24 May 2004 Media Statement
Budget 2004
Managing for success

Budget 2004 provides $2.4 million to help raise management capability.

"Good management is critical to the success of business. Budget 2004, therefore, has provided $2.4 million in funding so we can work together with businesses to help them maximise their opportunities to build up management capability," Minister of Economic Development, Jim Anderton said.

"Management capability, or the skills, aptitudes and knowledge of managers to create value, is an important part of New Zealand's skill mix, and the growth and sustained development of firms.

"The programme aims to raise awareness of management capability and strategic management in order to help businesses build a sustained competitive advantage and grow their operations. This will contribute to strengthening our economy in order to raise living standards for all New Zealanders," Progressive leader, Jim Anderton said.

Part of the four year $500 million Growth and Innovation Budget Package, this management development programme includes $1.2 million of funding for each of 2004-05 and 2005-06 to improve understanding of, and support action to improve, New Zealand’s management capability.

"Budget 2004 takes a comprehensive approach to economic development, focussed on strengthening and deepening New Zealand's connections with the world economy. Increasing our level of management capability has the potential to be a significant part of such a strategy," Jim Anderton said.

24 May 2004 Media Note
Budget 2004
Management Development Initiative

Portfolio: Economic, Industry and Regional Development

Description

Management capability – the skills, aptitudes and knowledge of managers to create value – is an important part of New Zealand’s skill mix, and the growth and sustained development of firms.

The Ministry of Economic Development (MED) will receive $1.2 million of funding for each of 2004/05 and 2005/06 to improve understanding and support action in the public and private sectors, as an initial step to improve New Zealand’s management capability.

A coordinating and advisory group will be established to act as a sounding board for research and policy on management capability. Membership of the Group will include organisations that represent businesses and employees and organisations that supply management and business services.

MED will contract with private sector organisations to develop innovative projects aimed at raising awareness of management capability and fostering activity in the private sector. The aim is to stimulate demand amongst firms for management development, and stimulate the supply of management development services and initiatives.

The funding will also be used for research into the nature of management capability in New Zealand. This will include developing indicators to assess capability over the long term, including types and quantity of management skills needed by firms, demand for different learning mechanisms and their quality and supply.

Rationale

Management capability contributes to a firm’s business practices – how a firm operates to achieve its objectives. It is through business practices that a firm can build sustained competitive advantage and grow. Growing firms are the drivers of higher sustainable economic growth. But there is little understanding for example, of what management capability is, how it can be developed, the existing “stock” of capability and what the underlying problems are:
- How management capability varies between firms (e.g. by size, industry, hi-growth);
- Whether the current stock of management capability is well aligned with the current New Zealand economy;
- What stock (and type) of management is needed to support higher growth;
- How management capability can best be developed (e.g. the importance of formal and informal learning); and
- What are the barriers to developing management capability.

There is also a large range of organisations (both private and public sector) offering management development services and advice of various kinds. Many businesses, particularly SMEs and micro-businesses, have difficulty knowing how to access appropriate services and advice. An approach aimed at achieving greater accessibility and higher quality of services and advice through collaboration on the provision and marketing of services is desirable.

The support of non-government sector stakeholders is essential to any initiative, which tries to understand or address management capability. Businesses, business groups, education providers and management and business service providers have the most influence on the demand and supply of management capability. Initial discussions with groups such the New Zealand Institute of Management, Employers and Manufacturers Association, New Zealand Business Excellence Foundation, Business New Zealand, Council for Trade Unions and others have demonstrated widespread support for a more coordinated approach.

How does the initiative contribute to GIF objectives

Higher sustainable economic growth requires accelerated export growth. But only a small number of New Zealand firms are exporters. Also, because of the small size of the domestic market, New Zealand firms typically have to expand offshore at a relatively immature stage in their development. There is also a link between firms moving into offshore markets, and a need for firms to focus on innovation, quality and leadership.

Building a better understanding of management capability, and initiatives to promote its development in the private sector, is a first step in ensuring that New Zealand’s stock of management capability reflects the skills and attributes required for firms to operate globally, and to make the transition to exporting.

While exporting firms are critical for growth, the management capability of domestic firms is also fundamental – both because of their role as the suppliers of goods and services to exporters, and as potential future exporters themselves.

Over the longer term, improvements in New Zealand’s stock of management capability can be expected to contribute to higher economic growth through improved performance for both domestic and exporting firms.

How does the initiative contribute to achieving the Government’s key goals?

Improving New Zealand’s stock of management capability will directly contribute to an improvement in New Zealander’s skills. In doing so, it will help New Zealand firms keep at the forefront of international developments in developing innovative products and identifying new market opportunities. It will also improve the production activities of firms, through the adoption of best and novel business practices. Improved management capability has the potential to raise labour productivity and firm performance, raising income for all New Zealanders.

Links to other initiatives/ rest of GIF package

The bid is a first step in better understanding and raising awareness of the importance of management capability in New Zealand.

Funding

Additional funding of $1.2 million for 2004/05 and 2005/06 will be received to support the initiative.

$million (GST inclusive where applicable) 2004/05 2005/06 2006/07 2007/08 Outyears
Operating – new

- Redistributed

Capital - new

- redistributed 1.2

Nil

Nil

Nil 1.2

Nil

Nil

Nil Nil

Nil

Nil

Nil Nil

Nil

Nil

Nil Nil

Nil

Nil

Nil
TOTAL 1.2 1.2 Nil Nil Nil

Questions and Answers

What evidence do you have about weaknesses in management capability?

The evidence is unclear about the extent to which the management capability of New Zealand managers is good or bad compared to other countries.

Nevertheless, based on the available evidence to hand, the common messages that emerge are that, in general, New Zealand managers tend to be more administrative than strategic, can lack people and communication skills, and can be weak in particular technical areas such as marketing. In addition, networking and relationship management do not appear to be emphasised by New Zealand managers.

The Government is keen to ensure that New Zealand managers have the right skills, attributes and knowledge needed to ensure that their firms are competitive, can produce high-value added and differentiated goods and services and can operate globally. Further research is being undertaken by the Ministry of Economic Development to better understand the capability of New Zealand managers and barriers to management development.

How will government know whether the initiative is successful?

The initiative will be successful if it generates:
- robust evidence about the stock of management capability in New Zealand which can be used to make a decision about what government interventions are warranted; and
- increased private sector awareness and activity around the demand and supply of management capability, as assessed by stakeholder feedback.

Aren’t there plenty of business schools and management qualifications already?

Yes, but SMEs in particular may not have the time or resources to pursue formal courses leading to qualifications. For most businesses there is likely to be a strong reliance on personal and informal learning, including observation and peer learning, informal mentoring, business-to-business learning, and life experience.

Concern about management capability is not unique to New Zealand. The United Kingdom has already undertaken considerable work into developing management capability. A two-year taskforce into management and leadership found a deficit in management capability in the United Kingdom, despite an increase in the supply of both formal management education and management training.

What role can government play in lifting management capability?

This initiative is aimed at improving our understanding of management capability, raise awareness in the private sector, and facilitate the development of innovative approaches to management development. The government already plays a role in fostering management capability in the economy through New Zealand Trade and Enterprise: Growth Services Fund; Enterprise Development Fund scheme; BIZ.org; Enterprise Training; and the Cluster Development Programme.

ENDS

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