Stumped for answers: Management’s MCI score still too low

There are some interesting similarities between New Zealand cricketers and managers. Individually they offer so much promise. Collectively they struggle to consistently give anything like 100 percent of their potential.
For our managers, however, world competition is an everyday event. Even the prospect of challenging struggle out of recession proved insufficient motivation to stir the nation’s managers from their corporate complacency this year.
Or at least, that is what the New Zealand Institute of Management’s 2010 Management Capability Index (MCI), kind of executive skills, abilities and competencies scorecard, suggests.
As the name indicates, the MCI provides an annual tracking and assessment of management capability in New Zealand. It was developed in 2003 by former NZIM national president and author of two best-selling books on corporate governance, Doug Matheson.
It has been conducted most years since and is now also used by other countries, including India, Canada and Malaysia, to measure their management performance.
The MCI reflects the chief executive’s assessment of his or her organisation. And, as Matheson points out, by measuring capability rather than just an individual’s ability to perform in particular job or position – competency – “we move up level in our measurement of what organisations are capable of”.
In six of the original nine criteria measured in the index, Kiwi managers slipped on 2009 scores. The overall score was salvaged only by the inclusion of new category, integrity and corporate governance, in which the nation’s companies scored very well indeed.
But even with that score, the MCI lifted only infinitesimally from 73.23 in 2009 to 73.33 last year.
The capabilities measured by the MCI include visionary and strategic leadership; performance leadership; people leadership; financial management; organisation capability; the application of technology and knowledge; external relationships; innovation – products and services; integrity and corporate governance; and results and comparative performance. Together, these rankings provide the overall capability index.
Matheson’s rationalisation for measuring these particular activities is embedded in his belief that they drive profitable business growth or the equivalent in non-commercial organisations.
The drivers have different weightings depending on importance and each measure is scored on scale of 100. score of less than 80 suggests management of that particular capability needs attention. (See chart.)
Taking the long view, New Zealand managers have lifted their game since NZIM started compiling its index. Scores were generally well below par, settled in the 60s. This year, only the collective results and comparative performance category failed to make it into the 70s.
Why bother with an index? Because, says Matheson, New Zealand needs to benchmark its management performance. And, as last year’s government-sponsored Management Matters research showed, to compete more effectively on the world stage New Zealand must lift its management capability.
When NZIM started compiling the index the results showed that Kiwi managers performed at little more than two thirds of their potential. They have lifted that performance closer to 75 percent in the past seven years but, the margin between potential and actual is, according to Matheson, still too great to deliver significantly improved economic and social benefits.
Reviewing this year’s results, Matheson says he thought leadership and management would refocus their capability to ensure results and performance as counter to the economic downturn, and global financial and general market uncertainty. The 2010 Index covers the impact of the financial recession on management capability.
But things didn’t improve much between 2009 and 2010. On the other hand, lift from 66.23 in 2003 to 73.33 last year is solid progress. It is new plateau, even if it is still some way from the 80 level Matheson thinks will start to make an impact nationally.
The fact is, New Zealand slipped in six of the 10 categories now included in the index and “while the improvement in capability over the seven years is good”, says Matheson, “a score of 70 is just too low. And we must be concerned that visionary and strategic leadership, and performance leadership both declined in 2010.”
Financial management has always scored highest in the MCI. At 82.6 it is still up there.
“New Zealand management continues to be weakest in results and comparative performance, innovation – products and services, and visionary and strategic leadership,” says Matheson. “And these three are critical capabilities for the future. There is real potential to improve New Zealand’s performance by focusing on these.”
NZIM Northern chief executive Kevin Gaunt says the feedback NZIM got while compiling the index this year was mixed. “The general impression seemed to be that management energy went into survival rather than stimulating new ideas and innovation,” he said.
Gaunt thinks the recession seriously impacted management confidence and performance. They had to grapple with uncertainty of magnitude they had not encountered before and, “when the chips are down the bottom line becomes the essential focus”. He suspects this reality is reflected in the 2010 survey results.
He says the decision to include integrity and corporate governance in the MCI was prompted by the need to examine factors which caused the recession. “It is also move to meet the needs of generation Y managers who want to work in an environment they find engaging.”
Like Matheson, Gaunt warns that the overall MCI message is that New Zealand management is still “too comfortable” and must lift its game. “Otherwise New Zealand will continue to slide toward third world status,” he adds. M

NEW ZEALAND MCI% WEIGHT20032006200720092010
1. Visionary & Strategic Leadership1565.2767.0768.1673.0170.93
2. Performance Leadership1069.1169.5668.0575.7172.56
3. People Leadership1064.9467.5071.9974.5874.65
4. Financial Management1074.4278.4976.5680.8782.65
5. Organisation Capability562.6366.9070.1473.5772.44
6. Application of Technology & Knowledge567.1569.6770.6071.5271.40
7. External Relationships572.7973.1073.6276.6475.33
8. Innovation – Products & Services1063.6964.5065.2168.7570.00
9. Integrity & Corporate Governance5––––86.05
10. Results & Comparative Performance2563.7566.8365.6070.8269.77
NZ MCI – (Note: Cat 9 added 2010)66.2368.5968.8073.2373.33

MCI totals have been adjusted to reflect some differences in the survey sample used in previous years.

Reg Birchfield is NZ Management’s consulting editor and writer-at-large.

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