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
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.
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