Is It Time For CIOs To Start To Apply Logic To Salaries?

Should CIOs get involved in determining how much employees get paid?
Should CIOs get involved in determining how much employees get paid?
Image Credit: 401(K) 2012

Psst – would you like to know a secret? It turns out that at most companies, how much any given employee gets paid is determined more by art than science. Yes, that’s right – most firms (and their IT departments) are making this stuff up on the fly. When you decide that that data scientist needs to be added to your team, nobody really has a clue what you should be paying him or her. Perhaps it’s time for the CIO to step in and create some structure to this task.

Why Should Companies Take A Look At What They Are Paying Employees?

A survey of over 7,000 firms was conducted just a while ago asking them about how they determined what salaries to pay their employees. The results were quite startling. It turns out that only 38% of companies have a formal philosophy or formal compensation structure that they use to determine what to pay their employees. There are lots of different types of jobs at each company. Salaried roles have the greatest variability because the hiring managers have the greatest amount of say in what an employee gets paid.

What a company decides to pay an employee can depend on a number of different factors. These factors can include the employee’s skill, their experience, and their performance. Because of the importance of information technology, more and more people with the CIO job are starting to take a closer look at how their company is handling salaries. The reasons for this closer look are many and varied: the job market is improving, fair-pay laws are being put in place in states like California, etc. What the survey also found out was that among firms that had no formal method of determining salaries, 34% are in the process of developing one.

A key motivation for the person in the CIO position to make changes to the way that his or her company handles salaries has to do with trust. CIOs realize that deep down, their employees do want to trust the company that they work for. They want to believe that at the company there is somebody somewhere who is looking out for that employee’s best interests. If a company is making pay decisions based on gut instincts, then it is all too easy for gender bias and other issues to creep in.

What Is The Correct Way To Set Salaries?

Given that the way that a lot of companies are coming up with salaries is probably wrong, what is the right way to go about doing this task? One thing that an IT department can do is to take the time to review the salaries of its workers regularly in order to excise any gender disparities. The goal of any IT department should be to take the mystery out of salaries for its workers.

At many companies, the way that the salary for a given job is determined is based on what the company was paying the last person who had the job. What many companies try to do is to pay at the 50th percentile level for a job with a spread of 20% on either side in order to account for a worker’s skills and experience.

In order to be able to do this, a company needs to have access to a source of outside pay data. The CIO’s goal needs to be to make the company’s pay system make sense to its employees. CIOs do need to be careful here, this all comes back to a question about how much transparency a company wants to allow into its salary system.

What All Of This Means For You

As CIO you are responsible for a department of people who are being paid to work for your company. However, you need to determine if they are being paid the right amounts – not too much and not too little. At most companies there is no fixed way to determine salaries and instead we go on our gut feelings. CIOs need to fix this situation.

Most companies are lacking a formal compensation structure and this especially shows when they are hiring for a salaried position. As the job market is improving and with the arrival of fair-pay laws, CIOs are now taking a closer look at how the company assigns salaries. The goal needs to get the employees to trust that the company’s salaries are fair. In order to make this happen, a company should review all of its salaries and make sure that they are fair. Next, they need to determine how much they want to spend for each type of job that they have. This will require some level of transparency.

How much an employee is making is very important to that employee. They want to make sure that they are being paid enough for the work that they are doing and they want to make sure that everyone around them is not making more than they are. If a company can create a sensible and easy-to-follow compensation structure, then all of their employees will feel better about the amount of money that they are being paid.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World IT Department Leadership Skills™

Question For You: Are you willing to let all of your employees know how much you are paying for each position in the IT department?

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What We’ll Be Talking About Next Time

As the person at your company who has the CIO job and who understands the importance of information technology, it turns out that you have an additional job. This is building the best IT team possible. In order to do this, you are going to have to hire some people and when you do this the odds are that you are going to have to end up paying them. This is where things start to get interesting: just exactly how much should you be paying them?