Importance of Vision and Mission Statement

The importance of vision and mission statements to effective strategic management is well documented in the literature, although research results are mixed. Rarick and Vition found that firms with a formalized mission statement have twice the aerate 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 tat 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 post 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 assessed and controlled.

A Resolution of Divergent Views

Developing a comprehensive mission statement is important because 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 known 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.

“What is our mission?” is a genuine decision; and a genuine decision must be based on divergent views to have a chance to be a right and effective decision. Developing a business mission is always a choice between alternatives, each of which rests on different assumptions regarding the reality of the business and its environment. It is always high-risk decision. A change in mission always leads to changes in objectives, strategies, organization, and behavior. The mission decision is far too important to be made by acclamation. Developing a business mission is a big step toward management effectiveness. Hidden or half understood disagreements on the definition of a business mission underlie many of the personality problems, communication problems, and irritations that tend to divide a top-management group. Establishing a mission should never be made on plausibility alone, should never be made fast, and should never be made painlessly.
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 bank-crupty and eventual liquidation.

Too often, strategists develop vision and business mission statements only when the organization is in trouble. Of course, it is needed then. Developing and communicating a clear mission during troubled times indeed may have spectacular results and even may 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. HT ancient Greeks knew that the penalty of success can be severe.  The management that does not ask “What is our mission?” When the company is successful is, in effect, smug, lazy, and arrogant. 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.”

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.

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. The vision and mission statements are effective vehicles for communicating with important internal and external stakeholders. The principal value of these statements as tools of strategic management is derived from their specification of the ultimate aims of a firm.