The Importance (Benefits) of Vision and Mission Statements

The importance (benefits) of vision and mission statements to effective strategic management is well documented in the literature, although research results are mixed. As indicated in Academic Research Capsule 2-1, there is a positive relationship between mission statements and measures of financial performance.

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 in order to reap the following benefits:

  1. To make sure all employees/managers understand the firm’s purpose or reason for being.
  2. To provide a basis for prioritization of key internal and external factors utilized to formulate feasible strategies.
  3. To provide a basis for the allocation of resources.
  4. To provide a basis for organizing work, departments, activities, and segments around a common purpose.

Reuben Mark, former CEO of Colgate, maintains that a clear mission increasingly must make sense internationally. Mark’s thoughts on vision are as follows:

When it comes to rallying everyone to the corporate banner, it’s essential to push one vision globally rather than trying to drive home different messages in different cultures. The trick is to keep the vision simple but elevated: “We make the world’s fastest computers” or “Telephone service for everyone.” You’re never going to get anyone to charge the machine guns only for financial objectives. It’s got to be something that makes people feel better, feel a part of something.4

1. The Mission Statement/Firm Performance Linkage

A meta-analysis of 20 years of empirical research on mission statements concluded that “there is a small positive relationship between mission statements and measures of financial organi­zational performance” (Desmidt et al., 2011, p. 468). However, research in marketing explains that customer satisfaction has a strong positive relationship with organizational performance (Devasagayam et al., 2013). Indeed, researchers have noted that “managers increasingly tend to see customer satisfaction as a valu­able intangible asset” (Luo et al., 2012, p. 745). Thus, mission statements designed from a customer perspective could positively impact organizational performance by enhancing customer satis­faction. If written from a customer perspective, mission statements could spur employees, salespersons, and managers to provide exemplary customer service, which arguably would enhance cus­tomer loyalty and translate into customers being “on a mission” to seek out, use, and promote the firm’s products and services. Written from a customer perspective, mission statements may indeed “accomplish their mission.”

Sources: Based on S. Desmidt, A. Prinzie, & A. Decramer, A. “Looking for the Value of Mission Statements: A Meta-Analysis of 20 Years of Research,” Management Decision, 49, no. 3 (2011): 468-483; R. Devasagayam, N. R. Stark, & L. S. Valestin, “Examining the Linearity of Customer Satisfaction: Return on Satisfaction as an Alternative,” Business Perspectives and Research 1, no. 2 (2013): 1-8; X. Luo, J. Wieseke, & C. Homburg, “Incentivizing CEOs to Build Customer- and Employee-Firm Relations for Higher Customer Satisfaction and Firm Value,” Journal of the Academy of Marketing Science 40, no. 6 (2012): 45-758; M. E. David, Forest R. David, & Fred R. David, “Mission Statement Theory and Practice: A Content Analysis and New Direction,” International Journal of Business, Marketing, and Decision Sciences 7, no. 1 (Summer 2014): 95-109.

2. A Resolution of Divergent Views

Another benefit of developing a comprehensive mission statement is that divergent views among managers can be revealed and resolved through the process. The question “What is our busi­ness?” can create controversy. Raising the question often reveals differences among strategists in the organization. Individuals who have worked together for a long time and who think they know each other suddenly may realize that they are in fundamental disagreement. For example, in a college or university, divergent views regarding the relative importance of teaching, research, and service often are expressed during the mission statement development process. Negotiation, compromise, and eventual agreement on important issues are needed before people can focus on more specific strategy-formulation activities.

Considerable disagreement among an organization’s strategists over vision and mission statements can cause trouble if not resolved. For example, unresolved disagreement over the business mission was one of the reasons for W. T. Grant’s bankruptcy and eventual liquidation. Top executives of the firm, including Ed Staley and Lou Lustenberger, were firmly entrenched in opposing positions that W. T. Grant should be like Kmart or JC Penney, respectively. W. T. Grant decided to become a bit like both Kmart and JC Penney; this compromise was a huge strategic mistake. In other words, top executives of W. T. Grant never resolved their vision/mission issue, which ultimately led to the firm’s disappearance.5

Too often, strategists develop vision and mission statements only when the organization is in trouble. Of course, the documents are needed then. Developing and communicating a clear mission during troubled times indeed may have spectacular results and may even reverse decline. However, to wait until an organization is in trouble to develop a vision and mission statement is a gamble that characterizes irresponsible management. According to Drucker, the most important time to ask seriously, “What do we want to become?” and “What is our business?” is when a company has been successful:

Success always obsoletes the very behavior that achieved it, always creates new realities, and always creates new and different problems. Only the fairy tale story ends, “They lived happily ever after.” It is never popular to argue with success or to rock the boat. It will not be long before success will turn into failure. Sooner or later, even the most successful answer to the question “What is our business?” becomes obsolete.6

In multidivisional organizations, strategists should ensure that divisional units perform strategic-management tasks, including the development of a statement of vision and mission. Each division should involve its own managers and employees in developing a vision and mission statement that is consistent with and supportive of the corporate mission. Ten benefits of having a clear mission and vision are provided in Table 2-2.

An organization that fails to develop a vision statement, as well as a comprehensive and inspiring mission statement, loses the opportunity to present itself favorably to existing and potential stakeholders. All organizations need customers, employees, and managers, and most firms need creditors, suppliers, and distributors. Vision and mission statements are effective vehicles for communicating with important internal and external stakeholders. The principal benefit of these statements as tools of strategic management is derived from their specification of the ultimate aims of a firm. Vision and mission statements reveal the firm’s shared expectations internally among all employees and managers. For external constituencies, the statements reveal the firm’s long-term commitment to responsible, ethical action in providing a needed product and/or service for customers.

Source: David Fred, David Forest (2016), Strategic Management: A Competitive Advantage Approach, Concepts and Cases, Pearson (16th Edition).

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