NZ Management Capability Climbs

Press Release
November 10, 2004

NZ Management Capability Climbs

New Zealand managers are steadily ratcheting their way up the New Zealand Institute of Management’s Management Capability Index (MCI).

The just-released 2004 MCI results show New Zealand managers and their organisations are performing at 65-70 percent of their potential – that’s a year-on-year increase of nearly four percent and represents an across-the-board rise in nine separate performance categories.

Those categories showing the highest increases are results and comparative performance (+5.15 percent), financial management (+4.22 percent), people leadership (+4.16 percent), and visionary and strategic leadership (+3.86 percent). The smallest lifts were registered in external relationships (+1.66 percent), performance leadership (+2.28 percent) and innovation in products and services (+2.66 percent).

The two other categories are organisation capability and application of technology and knowledge. The nine categories are given different weightings – 30 percent going to results and comparative performance, 15 percent to visionary and strategic leadership, 10 percent each to performance leadership, people leadership, financial management and innovation and five percent to each of the rest.

Measuring the capability of leadership in practice is a recent initiative of the NZIM and in his analysis of the second set of results, index author and NZIM national director Doug Matheson notes that improved business performance has been the main influence on lifting the index.

“The MCI has benefited from the current external environment. While the financial management, people leadership and visionary/strategic leadership [categories] have lifted about four percent this year, the real test of capability will be when the external environment gets more difficult,” he says.

“Can the leadership and management still deliver high levels of performance? That’s exactly what leadership and management capability is about.”

In terms of those categories that are lagging slightly, Matheson says it could be an issue when times get tougher. “The relatively small lift in performance management and innovation in products and services would suggest that leaders need to increase their focus on this if business performance is to be sustained in more difficult times,” he adds.

“However, there is an across-the-board improvement in management capability, so we are moving in the right direction.”

This year saw small to medium enterprises (SMEs) included in the survey for the first time. Their ability to lift management standards is tied to the lift in SME performance that the Government is currently focusing on, says Matheson.
“So it’s useful to compare the SME management capability results against the main control group in New Zealand’s Top 1000 companies.”

Perhaps not surprisingly, they average out 4.91 percent lower with the lag showing up most in the categories of people leadership (-9.75 percent), visionary/strategic leadership (-8.7 percent), financial management (-7.57 percent), organisation capability (-7.47 percent) and performance leadership (-5.06 percent).

In other areas – such as innovation, application of technology/knowledge, results and external relationships, they’re a lot closer to their larger – and better-resourced counterparts.

The MCI Index is based on self-evaluation – CEOs and general managers rate their own practice and performance against criteria statements describing the highest standards of leadership/management capability in an organisation. Respondents score the current position in their own organisation out of 100 percent.

This data is converted into an index which provides a useful indicator of how capable or inadequate one CEO, organisation, group, sector or even country is against the criteria – which allows performance levels to be benchmarked across sectors or across countries.

The importance of measuring capability is that it shows how management skills play out in practice, says Matheson. “Management capability is the ability to deliver performance by applying your competencies in the environment you face with the resources you have.”

A full description of the categories and 2004 scoring can be found on www.leadershipsummit.co.nz.

TABLE

Overall results of NZIM MCI
Categories (in 2004 ranking order) 2003 2004

Financial management 74.42 78.64
External relationships 72.79 74.45
Performance leadership 69.11 71.39
Application of technology/knowledge 67.15 70.50
Visionary and strategic leadership 65.27 69.13
People leadership 64.94 69.10
Results/comparative performance 63.75 68.90
Innovation: products/services 63.69 66.35
Organisation capability 62.63 66.07
NZIM Capability Index 66.23 70.13

ENDS

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