How Bonuses Can Affect IT/Business Alignment

Cash bonuses for software developers and other IT staff became commonplace during the go-go ’90s. Now, when money at many companies is tight, how can CIOs ensure that money is being disbursed wisely?

Bonuses have an inherent alignment problem, says John Blanco, vice president of Cablevision’s corporate IS strategic communications headquartered in Bethpage, N.Y. “Every IT professional is fighting to look over the fence to see what the business is really doing. It seems that when we reward people, we go back to our own camps.”

In pursuit of IT-business alignment, Cablevision recently reorganized the 600-person IT staff into cross-functional teams. IT employees continue to report to the CIO’s office, but they are stationed within the business units. The details of the bonus plan are still to be determined, but a big part of each IS staffer’s bonus will depend on what the head of his business unit says about IT. “I want my IT people to feel they have an investment in a business objective,” Blanco says. “It goes against the grain, so we use bonuses to help [alignment] along.”

Ralph Rodriguez, CIO and chief security officer of eXcelon, an XML software company based in Burlington, Mass., keeps his troops aligned by doling out bonuses quarterly. “The frequency helps alignment because [bonuses] come up so regularly,” he says. Bonuses are based on company performance and are not guaranteed; sometimes there’s no money to give. Most quarters, though, Rodriguez is able to sit down with each of his 16 IT staffers for a review of their work. Based on criteria such as effort, quality of work and collaboration with line managers, he hands out cash bonuses that range from zero to 15 percent of employees’ salaries. “I don’t try to give the money away,” he says. “The company doesn’t get a return from that.”

Suppressing Scope Creep

Ace Hardware uses bonuses to limit scope creep. “Users tend to say [to IS], ’I don’t have a lot of time. You know what I want,’” says Paul Ingevaldson, senior vice president of international and technology at the Oakbrook, Ill.-based company. That tendency leads to ambiguous targets, ever-expanding projects and missed deadlines.

“We argue back that it’s better to get things done,” Ingevaldson says. IT projects are rigorously defined at the start of the project, and the 300 IS employees are awarded bonuses based on their ability to meet the deadlines.

The bonus plan?which can be “pretty rich,” Ingevaldson says?”makes IT staff into businesspeople instead of a bunch of techies.” The result has been an increase in the number of projects coming in on time, he says, and an awareness throughout the company that the IS group will do what it says it will do.