake in deliverables.

"We're more interested in the account team turning up on a day-to-day basis saying 40 per cent of my at-risk pay is about how happy I keep people in the bank and about how happy they keep their customers," Mr Holdsworth, who's also the project lead for CBA's [$580 million] core banking transformation program, said.

"At the end of the year if I haven't achieved my targets in that respect then potentially 40 per cent of my pay will disappear.

"As an individual that helps to focus the mind on a daily basis around understanding what needs to be done to deliver the right outcome, not just go through the motions and see the service level agreement as something that 'oh as long as we're operating at the service level, we’re ok'," Mr Holdsworth said.

Holdsworth expanded on that powerful philosophy in a separate article on the itnews.com.au site:

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