Ten years ago, one of the New Zealand Institute of Management’s more thoughtful and visionary leaders turned his mind to an issue that had tested the organisation’s management development advice since its inception, 50 plus years earlier.
NZIM was established in the mid 1940s by the owners and leaders of the country’s fledgling post-war manufacturing and other commercial enterprises. They planned, among other things, to share their operational experiences and develop the component most missing from their stretched organisational resources – capable management.
Management capability, reasoned NZIM Fellow and President Doug Matheson five decades later, was and always had been the single most important factor in building successful businesses and, for that matter, non commercial organisations. “Management capability is,” he wrote in 2003, “the result of applied management leadership and competence in the key management practices that lead to sustainable business performance and growth.”
To seriously address the issue, Matheson decided organisations should
understand what drivers underpinned management capability. When they understood the components of capability and relentlessly applied them, so they would have something against which to measure both management performance and organisational progress. The outcome of his thinking was the NZIM Management Capability Index (MCI), the 2013 Report of which appears on pages 71-98 of this issue of NZ Management.
What Matheson created 10 years ago was, however, more than an occasionally published progress report on New Zealand’s prevailing level of management capability. “There are,” as he said, “factors beyond management” that influence business and organisational performance – markets, competition, government policy, inflation, the state of the labour market for example.
But Matheson believed, and still does, that management capability is the dominant determinant of organisational success. It is the real measure of just how effectively management applies and practises its competencies to deal with external and internal influences, to develop and motivate employees to innovate and, to achieve the highest possible levels of business performance.
Management capability, according to Matheson, is more than set of management skills. It is strongly behavioural and style-based. Management capability reflects an individual manager’s application of his or her skills, abilities and knowledge to achieve the organisation’s vision, create and maintain its organisational culture and values and lead people to achieve superior performance.
It is also measure of management performance. Management organisations in Australia, India, Malaysia and Singapore agree. They each now compile their own national MCI, based on the New Zealand model that has been adopted by the Asian Association of Management Organisations (AAMO).
Identifying the drivers of management capability and regularly measuring the extent of their application is both singularly (by enterprise) and globally (by nation) vital and revealing. India, through its All India Management Association, was the first AAMO country to realise the importance and value of Matheson’s thinking and adopted the Index. India’s managers score highest of the five nations using the MCI rankings. It is probably not surprising, though obviously not directly related other than as an expression of just how important India thinks best practice management is, that an increasing number of global management consultancies suggest India’s management philosophies, rather than say America’s, are now the ones to watch.
Matheson initially identified eight management capability drivers: visionary and strategic leadership; performance leadership; people leadership; financial management; organisation capability; technology and knowledge; external relationships; and, innovation – products and services. He subsequently added integrity and corporate governance as ninth category. For details of how these categories are weighted and summarised see the 2013 MCI report page 71.
Matheson effectively created management tool every organisation intent on lifting its business performance should adopt. The drivers provide focus for strategic management thinking and organisational priority. At national level the survey provides valuable insights into the current state of management capability in New Zealand. It also provides baseline against which to monitor progress, at both the micro and macro level.
In the 10 years since the MCI was established, New Zealand’s overall management capability has fluctuated, doing little more than hold steady over the decade. It hasn’t improved anything like enough to appreciably influence or hoist organisational performance sufficient to equip the nation to compete more successfully globally. As the government-sponsored Management Matters research conducted in 2010 showed, to compete more effectively on the world stage, New Zealand must lift its management capability across the board.
On one level, the message about enhanced management capability seems, finally, to be getting through. More senior executives than ever took part in this year’s self-assessment survey. “That’s important,” says NZIM’s chief executive Kevin Gaunt, “and not just because it gives more robust survey result, but because it suggests more organisations are taking the MCI seriously and perhaps using it to measure and focus their individual organisational performance.”
Both Matheson’s and Gaunt’s concern is, and has consistently been, that the margin between potential and actual management performance is too great. The overall NZIM MCI this year climbed from 69.9 to 71.9 of potential capacity of 100. “There is plenty of room for improvement when you consider that India clocks in at 76.8,” says Gaunt.
The 2013 Index shows New Zealand managers are still weak in critically important areas like organisation capability, innovation, and people leadership. “It’s good that our senior executives see their organisations as strong on integrity and corporate governance and also financial management, but this isn’t enough,” says Gaunt. “We are still dragging the chain on visionary and strategic leadership and that is critical capability driver for the future.”
Australia’s Institute of Management (AIM) has recently released the results of its 2012 and second MCI survey. AIM’s decision to embrace the survey is measure of how more AAMO member countries are taking the MCI more seriously. New Zealand now ranks slightly ahead of Australia on 70.3 but behind India and fractionally behind Malaysia which is on 72.0. Singapore’s last survey was conducted in 2010 and ranks last at 69.2.
The global comparisons are, according to Gaunt, both interesting and useful. But more important and even more valuable would be commitment by more New Zealand companies and organisations to embrace the drivers that deliver great management capability.
“The 21st century will bring new management challenges including rapid technology change, increasing globalisation and the shifting dynamics of multi-generational and mobile workforce,” says Gaunt. “The management and leadership principles and components embedded in MCI provide organisations of every kind with comprehensive and valuable tools with which to deal with and capitalise on those challenges.” M
Reg Birchfield Life FNZIM is writer on leadership, governance and management. [email protected]
