CIO pay tied to overall business success

By Kim S. Nash, CIO |  IT Management

"In the organization's lobby, a ticker shows it. People have it on laptops and desktops and mobile phones. When it's been a bad day for the company in terms of stock price, you feel it," he says. "Executives always look at it."

Monitoring share price is exactly what responsible executives should do, Gupta says. The idea is that if you, as part of the leadership team, hit all the financial metrics you're after, the company becomes more valuable, people want to invest in it and the stock price rises. Allstate's big financial goal now is 13% return on equity (ROE) by 2014, meaning the company wants to generate at least 13% in profits from the money people have invested by buying shares of stock. "ROE is all about shareholder value," he says.

Allstate, however, has a long way to go: ROE last year was 4.2%. The insurer posted just $788 million in profits on more than $32 billion in revenue. And many of those multi-policy households disappeared. Allstate had a target of selling 50,000 new policies to existing customers last year, but instead it lost more than 36,000 policies.

Gupta, who joined Allstate in April 2011, has ideas for how IT can help Allstate reverse those trends. He wants to upgrade the technology of insurance agents in local offices and centralize customer data from Allstate's many policy databases. This would allow agents to serve customers better and sell to them more efficiently, he says. He is also holding his group to 3,726 service-level agreements, which helps to improve IT's reputation within the company.

CEO Thomas Wilson likes Gupta's plans so much that he gave the new CIO $500,000 in bonus money last year for quickly re-aligning the IT group and "planning to enhance the use of technology" at the company, according to its latest proxy statement. Gupta's total compensation for 2011 was $2.9 million.

To entice high-performing executives to stay and commit to creating lasting value for the company and investors, companies offer long-term incentives of stock and options awards. It can take five years to reap the rewards of such grants. For example, Home Depot is only now paying out on stock granted in 2009. At Supervalu, Shurts won't see some of his options fully vest until 2014. That's why they call it "long-term."

Coming of Age

That CIOs are measured and paid in the same ways as other senior officers, Fonseca says, is a metric itself--of maturity. As CIO, she is the only IT member of a 15-leader team that approves and prioritizes company IT projects, and she is one of a smaller, more-exclusive group that strategizes about new business the company wants to create.

"For us, it's not just aligning with the business. IT has to be in the business," she says. "That has been a key driver in being an effective CIO."


Originally published on CIO |  Click here to read the original story.
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