The Bottom Line
John A. Pearce II Fred David
George Mason University Auburn University
Developing a mission statement is an important first step in the strategic planning process, according to both practitioners and research scholars. Several recent books on strategic management include entire chapters on mission statements, which attest to their perceived importance in the strategy formulation process. Nevertheless, the components of mission statements are among the least empirically examined issues in strategic management. No reported empirical studies describe the composition of business mission statements, only a few conceptual articles suggest desirable component characteristics, and no reported attempts have been made to link mission statements to corporate performance. This neglect is surprising since several studies have concluded that firms that engage in strategic planning outperform firms that do not. Thus, the research reported in this paper focused on the nature and role of mission statements in organizational processes; its goal was to improve our understanding of the link between strategic planning and firm performance.
The Mission Statement
An effective mission statement defines the fundamental, unique purpose that sets a business apart from other firms of its type and identifies the scope of the business's operations in product and market terms. It is an enduring statement of purpose that reveals an organization's product or service, markets, customers, and philosophy. When prepared as a formal organizational document, a mission statement may be presented under a maze of labels, including "creed statement," "statement of purpose," "statement of philosophy," or a statement "defining our business." Yet regardless of the label, a mission statement provides the foundation for priorities, strategies, plans, and work assignments. It is the starting point for the design of managerial jobs and structures. It specifies the fundamental reason why an organization exists. A mission statement should create an organization identity larger than the limits placed on the firm by any individual. An effective statement helps to satisfy people's needs to produce something worthwhile, to gain recognition, to help others, to beat opponents and to earn respect. Thus, it is a general declaration of attitude and outlook. Free from details, a mission statement has breadth of scope; it provides for the generation and consideration of a range of alternative objectives and strategies because it does not unduly stifle management creativity.
A mission statement may be the most visible and public part of a strategic plan. As such, it is comprehensive in its coverage of broad organizational concerns. Although no empirical research has been published to guide corporate mission statement development, the limited evidence available suggests eight key components of mission statements: 1. The specification of target customers and markets.
2. The identification of principal products/ services.
3. The specification of geographic domain.
4. The identification of core technologies.
5. The expression of commitment to survival, growth, and profitability. 6. The specification of key elements in the company philosophy. 7. The identification of the company self-concept.
8. The identification of the firm's desired public image.
A Study of Mission Statements
Based on previous theoretical and conceptual work focusing on the composition of mission statements, the present empirical investigation was undertaken to assess the relationship between mission statements with the eight components listed above and corporate financial performance. The present study specifically addressed the following hypothesis: The mission statements of high performing Fortune 500 companies will exhibit more of the desired components than will those of low performing Fortune 500 firms. Our...