Three years ago the New Zealand Institute of Management developed and introduced its management capability index (MCI). It has just released the results of its third annual survey, the 2005 MCI. The index-based survey of management capability has also been picked up by India and its first published results make interesting comparative reading. It shows, for example, that Kiwi managers trail their Indian counterparts in eight of the nine management capability categories measured by the survey.
“Clearly India’s very strong strategic focus on lifting management performance is paying off,” says Doug Matheson, former NZIM national chairman and the creator of the Index. “It will be fascinating to measure our performance against other countries as they take up the index and start their own surveys.” NZIM is working with other Asian countries and the United Kingdom to adopt the Index and create an international comparison of management capability.
The 2005 survey suggests the capability of New Zealand managers has stagnated in the past year. The overall index score improved from 70.13 in 2004 to just 70.27 this year after lifting from 66.23 in 2003. “The pace of improvement in our management capability has clearly slowed,” says Matheson, “and an overall index level of shade over 70 ranking points is just not good enough to make an impression. It is also not good enough to impact the results and comparative performance of business generally.”
The survey effectively means that New Zealand managers and their organisations are performing at little more than 70 percent of their potential. The Index measures management performance on nine different categories including:
• financial management
• external relations
• application of technology/knowledge
• visionary and strategic leadership
• people leadership
• performance leadership
• organisation capability
• results and comparative performance, and
• innovation – products and services.
The nine categories are given different weightings with 30 percent going to results and comparative performance because that, after all, is the most important objective and outcome of enhanced capability. Visionary and strategic leadership is weighted by 15 percent, performance leadership, people leadership, financial management and innovations are each weighted by 10 percent and the rest are weighted by five percent.
The 2005 survey shows an improvement in organisation capability (up 2.44); visionary and strategic leadership (up 1.62); and people leadership (up 1.54). However, the index for innovation – products and services has slipped by 1.77 and performance leadership is down 1.22 points.
According to Matheson, categories rating at less than 70 points need special attention and they include results and comparative performance, organisation capability, and innovation. Matheson concedes it is hard to know exactly what figure is ideal, but unless organisations are managed at something like 80 percent of their capability it seems likely New Zealand will struggle to compete and perform successfully in an increasingly competitive world.
New Zealand’s highest performing categories are financial management at 79.19 and external relations on 75.51. Financial management is the only index category in which New Zealand outperforms managers in India. Indian managers scored 77.91 on this criterion.
India’s overall 2005 Index score is 76.37 which is 6.10 higher than New Zealand’s overall score. That is significant gap, says Matheson. “India has no categories below 70.” And they score well ahead of their Kiwi cousins on innovation, performance leadership, results and comparative performance, and visionary and strategic leadership.
Matheson suggested last year that New Zealand’s improved performance between the 2003 and 2004 surveys may have been assisted by generally buoyant business environment. “The real test of capability will be when the external environment gets more difficult,” he said. Given that the economy looks headed for an even greater slowdown in the next 12 months, Matheson’s hypothesis will be put to the test.
Management capability is all about delivering higher levels of performance in tougher times. And given the Government’s focus on encouraging New Zealand enterprise, particularly small to medium size companies, to lift their commitment to innovation, the slippage revealed in this year’s survey is disappointing. The slip in innovation and performance management categories suggests New Zealand managers are struggling to make improvements in these two key management competencies. Matheson believes organisations will need to increase their focus on both of these if business performance is to be sustained in more difficult times.
With three years of data now available from the survey, Matheson is concerned about the trend. “The results are not great for New Zealand,” he says. “Our management capability appears to have plateaued at time when we really need it to be tracking consistently upward. The tightness and similarity in the findings suggests the criteria and approach are pretty robust and so I am confident that we are measuring consistently.”
Matheson is not surprised by the findings from the first Indian survey. “Given India’s emphasis on education, their personal commitment to achieving higher qualifications and the relatively intense management training provided by the Indian Management Association it is probable that their equivalent level managers are better than ours.”
It is also possible that New Zealand managers are more self-critical and rather less generous in their scoring and their responses. But if cultural differences produce different score levels the ongoing survey will start to show comparative trend data. “We probably need to do some more detailed one-on-one probing of respondents to get better fix on the reasons why we are scoring so consistently and not, at least on the face of it, lifting our game,” adds Matheson. “But at least we have survey that is now providing some valuable local, and we hope increasingly international, management trend data.”
• Reg Birchfield is the publisher of Management.
