The New Zealand Institute of Management has created the NZIM Management Capability Index. In management research terms it is world first. It could become global executive performance benchmark with number of countries already committed to adopting the methodology. And the first set of research findings will be released this month.
The Index suggests that New Zealand managers are performing at only two thirds of their potential. These findings are based on survey of 403 chief executives and managing directors. So when it comes to measuring Kiwi managers’ capability “there is considerable opportunity for improvement”, says Doug Matheson, NZIM’s immediate past national chairman and architect of the Index.
NZIM has been grappling with the problem of how to proceed with plans to help New Zealand enterprise lift its management performance. Like the Chartered Institute of Management (CIM) in Britain, NZIM believes that improved individual management capability is the best way to lift country’s total economic performance.
The United Kingdom government has bought into this argument and chipped in to help CIM promote British management upskilling. NZIM decided to establish capability index and create yardstick against which to measure progress once local equivalent of the British ‘Raising our Game’ management skills programme started.
“We need to know where we stand,” says Matheson. “It is difficult to make point without compelling evidence to support the case. This research will also help us identify the best ways forward and simultaneously help organisations identify their management weak spots.”
Until now no other country currently has measured management capability. The United States-based Baldrige Performance Excellence programme is the most used international performance measurement system, but it doesn’t measure management practice and competence or management capability. And while organisations such as IMD International and the World Economic Forum survey and rank countries in terms of their economic environment, these surveys do not focus on individual managers.
“NZIM and the American Management Association (AMA) appear to be leaders in surveying management practices and competence but even though we do more than others, no country has regularly surveyed management capability in this way,” Matheson adds.
Because this is the first time management capability has been measured there are no trends to consider or compare the findings with. NZIM’s Index is based on eight major drivers of management capability. “These drivers deliver profitable business growth, or the equivalent in non-commercial organisations,” Matheson explains.
The drivers, and the weightings they are given in compiling the Index include:
1. Visionary and strategic leadership5%
2. Performance leadership 10%
3. People leadership10%
4. Financial management 10%
5. Organisation capability5%
6. Technology and knowledge 5%
7. External relations 5%
8. Innovation – products & services 10%
A ninth collective category, ‘results and comparative performance’, gets 30% weighting.
New Zealand managers rank their ‘financial management’ capability highest at 74.42 on scale of 100. The ‘organisation capability’ rates lowest at 62.63.
In descending order after ‘financial management’ the Index ranks ‘external relationships’ 72.79; ‘performance leadership’ 69.11; ‘application of technology and knowledge’ 67.15; ‘visionary and strategic leadership’ 65.27; ‘people leadership’ 64.94; ‘innovation – products and services’ 63.69; ‘results and comparative performance’ 63.75 and last ‘organisation capability’. These rankings give an overall capability index of 66.23.
“The overall assessment of ‘results and comparative performance’ is low at 63.75 percent of potential,” says Matheson. “Clearly organisations are not reaching their potential.”
NZIM believes the Index will help organisations benchmark themselves against other New Zealand enterprises. As other countries adopt the Index it will be possible to create an international comparison and benchmark.
The value of the Index for any individual organisation is to help identify where management capability improvements can be made. “First of all, CEOs and managing directors need to benchmark their own organisation against these results,” says Matheson. “To really make progress organisations must make commitment to continuous improvement as way of life.”
The findings of the first NZIM Management Capability Index confirm different management performance findings consistently revealed in another NZIM research initiative. The NZIM/Wevers Index of Human Resource Management and Organisational Effectiveness study (See UPfront, ‘Are Kiwi managers too shortsighted?’ p4), also just released this year, looks at management practices and related competence, but not management performance or capability.
The NZIM/Wevers survey measures the gap between managers’ expectations or stated importance of key management practices and their perceptions of their actual current performance and practices (competence). Where the Capability Index rated ‘visionary and strategic leadership’ down at 65.27, so the NZIM/Wevers survey confirms that while 91.4 percent of managers believe vision, mission, values and goals should be part of their management ethos and style, only 64.5 percent think it is.
And while 90.1 percent of managers in the NZIM/Wevers survey think managers should actively foster and encourage staff ownership of the vision, only 60.5 percent practise it.
“The results of the two surveys are remarkably similar and reveal the same opportunities for improvement,” says Matheson. “This should be key area of focus for New Zealand managers.”
When it comes to ‘people leadership’ which scored even lower at 64.9 on the Capability Index, the NZIM/Wevers survey confirms that of the 88 percent of managers who believe strategic planning should involve managers and staff, only 63.3 percent adopt the practice. Of 86.6 percent of managers who believe human resource management planning should be an integral part of business planning at all levels, only 59.6 percent say it is the practice in their organisations.
The gap between what managers know should be done and what they actually practise is consistent across an alarming number of key performance areas. For instance:
• 89.9 percent of managers believe managers should understand the impact of recruitment and selection on the future of their organisation and its performance, yet only 66 percent respond that they do.
• 88.7 percent of managers surveyed believe the induction process should ensure that new staff internalise the mission, values and goals, but only 62 percent respond that is the case.
• 80.9 percent of managers believe it should be the manager’s role to undertake the induction of new staff they are responsible for, but again only 64 percent do it.
• 86.9 percent of managers think training and development strategies should be consistent with business plans. They are in only 61.5 percent of cases.
• 83.6 percent of managers believe the effectiveness of training should be measured back in the workplace but only 52.8 percent of them do it.
• 86.8 percent of managers believe performance appraisals should enhance their organisation’s achievement of its mission, values and goals. Only 56.2 percent adopt the practice.
• 91.8 percent of managers believe that managers should know when and how to intervene in deteriorating performance situation. Again, only 59.7 think they do.
• 90.4 percent of managers believe managers should recognise the impact of effective communication about the business on the employee and organisational performance. Only 63.5 percent respond that they implement effective communication practices.
“Clearly human resource management should be key area of focus for New Zealand managers,” adds Matheson.
The importance of leadership emerges from both these surveys. “The old leadersh
