How Does New Zealand Management Measure-up? www.med.govt.nz
Effective management practices are closely related to higher productivity and output in New Zealand manufacturing firms, according to an international comparative study released today.
The study of 152 medium and large New Zealand manufacturing firms benchmarks New Zealand management practices against 16 other countries, including Australia, Britain, Canada and the United States, and was led by the London School of Economics and McKinsey & Co.
The results show a strong relationship between New Zealand management practices and various firm performance indicators, particularly the profit per employee, firm sales and number of employees.
Management practices in New Zealand are ‘middling to average’ by global standards according to the study. It shows that, while New Zealand managers in manufacturing firms perform well on operational and performance management, they are relatively weak on people management, particularly when it comes to attracting and retaining talent and managing poor performers.
Economic Development Ministry Acting Deputy Secretary Michael Bird said “This study demonstrates a strong link between effective management practices and various firm performance indicators. The message for New Zealand firms is clear: improving management practices impacts positively on the firm’s bottom line.
“This report allows us to look at ourselves compared to other countries for the first time. It also clearly identifies management practices that New Zealand firms can improve.”
Michael Bird said that the Ministry was working closely with Business New Zealand, the New Zealand Institute of Management, and NZ Trade and Enterprise to help firms learn more about the research, and encourage firms to focus on improving their management practices.
The study, commissioned by the Ministries of Economic Development, Labour and The Treasury, as well as New Zealand Trade and Enterprise, was undertaken by University of Technology Sydney (UTS). UTS also did an equivalent study in Australia.
‘Management Matters in New Zealand: How does Manufacturing Measure Up?’ is available on www.med.govt.nz.
Management Matters in New Zealand - How does manufacturing measure-up?
Questions and Answers
How was the research done?
The University of Technology Sydney (UTS), was engaged by the Ministry of Economic Development, in conjunction with The Treasury, the Department of Labour, and New Zealand Trade and Enterprise to assess 152 medium and large-sized New Zealand manufacturing firms in 2009.
The study uses a method developed by the London School of Economics and McKinsey & Co to review management practices in manufacturing firms, identify key determinants of management performance and interpret the relationship between management capability and firm performance.
It globally benchmarks New Zealand management with a range of countries, including the United States, United Kingdom, Canada, Australia, Japan and emerging economies like China and India.
Medium firms are defined as employing 100 to 5000 employees, although in parts of the study, the sample is broadened to include firms employing 50 to 5000 employees.
Why was the research done?
While New Zealand is at the forefront of the OECD in adopting policies in many areas that have been shown to lead to high per capita income, paradoxically it still ranks toward the bottom end of the OECD’s productivity league.1
Management is an underlying determinant of productivity growth. Management practices and leadership skills impact substantially on organisational performance. Effective performance management systems and skilled managers create an environment where innovation and skill development can flourish. And, in turn, flourishing firms drive New Zealand’s economic growth.
To date, however, there has been a paucity of research that quantifies and analyses New Zealand’s management quality and performance in order to understand where action needs to occur that might boost productivity growth rates.
What did the study not consider smaller firms as 97% of New Zealand businesses have fewer than 20 employees?
As the study is an international comparison, it needed to focus on firms of similar size.
Other studies have focused on management development in NZ firms, most recently the Massey University SME Centre research.
http://sme-centre.massey.ac.nz/files/managementcapability.pdf
Are the results applicable to SMEs and other sectors?
While this study was specific to manufacturing firms, elsewhere the findings in similar studies have been found to be as applicable to firms in the service industry.
The general message is that effective management practices improves firm productivity is still important so improving management practices can have benefits for all businesses.
Who can firms talk to about the possible implications of the research for their business?
Business NZ, NZ Institute of Management, and NZ Trade and Enterprise are available to discuss the research with firms.