POSTED: May 13 2016
Employers still rewarding poorly-performing bosses with bonuses

Employers still rewarding poorly-performing bosses with bonuses

More than one in five managers who fell short of performance expectations in the last year still received bonus pay-outs, according to new data published by the Chartered Management Institute (CMI) and XpertHR. Data from the 2016 National Management Salary Survey reveal that many managers and professional staff still reap the benefits of bonus pay outs despite falling short of expectations. Of those deemed to be underperforming or developing, 23% still received a bonus payment on top of their basic salary. The average bonus payments to this group were worth £4,270, or 12% of their basic pay, taking their total packages to £40,067.

The data also suggest that so-called ‘rewards for failure’ could be even more common for more senior leaders. Among senior managers who fell short of performance expectations, as many as 43% took home bonuses.

The survey shows that bonuses remain a valuable part of annual remuneration for those who receive them. C-suite executives continue to earn a substantially larger part of their pay in bonuses compared to managers. On average, bonuses count for 38% of CEOs’ and directors’ pay – equivalent to £55,969. But across the wider management population, they represent just 17% of pay packages, despite an increase in the average size of bonuses for this group from £8,836 to £11,413. The number of managers receiving bonuses has also increased over the past year, from 54% to 57%.

The National Management Salary Survey, which has been tracking executive pay since 1973, analysed remuneration data for over 105,000 managers and professionals from 425 organisations.

According to CMI’s chief executive Ann Francke, the findings reveal a costly problem for business that too many employers are failing to address.

“Pay and performance issues in the UK extend well beyond CEO level. The truth is that bonuses continue to remain divorced from performance in too many organisations. Fixing the problem means setting clear targets, aligning bonus pay with performance, and being prepared to have difficult conversations with underperformers who don’t measure up.”

XpertHR Content Director Mark Crail said: “Employers have reined in a lot of poorly focused executive perks since this survey began back in the early 1970s. Subsidies for school fees and chauffeur driven cars are not exactly commonplace these days. But the bonus is as significant a part of many managers’ incomes as it ever was. Employers have come a long way in aligning pay and performance, but as our research shows, there is still some distance to go to get it right.”

In other findings, the data suggest managers below senior ranks are feeling the effects of employer belt-tightening, as they experience the lowest rate of basic pay increases since 2011, at just 2.6% compared to 3% last year. Overall, the average salary across all executives now stands at £34,479.

The report also provides evidence of increasing problems for employers when it comes to recruitment. Nine in 10 (91%) of the employers surveyed report that they are facing recruitment problems, up from 89% in 2015 and 79% in 2014.

The main issue cited is the challenge of recruiting people specific skills, identified by 87%, up from 75% a year ago and more than doubled from two years ago (41% in 2014). But pay is also a factor, with a rising number now saying that the problem lies with reward packages being too low to attract high quality applicants – 36%, up from 20% – while similar numbers report that the high cost of recruitment is a problem – 32%, up from 23%.

Ann Francke added:

“The labour turnover data also show that the rising financial cost of attracting, recruiting and keeping management talent is now a huge challenge for employers. This makes it imperative for employers to look at how they engage, train and retain key staff.”

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