The Business Vision and Mission

The Business Vision and Mission

Learning Outcomes

After studying this unit, you should be able to do the following:

➢ Describe the nature and role of vision and mission statements in strategic management

➢ Discuss why the process of developing a mission statement is as important as the resulting document

➢ Identify the components of mission statements

➢ Discuss how clear vision and mission statements can benefit other strategic management activities

➢ Evaluate mission statements of different organisations

➢ Write good vision and mission statements

What Do We Want to Become?

It is especially important for managers and executives in any organization to agree upon the basic vision that the firm strives to achieve in the long term. A vision statement should answer the basic question, “What do we want to become?” A clear vision provides the foundation for developing a comprehensive mission statement. Many organizations have both a vision and mission statement, but the vision statement should be established first and foremost. The vision statement should be short, preferably one sentence, and as many managers as possible should have input into developing the statement.

Several example vision statements:

➢ The Vision of the National Pawnbrokers Association is to have complete and vibrant membership that enjoys a positive public and political image and is the focal organization of all pawn associations. - National Pawnbrokers Association

➢ Our Vision as an independent community financial institution is to achieve superior long-term shareholder value, exercise exemplary corporate citizenship, and create an environment which promotes and rewards employee development and the consistent delivery of quality service to our customers. - First Reliance Bank of Florence, South Carolina

➢ At CIGNA, we intend to be the best at helping our customers enhance and extend their lives and protect their financial security. Satisfying customers is the key to meeting employee needs and shareholder expectations, and will enable CIGNA to build on our reputation as a financially strong and highly respected company.

What is Our Business?

Current thought on mission statements is based largely on guidelines set forth in the mid 1970s by Peter Drucker, who is often called “the father of modern management” for his pioneering studies at General Motors Corporation and for his 22 books and hundreds of articles. Harvard Business Review has called Drucker “the preeminent management thinker of our time.”

Drucker says that asking the question “What is our business?” is synonymous with asking the question “What is our mission?” An enduring statement of purpose that distinguishes one organization from other similar enterprises, the mission statement is a declaration of an organization’s “reason for being.” It answers the pivotal question “What is our business?” A clear mission statement is essential for effectively establishing objectives and formulating strategies.

Sometimes called a creed statement, a statement of purpose, a statement of philosophy, a statement of beliefs, a statement of business principles, or a statement “defining our business,” a mission statement reveals what an organization wants to be and whom it wants to serve. All organizations have a reason for being, even if strategists have not consciously transformed this reason into writing.

Some strategists spend almost every moment of every day on administrative and tactical concerns, and strategists who rush quickly to establish objectives and implement strategies often overlook the development of a vision and mission statement. This problem is widespread even among large organizations.

Some companies develop mission statements simply because they feel it is fashionable, rather than out of any real commitment. However, firms that develop and systematically revisit their vision and mission statements, treat them as living documents, and consider them to be an integral part of the firm’s culture realize great benefits. Johnson & Johnson (J&J) is an example firm. J&J managers meet regularly with employees to review, reword, and reaffirm the firm’s vision and mission. The entire J&J workforce recognizes the value that top management places on this exercise, and these employees respond accordingly.

Vision Versus Mission

Many organizations develop both a mission statement and a vision statement. Whereas the mission statement answers the question “What is our business,” the vision statement answers the question “What do we want to become?” Many organizations have both a mission and vision statement.

It can be argued that profit, not mission or vision, is the primary corporate motivator. But profit alone is not enough to motivate people. Profit is perceived negatively by some employees in companies. Employees may see profit as something that they earn and management then uses and even gives away to shareholders. Although this perception is undesired and disturbing to management, it clearly indicates that both profit and vision are needed to effectively motivate a workforce.

When employees and managers together shape or fashion the vision and mission statements for a firm, the resultant documents can reflect the personal visions that managers and employees have in their hearts and minds about their own futures. Shared vision creates a commonality of interests that can lift workers out of the monotony of daily work and put them into a new world of opportunity and challenge.

The Process of Developing a Mission Statement

A clear mission statement is needed before alternative strategies can be formulated and implemented. It is important to involve as many managers as possible in the process of developing a mission statement, because through involvement, people become committed to an organization.

A widely used approach to developing a mission statement is first to select several articles about mission statements and ask all managers to read these as background information. Then ask managers themselves to prepare a mission statement for the organization. A facilitator, or committee of top managers, should then merge these statements into a single document and distribute this draft mission statement to all managers. A request for modifications, additions, and deletions is needed next, along with meeting to revise the document. To the extent that all managers have input into and support the final mission statement document, organizations can more easily obtain managers’ support for other strategy formulation, implementation, and evaluation activities. Thus, the process of developing a mission statement represents a great opportunity for strategists to obtain needed support from all managers in the firm.

During the process of developing a mission statement, organizations use discussion groups of managers to develop and modify the mission statement. Some organizations hire an outside consultant or facilitator to manage the process and help draft the language. Sometimes an outside person with expertise in developing mission statements, who has unbiased views, can manage the process more effectively than an internal group or committee of managers. Decisions on how best to communicate the mission to all managers, employees, and external constituencies of an organization are needed when the document is in final form. Some organizations even develop a videotape to explain the mission statement and how it was developed.

An article by Campbell and Yeung emphasizes that the process of developing a mission statement should create an “emotional bond” and “sense of mission” between the organization and its employees. Commitment to a company’s strategy and intellectual agreement on the strategies to pursued do not necessarily translate into an emotional bond; hence, strategies that have been formulated may not be implemented. These researchers stress that an emotional bond comes when an individual personally identifies with the underlying values and behavior of a firm, thus turning intellectual agreement and commitment to strategy into a sense of mission. Campbell and Yeung also differentiate between the terms vision and mission, saying that vision is “a possible and desirable future state of an organization” that includes specific goals, whereas mission is more associated with behavior and the present.

Importance of Vision and Mission Statements

The importance of vision and mission statements to effective strategic management is well documented in the literature, although research results are mixed. Rarick and Vitton found that firms with a formalized mission statement have twice the average return on shareholders’ equity than those firms without a formalized mission statement have; Bart and Baetz found a positive relationship between mission statements and organizational performance; Business Week reports that firms using mission statements have a 30 percent higher return on certain financial measures than those without such statements; however, some studies have found that having a mission statement does not directly contribute positively to financial performance. The extent of manager and employee involvement in developing vision and mission statements can make a difference in business success. This chapter provides guidelines for developing these important documents. In actual practice, wide variations exist in the nature, composition, and use of both vision and mission statements. King and Cleland recommend that organizations carefully develop a written mission statement for the following reasons:

1. To ensure unanimity of purpose within the organization

2. To provide a basis, or standard, for allocating organizational resources

3. To establish a general tone or organizational climate

4. To serve as a focal point for individuals to identify with the organization’s purpose and direction, and to deter those who cannot from participating further in the organization’s activities

5. To facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organization

6. To specify organizational purposes and then to translate these purposes into objectives in such a way that cost, time, and performance parameters can be assed and controlled.

Characteristics of a Mission Statement

A Declaration of Attitude

A mission statement is more than a statement of specific details; it is a declaration of attitude and outlook. It usually is broad in scope for at least two major reasons. First a good mission statement allows for the generation and consideration of a range of feasible alternative objectives and strategies without unduly stifling management creativity. Excess specificity would limit the potential of creative growth for the organization. On the other hand, an overly general statement that does not exclude any strategy alternatives could be dysfunctional.

Second, a mission statement needs to be broad to effectively reconcile differences among, and appeal to, an organization’s diverse stakeholders, the individuals and groups of individuals who have a special stake or claim on the company. Stakeholders include employees, managers, stockholders, boards of directors, customers, suppliers, distributors, creditors, governments (local, state, federal, and foreign), unions, competitors, environmental groups, and the general public. Stakeholders affect and are affected by an organization’s strategies, yet the claims and concerns of diverse constituencies vary and often conflict. For example, the general public is especially interested in social responsibility, whereas stockholders are more interested in profitability. Claims on any business literally may number in the thousands, and they often include clean air, jobs, taxes, investment opportunities, career opportunities, equal employment opportunities, employee benefits, salaries, wages, clean water, and community services. All stakeholders’ claims on an organization cannot be pursued with equal emphasis. A good mission statement indicates the relative attention that an organization will devote to meeting the claims of various stakeholders.

An effective mission statement should not be too lengthy; recommended length is less than 200 words. An effective mission statement also arouses positive feelings and emotions about an organization; it is inspiring in the sense that it motivates readers to action. An effective mission statement generates the impression that a firm is successful, has direction, and is worthy of time, support, and investment---from all socioeconomic groups of people.

It reflects judgments about future growth directions and strategies that are based upon forward-looking external and internal analyses. A business mission should provide useful criteria for selecting among alternative strategies. A clear mission statement provides a basis for generating and screening strategic options. The statement of mission should be dynamic in orientation, allowing judgments about the most promising growth directions and those considered less promising.

A Customer Orientation

A good mission statement describes an organization’s purpose, customers, products or services, markets, philosophy, and basic technology. According to Vern McGinnis, a mission statement should:

1. Define what the organization is and what the organization aspires to be

2. Be limited enough to exclude some ventures and broad enough to allow for creative growth

3. Distinguish a given organization from all others

4. Serve as a framework for evaluating both current and prospective activities

5. Be stated in terms sufficiently clear to be widely understood throughout the organization.

A good mission statement reflects the anticipations of customers. Rather than developing a product and then trying to find a market, the operating philosophy of organizations should be to identify customer’s needs and then provide a product or service to fulfill those needs. Since more and more customers are using the Internet, all firms should post their vision and mission statements at the company’s home page---as indicated in the “E-Commerce Perspective.”

A major reason for developing a business mission statement is to attract customers who give meaning to an organization. A classic description of the purpose of a business reveals the relative importance of customers in a statement of mission:

A Declaration of Social Policy

The term social policy embraces managerial philosophy and thinking at the highest levels of an organization. For this reason, social policy affects the development of a business mission statement. Social issues mandate that strategists consider not only what the organization owes its various stakeholders but also what responsibilities the firm has to consumers, environmentalists, minorities, communities, and other groups. After decades of debate on the topic of social responsibility, many firms still struggle to determine appropriate social policies.

The issue of social responsibility arises when a company establishes its business mission. The impact of society on business and vice versa is becoming more pronounced each year. Social policies directly affect a firm’s customers, products and services, markets, technology, profitability, self-concept, and public image. An organization’s social policy should be integrated into all strategic-management activities, including the development of a mission statement. Corporate social policy should be designed and articulated during strategy formulation, set and administered during strategy implementation, and reaffirmed or changed during strategy evaluation. The emerging view of social responsibility holds that social issue should be attended to both directly and indirectly in determining strategies.

Firms should strive to engage in social activities that have economic benefits. For example, Merck & Co. recently developed the drug ivermectin for treating river blindness, a disease caused by a fly-borne parasitic worm endemic in poor, tropical areas of Africa, the Middle East, and Latin America. In an unprecedented gesture that reflected its corporate commitment to social responsibility, Merck then made ivermectin available at no cost to medical personnel throughout the world. Merck’s action highlights the dilemma of orphan drugs, which offer pharmaceutical companies no economic incentive for development and distribution.

Some strategists agree with Ralph Nader, who proclaims that organizations have tremendous social obligations. Others agree with Milton Friedman, the economist, who maintains that organizations have no obligation to do any more for society than is legally required. Most strategists agree that the first social responsibility of any business must be to make enough profit to cover the costs of the future, because if this is not achieved, no other social responsibility can be met. Strategists should examine social problems in terms of potential costs and benefits to the firm, and they should address social issues that could benefit the firm most.

Mission Statement Components

Mission statements can and do vary in length, content, format, and specificity. Most practitioners and academicians of strategic management feel that an effective statement exhibits nine characteristics or components. Because a mission statement is often the most visible and public part of the strategic-management process, it is important that it includes all of these essential components:

1. Customers---Who are the firm’s customers?

2. Products or services---What are the firm’s major products or services?

3. Markets---Geographically, where does the firm compete?

4. Technology---Is the firm technologically current?

5. Concern for survival, growth, and profitability---Is the firm committed to growth and financial soundness?

6. Philosophy---What are the basis beliefs, values, aspirations, and ethical priorities of the firm?

7. Self-concept---What is the firm’s distinctive competence or major competitive advantage?

8. Concern for public image---Is the firm responsive to social, community, and environmental concerns?

9. Concern for employees---Are employees a valuable asset of the firm?

Writing and Evaluating Mission Statements

Perhaps the best way to develop a skill for writing and evaluating mission statements is to study actual company missions. There is no one best mission statement for a particular organization, so good judgment is required in evaluating mission statements. Some individuals are more demanding than others in rating mission statements in this manner. For example, if a statement includes the word employees or customer, is that alone sufficient for the respective component? Some companies answer this question in the affirmative and some in the negative. You may ask yourself this question: “If I worked for this company, would I have done better with regard to including a particular component in its mission statement?” Perhaps the important issue here is that mission statements include each of the nine components in some manner.

Note:

All notes for this chapter are sourced from the following text book:

David, F 2007, Strategic Management: Cases and Concepts, Pearson Education, New Jersey

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A business mission is the foundation for priorities, strategies, plans, and work assignments. It is the starting point for the design of managerial jobs and, above all, for the design of managerial structures. Nothing may seem simpler or more obvious than to know what a company’s business is. A steel mill makes steel, a railroad runs trains to carry freight and passengers, an insurance company underwrites fire risks, and a bank lends money. Actually, “What is our business?” is almost always a difficult question and the right answer is usually anything but obvious. The answer to this question is the first responsibility of strategists. Only strategists can make sure that this question receives the attention it deserves and that the answer makes sense and enables the business to plot its course and set its objectives.

It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or service converts economic resources into wealth and things into goods. What a business thinks it produces is not of first importance, especially not to the future of the business and to its success. What the customer thinks he/she is buying , what he/she considers value, is decisive---it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, meaning what a product or service does for him or her. The customer is the foundation of a business and keeps it in existence.