Nearly half of organisations have problems recruiting managers due to skills shortages, according to the 2005 National Management Salary Survey.

The survey of 20,989, by the Chartered Management Institute (CMI) and Remuneration Economics, shows shortages of skilled managers across the board, with 43% of respondents experiencing recruitment difficulties, up from 30.9 per cent last year.

The CMI has warned that companies need to get serious about management development if organisations are to recruit and retain staff.

Of those companies facing recruitment problems, more than two-thirds (69%) put them down to a lack of candidates with specialised skills, especially those in IT management, engineers and salespeople.

In an effort to tackle the recruitment and retention problems, organisations are boosting their incentive schemes, with most (91%) now giving cash alternatives to traditional perks. The popular benefits are pension schemes, life assurance cover of up to four times salary and private medical insurance.

Salaries for all executives rose by 4.3% in 2005 to £46,054, against 4.4% in 2004. However, recruitment problems mean that bonuses, and combined earnings, are higher than last year. Almost 70% of executives received a bonus in the year to January 2005, compared to just over half, five years ago. But in spite of the escalation of bonus payments, 45% of companies are reporting retention problems – the highest level for 15 years.

Mary Chapman, chief executive of the Chartered Management Institute, said that the shortage of managers with relevant skills could affect companies' competitive advantage.

"Worse still, many organisations admit that they fail to provide adequate development initiatives, even though it is a major reason for leaving," she added. "If employers are serious about reversing the current recruitment and retention trend, they must address this issue and develop incentives that suit employees’ needs.”