One-third of underperforming managers still receive bonuses

Companies are routinely giving bonuses to underperforming managers, according to the latest pay data from XpertHR and the Chartered Management Institute (CMI).

This year’s annual National Management Salary Survey found that one-third of managers ranked as underperforming still received a bonus in 2014.

The data, which this year includes performance ratings as well as pay for the first time, found that the average bonus paid to these underperforming senior managers was £8,873.

Almost half of managers (45%) who were rated as “not meeting expectations” received a financial bonus, the survey showed.

The XpertHR/CMI survey also revealed that managers’ pay has increased by 3% on average in the past year, with the average salary level across all executive levels at £38,328.

This marks the biggest annual increase since 2012, and a slight rise from 2013, when the increase was 2.7%.

The average bonus payout for all managers was £8,836, jumping to £44,687 for directors.

XpertHR content director Mark Crail called the statistics around bonuses and underperformance “a culture of rewarding past glories”.

He said: “The biggest and most significant indicator of whether or not someone will get a bonus this year is whether or not they got one last year. The longer that goes on, the more people come to rely on the money and the harder it is to stop paying it.

“In those circumstances, employers really should think about whether or not it would be better to address the level of basic pay, rather than finding spurious reasons to add on an arbitrary annual bonus that has little basis in performance.”

CMI chief executive Ann Francke added: “Too many managers are reaping the rich rewards of their positions, despite being poor performers.

“This unacceptable discrepancy between pay and performance is even more widespread among the ranks of senior managers. Unfortunately, it seems to be a lot easier to reward poor performance than to face the awkwardness of having difficult conversations with underperforming staff.”

Francke said that to reform this culture, employers must first tackle CEO pay, plus provide managers with clear targets and explain how they will be measured against them.

The survey also found that the number of employers experiencing problems recruiting new staff has risen significantly in the past year; almost nine in 10 said they had difficulty recruiting in 2015, compared with 79% in 2014. The main reasons given were finding people with specific skills and a shortage of quality applicants.