Subba’s Serendipitous moments

September 1, 2009

At Telstra you get a bonus for delayed IT projects

Welcome to the Telstra’s compensation model.

Greg Winn, the Sol Trujillo-appointed chief operating officer of Telstra until February 2009, was paid a bonus of $2.2 million for outcomes related to the delivery of the carrier’s IT transformation, which has since been revealed to be running $200 million over budget. Read the details here.

What’s interesting is that despite it running over $200 million over budget ( the project was supposed to save $100 million a year in IT expenses), the CIO feels satisfied that many of the objectives of the five year transformation was achieved.

David Thodey — the Telstra’s CEO believes a $200 million overspend should be considered a good result, considering the awful experiences other industries have had attempting an IT transformation.

“I do not know of a better IT transformation,” he said. “I’ve never seen a transformation come in that well.”

I am wondering if this is Telstra’s compensation policy and if I can get a job there. I am also curious to study Telstra’s goal setting methods, budgeting process and their compensation model.

Last year, I was advising a IT services firm on the strategy approach to managing a business transformation program for one of their clients. Knowing the risk of such a program and the various dependencies, there was a discussion of how the compensation structure for the team should be built. While I didn’t have a hand at making the final recommendation, the consensus was that the bonus scheme should be weighted in favor of the benefits realization proposition. Benefits in this case was actual cost savings and hence the cost savings need to be computed, independently verified, communicated to the client who has to accept it. Only then could the bonuses be paid.

Ironically, the IT services firm has Telstra as one of their large accounts. I hope they don’t adopt the Telstra model.

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1 Comment »

  1. Two things cross my mind when I read this article.

    The company Telstra has 1500 disparate legacy systems which was envisaged to be cut down to 300 over the specified time frame. The CFO states that 50% has been achieved (I presume he means 50% of 1500 systems have been retired).

    Now the compensation part which is quite tricky. If we say the company had made a perfectly legal binding contract that X USD can be paid if 1500 systems are integrated to 300 systems then he should get X/2 USD as compensation, but then things are not so water tight.

    Finally I think Telstra pays IT guys well and that is good. Just find out if you and me can join them !!!

    Comment by Nikhil Gujar — September 1, 2009 @ 3:39 pm | Reply


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