NZIM: Management Capability – How Capable Are Kiwi Managers?

First it was the Indians, then the Malaysians – now the Canadians have taken to using the NZIM’s Management Capability Index (MCI) and showing us up.
Results from the latest survey of the country’s management capability conducted by the New Zealand Institute of Management do reveal some good news. Gains in performance have been made in all but one of the nine categories measured – and that’s lifted the overall MCI for 2009 by 2.5 points.
The downside is that the Canadians have now joined slowly growing list of countries whose managers outperform ours – by achieving total score of 73.89 against our 69.87.
So just what is management capability – and why does it matter?
“Capability” is critical indicator of management performance because it goes beyond the individual’s skill level to reflect how those skills play out at an organisational level. While management “competency” provides general description of an individual’s ability to perform successfully in particular job or position, “capability” measures the application of management to the total organisation and to the resulting organisational performance that is achieved.
It is the result of management leadership and competence in the key management practices that lead to sustainable performance and business growth.
Of course, there are bunch of other factors that influence enterprise performance – the current recession for starters. So the state of the economy, government policy, market competition, inflation, labour market practices and technology changes all have an influence on organisational performance.
But the important dimension is how effectively management applies and practises its competencies to deal with those external and internal influences and achieve the highest levels of business or organisational performance.
How you measure that is challenge and up until the MCI was created in 2003, assessments of management capability were largely subjective. Since then, the adoption of the Index by several other countries has helped provide broader basis for looking at management performance internationally.
The primary value of the MCI for any organisation is that it helps identify where improvements can be made, as well as allowing comparisons with other organisations and other countries.
So, for instance, when the same index was applied to managers in India in 2005, they proved to rate significantly higher in innovation, performance leadership, visionary and strategic leadership, and results and comparative performance. In fact they scored higher in all categories bar one – financial management.
When Malaysia measured its management performance in 2006, it found weaknesses in four key areas: performance leadership, application of technology and knowledge, people leadership and, worst of all, organisational capability.
Overall, the MCI is based on the chief executive’s or the board’s self-assessment of nine key drivers of management capability. Current performance, including actual results and comparative performance of the organisation, is scored as percentage against criteria to create an index of management capability for the organisation.
The categories in the index, and the weighting given to each are as follows:

1.Visionary and Strategic Leadership >15%
2.Performance Leadership > 10%
3.People Leadership >10%
4.Financial Management > 10%
5.Organisation Capability > 5%
6.Technology and Knowledge >5%
7.External Relationships >5%
8.Innovation – Products and Services >10%
9.Results and Comparative Performance >30%

Results from 2009 compare fairly favourably with those from 2007 – at least most of the scores are headed in the right direction. The only one that has slipped back is in the application of technology and knowledge – an area that can ill afford any lapses if New Zealand companies are to follow the injunction ‘work smarter, not harder’.
Overall the 2009 MCI has improved 2.5 points from the previous survey. That is good news because the MCI for New Zealand had been declining over recent years. It is particularly important this year to see the significant improvement and higher scoring of visionary and strategic leadership, performance leadership, and people leadership – all very important in the environment faced by organisations today.
New Zealand management’s strongest capabilities continue to be financial management, and external relationships.
The most significant factor that continues to impact New Zealand’s overall management capability is the low rating managers give their results and comparative performance.
Results and comparative performance is the most important overall measure of management performance for every organisation – this is reflected in its 30 percent weighting in the MCI. Since NZIM began the MCI in 2003, the New Zealand results and comparative performance rating has never reached 70. Most other countries continually exceed 70 in this important area.
As with other country comparisons over the past few years, this year we find Canadian management scoring significantly higher than New Zealand management’s current scoring of itself, in all areas.
New Zealand management’s self rating suggests managers recognise that there is considerable scope to improve capability, and through that, improve performance of the organisation. Given today’s difficult environment managers should use the MCI criteria as tool to analyse and put in place actions to lift their performance.
Striving for an 80 percent performance in each category and overall certainly would assist management identify the opportunities to lift performance in both results and in external comparison.
The 2009 MCI results should be wake-up call for New Zealand management.

•Details of the NZIM Management Capability Index can be obtained from NZIM National Office. [email protected]

Doug Matheson is former president of NZIM and specialist writer and speaker on corporate governance.

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