NZIM MANAGEMENT SURVEY : Many managers ‘mediocre’

For nation that prides itself on the natural friendliness and personal empathy of its population, it is always something of jolt to find that, when it comes to people management, we don’t do it very well. Now another rigorously-researched report confirms the fact.
The Ministry of Economic Development, in conjunction with The Treasury, Department of Labour and New Zealand Trade and Enterprise, commissioned the University of Technology Sydney (UTS), using study methodology developed by the London School of Economics and global consultancy McKinsey & Co, to review Kiwi manufacturing firms’ management practices.
The object of the exercise was to identify key management performance drivers and interpret the relationship between management capability and enterprise performance. The study benchmarks New Zealand management with range of countries, including the United States, United Kingdom, Canada, Australia, Japan and emerging economies like China and India – 17 countries in all.
The findings, according to the Dean of the UTS Faculty of Business professor Roy Green, suggest that while some New Zealand firms are as good as any in the world, there is “substantial tail of firms that are mediocre”, especially in their approach to people management. And this, he adds, is key differentiating factor between New Zealand and better-performing, more innovative countries. The finding, however, echoes “similar recent findings for Australian manufacturers”.
The report is timely, says New Zealand Institute of Management Northern chief executive Kevin Gaunt, and should prove an important touchstone in the development of New Zealand managers. “It identifies that people management is critical part of the manager’s toolbox and that it is an area where there is gap in New Zealand management competency,” he adds.
New Zealand’s low per capita income compared with other developed countries is both an economic and political challenge. The finding suggests link between management quality – scored across 18 dimensions of people, performance and operations – and enterprise productivity.
New Zealand has, since the end of the 1990s, slipped from 10th to 29th place in the World Economic Forum’s Global Competitive Index (see page eight for the latest rankings) with the 2009 OECD Economic Survey of New Zealand making the point that “boosting [New Zealand’s] productivity growth is crucial for closing the substantial income gap with other OECD countries”.
The general consensus is that New Zealand has weathered the world economic downturn relatively well through an effective stimulus package. But Green warns that the Management Matters study suggests Kiwi manufacturing firms need to improve their management performance to build longer-term competitive advantage.
And, according to Green, it reveals that some management practices represent opportunities for improvement for manufacturing firms. “The study shows that cost-effective way of improving productivity performance by New Zealand manufacturers is to promote transformation in the calibre of the management and leadership of its organisations. This is the key to more innovative, dynamic and sustainable economy,” he says.
The Institute of Management agrees. “In addition to our learning and performance recognition roles, we encourage research,” says Gaunt. “We look at important global trends in management and at what is actually happening in New Zealand. We analyse and interpret this information and have built management competency model for local managers to help them build their capabilities. This study will contribute to that work.”
The study is also important, says Gaunt, because organisational success “now depends on attracting and retaining high-quality people, engaging them in the business, and enabling them to be innovative and creative”.
“This needs appropriate leadership and management and the Management Matters report suggests New Zealand managers currently do not attach high priority to this essential management trend,” says Gaunt.
“We recognised this few years ago and have now re-aligned many of our learning programmes to encourage stronger focus on developing this management capability. ”
The ministry initiated the study because it is concerned that, while New Zealand is at the forefront of OECD nations in adopting policies that seem to lead to high per-capita income, the country still ranks nearer the bottom end of the OECD’s productivity league.
This paradox, coupled with lack of research quantifying and analysing New Zealand’s management quality and performance to identify where action might be taken to boost productivity growth rates, was enough to pull other key government departments into sponsoring the research.
The study assessed 152 medium and large Kiwi manufacturing firms in 2009. Medium firms are defined as employing 100 to 5000 employees, although in parts of the study the sample is broadened to include firms with 50 to 5000 employees.
“The general message that effective management practices improves organisational productivity is still important,” according to the ministry. “Improving management practices has benefits for all businesses.”
The study found that, by global standards, New Zealand’s management practices are “average to middling”. On an overall management score by country we ranked 10th out of the 17 countries that have so far taken part in this research. The US tops the chart and China sits at the bottom. Australia is sixth.
Of the three areas of management practice measured – operations,
performance, people – people management is our weakest link.
Significant findings include:
• The nature and characteristics of people management, including collaborative workplace relations and an open organisational culture, are determined more by the firms than the structure of the [New Zealand] labour market.
• Management performance is enhanced by high levels of education and skills among both managers and non-managers.
• Management autonomy leads to superior management performance.
• Balancing organisational structure (hierarchy) and managerial autonomy is critical.
• Firm size helps determine management performance; larger New Zealand firms significantly outperform smaller ones.
• Ownership is factor. Multi-national corporations adopt and spread better management practices than domestic firms.
• New Zealand’s publicly listed companies exhibit better management performance than other types of companies including privately-owned firms, family-owned firms and co-operatives.
• Family-run firms tend to under-perform others in their management practices.
• New Zealand managers tend to overrate their firms’ management practices.
• New Zealand manufacturers should pay attention to both advanced and emerging economies.
People management deficiencies aside, the study effectively answers the question frequently raised by government departments like the Treasury, which has traditionally pooh-poohed any significantly measurable link between enhanced economic performance and money spent on developing capable managers.
The quality of management really matters for organisational performance when you consider that: If business managed to increase its management capability from the lower to the upper quartile, the impact would be equivalent to increasing its workforce by 41 percent or its investment in capital by 75 percent. Surely that’s an investment worth making.