2006 MALAYSIAN MANAGEMENT CAPABILITY INDEX
1^st Report on Management Capability of Malaysian Management
Malaysian Institute of Management (MIM)
MCI Research Team
December 2006

Survey conducted & Report prepared by	2008 Malaysian MCI Study In collaboration with	Under the auspices of	MCI Model by NZIM
	Malaysia Productivity Corporation	Asian Association of Management Organisations

The 2006 Malaysian MCI Report

What is Management Capability? What is the Management Capability Index (MCI)? 2006 Malaysian MCI - Executive Summary Malaysian Companies Comparison International Comparison
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What is Management Capability?

Management capability stems from an individual's competences and embraces sound processes, practices and structure. This, in turn, results in the improvement in management capability of an organisation, which directly influences the country's capability for long term economic and growth performance.

It is important to understand that management capability is much more than management competencies. While competencies are general descriptions of the abilities necessary to perform successfully in a particular job or position, capability is the degree to which management uses its skills, abilities and competencies to achieve results. In examining capability, we are moving up a level beyond competencies.

Management capability is demonstrated in business / organisational performance, and is the result of management leadership and competence in the key management practices that lead to sustainable business performance and business growth.

Of course, there are other factors beyond management that also influence business / organisational performance i.e. government policy, inflation, labour market, etc. Management capability is the ability to deliver performance by applying your competencies in the environment you face, with the resources you have, engaging the challenges you face - in achieving with the organisation what you have to want to achieve.

The important aspect of capability is how effectively management applies and practises its competencies to deal with external and internal influences to achieve the highest levels of business / organisational performance.

When the environment gets real tough, the highly capable managers win through and deliver in spite of it. The best managers are those capable of applying their competencies in different environments, in challenging environments, and producing superior results. They are capable of overcoming the environment and growing their organisations. We all have skills, abilities, personal attributes and competencies. But can we apply them to deliver superior business performance in the organisation we lead?

So, capability is the ability to deliver performance by applying your competencies in the environment, situation, with the resources you have, engaging the challenges you face - in achieving with the organisation what you want to achieve.

The measurement of management capability must therefore link the application of management skills and abilities to the results achieved by the business or organisation.

What is the Management Capability Index (MCI)?

The MCI converts the evaluation of management performance into an index. The index then is a useful indicator of how capable, or inadequate, one CEO, organisation, group, sector or even country is against the criteria. Thus, the MCI enables useful comparison or benchmarking between individual CEOs, organisations, sectors or even countries.

The MCI is based on the following eight major drivers of management capability that deliver profitable business growth, plus actual results and comparative performance to create an index of management capability. The weighting of the nine categories indicating their degree of importance in the final index are as follows:

For each of the nine categories that make up the MCI, CEOs / Managing Directors / General Managers assess what they consider to be their organisation's current position.

2006 Malaysian MCI - Executive Summary

In this inaugural Malaysian MCI survey, Malaysian management assesses itself as consistently better than the 60% level of performance and on the way to an 80% level of performance.

Based on the overall response, the ranking of the nine categories are as follows:

Interpretation of Findings

Malaysia is strongest in "External Relationships" and "Financial Management", and weakest in "Organisation Capability".

As would be expected from the responses of the other eight categories, the assessment of the most heavily weighted category of "Results and Comparative Performance" is 70.4.

The overall Malaysian Management Capability Index 2006 is 71.3. This suggests that Malaysian management is performing at 71% of its potential 100% capability.

Management should aim for more than 80% performance in each of the categories which shows that the criteria statements are practised consistently across the organisation and where there is a commitment to continuous improvement.

Responses at around 70 essentially represent what can best be described as a level of mediocrity. Top management is not achieving the potential of the organisation it leads. There clearly is opportunity for improvement. There is the need for a greater focus on lifting management performance by boards and chief executives.

Overall, based on the results of the individual categories that make up the index, Malaysian management assesses their capability to be highest (i.e. between 72% to 74% of potential) in:

Next range of results of the individual categories (i.e. between 70% to 72% of potential) include:

The weakest capability (at below 70% of potential) was found in:

The overall assessment of "Results & Comparative Performance" at 70.4% of potential suggests good performance in many areas of management. Many trends compared against benchmarks show areas of good performance.

The primary value of the Management Capability Index for any organisation is in identifying where management performance improvements can be made, and through that the performance of the organisation, with the aim of the organisation ultimately achieving its potential.

The first step is for CEOs / Managing Directors / General Managers to benchmark their own organisation against these results and then to identify opportunities and development initiatives for improvement in each individual category.

This being the first time MIM has conducted the Malaysian MCI survey, there are no trends to consider.

Malaysian Companies Comparison

Comparison of companies' results with the Malaysian MCI

The following illustrates how a company's results can be compared to the Malaysian MCI and the gaps in each of the nine individual categories that make up the MCI be identified. This sample result is taken from one of the 110 respondents received from the 2006 Malaysian MCI survey results.

Company A's performance is as follows:

Company A's Performance

The Management Capability Index for Company A is 72.0. This suggests that Company A is performing at 72% of its potential 100% capability. Company A's MCI of 72.0 is higher than the national MCI of 71.3.

Company A assesses itself as consistently better than the 60% level of performance and on the way to an 80% level of performance.

Company A is strongest in "Financial Management" and "External Relationships" and weakest in "Organisation Capability". This trend is similar to the trend of the overall Malaysian MCI.

However, looking at the comparison between Malaysian MCI and Company A on the individual nine categories that make up the MCI, Company A surpasses the Malaysian MCI in three categories - "Performance Leadership", "Financial Management" and "External Relationships"; it meets the Malaysian MCI in three categories - "Visionary & Strategic Leadership", "Innovation - Products & Services" and "Results & Comparative Performance"; it is lower than the Malaysian MCI in three categories - "People Leadership", "Organisation Capability" and "Application of Technology & Knowledge".

In its strongest areas (Performance Leadership, Financial Management and External Relationships), Company A should continue its efforts to set the industry standards in these areas.

Company A should now focus on its three weakest areas, with emphasis on improvement in "Organisation Capability" which has the widest gap of (-22.4) followed by "People Leadership" (-15.7) and "Application of Technology and Knowledge" (-11.1).

Company A should address these three areas by looking at the criteria that make up these three areas and putting them in place to improve organisational performance. After achieving the Malaysian benchmark, Company A should then continue to strive for management capability excellence by aiming to perform at 100% of its capability in all the nine areas of the MCI.

International Comparison

While the results of this first Malaysian MCI will assist individual organisations in benchmarking themselves against other Malaysian organisations, the Index is being adopted by a number of countries throughout the world, so international comparisons and benchmarking will also be possible in the near future. New Zealand has been producing the MCI for four years and India produced its first MCI in 2005.

Comparison with New Zealand and Indian MCI

India did not undertake the MCI in 2006. However, for comparison purpose, the 2005 Indian MCI as below will be used here.

Malaysian MCI 2006 at 71.3 is higher than New Zealand MCI 2006 at 68.6 (+2.7) but lower than Indian MCI 2005 at 76.4 (-5.1).

In all categories except "Financial Management", Malaysia is higher than New Zealand:

Comparison between Malaysia and New Zealand on the nine areas of management capability

On the other hand, when compared with India, Malaysia is weaker in all factors:

Comparison between Malaysia and India on the nine areas of management capability

India has no category below 70. Malaysia has one category below 70 ("Organisation Capability") and New Zealand has seven categories below 70 ("Visionary & Strategic Leadership", "Performance Leadership", "People Leadership", "Organisation Capability", "Technology & Knowledge", "Innovation - Products & Services" and "Results & Comparative Performance").

Of the four categories that Malaysia is weaker in, Malaysia is still higher than New Zealand i.e. "Performance Leadership" (+1.7), "People Leadership" (+3.2), "Organisation Capability" (-0.5), "Application of Technology & Knowledge" (+1.4). But the gaps in differences are not very wide.

The largest disparity between Malaysia and New Zealand is in the category of "Innovation - Products & Services" (+7.5). This shows that Malaysia has a management culture that encourages innovation in products and services and is recognised by Malaysian management as one of the key success factors that leads businesses to new dimensions of performance.

Clearly, India has very strong strategic focus on lifting management performance as compared to New Zealand and Malaysia. Malaysia which featured strongly in "External Relationships" needs to further enhance this area as it is still lagging behind India (-4.9) with New Zealand fast catching up (+0.9). In "Financial Management" which is Malaysia's second strongest category, it is still behind New Zealand (-5.4) and India (-4.8).

The largest disparity between Malaysia and India is in the category of "Organisation Capability" (-8.5). "Organisation Capability" ranks lowest amongst all categories in the Malaysian MCI whereas for India it ranks eighth amongst all categories in the Indian MCI, and for New Zealand, it ranks seventh amongst all categories of the New Zealand MCI.

For Malaysia, "External Relationships" ranks highest and "Organisation Capability" ranks lowest.

For New Zealand, "Financial Management" ranks highest and "Innovation - Products & Services" ranks lowest.

For India, "External Relationships" ranks highest and "Innovation - Products & Services" ranks lowest.

Contact Us

For 2008, MIM will be collaborating with the Malaysia Productivity Corporation (MPC) to conduct the 2008 Malaysian Management Capability Index Research Study. We invite all organisations to participate in this study in order for Malaysia to come up with the 2008 Malaysian MCI.

To participate:

Download the 2008 MCI Questionnaire, fill up the questionnaire and fax or email or mail (before 15 May 2008) to:

MIM-MPC MCI Research Team: