|MISSION STATEMENTS: IMPORTANCE, CHALLENGE, AND RECOMMENDATIONS FOR DEVELOPMENT
Source: Business Horizons, May/Jun92, Vol. 35 Issue 3, p34, 9p
Mission statements can help focus the organization on what really matters--to itself as well as to its stakeholders. Mission statements are important to organizations of all types (public, private, not-for-profit, for-profit, family-owned, etc.). A key reason for such importance is the mission statement's guidance of strategic and day-to-day, operational decisions. Additionally, mission statements represent the glue that binds organizations together.
For example, Sears might improve its performance through decisions guided by a new, more effective mission statement. Sears' competitors have remodeled their old stores and implemented strategies for entering new markets while Sears struggles to "figure out what it wants to be" (Caminiti 1990), and its buyers and customers remain confused "regarding the products the company intends to stock" (Kelly and Zinn 1990). Thus, Sears' current mission statement may not indicate the direction required for effective strategic and operational decisions.
Grounded in the significance of mission statements, this article seeks to 1) define and discuss their importance, 2) identify briefly the significance of environmental challenges confronting many organizations, 3) note that even in light of their importance, mission statements have not been developed in many organizations, 4) examine factors that inhibit mission statement development, and 5) offer recommendations that, if followed, increase the probability of developing effective mission statements.
WHAT IS A MISSION STATEMENT AND WHY IS IT IMPORTANT?
An effective mission statement describes the firm's fundamental, unique purpose. An important part of this description indicates how a firm is unique in its scope of operations and its product or service offerings. In simple yet powerful terms, a mission statement proclaims corporate purpose. This proclamation indicates what the organization intends to accomplish, identifies the market(s) in which the firm intends to operate, and reflects the philosophical premises that are to guide actions.
Mission statements are also intended to provide motivation, general direction, an image of the company's character, and a tone, or set of attitudes, through which actions are guided. Furthermore, because mission statements embody a company's soul, they are often inspirational.
Levi Strauss & Company's mission statement is described as follows:
Thus, the firm has described its fundamental, unique purpose.
Additionally, the mission statement indicates what the company intends to accomplish and describes the philosophical premises that guide peoples' actions. Once completed, mission statements become the foundation on which other intended actions are built. Only after a mission statement has been developed can objectives and appropriate strategies be formed properly.
The following part of the mission statement of Anheuser-Busch Companies, Inc. demonstrates this point: "Anheuser-Busch's corporate mission statement provides the foundation for strategic planning for all subsidiaries."
Peter Drucker (1973) perhaps best described the general relationship and sequence between a mission statement and objectives. "A business is defined by the business mission. Only a clear definition of the mission and purpose of the organization makes possible clear and realistic business objectives."
TODAY'S COMPLEX ENVIRONMENTAL CHALLENGES
Today's challenges suggest the critical nature of effectively articulated mission statements. Included among the challenges confronting executives are:
1. complex and ambiguous decision conditions;
These types of conditions clearly suggest the paramount importance of effective mission statements.
A key outcome of mission statements is the determination of a firm's focus when coping with complex environments.
Home Depot, America's largest warehouse chain selling do-it-yourself items, has remained focused. The company's CEO suggested that although Home Depot may be able to sell many products (including, for example, toys and food products), it has avoided the temptation to do so. The reason for retaining Home Depot's original focus is to prevent the customer from thinking the company is anything other than what it is--a highly successful purveyor of do-it-yourself products (Caminiti 1990).
The mission statement of Anheuser-Busch notes that "the fundamental premise of the mission statement is that beer is and always will be Anheuser-Busch's core business."
In reference to its mission, the Harley-Davidson company has stressed that "instead of pandering to trends, we'll stick with what got us here: remaining faithful to our heritage."
THE FAILURE TO DEVELOP MISSION STATEMENTS
Many organizations, however, have not formed essential direction-setting statements. One researcher found that 59 percent of the Chief Executive Officers of Business Weeks top 1,000 firms run companies that do not have mission statements (David 1989). Interestingly, some of these large firms had acquired other companies to diversify their scope of operations beyond the company's original core business or product areas.
Porter discovered that "on average, corporations divested more than half of their acquisitions in new industries and more than 60 percent of their acquisitions in entirely new fields." As noted previously, a mission statement is intended to provide a focus for all firms' efforts, including those that have diversified through acquiring other companies. Thus, it is possible that the lack of an effective mission statement and the necessity of restructuring have contributed to the number of divestitures that have occurred recently in some large diversified firms. For example, Chrysler Corporation's Lee Iacocca admitted that diversification was his "big sin." He further suggested that diversification siphoned management attention and resources from the critical task of designing and manufacturing new, high-quality vehicles (Ingrassia and Stertz 1990).
The results of failing to draft mission statements in small firms mirror those in large companies. Researchers discovered that 20 percent of small firms that did not engage in any type of strategic planning failed, while failures occurred in only 8 percent of the companies engaging in sophisticated strategic planning (Sexton and Van Auken 1985).
The evidence presented above suggests the following important question: Why are mission statements not developed in all types of organizations?
FACTORS INHIBITING THE DEVELOPMENT OF MISSION STATEMENTS
Several factors may account for the failure to develop mission statements. Here, we examine the following:
A Large and Diverse Set of Stakeholders
Most organizations serve many individuals and groups. Stakeholders derive value from the firm's outputs; as such, they want the organization to constantly increase its capabilities of satisfying stakeholder interests and needs. The outcomes achieved by today's profit-making corporations must be at least satisfactory to the following stakeholders: shareholders, capital markets, customers, suppliers, various governmental agencies (at the national, state, and local levels), and the communities in which the organization operates (including the host countries in which a multinational company conducts business).
Anheuser-Busch's mission statement indicates a clear concern regarding a commitment to "quality and maintaining the highest standards of honesty and integrity in its dealings with all stakeholders."
Many more stakeholders today strongly vocalize their stake in an organization's future. For example, when Roger Smith announced his retirement as CEO of General Motors, representatives from several pension funds (whose companies held GM stock) suggested they should be active participants in the process to select Mr. Smith's successor.
The Work Required to Develop an Effective Mission Statement
Preparing an effective mission statement is not accomplished easily or quickly. Writing a mission statement is time consuming. Each word must be selected carefully to ensure its consistency with directions sought by all stakeholders.
Comfort With the Status Quo
Generally speaking, organizational structures are changed only after a firm's performance declines. Executives (and others who have a strong interest in the firm's success) may not recognize the role a new mission statement or a change in the old one could play in efforts to reverse a firm's performance.
As indicated previously, a mission statement should describe, at a minimum, how an organization is unique, what it desires to be. This information provides valuable insights to various stakeholders. As such, a mission statement appropriately reflects general indicators of an organization's current and intended actions.
Some executives believe this type of information is confidential and should not be available to many parties. However, detail is the province of strategies and various types of plans, procedures, and policies, not mission statements. A mission statement is meant to be broad and to indicate only the general direction of intended actions.
Mission Statements Can Be Controversial
Choices must be made in determining answers to the questions of "who we are" and "what we intend to be." Generally speaking, each possible direction is attractive to one or more stakeholders. Alternative solutions should be evaluated openly and resolutions formed. Thus, developing a mission statement yields an opportunity to identify any stakeholder disagreements that could exist within groups (among key managerial personnel, for example) or between groups (between managerial personnel and a board of directors).
Time Spent Dealing With Operational Matters
On occasion, those involved with key strategic organizational roles can become embroiled in coping successfully with day-to-day, operational problems. Upper-level managers may spend far more time with tasks related to "getting the product out the door" than with matters pertaining to the organization's long-term direction.
The Generalist Versus the Specialist
Initially, the skills of most managerial personnel are those of the specialist. However, mission statement development requires the primary use of general rather than specific technical skills; the ability to think simultaneously about the interests of all stakeholders -- those that are both internal and external to the firm. When preparing a mission statement, managers, regardless of initial training and type of technical expertise, are challenged to concentrate on a general, integrative focus rather than the more narrow view of a specialist.
The Pursuit of Organizational Autonomy
Even in an historical sense, America has been known as an "entrepreneurial society" (Kaplan 1987). It may be difficult to gain commitment from those who subscribe to this view of entrepreneurial activity when attempting to form a mission statement. The challenge for those responsible for developing mission statements, then, is to determine and articulate the legitimate role an entrepreneurial focus can play in forming and implementing a mission statement.
Formality of Historical Strategic Planning Processes
Traditionally, strategic planning processes have been formal in nature. The first objectives of the strategic planning process is to develop an effective mission statement. However, more formal strategic planning processes often reduce the number of people associated with this activity. To be successful, many people should be involved with the development of a mission statement. Managers therefore are challenged to identify processes that will encourage and facilitate the active involvement of many people when developing mission statements, strategies, and plans.
RECOMMENDATIONS FOR DEVELOPING EFFECTIVE MISSION STATEMENTS
Each organization has unique internal capabilities and external opportunities. This should be recognized when developing unique mission statements. The recommendations presented below can be used effectively across many organizations.
Support from Top-Level Managers
Effective mission statements yield general indicators regarding what an organization intends to be, whom it intends to serve, and the philosophies and values that will guide its strategic and operational decision making processes. Top-level managers must accept responsibility for articulating a mission in ways that are meaningful for each stakeholder group. Mission statements should be formed only when top-level managers have made the philosophical and operational commitment required to focus the organization's resources on mission accomplishment.
Mission Statement Complexity
Previously, task complexity was shown to inhibit mission statement development. As such, those who select the process to form (or reshape) a mission statement should recognize that it may require a complex reorientation of the firm.
The Need for Transformational Leadership
Transformational leaders inspire, energize, and intellectually stimulate and stir employees to look beyond their own self-interest for the benefit of individual work groups and the organization as a whole. Typically, such leaders are seen as charismatic and capable of providing individualized consideration to stakeholders in efforts to satisfy their unique interests and needs. Because of the "generalized" nature of mission statements, a transformational leader may be necessary to marshal the support (from a diverse group of stakeholders) required to effectively implement a mission statement and to share the vision it embodies.
The Consistency of Mission Statement Guidance
Andrew Grove, Intel's CEO, believes that a mission statement is valuable when it is "used as a constant guide for the actions of managers and workers." In Grove's view, the acid test of a statement's effectiveness is how well it helps individuals accomplish their jobs (Henkoff 1990).
Intel's current mission of becoming the premier building block supplier to the computer industry is used constantly as the foundation for decisions and resource commitments. It is the responsibility of key individuals to verify that once formed, a mission statement is used consistently as a guide for all organizational decisions and actions.
Listening to Customers
It is generally agreed that organizations exist to satisfy customers needs. In this sense, customers could be viewed as the most critical stakeholder group and therefore should play a prominent role in a mission statement's focus.
We have argued that mission statements provide critical direction for all types of organizations. Failure to involve a broad range of stakeholders in processes intended to determine an organization's reason for being, those the organization intends to serve, and the key philosophical premises that will guide decisions and actions may contribute to poor performance. But mission statements have not been developed in many organizations. We have examined nine factors that may inhibit their formation. The challenge facing managers today is to understand the criticality of mission statements and to learn how to cope successfully with factors or conditions that may prevent their development and revision. We have also presented recommendations that, if followed, should enhance managerial commitments to the development of mission statements. In turn, developing effective mission statements can contribute to increases in a firm's overall performance.
|Mission statements... help focus the organization on what really
...guidance of strategic and day-to-day, operational decisions...
An effective mission statement describes the firm's fundamental, unique purpose...
...this description indicates how a firm is unique in its scope of operations and its product or service offerings...
...because mission statements embody a company's soul, they are often inspirational...
...the mission statement indicates what the company intends to accomplish and describes the philosophical premises that guide peoples' actions...
...the foundation on which other intended actions are built...
A key outcome of mission statements is the determination of a firm's focus when coping with complex environments...
...a mission statement is intended to provide a focus for all firms' efforts, including those that have diversified through acquiring other companies...
Researchers discovered that 20 percent of small firms that did not engage in any type of strategic planning failed...
...while failures occurred in only 8 percent of the companies engaging in sophisticated strategic planning...
Most organizations serve many individuals and groups...
Stakeholders derive value from the firm's outputs; as such, they want the organization to constantly increase its capabilities of satisfying stakeholder interests and needs...
Writing a mission statement is time consuming. Each word must be selected carefully to ensure its consistency with directions sought by all stakeholders.
...detail is the province of strategies and various types of plans, procedures, and policies, not mission statements. A mission statement is meant to be broad and to indicate only the general direction...
...mission statement development requires the primary use of general rather than specific technical skills; the ability to think simultaneously about the interests of all stakeholders...
To be successful, many people should be involved with the development of a mission statement.
Effective mission statements yield general indicators regarding what an organization intends to be, whom it intends to serve, and the philosophies and values that will guide its strategic and operational decision making processes.
...a mission statement is valuable when it is "used as a constant guide for the actions of managers and workers." -- Andrew Grove