MANAGEMENT : A Sorry State – Studies reveal the troubling truth about local management

Three separate research studies released over the past month or so, one local and two global, contain disturbing collective news for New Zealand Inc. Our management is performing below par and, predictably, the way of the future is dependent on quality management performance.
The first sorry revelation came from Doug Matheson, former President of the New Zealand Institute of Management and architect of the locally developed Management Capability Index. Matheson had just released his analysis of the 2006 findings of another long standing survey, the NZIM/Wevers HRM Index.
The survey has been conducted five times since 1994 and examines New Zealand management practices and related competence. It measures the gap between manager’s expectations of performance on key management practices and their perception of their actual current performance in carrying out or rating those practices. In other words, it is measure of the “ideal state” against the perceived actual performance.
The results showed virtually no improvement on the relatively mediocre results achieved in 2003 when the survey was last conducted. Matheson summed up the latest survey simply saying: “… many of New Zealand’s managers are not achieving the potential of the organisations they lead”.
He then combined and compared the findings of last year’s Management Capability Index, which measures another different set of nine management performance criteria, and concluded that both surveys suggest New Zealand management practice and capability has “plateaued at what can best be described as level of mediocrity”.
“If New Zealand management wants to lift the performance of its businesses and organisations, then we must lift our game in terms of visionary and strategic leadership,” said Matheson, “and we must do much better job of people leadership and people management.”
And if that explicit warning doesn’t ring any bells of apprehension for organisational New Zealand, consider the findings of the Swiss business school IMD’s World Competitiveness Yearbook released last month in which New Zealand slipped telling six places to rank 22nd of the 61 nations surveyed.
The slide in overall ranking was grim news enough. But dig down among the 312 different criteria measured under the four general categories of economic performance, government efficiency, business efficiency and infrastructure and, under business efficiency, there is more disturbing evidence of problematic management issues.
For example, our senior managers lack “international experience” and there is, according to IMD, shortage of “competent senior managers”. On these two issues we rank 49th and 46th out of 61. Perhaps they contribute, in some measure, to the point business commentator Rod Oram made after the survey was announced that the analysis of relative government efficiency (good) compared with business efficiency (poor) revealed “troubling truth” for New Zealand.
Even if (government) policy settings were perfect, most (New Zealand) business “wouldn’t have clue how to earn living in the world economy”, he wrote. “Until they do, we will languish in the competitiveness rankings eking out low-value, low-wage, unsophisticated living in tiny domestic economy.” Has that anything to do with our lack of international experience at senior management level?
Add to this, 90-something page report from the London-based Economist Intelligence Unit. Its Foresight 2020 global survey of 1656 executives, plus series of in-depth interviews with executives, analysts and policymakers, was released in March. It analyses future economic, industry and corporate trends and, frankly, provides some robust evidence to support NZIM’s regular calls for coherent, concerted and nationally directed programme to develop plan for lifting our management game. The Ministry of Economic Development-sponsored Project Collaboration which promised start in this direction, appears to have dropped off the agenda of political priorities.
Local activity and politics aside, the Economist Intelligence Unit’s 15-year forecast identified, substantiated and even quantified some critically important global economic and business trends including, of course, the impacts of globalisation, our shifting demographics, the atomisation of enterprise, the personalisation of products and services and the increasingly pervasive importance of knowledge management.
On the management side what it found, surprise, surprise, was that executives expect the “fundamentals” to matter just as much as ever. In other words, “a clear statement (of organisational intent), top-notch management, and high quality products and services” are still seen as critical sources of competitive advantage.
But respondents also expect much change in the next 15 years, and good deal of it will come through enhanced management and leadership. Virtually every sector surveyed identified management and interpersonal skills as the factors most important to organisational success. “Relationships, knowledge management and creativity will be essential to gaining and sustaining competitive advantage in core markets,” according to the report.
And, says the report, human resources management and training will also be more important as companies develop training programmes “off-line” and then deliver them online and remotely through software applications. “Training will be crucial, and in many cases will be done by professional training companies.”
Envisaging “the company” in 2020 the vast majority of business leaders believe that “complex knowledge-based roles will become their most valuable source of competitive advantage”. Conversely, production and simple knowledge-based roles will slip in importance and impact, thanks to automation and outsourcing.
The report identifies management, interpersonal and problem-solving skills as the most important qualities for individuals over the next 15 years and, presumably, further into the future. “Improving performance in these areas, the provinces of the knowledge worker, will be major boardroom preoccupation from now through to 2020,” the study concludes.
Quality of management far outstripped any other option when it came to rating the importance of factors which will enable organisations to substantially increase their growth rate over the next 15 years. Conversely, poor management was seen as the factor most likely to “threaten the future” of companies between now and 2020. Quality management runs throughout the survey as “one of the primary determinants of success or failure”.
What constitutes successful management will change, however. “The most important contribution of management in the 20th century was the 50-fold increase in the productivity of the manual worker in manufacturing,” wrote Peter Drucker, the great management thinker who died at the end of last year. “The most important contribution management needs to make in the 21st century is similarly to increase the productivity of the knowledge worker.” Such productivity, Drucker declared, is now the key to competitive strength and economic achievement.
According to the Economist Intelligence Unit’s survey, improving the productivity of knowledge workers has, however, been more difficult than expected. Measuring the output of manual worker is easy enough. How to measure knowledge output is another matter altogether. “Exactly how to improve knowledge work productivity is one of the most important economic issues of our time,” says Thomas Davenport, management thinker, in his recent book Thinking for Living.
Companies that grapple with this challenge now will be best placed to seize the opportunities of the future. But whatever it takes, the solutions will lie with competent management and leadership and the growing body of evidence suggests New Zealand is not looking well placed to deliver.
Harking back to the IMD Competitiveness study there is one other reason for concern. The “well educated and skille