The Government, in particular the Minister for Economic Development Jim Anderton, is concerned about how the capability of New Zealand managers stacks up when compared with other countries. Accordingly, The Budget allocated $2.4 million to be spent over the next two years to help find out.
But before I go any further let's be clear about the terminology. Business capability is the overall capability of a business to perform. It includes individual management capability and embraces processes, practices and structure. The New Zealand Institute of Management has been focussing on the issue of management capability for the past two years. It has carried out a number of research studies aimed at both understanding the current New Zealand situation and identifying where we need to improve, and last year NZIM introduced its annual Management Capability Index (MCI).
There are, of course, factors other than management capability that influence business and organisational performance, such as markets, competition, government policy, inflation, the labour market and so on. But the most important factor is how effectively management applies and practises its competencies to deal with external and internal threats and opportunities, to develop and motivate employees to innovate and achieve the highest levels of performance--that is management capability.
New Zealand Business Roundtable executive director Roger Kerr wrote in a recent issue of the NZIM Wellington division newsletter, that if business is profitable, it follows that management is performing well. The NZIM MCI findings (that New Zealand managers perform to about two thirds of their capability) did not, he wrote, reflect the real position in New Zealand. He ignores the fact however, that it is an index reflecting how chief executives and general managers assess their own organisation's current position. The vision is world-class business capability, not profitability or shareholder value at a comfortable level of business growth. The aim is to achieve the highest possible organisational potential and through that, the country's highest potential.
The US Baldrige business excellence model has for years been used as an international benchmark to link superior levels of organisational performance to strong leadership and management capability. Several New Zealand organisations have used it to lift their performance.
But while enlightened leadership and the adoption of particular management techniques deliver enhanced performance initially, this soon plateaus out at what might best be described as a level of mediocrity. Management does not drive on to achieve world-class performance. Indeed, in more than 10 years, only two New Zealand enterprises have reached Baldrige world-class performance.
Management capability is the practice and application of management skills, abilities and knowledge--management competencies--to achieve superior results that are reflected in organisational/business performance. Management's capability is what lifts performance above the average. Management's capability leads and manages the enterprise and its people to achieve their potential.
Management capability is more than a management skill. It is a complex set of attributes that results in the effective application of the individual's management skills, abilities and knowledge that brings about the highest levels of organisational performance.
Most management research focuses, unfortunately, on competencies. It doesn't reveal the effectiveness of the application of management competencies that is management capability. The NZ Business Excellence Foundation, using the Baldrige business excellence model, and the NZIM MCI evaluation of management capability, indicates New Zealand organisations and management operate at about two thirds of their potential.
Business performance is the single most important measure of management capability. …