2016 HCIT C-Level Compensation Report

Transcription

1 2016 HCIT C-Level Compensation Report We are pleased to release our 2016 HCIT C-Level Compensation report. Our market space has never been more exciting to investors, leaders and young professionals looking for a market segment to develop their careers after graduation. In a recent report from KeyBank Capital, the healthcare information technology (HCIT) market is swelling, thanks to the federal government s legislative and financial incentives for technological progress. While most industries have adopted technology much earlier, the healthcare industry is really just now catching up. These changes are coming in waves. The first wave encouraged digital infrastructure and electronic health records adoption - a market - which is now mature. This wave was initiated in 2009, when Congress passed the Health Information Technology for Economic and Clinical Health (HITECH) Act, which offered healthcare providers a carrot and stick approach to adopting meaningful use of this technology. This act incentivized hospitals, medical groups and doctors offices with more than $30 billion to change from paper patient medical records to electronic medical records (EMRs), and use them in a meaningful way. Bottom line: HCIT is no longer a cottage industry. Leadership and human capital is a key ingredient to realize the success in scaling an HCIT business today and the war on talent and leadership has never been greater. Our objective is to frequently publish meaningful data on C-level HCIT compensation as a thought leader in this market. This compensation report was developed to provide data to the HCIT market at large, but also help our readers compare and contrast their own C-level compensation to their peer group based on company size, number of employees, industry experience, geographic location and a variety of other data points. We also gathered data on reporting structures, equity grants and the number of companies that are privately held, venture backed or funded by a private equity firm. Our firm, The Tolan Group is dedicated to the HCIT market and we provide talent to any software or services organization that serves the provider, payer or health system/idn markets. We conduct search assignments for executive leadership as well as mid-level management and individual contributors. We know and understand this space extremely well and have had the pleasure to serve over 100 clients with their talent needs since our inception in We hope you find our report helpful as you compare our compensation data to your own or to C level executives that lead a portfolio company you ve invested in. 319 West Town Place Suite 22 Saint. Augustine, FL

2 Our report shows the majority of HCIT leaders have the CEO title (nearly 2/3) while the role of President is held by over 1/3 of our respondents. Due to the size of many of these companies often times the CEO role is left open as the companies grow from early stage to large scale growth where the leadership needs change. Our average C-level executive has more than ten years of leadership experience while nearly 40% of those surveyed had less than 10 years of C level experience. This chart underscores the percentage of leaders that have emerged in the last 10 years. This is consistent with the exponential growth our industry has experienced since being fuel by government adoption subsidies and the amount of venture capital and private equity investments made in the last 8-10 years. This chart illustrates the depth of experience our industry has in leadership and offers supporting data that our C-level talent pool as a good mixture of tenure and as our industry continues to grow and scale there should be plenty of talented executives to lead new start-ups and early stage companies and to lead larger organizations as the industry continues to consolidate. 1

3 Software leads as the largest single segment in our space with the other segments like revenue cycle and services. There are also a large number of niche solutions like Big Data and analytics that also continue to grow. The companies that are solely focused on payer and provider only solutions are much lower as the two sectors converge in the Accountable Care world we have all embraced. No surprises in location of those surveyed but those numbers also include all HCIT companies from start up to publicly traded companies. Boston continues to be the hot spot for start-ups and venture capital for HCIT and New York and Atlanta are not far behind. Silicon Valley still has a big impact in our space with many of those companies located on the west coast followed by the Midwest at just under 20%. Most of our respondents are from Privately held companies at 64%. Followed by PE and venture backed companies at just under 1/3. Only 5% of those surveyed work for a publicly traded company which is consistent with the Healthcare Informatics Top 100 list. There are many companies with revenues below $10M which will drive further consolidation. 2

4 No surprise here as we all know HCIT while a hot market today, has historically been made up of smaller sized companies as this chart illustrates. This also indicates the number of early stage and start up companies in our space fueled mainly by the extraordinary amount of capital that has been invested over the last few years. Conversely a very small percentage of companies are in the $501M + category or 2% in this report. The same story holds true when it comes to the size of the companies in this report as measured by the total number of employees. The largest percentage of those surveyed have less than 100 employees which is indicative of the start-up s and early stage companies that represent our market. Also noted are the number of companies with employees followed by an even smaller number of companies with over 1000 employees. This chart represents the titles by function that report to the CEO. Most have a core team of leaders that drive revenue (sales), provide financial reporting (CFO) and operations (COO)a surprisingly smaller number of HR executives report to the CEO which varies from company to company but helps set the culture for the CEO. 3

5 When you evaluate this chart you see that 20% of those surveyed have a lower base salary than most would expect. That could be a trade-off for equity in the smaller start-up or early stage firms. On the other hand over 40% of those surveyed earn a base salary of less that $250K. Again this could be the same scenario for executives keeping a healthy equity stake versus a higher base salary. Only 44% of those surveyed actually noticed an increase in salary which could be tied to the compensation structure that pays for performance by delivering an increase in EBITDA or top line revenues or both. 57% of those surveyed did not see any change in their base salary. While over 1/2 of our executive received no change in their base salary that doesn t always mean it s necessarily negative news. Most CEO s that are growing top line revenues and EBIT- DA are also increasing the value of the companies they lead so they are probably opting for additional equity grants instead of an increase in their cash compensation. This chart has an interesting mix of bonus payouts with 10% receiving more equity and no cash compensation. The average of those surveyed a cash bonus between 10% and 20% of their base salary in the form of cash. Investors are looking for an increase in revenues and profit and the CEO s bonus reflects that. 4

6 The HCIT leadership is made up of C level executives who have no degree to those that hold a Doctorate degree. Those with no degree are likely made up of entrepreneurs who started their company from scratch and are still in the CEO chair today. Typically, as those companies scale the founders usually make room for an experience CEO with broad executive skills and an undergraduate degree or an MBA who can lead the company to its next level of growth. Those two camps are evenly divided in this report at 43%. A small percentage of respondents have an Associates degree. Another interesting statistic is tenure. We knew these numbers would look interesting because of the number of companies formed in the last 8-10 years. Of those surveyed, a whopping 55% have been with the company for less than five years with 11% of the respondents still working towards their first 12 month milestone! Overall longevity on tenure is surprisingly high with 42% reporting they have been with the same organization for more than 10 years while 25% of those surveyed have been in the seat between 5-10 years. Over 1/3 of the executives we polled are satisfied in their current position while roughly another 1/3 surveyed are somewhat satisfied. Those are pretty good numbers but the balance of those surveyed fall into an entirely different camp. 21% of the executives we surveyed are neutral which is always an interesting description to define while 8% are somewhat dissatisfied. Only 2% of those surveyed are very dissatisfied which in itself is not a very large percentage overall - unless you have to work under their leadership! All in all our HCIT executives are satisfied with the work they do. 5