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Developing a mission for a diversified company
Developing a Mission for a Diversified Company R e b e c c a J. Morris
M I S S I O N STATEMENTS ARE OFTEN SEEN AS a n essential
component in the strategic management of firms. Since Peter Drucker's writings on the importance of a mission as a precursor to 'clear and realistic business objectives') managers and academics alike have embraced the idea of mission statements with great enthusiasm. It has been presumed that mission statements are equally important for firms in a variety of strategic contexts: large versus small, profit versus non-profit, simple versus complex. However, mission statements may serve a critical role in the success of diversified firms in that they define the firm's scope of operations. Some researchers 2 have suggested that the lack of an effective mission statement may be a possible contributing factor to the failure of m a n y acquisitions in large diversified firms. One researcher found that 'on average, corporations divested more than half their acquisitions in new industries and more than 60 per cent of their acquisitions in entirely new fields'. 3 The implication is that perhaps these illfated acquisitions w o u l d not have been made if a mission statement had existed to provide a strategic focus to the firm's portfolio of businesses. If a mission statement can serve to guide and focus diversification efforts toward a specified strategic scope of operations, what form should the mission of diversified firms take? Should the mission statement of a highly diversified firm contain the same elements as the mission for a single-product firm? Should the mission of a firm that has diversified into related businesses differ from one that has diversified into unrelated businesses? Numerous articles have been published in management journals explaining the mission statement's purpose and providing guidelines for the creation of organizational statements. To date, few of these articles have dealt specifically with the development of mission statements for diversified firms. This article seeks to address these ques~
Pergamon 0024-6301(95)00071-2
tions through an exploration of the missions of a random sample of Fortune 500 firms. By comparing and contrasting the missions of firms at different levels of diversification, guidelines for developing effective mission statements in a variety of strategic contexts are developed.
Mission Statements The starting point for most models of strategic management has been the creation of a mission statement. Long Range Planning, Vol. 29, No. 1, pp. 103 to 115, 1996 Copyright © 1996 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0024-6301/96 $15.00+0.00
The mission statement serves to set the organizational context within w h i c h strategic decisions will be made. As 'an enduring statement of purpose that distinguishes one business from other similar firms', 4 the mission statement is the 'ultimate guiding force that governs where the firm's critical resources will be deployed'. 5 In its simplest form, the mission statement describes the nature and concept of the firm's future business. It establishes what the firm plans to do and for whom. The mission statement answers the question 'What is our business?' In defining the business of the firm, its basic goals, characteristics and guiding philosophies, the mission statement provides the firm with strategic focus and direction.
Mission Statement Components What form should mission statements take? What are the key components of an effective mission statement? A variety of approaches has been proposed. For example, Abell 6 suggested that the question 'What is our business?' could be answered in terms of three dimensions: 1. what customer groups are being satisfied; 2. what customer need is being satisfied; and 3. how the customer needs are being satisfied. Want 7 considered the primary components of the mission statement to be 1. purpose, 2. principle business aims, 3. corporate identity, 4. policies of the company, and 5. corporate values. Kotler 8 suggested that mission statements should be stated in terms of five key factors: 1. the firm's history, 2. current preferences of management and owners, 3. environmental considerations, 4. available resources, and 5. distinctive competencies. Pearce 9 identified a list of eight key components of mission statements w h i c h include: O Target customers and markets. O Principal products and services. O Geographic domain. O Core technologies. O Commitment to survival, growth and profitability. O Key elements in the company philosophy. O The company self-concept. O The firm's desired public image. A ninth element, concern for employees, was later added to this list by David. 1° These nine elements appear to summarize m a n y of the key concerns presented in alternative mission statements.
Different Strategic Contexts While agreeing that mission statements may vary in length, content, format and specificity, most models Developing a Mission for a Diversified Company
of mission statement components do not discuss differences in mission statements for organizations in different strategic contexts. Should the mission statement of a single-product firm contain the same elements as the mission for a highly diversified firm? Campbell 11 asks the question 'How diversified can a group of companies (businesses) be before it becomes impossible to have a shared sense of mission?' He concludes that based on his consultations with m a n y companies it is possible to create a single mission statement for a multi-business company only so long as the level of diversity remains low. Mission statements may not be appropriate w h e n the company is a diversified conglomerate or holding company according to Klemm, Sanderson and Luffman. 12 Others have suggested a hierarchy of mission statements for the diversified firm. Hill and Jones ~3 provide a separate list of mission statement components for diversified companies. Because the business of a diversified company is the management of a collection of businesses, the question 'What is our business?' must be answered with a portfolio orientation. A portfolio, approach to business definition in the mission statement should include: 1. the purpose of the company's portfolio of businesses, 2. the desired scope (diversity) of the portfolio, and 3. the balance desired between different businesses in the portfolio. The firm's corporate mission is then supplemented with the mission statements of each business unit. Business unit missions follow the formats outlined in the previous section. Wright, Pringle and Krol114 distinguish between the mission at the corporate level and at the business unit level without providing m u c h guidance as to what the mission should contain at each level. Missions at the corporate level should be stated in fairly broad terms while still providing a sense of direction for the company. At the business level, the mission becomes more clearly defined and narrower in scope. Similarly, David ~5 advocates a hierarchy of missions for the multidivisional organization with an overall corporate mission statement and a separate statement for each of its divisions. Although some mission statement models have made a distinction between the content of mission statements at the corporate and business levels, do mission statements of actual firms reflect this distinction? Are diversified firms more likely to include certain components than non-diversified firms? An exploratory study of the missions of firms was conducted with these questions in mind. The study was designed to detect any difference in coverage of the nine key elements of mission statements that could be attributed to differences in strategic context. A review of the way in w h i c h firms with differing levels of diversification incorporated the nine mission elements into their mission statements was designed to provide profiles and guidelines which might be
useful to practicing managers wishing to develop mission statements for their own firms.
The Documents One problem m a n y researchers have encountered in conducting research on mission statements is that m a n y companies do not have mission statements or consider them to be proprietary in nature. Cochran and David ~6 found that 40.4% of the 218 Fortune 500 firms responding to their request had no mission statement. Another 11 firms indicated that their mission statement was confidential. Lack of a formal mission statement d o c u m e n t should not be interpreted as the firm's failure to consider its mission, purpose or reason for existence. Individuals within the firm may have a clear idea of its mission without creating a formal mission statement document. A sense of a corporation's mission may be contained in the annual report. In particular, the letter to the shareholders section serves as a good indicator of the major topics attended to by organizational managers. In m a n y cases, the firm will elect to include a mission statement, corporate creed or statement of beliefs in the letter to the shareholders. If the firm included its mission statement in the letter to the shareholders, as did 52 of the 141 firms (37%), the mission statement was included in the analysis for this study. A random sample of letters to shareholders for Fortune 500 firms was extracted from the Compustat Corporate Text CD-Rom database for 1990. Only those firms w h i c h are publicly held are included in the Compustat database. The final sample included 141 firms representing a wide variety of industries. The sample firms represented approximately half of the Fortune 500 firms available on the CD-Rom for 1990. The letters to the shareholder were supplemented with SIC information extracted from the Disclosure CD-Rom database for the same time period.
The Level of Diversification Level o f Diversification The level of diversification of each firm in the sample was classified using the guidelines proposed by Rumelt 17 as follows:
Q A single-product firm is defined as a firm whose primary commitment is to a single business. More specifically, this is a firm that derives 95% or more of its revenues from a single product-market activity.
Q A dominant product firm has a primary comm i t m e n t to a single business but has diversified to a small degree. Firms are classified as dominant product firms if the revenues due to a single prod-
uct-market activity are between 70%-94% of total revenues. [3 In diversified firms, less than 70% of the revenues are derived from any one product-market activity. Diversified firms are further classified as related or unrelated.
• A related diversified firm has diversified into new areas related to the primary end-product by market or technology. • An unrelated diversified firm has diversified into new areas without regard to market or technology relationships to the primary product. The method used to classify firms as either related or unrelated diversified firms is provided at the conclusion of this article.
Mission E l e m e n t s Computerized content analysis was used to evaluate each of the annual reports to determine whether the nine mission elements were included. The creation, validation and operation of the computerized content analysis approach to analyzing the sample documents for the presence of the mission elements is described further in an article by Morris. 18 Statistical routines were conducted to detect any differences in the presence or absence of the mission elements that could be attributed to differences in the level of diversification as explained in the appendix. The results are shown in Table I and discussed in the examples below.
H o w it Works in Practice Customers The specification of the major customers or target markets is intended to acknowledge the firm's comm i t m e n t to serve particular customer segments, thus defining itself and its future strategic direction relative to these customers. As indicated by Table 1, single-product and unrelated diversification firms in the sample were more likely to include a discussion of the firm's target customers than the firms following a related diversification strategy. The finding for singleproduct firms is not surprising. One w o u l d expect that because single product firms are obtaining the largest percentage of their revenues from a single product/market activity, specification of target customers w o u l d be an important part of defining their strategic focus. However, the finding that unrelated diversified firms were more likely to include a discussion of target customers in their missions than firms following a related diversification strategy is somewhat counter-intuitive. One might expect that the more diversified a firm becomes and the more unrelated the diversification, the more difficult it Long Range Planning Vol. 29
February 1996
Type of Firm Mission Element
Single-Product
Dominant Product
Related Diversified
Unrelated Diversified
Customer Products Geographic Domain Technology Survival, Growth & Profitability Company Philosophy Self-Image Public Image Employee Number of Firms
48.72 56.41 53.85 2.56 33.33 35.90 66.67 23.08 5.13 39
39.58 50.00 45.83 6.25 47.92 43.75 52.08 27.08 12.50 48
22.22 50.00 50.00 11.11 44.44 38.89 61.11 19.44 19.44 36
55.56 66.67 66.67 38.89 66.67 55.56 88.89 27.78 27.78 18
w o u l d become to define exactly who the customers of the firm are. The following mission statement extracts demonstrate the w a y firms at each level of diversification defined their target customers:
0 Single-product firm: 'Duke Power is the nation's seventh-largest investor-owned electric utility. Headquartered in Charlotte, North Carolina, the Company serves 4.5 million people in a 20,000 square-mile service in North Carolina and South Carolina. Duke Power supplies electricity to more than 1.6 million residential, commercial and industrial customers in that area.'
Q Dominant product firm: 'The Charles Schwab Corp o r a t i o n . . , is the nation's leading provider of discount brokerage and related financial services. We serve 1.3 million active investor accounts through 111 branches nationwide. Our focus is serving clients w h o seek fast, efficient transactions and a wide selection of financial services at fees that, in most cases, are substantially lower than fullcommission brokerage firms.'
0 Related diversified firms: 'United Technologies provides a broad range of high-technology products and support services to customers in the aerospace, building and automotive industries worldwide. Approximately half of UTC's sales come from businesses serving commercial and industrial markets. The remainder is split about evenly between commercial aerospace and defense-related operations.'
0 Unrelated diversified firms: 'HP's basic business purpose is to provide the capabilities and support needed to help customers w o r l d w i d e improve their personal and business effectiveness. The Semiconductor Products Sector designs and produces a broad line of discrete semiconductors and integrated circuits, including microprocessors, Developing a Mission for a Diversified Company
microcomputers and memories, to serve the advanced systems needs of the computer, consumer, automotive, industrial, federal governmental/military and telecommunications markets. The Government Electronics Group specializes in research, development and production of electronic systems and equipment for the US Department of Defense, NASA and other government agencies, commercial and international customers.' (Hewlett-Packard) As the examples illustrate, specification of target customers may be a means for effectively elaborating the various business interests of the unrelated diversified firms. Rather than serving as a unifying element of the mission, unrelated diversified firms may use descriptions of the firm's target customers to describe the diversity of its mission.
Products or Services No statistical difference was found in the rate of inclusion of a statement of products or services in the missions of firms at different levels of diversification. In fact, at least half of the firms in each diversification category included this component in their missions (see Table 1 ). The frequency of inclusion for the unrelated diversification firms was greater than for any other level of diversification but not significantly so. These findings support Pearce's claim that description of the company's basic products or services is an indispensable component of the mission statement. 19 The significance of the products element for all firms is also demonstrated by the importance of the products a firm makes to its corporate identity with outsiders such as investors and competitors. The following excerpts provide a sense of h o w firms at each level of diversification incorporated a description of their basic products or services into their mission:
Q Single-product firm: 'Allegheny Power System,
Inc., incorporated in Maryland in 1925, is an electric utility holding c o m p a n y that derives substantially all of its income from the electric utility operations of its subsidiaries, Monongahela Power Company, The Potomac Edison Company, and West Penn Power Company.'
0 Dominant-product
firm: 'Caterpillar Inc . . . . designs, manufactures, and markets products in two principal categories: Earthmoving, Construction, and Materials Handling Machinery--Track, wheel, and tillage tractors--Track and wheel loade r s - Lift trucks--Self-guided materials handling v e h i c l e s . . . E n g i n e s - - F o r on-highway trucks-Electric p o w e r generation s y s t e m s - - M a r i n e - Petroleum - - Industrial - - Locomotive - - Agricultural--Earthmoving, construction, and materials handling machinery, and other applications.'
0 Related diversified firms: 'ARCO, Atlantic Richfield Company, is a worldwide, integrated hydrocarbons-based company. Its operations include all aspects of the oil and gas business, from the exploration and production of crude oil, natural gas and natural gas liquids to the refining and marketing of petroleum products. ARCO also mines and markets coal and has interests in two companies that produce and market petrochemical products.'
0 Unrelated
diversified firms:
'Browning-Ferris Industries, Inc. is one of the largest publicly-held companies whose subsidiaries and affiliates collect, process for recycling, transport, and dispose of a wide range of commercial, industrial, medical and residential solid wastes. BFI subsidiaries are also involved in resource recovery facilities, portable restroom and sweeping services.'
Geographic Domain Specification of a firm's geographic domain in the mission statement was also expected to differ at different levels of diversification, with unrelated diversification firms less likely to include a description of their target geographic markets. As the firm becomes more diversified, different geographic domains may apply to each of the firm's different product/market divisions. As the number of different geographic domains served by the various divisions of a firm increased, the expectation was that the firm w o u l d be less likely to include this element in its mission statement due to the complexities it posed. However, no significant difference was observed in the inclusion of geographic domain b e t w e e n diversification levels. In fact, firms at all levels of diversification were more likely to include a description of geographic domain in their mission statements than other mission elements such as technology, public image and employees. This may be due in part to the
increased emphasis on international business in the 1990s. Firms that were doing business internationally may have felt it beneficial to identify their geographic markets. The statement examples below illustrate the w a y in which firms identified their geographic domains:
0 Single-product firms: 'Dillard Department Stores, Inc., is a regional group of traditional department stores operating 162 stores at year end: 58 in Texas, 19 in Louisiana, 19 in Missouri, 16 in Oklahoma .... '
0 Dominant product firms: 'The American President Companies mission is to be the leader in integrated transportation, distribution and logistics services for containerized freight within and between North America and Asia.'
0 Related diversified firms: 'We start with the advantage of being a truly global corporation, with 175 companies selling products in most countries of the world and with numerous leadership brands in each of our business sectors. Our single-minded goal is leadership-in every market, in every business, and in every country in which we compete.' (Johnson and Johnson)
0 Unrelated diversified firms: 'BFI subsidiaries and affiliates employ over 25,000 employees involved in continuing operations in approximately 350 districts serving North America, and 104 districts outside of North America in Australia, Hong Kong, Italy, N e w Zealand, the Netherlands, Spain, the United Kingdom and Venezuela.' (BrowningFerris Industries) It should be noted that in all of the above examples (with the exception of Johnson and Johnson), the firms have identified their current geographic domains. They have not provided any sense of intended future markets as might be expected in a mission statement w h i c h is meant to identify the future strategic focus of the firm. The lack of future geographic expansion plans in these documents is most likely due to their public nature. Due to competitive concerns, firms may be unwilling to disclose their future growth plans.
Technology By identifying the firm's core technologies in the mission statement, firms address the 'how' part of Abell's 2° framework for defining the business. Inclusion of the technology element was expected to vary with different levels of diversification. More diversified firms were expected to have difficulties in describing the various technologies utilized, especially as they began to diversify in unrelated areas. The results indicate just the opposite. As shown in Table 1, no significant difference was observed in the rate of inclusion of the technology component Long Range Planning Vol. 29
February 1996
for the single-product, dominant product or related diversification firms. The rate of inclusion of the technology element in unrelated diversification firms was significantly greater than for all other levels of diversification. The technology element was less frequently included in the mission statements than the other mission elements. However, the tendency of unrelated diversification firms in this sample to include the technology element more frequently than firms with lower levels of diversification contradicts their rationale. Responses to their follow-up questions indicated that many firms did not incorporate the technology element in their missions due to the impossibility of describing the diverse technologies on w h i c h the firm's multiple products depended. A possible explanation may be that in seeking to provide a sense of unified purpose, firms following an unrelated diversification strategy are more likely to find the common thread through similarities in technology than through products or customers. Thus, although classified as unrelated diversified firms with the more product-oriented definition based on specialization ratios and related ratios, these firms may have technological processes in common and emphasize them in their missions. This makes some sense, especially in light of Pearce's 21 assertion that the products, geographic domain and technology components were indispensable in describing a firm's business activity. If unrelated diversified firms do not have commonalties in their products or primary markets, relationships (however slight) between the technologies of divisions may be the only way to provide a common focal point for future strategies. The examples below effectively demonstrate the use of a common technology as a connecting link among the various businesses of diversified firms:
Q Single-product firm: 'The
advanced services BellSouth provides its customers reflect the corporation's commitment to developing a costefficient, technologically robust network. Electronic switches are helping us lower costs, increasing the network's reliability and enabling customers to manage their phone service more effectively. Common channel signaling adds intelligence to the network and makes possible expanded services... Fiber optic cable permits the simultaneous transmission of hundreds of voice, data and video signals over the same glass strand.'
Q Dominant product company: 'We are exploring and defining the best ways to manage the convergence of conventional imaging science with electronics. While it has yet to make a significant impact in consumer markets, electronic still-photography is increasingly important in highly specialized government, commercial and industrial uses.' (Eastman Kodak) Developing a Mission for a Diversified Company
[3 Related diversified firms: 'Tandy's long-standing product leadership emanates from a strong technology base in audio, video, telephony, personal computers and magnetic media.' O Unrelated diversified firms: 'A key mission statement that will drive much of our future growth can be simply stated: "We will build on our semiconductor technology and market position to be the world's premier provider of products, systems and services for communication, computing and control for people and machines on the move." Motorola is the best positioned company in the world to effectively fulfill this mission.'
C o m m i t m e n t to Survival, Growth and Profitability Since survival, growth and profitability are mainstay goals of almost every business organization, the level and type of diversification were not expected to influence the inclusion or exclusion of this element from a firm's mission. No difference in commitment to survival, growth and profitability was predicted for firms at different levels of diversification. The results supported this prediction. All firms were equally likely to include language expressing their commitment to the firm's continued survival, growth and profitability in the letters to the stockholders. Although the rate of inclusion for this element appears greater for unrelated diversifications, the difference was not significant. The examples below demonstrate the firms' commitment to continued survival, growth and target levels of profitability. Although three of the four examples chosen to illustrate this element happen to be for financial institutions, firms in other industries also expressed their commitment to economic goals, albeit not as clearly or completely.
El Single-product firm: 'Metropolitan Financial Corporation is a publicly-held financial institution. Therefore, part of the overall corporate mission is profitable growth and the enhancement of shareholder value. We are constantly analyzing our markets, our services, and the region we serve searching for outstanding opportunities to grow. We look for opportunities that meet the goals of a traditional thrift, that are within our fields of corporate expertise, and that offer excellent potential for enhancing value. The result has been considerable geographic and market expansion for Metropolitan Financial, especially in the last five years.'
E3 Dominant product firm: 'This year, the concept of profitability--its creation, its maintenance, its significance--is the theme of our annual report essay. Perhaps no other factor is as important to
the continued strength of the bank. It is stable profitability that allows us to fulfill our basic mission-the protection of depositors' funds.' (Republic N e w York Corp.)
0 Related diversified firm: 'Itel's mission is to build value for its shareholders. We pursue this objective by investing in the long-term performance of our operating units and by making selected acquisitions in high quality markets.'
0 Unrelated diversified firm: 'We know what we want to do: Our fundamental objective is to maximize shareholder value over the long term. We know what we want to be: Our vision is to be a highly profitable, independent, large, effectively managed, strategically balanced and socially responsible institution, with leadership positions in our three core businesses, supported by stateof-the-art technologies.' (Mellon Bank)
C o m p a n y Philosophy The c o m p a n y philosophy element specifies the basic beliefs, values, aspirations and philosophical priorities of the firm. Because these values reflect a general code ofbehaviour that governs business actions,22 no difference was expected in the frequency of inclusion of this element in the mission statements of firms at different levels of diversification. The results support this prediction. No significant difference was found b e t w e e n firms at different levels of diversification. As part of their c o m p a n y philosophy, these sample firms stated the following:
0 Single-product firm: 'Our Total Quality Management System is based on a very different assumption. It is based on the belief that people want to do quality work and with proper training can decide h o w best to achieve it. It is based on trust and support.' (McDonell Douglas Corp)
0 Dominant product firm: 'As a conservative, riskaverse institution, we seek profitability in areas that offer safe, stable returns over time. We value dependability and consistency, quality over quantity. This 'slow and steady' philosophy has allowed us to grow significantly, while avoiding the uncertainty prevalent in more speculative financial activity. Building profitability means establishing a set of guiding precepts and then putting them into practice every day. The best organizations blend their resources into a single, coherent vision, articulated in all aspects of their operations. At Republic, our vision, with its emphasis on profitability, is shared throughout the bank. And our clarity of purpose has helped us achieve success across a range of financial conditions and activities.' (Republic N e w York)
0 Related diversified firms: 'We believe we differ from many public companies in a number of ways. First is our unwavering long-term approach to our business, an approach that places secondary importance on near-term results in favor of measured, sustainable progress. We measure our results by growth in cash flow, which we feel is the clearest contribution to shareholder value. We differ also in our owner-operator philosophy, which gives our key managers the latitude to run their businesses and gives them equity participation in Itel's performance.'
E3 Unrelated diversified firms: 'Our philosophy is based upon ethical conduct, mutual trust and teamwork. To ensure continuous improvement, we challenge, test, reevaluate and continually raise our standards of excellence. As a service organization, our success depends upon the combined capability and contribution of all employees. Fluor Daniel is dedicated to fostering a work environment which challenges, enriches and rewards each individual.'
Self-image A firm's self-image reflects a self-assessment of competitive strengths and weaknesses. The ability of a firm to perform a realistic self-diagnosis is crucial to success regardless of its complexity due to diversification. However, significant differences were observed b e t w e e n firms at different levels of diversification w h e n referring to the self-image mission element. The frequency of inclusion of the element for unrelated diversification firms differed significantly from the rate of inclusion for the dominant product or related diversification firms. The inclusion rate for the single-product firms was not significantly different from firms following dominant product, related or unrelated diversification strategies. Firms following an unrelated diversification strategy were more likely to include statements identifying their competitive strengths and weaknesses (their self-image) than firms following either related diversification or dominant-product strategies. One possible explanation for this seemingly contradictory finding may be that unrelated diversified firms may be trying to compensate for the supposed disadvantages of the 'unrelatedness' of their businesses by explicitly stating and drawing attention to their competitive strengths. Current trends toward related diversification as a superior strategy tend to support this explanation. The following brief excerpts demonstrate the ways in w h i c h firms disclosed their competitive strengths:
0 Single-product firm: 'We believe this success, which we have achieved in a highly competitive retail environment, is the direct result of our focus on the customer and our dedication to basic conLong Range Planning Vol. 29
February 1996
cepts of retailing that never go out of fashion. Service, quality, selection, value, and customer satisfaction: these principles have been the foundation of our success over the last three decades. As the 1990s unfold, we will stay flexible, but we will never abandon the principles that got us where we are today.' (Service Merchandise)
0 Dominant product firm: 'Quality is the cornerstone of the company's marketing efforts. Products of quality and value, presented with integrity in 150 countries, give all Kodak business groups a clear identity. The common drive is to know customer wants, then to respond in creative ways to help customers succeed.'
0 Related
diversified firm: 'Paramount Communications provides entertainment and information to a growing w o r l d w i d e audience. After one of the most extensive transformations in corporate history, the Company has emerged as a pacesetter in entertainment and publishing with unprecedented financial strength and exceptional creative and distribution capabilities.'
0 Unrelated diversified firm: 'We believe in providing superior value to customers through highquality technologically advanced, fairly-priced products and customer service, designed to meet customer needs better than all alternatives.' (Rockwell International)
Public Image
is not only good policy, it is good business.' (Standard Federal Bank)
0 Dominant product firms: 'Signet has always believed that supporting efforts to improve the quality of life in the communities where we operate is a duty of good corporate citizenship. We are proud of the volunteer work and financial support provided by Signet and its employees. Since the founding of our Corporation, we have been a leader in many worthwhile developments in these communities.' (Signet Banking Corporation)
0 Related diversified firms: 'Our passion for quality is anchored by the principle of r e s p e c t . . . Respect for clients means continually making an extraordinary effort to understand and be responsive to their financial services n e e d s - - a n effort which distinguishes us from our competition, earns strong client recognition and ensures a loyal and growing client base.' (Homefed Corporation)
El Unrelated diversified firms: 'The Rockwell Credo makes explicit our commitment to responsible corporate citizenship. This commitment is more than an abstract principle. It is demonstrated every day-by Rockwell people determined to deal honestly and fairly with customers, suppliers and each other; by our expanding support of education; and by our involvement in a wide range of other activities directed to improving the quality of life in the communities where we live and work.' (Rockwell International)
The public image mission element addresses the qualities which are attributed to the firm by customers, suppliers, creditors and other external entities. Inclusion of a firm's desired public image in its mission provides outsiders with a statement of the firm's future intentions to remain true to those qualities the public has come to associate with the firm. It was expected that all firms w o u l d express their desired public image in their mission statements and that this expression w o u l d not differ with regard to the level of diversification. As s h o w n in Table 1, this prediction was supported. No significant difference in the rate of inclusion of the public image element was observed for the different levels of diversification. The following samples demonstrate the firms' desire to be seen as responsible corporate citizens:
Although all firms were equally likely to include this element, concern for public image was included less frequently than many of the other mission elements. Only 24% of the 141 firms in this study included this element in their mission statements while 87% of Pearce and David's 23 firms expressed their desired public image. The smaller percentage of firms including public image in this study may be due to differences in environmental stresses encountered by the firms at the time the samples were collected for this study and the Pearce and David study. During times w h e n corporate legitimacy and responsibility is challenged by outsiders, firms may be compelled to include more public image verbiage to reemphasize or stress the firm's beneficial aspects.
E3 Single-product firms: 'The long-term success of
The concern for employees mission element recognizes the employees of the firm as valuable assets instrumental to the achievement of organizational goals. This recognition appears to be equally important to all firms whether they are single-product or diversified firms. This prediction was not supported by the results. Firms that followed an unrelated diversification strategy were more likely to include a discussion of the importance of employees than single-
any financial institution depends u p o n the underlying strength and vitality of its market areas. The Bank must reinvest in the communities it serves to ensure the potential for growth and profits. We strive to reinvest the deposits raised in each community to meet the residential housing and family financial needs of that community. At Standard Federal, we believe that c o m m u n i t y reinvestment Developing a Mission for a Diversified Company
Concern for Employees
product firms. As s h o w n in Table 1, only 5% of the single-product firms included a discussion of employees while almost 28% of the unrelated diversification firms discussed the importance of employees to firm goal attainment. The inclusion percentages appear to be the reverse of what one w o u l d expect although unrelated diversification firms might view concern for employees as a potential rallying point for unifying their diverse interests. By emphasizing a commitment to value the employees and their contributions to the firm, the unrelated diversification firm may be trying to motivate and inspire employees to achieve corporate goals. Concern for employees is demonstrated in these examples:
Q Single-product firm: 'It takes 55,000 dedicated employees to make the organization successful. From courtesy clerk to senior management, our employees are the best in the industry. They are dedicated, hardworking and friendly; and they k n o w h o w to run a successful retail food-drug company. Our people are the key to a promising, exciting future.' (Albertson's)
Q Dominant product firm: 'When we (UJB Financial Corp.) try to analyse our success of the past few years, one thing consistently stands out. Our people. They have distinguished us from our competitors, and they will continue to as we move toward the next century....There have been times w h e n the term "good banker" was a contradiction in terms. To be part of the UJB team, y o u must be good in many ways. Not just as a banker, but as a responsive and involved member of the community.'
Q Related diversified firm: 'Anheuser-Busch Companies' commitment to quality is reflected not only in its products, but also in its people. The c o m p a n y recognizes the importance of h u m a n resources in the continued growth and success of its business operations and is dedicated to providing its employees with financially rewarding work and with continuing opportunities for personal development.'
Q Unrelated diversified firm: 'It's hard to measure loyalty and enthusiasm, yet our employees are motivated to give their very best. We count on their contributions for our progress. Resolve to Win: Our 22,800 associates share our commitment to being the best in the industry. Fleming has assembled a strong retail-minded management team and group of associates dedicated to providing superior service to our retailers and value to our shareholders .... As a service organization, our success depends u p o n the combined capability and contribution of all employees.' (Fleming Companies)
It should be noted that the above examples were carefully selected to demonstrate firms including a concern for employees in their mission statements. Some firms only mentioned employees in passing or focused on what the firm was doing to improve the skills and capabilities of the employees rather than recognizing their importance to attainment of goals.
Writing an Effective Mission Statement The process of creating an effective mission statement involves the identification of the distinctive competencies of the firm, the identification of important external factors and constituencies which are expected to impact the firm and the identification of organizational goals and aspirations. In many firms, the mission creation process is conducted by a management team, thus promoting valuable dialogue and consensus building among team members. Finally, the process involves the selection of appropriate content and verbiage to effectively communicate the firm's strategic vision. Great care should be taken in applying the examples in the previous sections to the creation of mission statements for actual firms. It was not the intent of the author to imply that a magic check-list of elements exists for firms at each level of diversification. If the mission statement is to be effective in providing strategic direction for the firm, it must address the unique aspects of a firm's strategic context rather than follow a 'generic' mission statement format. Pearce and David 24 recognized this need in their original article, but unfortunately their work has often been misinterpreted as providing a blueprint for creating the 'ideal' mission statement. The examples do show that diversified firms do not share Campbell's concerns regarding the creation of a mission statement w h e n the level of diversity is high. 25 Mission statements serve an important purpose in defining the strategic direction for the firm regardless of the level of diversification. Although statistically significant differences were observed in the composition of mission statements at different levels of diversification in this sample, the mission statement excerpts demonstrate the w a y in which firms effectively communicated their strategic positions v i s a vis each of the nine mission statement components contained in the strategic management literature. Researchers may be correct that it is difficult to construct a single mission statement for the highly diversified company. Multi-business firms may be more effective in providing a strategic focus through a mission statement hierarchy as discussed earlier. Motorola's annual report for 1989 (shown as Figure 1) demonstrates a hierarchical approach to Long Range Planning Vol. 29
February 1996
The Communications Sector designs and manufactures twoway radios, pagers and other forms of electronic communications systems for agriculture, commercial, construction, education, state, local and federal government and health care markets, as well as for industrial, mining, petroleum, radio common carrier, telephone and transportation companies and utilities.
The Communications Sector
The Semiconductor Products Sector designs and produces a broad line of discrete semiconductors and integrated circuits, including microprocessors, microcomputers and memories, to serve the advanced systems needs of the computer, consumer, automotive, industrial, federal governmental/military and telcommunications markets.
The Semiconductor Products Sector
The General Systems Sector designs and manufactures computer-based cellular radiotelephone systems, mobile and portable radiotelephones, microcomputer boards, and information processing and handling equipment, such as multi-user microcomputer systems.
The General Systems Sector
The New Enterprises organization manages...
New Enterprises
The Automotive and Industrial Electronics Group serves...
The Automotive and Industrial Electronics Group
The Information Systems Group combines the capabilities of...
The Information Systems Group
The Government Electronics Group specializes in.,.
The Government Electronics Group
• A key mission statement that will drive much of our future growth can be simply stated: 'We will build on our semiconductor technology and market position to be the world's premier provider of products, systems and services for communication, computing and control for people and machines on the move.'
• Our semiconductor capability is the foundation of all our other business. A strong merchant semiconductor position is vital to driving the technology, cost and quality. We will grow faster than the market in each of our key semiconductor businesses. In our equipment business, we will strive to grow faster than the components business so as to achieve a business mix that is less subject to the swings of the semiconductor industry. In international markets, our business will grow to about 50% of total revenues, compared with 40% today.
• In each of our chosen arenas of the electronics industry, we will grow rapidly by providing our worldwide customers what they want, when they want it, with Six Sigma quality and best-in-class cycle time, as we strive to achieve our fundamental corporate objective of Total Customer Satisfaction, and to achieve our stated goals of increased global market share; best-in-class people, products, marketing, manufacturing, technology and service; and superior financial results.
Motorola's corporate charcter is shaped by certain fundamental beliefs in personal integrity and the dignity of the individual. This creates a climate in which a dedicated workforce respects the needs of suppliers and customers alike. At Motorola, we build on our beliefs and thrive on change, creativity and innovation. It is an environment that encourages all our people to develop their own dreams. We know how the world should be for our customers, and this enables us to express our business vision as follows:
communicating the firm's sense of direction at the corporate level and for each strategic business unit. Motorola successfully communicates the purpose of the company's portfolio of b u s i n e s s e s - - 'to be the world's provider of products, systems, and services for communication, computing and control for people and machines on the move'. 2~ The desired scope or diversity of the portfolio is defined by the elaboration of the various business units and their relationship to the core semiconductor products sector. Technology via the semiconductor serves to unify the firm's business units. The balance b e t w e e n the firm's different businesses is indicated by the paragraph stating that Motorola's semiconductor capability serves as the foundation for the other business units. The statement also provides growth objectives for key business units w h i c h communicate the priority that will be placed on each of these units. Each business unit is then defined primarily by the products and customers served by the unit. In Motorola's case, a product and customer orientation at the business unit level may be sufficient to communicate the strategic direction of each unit, especially since the corporate sections of the statement effectively communicate a sense of the firm's geographic domain (worldwide, with 50% of total revenues in international markets), core technologies (semiconductor capability), c o m p a n y philosophy (personal integrity and respect for the dignity of the individual), self image (high quality, customer oriented), public image (respectful of employees, cus-
tomers and suppliers), and concern for survival, growth and profitability (growing faster than the market and providing superior financial results). Multi-business firms may find it useful to follow Motorola's example, communicating shared values in a corporate mission statement while focusing on products and customers at the business unit level. This approach serves to unify the various business units around a common value system, thus clearly indicating an overall sense of purpose to both internal and external stakeholders while also communicating the relative importance and emphasis of each of the business units. Missions written in this manner will provide a strong starting point for the establishment of effective organizational priorities, strategies and plans that ultimately will contribute to superior organizational performance as depicted in Figure 2. An effective mission statement may impact organizational performance by providing a focused and supportive organizational environment that leads decision makers to craft superior strategies, thus positioning the firm advantageously relative to competitors and external threats and opportunities. By effectively communicating organizational goals and philosophy to employees in an inspirational way, the mission statement may also improve the firm's ability to implement strategic plans. Perhaps most importantly, the process of creating an effective mission statement can provide managers with an opportunity to resolve internal con-
Long Range Planning Vol. 29
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Statistical Analysis. No statistical difference was observed in the size of the firms classified in each of the four diversification levels. Analysis of variance of firm size as measured by sales for 1988, 1989, 1990 or the number of employees indicated that any differences observed in the later analysis was not due to differences in the firm size but due to the level of diversification. A series of one-way analyses of variances were run to determine if significant differences existed in the inclusion of each of the mission elements by level of diversification. Significant differences (at the.05 level or better) between the four levels of diversification Coding Methodology. Classification of the nature of were found for the customer, technology and selfdiversification (either related or unrelated) was image mission elements. The concern for employees accomplished using the method outlined in Rumelt. 27 mission element was marginally significant (p <.10 The related ratio, or the proportion of each firm's level). No significant difference was observed in the revenue coming from its largest group of related busi- other five mission elements. nesses, was calculated using the line-of-business data When significant differences in the inclusion of the reported in 10-K filings. Firms with related ratios of mission elements by level of diversification were 70% or greater were considered related diver- indicated in the one-way analysis of variance, the sification firms. Firms with related ratios of less than Scheffe multiple comparison test was run to pinpoint 70% were classified as unrelated diversifications. the differences between groups. flicts about the future direction of the organization, reaching a consensus that results in organizational progress in the desired direction. Firms that work to resolve interorganizational differences to create an effective mission statement and subsequently conduct their business in accordance with the beliefs and philosophies outlined in the statement should ultimately benefit through improved organizational performance.
Research Methodology
References 1. P.F. Drucker, Management: Tasks, Responsibilities and Practices, Harper & Rowe, New York (1973). 2. R.D. Ireland and M.A. Hitt, Mission Statements: Importance, challenge and recommendations for development, Business Horizons, May-June, 34-42 (1992). 3. M.E. Porter, From competitive advantage to corporate strategy, Harvard Business Review, May-June, 43-59 (1987). 4. J.A. Pearce, II, The company mission as a strategic goal, Sloan Management Review, 23 (3), 15-24 (1982). 5. F.G. Boseman and A.V. Phatak, Strategic Management, John Wiley & Sons, New York (1989). 6. D.F. Abell, Defining the Business: The Starting Point of Strategic Planning, Prentice-Hall, Englewood Cliffs, NJ (1980). 7. J.H. Want, Corporate mission, Management Review75 (8), 45-50 (1986). 8. P. Kotler, Marketing Management, Prentice-Hall, Englewood Cliffs, NJ (1984). 9. See Pearce (1982), op. cit. 10. F.R. David, How companies define their mission, Long Range Planning22 (1), 90-97 (1989). 11. A. Campbell, Does your organisation need a mission? Leadership and Organization Development Journal 16 (3), 3-9 (1989). 12. M. Klemm, S. Sanderson and G. Luffman, Mission statements: selling corporate values to employees, Long Range Planning 24 (3), 73-78. The views of Cambell (1989) and Klemm eta/. (1991) may reflect a cultural difference with respect to the descriptive content, purpose, and audience of mission statements as both studies utilized samples of firms operating in the UK. Mission statements have not been as widely utilized in the UKas in the US although this may be changing. 13. C.W.L. Hill and G.R. Jones, Strategic Management: An Integrated Approach, Houghton Mifflin, Boston, MA (1992). 14. P. Wright, C.D. Pringle and M.J. Kroll, Strategic Management: Text and Cases, Allyn and Bacon, Boston, MS (1992). 15. F.R. David, Strategic Management (Fourth edn), Macmillan Publishing, New York (1993). 16. D.S. Cochran and F.R. David, Communications effectiveness of organizational mission statements, Journal of Applied Communication Research 14 (2), 108-118 (1986).
Developing a Mission for a Diversified Company
17. R.P. Rumelt, Strategy, Structure and Economic Performance, Division of Research, Graduate School of Business Administration, Harvard University, Boston (1974). 18. R.J. Morris, Computerized content analysis in management research: a demonstration of advantages and limitations, Journal of Management20 (4), 903-931 (1994). 19. See Pearce (1982), op. cit. 20. See Abell (1980), op. cit. 21. J.A. Pearce, II, Strategic Management: Formulation, Implementation and Control, Richard D. Irwin, Homewood, IL (1991). 22. Ibid. 23. J.A. Pearce, II and F. David, Corporate Mission Statements: The Bottom Line, Academy of Management Executive 1 (2), 109-115 (1987). 24. ibid. 25. See Campbell (1989), op. cit, 26. Motorola, Inc., 1989 Annual Report, Author, Schaumburg, iL (1989). 27. See Rumeit (1974), op. cit.
Long Range Planning Vol. 29
February 1996
M I S S I O N STATEMENTS ARE OFTEN SEEN AS a n essential
component in the strategic management of firms. Since Peter Drucker's writings on the importance of a mission as a precursor to 'clear and realistic business objectives') managers and academics alike have embraced the idea of mission statements with great enthusiasm. It has been presumed that mission statements are equally important for firms in a variety of strategic contexts: large versus small, profit versus non-profit, simple versus complex. However, mission statements may serve a critical role in the success of diversified firms in that they define the firm's scope of operations. Some researchers 2 have suggested that the lack of an effective mission statement may be a possible contributing factor to the failure of m a n y acquisitions in large diversified firms. One researcher found that 'on average, corporations divested more than half their acquisitions in new industries and more than 60 per cent of their acquisitions in entirely new fields'. 3 The implication is that perhaps these illfated acquisitions w o u l d not have been made if a mission statement had existed to provide a strategic focus to the firm's portfolio of businesses. If a mission statement can serve to guide and focus diversification efforts toward a specified strategic scope of operations, what form should the mission of diversified firms take? Should the mission statement of a highly diversified firm contain the same elements as the mission for a single-product firm? Should the mission of a firm that has diversified into related businesses differ from one that has diversified into unrelated businesses? Numerous articles have been published in management journals explaining the mission statement's purpose and providing guidelines for the creation of organizational statements. To date, few of these articles have dealt specifically with the development of mission statements for diversified firms. This article seeks to address these ques~
Pergamon 0024-6301(95)00071-2
tions through an exploration of the missions of a random sample of Fortune 500 firms. By comparing and contrasting the missions of firms at different levels of diversification, guidelines for developing effective mission statements in a variety of strategic contexts are developed.
Mission Statements The starting point for most models of strategic management has been the creation of a mission statement. Long Range Planning, Vol. 29, No. 1, pp. 103 to 115, 1996 Copyright © 1996 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0024-6301/96 $15.00+0.00
The mission statement serves to set the organizational context within w h i c h strategic decisions will be made. As 'an enduring statement of purpose that distinguishes one business from other similar firms', 4 the mission statement is the 'ultimate guiding force that governs where the firm's critical resources will be deployed'. 5 In its simplest form, the mission statement describes the nature and concept of the firm's future business. It establishes what the firm plans to do and for whom. The mission statement answers the question 'What is our business?' In defining the business of the firm, its basic goals, characteristics and guiding philosophies, the mission statement provides the firm with strategic focus and direction.
Mission Statement Components What form should mission statements take? What are the key components of an effective mission statement? A variety of approaches has been proposed. For example, Abell 6 suggested that the question 'What is our business?' could be answered in terms of three dimensions: 1. what customer groups are being satisfied; 2. what customer need is being satisfied; and 3. how the customer needs are being satisfied. Want 7 considered the primary components of the mission statement to be 1. purpose, 2. principle business aims, 3. corporate identity, 4. policies of the company, and 5. corporate values. Kotler 8 suggested that mission statements should be stated in terms of five key factors: 1. the firm's history, 2. current preferences of management and owners, 3. environmental considerations, 4. available resources, and 5. distinctive competencies. Pearce 9 identified a list of eight key components of mission statements w h i c h include: O Target customers and markets. O Principal products and services. O Geographic domain. O Core technologies. O Commitment to survival, growth and profitability. O Key elements in the company philosophy. O The company self-concept. O The firm's desired public image. A ninth element, concern for employees, was later added to this list by David. 1° These nine elements appear to summarize m a n y of the key concerns presented in alternative mission statements.
Different Strategic Contexts While agreeing that mission statements may vary in length, content, format and specificity, most models Developing a Mission for a Diversified Company
of mission statement components do not discuss differences in mission statements for organizations in different strategic contexts. Should the mission statement of a single-product firm contain the same elements as the mission for a highly diversified firm? Campbell 11 asks the question 'How diversified can a group of companies (businesses) be before it becomes impossible to have a shared sense of mission?' He concludes that based on his consultations with m a n y companies it is possible to create a single mission statement for a multi-business company only so long as the level of diversity remains low. Mission statements may not be appropriate w h e n the company is a diversified conglomerate or holding company according to Klemm, Sanderson and Luffman. 12 Others have suggested a hierarchy of mission statements for the diversified firm. Hill and Jones ~3 provide a separate list of mission statement components for diversified companies. Because the business of a diversified company is the management of a collection of businesses, the question 'What is our business?' must be answered with a portfolio orientation. A portfolio, approach to business definition in the mission statement should include: 1. the purpose of the company's portfolio of businesses, 2. the desired scope (diversity) of the portfolio, and 3. the balance desired between different businesses in the portfolio. The firm's corporate mission is then supplemented with the mission statements of each business unit. Business unit missions follow the formats outlined in the previous section. Wright, Pringle and Krol114 distinguish between the mission at the corporate level and at the business unit level without providing m u c h guidance as to what the mission should contain at each level. Missions at the corporate level should be stated in fairly broad terms while still providing a sense of direction for the company. At the business level, the mission becomes more clearly defined and narrower in scope. Similarly, David ~5 advocates a hierarchy of missions for the multidivisional organization with an overall corporate mission statement and a separate statement for each of its divisions. Although some mission statement models have made a distinction between the content of mission statements at the corporate and business levels, do mission statements of actual firms reflect this distinction? Are diversified firms more likely to include certain components than non-diversified firms? An exploratory study of the missions of firms was conducted with these questions in mind. The study was designed to detect any difference in coverage of the nine key elements of mission statements that could be attributed to differences in strategic context. A review of the way in w h i c h firms with differing levels of diversification incorporated the nine mission elements into their mission statements was designed to provide profiles and guidelines which might be
useful to practicing managers wishing to develop mission statements for their own firms.
The Documents One problem m a n y researchers have encountered in conducting research on mission statements is that m a n y companies do not have mission statements or consider them to be proprietary in nature. Cochran and David ~6 found that 40.4% of the 218 Fortune 500 firms responding to their request had no mission statement. Another 11 firms indicated that their mission statement was confidential. Lack of a formal mission statement d o c u m e n t should not be interpreted as the firm's failure to consider its mission, purpose or reason for existence. Individuals within the firm may have a clear idea of its mission without creating a formal mission statement document. A sense of a corporation's mission may be contained in the annual report. In particular, the letter to the shareholders section serves as a good indicator of the major topics attended to by organizational managers. In m a n y cases, the firm will elect to include a mission statement, corporate creed or statement of beliefs in the letter to the shareholders. If the firm included its mission statement in the letter to the shareholders, as did 52 of the 141 firms (37%), the mission statement was included in the analysis for this study. A random sample of letters to shareholders for Fortune 500 firms was extracted from the Compustat Corporate Text CD-Rom database for 1990. Only those firms w h i c h are publicly held are included in the Compustat database. The final sample included 141 firms representing a wide variety of industries. The sample firms represented approximately half of the Fortune 500 firms available on the CD-Rom for 1990. The letters to the shareholder were supplemented with SIC information extracted from the Disclosure CD-Rom database for the same time period.
The Level of Diversification Level o f Diversification The level of diversification of each firm in the sample was classified using the guidelines proposed by Rumelt 17 as follows:
Q A single-product firm is defined as a firm whose primary commitment is to a single business. More specifically, this is a firm that derives 95% or more of its revenues from a single product-market activity.
Q A dominant product firm has a primary comm i t m e n t to a single business but has diversified to a small degree. Firms are classified as dominant product firms if the revenues due to a single prod-
uct-market activity are between 70%-94% of total revenues. [3 In diversified firms, less than 70% of the revenues are derived from any one product-market activity. Diversified firms are further classified as related or unrelated.
• A related diversified firm has diversified into new areas related to the primary end-product by market or technology. • An unrelated diversified firm has diversified into new areas without regard to market or technology relationships to the primary product. The method used to classify firms as either related or unrelated diversified firms is provided at the conclusion of this article.
Mission E l e m e n t s Computerized content analysis was used to evaluate each of the annual reports to determine whether the nine mission elements were included. The creation, validation and operation of the computerized content analysis approach to analyzing the sample documents for the presence of the mission elements is described further in an article by Morris. 18 Statistical routines were conducted to detect any differences in the presence or absence of the mission elements that could be attributed to differences in the level of diversification as explained in the appendix. The results are shown in Table I and discussed in the examples below.
H o w it Works in Practice Customers The specification of the major customers or target markets is intended to acknowledge the firm's comm i t m e n t to serve particular customer segments, thus defining itself and its future strategic direction relative to these customers. As indicated by Table 1, single-product and unrelated diversification firms in the sample were more likely to include a discussion of the firm's target customers than the firms following a related diversification strategy. The finding for singleproduct firms is not surprising. One w o u l d expect that because single product firms are obtaining the largest percentage of their revenues from a single product/market activity, specification of target customers w o u l d be an important part of defining their strategic focus. However, the finding that unrelated diversified firms were more likely to include a discussion of target customers in their missions than firms following a related diversification strategy is somewhat counter-intuitive. One might expect that the more diversified a firm becomes and the more unrelated the diversification, the more difficult it Long Range Planning Vol. 29
February 1996
Type of Firm Mission Element
Single-Product
Dominant Product
Related Diversified
Unrelated Diversified
Customer Products Geographic Domain Technology Survival, Growth & Profitability Company Philosophy Self-Image Public Image Employee Number of Firms
48.72 56.41 53.85 2.56 33.33 35.90 66.67 23.08 5.13 39
39.58 50.00 45.83 6.25 47.92 43.75 52.08 27.08 12.50 48
22.22 50.00 50.00 11.11 44.44 38.89 61.11 19.44 19.44 36
55.56 66.67 66.67 38.89 66.67 55.56 88.89 27.78 27.78 18
w o u l d become to define exactly who the customers of the firm are. The following mission statement extracts demonstrate the w a y firms at each level of diversification defined their target customers:
0 Single-product firm: 'Duke Power is the nation's seventh-largest investor-owned electric utility. Headquartered in Charlotte, North Carolina, the Company serves 4.5 million people in a 20,000 square-mile service in North Carolina and South Carolina. Duke Power supplies electricity to more than 1.6 million residential, commercial and industrial customers in that area.'
Q Dominant product firm: 'The Charles Schwab Corp o r a t i o n . . , is the nation's leading provider of discount brokerage and related financial services. We serve 1.3 million active investor accounts through 111 branches nationwide. Our focus is serving clients w h o seek fast, efficient transactions and a wide selection of financial services at fees that, in most cases, are substantially lower than fullcommission brokerage firms.'
0 Related diversified firms: 'United Technologies provides a broad range of high-technology products and support services to customers in the aerospace, building and automotive industries worldwide. Approximately half of UTC's sales come from businesses serving commercial and industrial markets. The remainder is split about evenly between commercial aerospace and defense-related operations.'
0 Unrelated diversified firms: 'HP's basic business purpose is to provide the capabilities and support needed to help customers w o r l d w i d e improve their personal and business effectiveness. The Semiconductor Products Sector designs and produces a broad line of discrete semiconductors and integrated circuits, including microprocessors, Developing a Mission for a Diversified Company
microcomputers and memories, to serve the advanced systems needs of the computer, consumer, automotive, industrial, federal governmental/military and telecommunications markets. The Government Electronics Group specializes in research, development and production of electronic systems and equipment for the US Department of Defense, NASA and other government agencies, commercial and international customers.' (Hewlett-Packard) As the examples illustrate, specification of target customers may be a means for effectively elaborating the various business interests of the unrelated diversified firms. Rather than serving as a unifying element of the mission, unrelated diversified firms may use descriptions of the firm's target customers to describe the diversity of its mission.
Products or Services No statistical difference was found in the rate of inclusion of a statement of products or services in the missions of firms at different levels of diversification. In fact, at least half of the firms in each diversification category included this component in their missions (see Table 1 ). The frequency of inclusion for the unrelated diversification firms was greater than for any other level of diversification but not significantly so. These findings support Pearce's claim that description of the company's basic products or services is an indispensable component of the mission statement. 19 The significance of the products element for all firms is also demonstrated by the importance of the products a firm makes to its corporate identity with outsiders such as investors and competitors. The following excerpts provide a sense of h o w firms at each level of diversification incorporated a description of their basic products or services into their mission:
Q Single-product firm: 'Allegheny Power System,
Inc., incorporated in Maryland in 1925, is an electric utility holding c o m p a n y that derives substantially all of its income from the electric utility operations of its subsidiaries, Monongahela Power Company, The Potomac Edison Company, and West Penn Power Company.'
0 Dominant-product
firm: 'Caterpillar Inc . . . . designs, manufactures, and markets products in two principal categories: Earthmoving, Construction, and Materials Handling Machinery--Track, wheel, and tillage tractors--Track and wheel loade r s - Lift trucks--Self-guided materials handling v e h i c l e s . . . E n g i n e s - - F o r on-highway trucks-Electric p o w e r generation s y s t e m s - - M a r i n e - Petroleum - - Industrial - - Locomotive - - Agricultural--Earthmoving, construction, and materials handling machinery, and other applications.'
0 Related diversified firms: 'ARCO, Atlantic Richfield Company, is a worldwide, integrated hydrocarbons-based company. Its operations include all aspects of the oil and gas business, from the exploration and production of crude oil, natural gas and natural gas liquids to the refining and marketing of petroleum products. ARCO also mines and markets coal and has interests in two companies that produce and market petrochemical products.'
0 Unrelated
diversified firms:
'Browning-Ferris Industries, Inc. is one of the largest publicly-held companies whose subsidiaries and affiliates collect, process for recycling, transport, and dispose of a wide range of commercial, industrial, medical and residential solid wastes. BFI subsidiaries are also involved in resource recovery facilities, portable restroom and sweeping services.'
Geographic Domain Specification of a firm's geographic domain in the mission statement was also expected to differ at different levels of diversification, with unrelated diversification firms less likely to include a description of their target geographic markets. As the firm becomes more diversified, different geographic domains may apply to each of the firm's different product/market divisions. As the number of different geographic domains served by the various divisions of a firm increased, the expectation was that the firm w o u l d be less likely to include this element in its mission statement due to the complexities it posed. However, no significant difference was observed in the inclusion of geographic domain b e t w e e n diversification levels. In fact, firms at all levels of diversification were more likely to include a description of geographic domain in their mission statements than other mission elements such as technology, public image and employees. This may be due in part to the
increased emphasis on international business in the 1990s. Firms that were doing business internationally may have felt it beneficial to identify their geographic markets. The statement examples below illustrate the w a y in which firms identified their geographic domains:
0 Single-product firms: 'Dillard Department Stores, Inc., is a regional group of traditional department stores operating 162 stores at year end: 58 in Texas, 19 in Louisiana, 19 in Missouri, 16 in Oklahoma .... '
0 Dominant product firms: 'The American President Companies mission is to be the leader in integrated transportation, distribution and logistics services for containerized freight within and between North America and Asia.'
0 Related diversified firms: 'We start with the advantage of being a truly global corporation, with 175 companies selling products in most countries of the world and with numerous leadership brands in each of our business sectors. Our single-minded goal is leadership-in every market, in every business, and in every country in which we compete.' (Johnson and Johnson)
0 Unrelated diversified firms: 'BFI subsidiaries and affiliates employ over 25,000 employees involved in continuing operations in approximately 350 districts serving North America, and 104 districts outside of North America in Australia, Hong Kong, Italy, N e w Zealand, the Netherlands, Spain, the United Kingdom and Venezuela.' (BrowningFerris Industries) It should be noted that in all of the above examples (with the exception of Johnson and Johnson), the firms have identified their current geographic domains. They have not provided any sense of intended future markets as might be expected in a mission statement w h i c h is meant to identify the future strategic focus of the firm. The lack of future geographic expansion plans in these documents is most likely due to their public nature. Due to competitive concerns, firms may be unwilling to disclose their future growth plans.
Technology By identifying the firm's core technologies in the mission statement, firms address the 'how' part of Abell's 2° framework for defining the business. Inclusion of the technology element was expected to vary with different levels of diversification. More diversified firms were expected to have difficulties in describing the various technologies utilized, especially as they began to diversify in unrelated areas. The results indicate just the opposite. As shown in Table 1, no significant difference was observed in the rate of inclusion of the technology component Long Range Planning Vol. 29
February 1996
for the single-product, dominant product or related diversification firms. The rate of inclusion of the technology element in unrelated diversification firms was significantly greater than for all other levels of diversification. The technology element was less frequently included in the mission statements than the other mission elements. However, the tendency of unrelated diversification firms in this sample to include the technology element more frequently than firms with lower levels of diversification contradicts their rationale. Responses to their follow-up questions indicated that many firms did not incorporate the technology element in their missions due to the impossibility of describing the diverse technologies on w h i c h the firm's multiple products depended. A possible explanation may be that in seeking to provide a sense of unified purpose, firms following an unrelated diversification strategy are more likely to find the common thread through similarities in technology than through products or customers. Thus, although classified as unrelated diversified firms with the more product-oriented definition based on specialization ratios and related ratios, these firms may have technological processes in common and emphasize them in their missions. This makes some sense, especially in light of Pearce's 21 assertion that the products, geographic domain and technology components were indispensable in describing a firm's business activity. If unrelated diversified firms do not have commonalties in their products or primary markets, relationships (however slight) between the technologies of divisions may be the only way to provide a common focal point for future strategies. The examples below effectively demonstrate the use of a common technology as a connecting link among the various businesses of diversified firms:
Q Single-product firm: 'The
advanced services BellSouth provides its customers reflect the corporation's commitment to developing a costefficient, technologically robust network. Electronic switches are helping us lower costs, increasing the network's reliability and enabling customers to manage their phone service more effectively. Common channel signaling adds intelligence to the network and makes possible expanded services... Fiber optic cable permits the simultaneous transmission of hundreds of voice, data and video signals over the same glass strand.'
Q Dominant product company: 'We are exploring and defining the best ways to manage the convergence of conventional imaging science with electronics. While it has yet to make a significant impact in consumer markets, electronic still-photography is increasingly important in highly specialized government, commercial and industrial uses.' (Eastman Kodak) Developing a Mission for a Diversified Company
[3 Related diversified firms: 'Tandy's long-standing product leadership emanates from a strong technology base in audio, video, telephony, personal computers and magnetic media.' O Unrelated diversified firms: 'A key mission statement that will drive much of our future growth can be simply stated: "We will build on our semiconductor technology and market position to be the world's premier provider of products, systems and services for communication, computing and control for people and machines on the move." Motorola is the best positioned company in the world to effectively fulfill this mission.'
C o m m i t m e n t to Survival, Growth and Profitability Since survival, growth and profitability are mainstay goals of almost every business organization, the level and type of diversification were not expected to influence the inclusion or exclusion of this element from a firm's mission. No difference in commitment to survival, growth and profitability was predicted for firms at different levels of diversification. The results supported this prediction. All firms were equally likely to include language expressing their commitment to the firm's continued survival, growth and profitability in the letters to the stockholders. Although the rate of inclusion for this element appears greater for unrelated diversifications, the difference was not significant. The examples below demonstrate the firms' commitment to continued survival, growth and target levels of profitability. Although three of the four examples chosen to illustrate this element happen to be for financial institutions, firms in other industries also expressed their commitment to economic goals, albeit not as clearly or completely.
El Single-product firm: 'Metropolitan Financial Corporation is a publicly-held financial institution. Therefore, part of the overall corporate mission is profitable growth and the enhancement of shareholder value. We are constantly analyzing our markets, our services, and the region we serve searching for outstanding opportunities to grow. We look for opportunities that meet the goals of a traditional thrift, that are within our fields of corporate expertise, and that offer excellent potential for enhancing value. The result has been considerable geographic and market expansion for Metropolitan Financial, especially in the last five years.'
E3 Dominant product firm: 'This year, the concept of profitability--its creation, its maintenance, its significance--is the theme of our annual report essay. Perhaps no other factor is as important to
the continued strength of the bank. It is stable profitability that allows us to fulfill our basic mission-the protection of depositors' funds.' (Republic N e w York Corp.)
0 Related diversified firm: 'Itel's mission is to build value for its shareholders. We pursue this objective by investing in the long-term performance of our operating units and by making selected acquisitions in high quality markets.'
0 Unrelated diversified firm: 'We know what we want to do: Our fundamental objective is to maximize shareholder value over the long term. We know what we want to be: Our vision is to be a highly profitable, independent, large, effectively managed, strategically balanced and socially responsible institution, with leadership positions in our three core businesses, supported by stateof-the-art technologies.' (Mellon Bank)
C o m p a n y Philosophy The c o m p a n y philosophy element specifies the basic beliefs, values, aspirations and philosophical priorities of the firm. Because these values reflect a general code ofbehaviour that governs business actions,22 no difference was expected in the frequency of inclusion of this element in the mission statements of firms at different levels of diversification. The results support this prediction. No significant difference was found b e t w e e n firms at different levels of diversification. As part of their c o m p a n y philosophy, these sample firms stated the following:
0 Single-product firm: 'Our Total Quality Management System is based on a very different assumption. It is based on the belief that people want to do quality work and with proper training can decide h o w best to achieve it. It is based on trust and support.' (McDonell Douglas Corp)
0 Dominant product firm: 'As a conservative, riskaverse institution, we seek profitability in areas that offer safe, stable returns over time. We value dependability and consistency, quality over quantity. This 'slow and steady' philosophy has allowed us to grow significantly, while avoiding the uncertainty prevalent in more speculative financial activity. Building profitability means establishing a set of guiding precepts and then putting them into practice every day. The best organizations blend their resources into a single, coherent vision, articulated in all aspects of their operations. At Republic, our vision, with its emphasis on profitability, is shared throughout the bank. And our clarity of purpose has helped us achieve success across a range of financial conditions and activities.' (Republic N e w York)
0 Related diversified firms: 'We believe we differ from many public companies in a number of ways. First is our unwavering long-term approach to our business, an approach that places secondary importance on near-term results in favor of measured, sustainable progress. We measure our results by growth in cash flow, which we feel is the clearest contribution to shareholder value. We differ also in our owner-operator philosophy, which gives our key managers the latitude to run their businesses and gives them equity participation in Itel's performance.'
E3 Unrelated diversified firms: 'Our philosophy is based upon ethical conduct, mutual trust and teamwork. To ensure continuous improvement, we challenge, test, reevaluate and continually raise our standards of excellence. As a service organization, our success depends upon the combined capability and contribution of all employees. Fluor Daniel is dedicated to fostering a work environment which challenges, enriches and rewards each individual.'
Self-image A firm's self-image reflects a self-assessment of competitive strengths and weaknesses. The ability of a firm to perform a realistic self-diagnosis is crucial to success regardless of its complexity due to diversification. However, significant differences were observed b e t w e e n firms at different levels of diversification w h e n referring to the self-image mission element. The frequency of inclusion of the element for unrelated diversification firms differed significantly from the rate of inclusion for the dominant product or related diversification firms. The inclusion rate for the single-product firms was not significantly different from firms following dominant product, related or unrelated diversification strategies. Firms following an unrelated diversification strategy were more likely to include statements identifying their competitive strengths and weaknesses (their self-image) than firms following either related diversification or dominant-product strategies. One possible explanation for this seemingly contradictory finding may be that unrelated diversified firms may be trying to compensate for the supposed disadvantages of the 'unrelatedness' of their businesses by explicitly stating and drawing attention to their competitive strengths. Current trends toward related diversification as a superior strategy tend to support this explanation. The following brief excerpts demonstrate the ways in w h i c h firms disclosed their competitive strengths:
0 Single-product firm: 'We believe this success, which we have achieved in a highly competitive retail environment, is the direct result of our focus on the customer and our dedication to basic conLong Range Planning Vol. 29
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cepts of retailing that never go out of fashion. Service, quality, selection, value, and customer satisfaction: these principles have been the foundation of our success over the last three decades. As the 1990s unfold, we will stay flexible, but we will never abandon the principles that got us where we are today.' (Service Merchandise)
0 Dominant product firm: 'Quality is the cornerstone of the company's marketing efforts. Products of quality and value, presented with integrity in 150 countries, give all Kodak business groups a clear identity. The common drive is to know customer wants, then to respond in creative ways to help customers succeed.'
0 Related
diversified firm: 'Paramount Communications provides entertainment and information to a growing w o r l d w i d e audience. After one of the most extensive transformations in corporate history, the Company has emerged as a pacesetter in entertainment and publishing with unprecedented financial strength and exceptional creative and distribution capabilities.'
0 Unrelated diversified firm: 'We believe in providing superior value to customers through highquality technologically advanced, fairly-priced products and customer service, designed to meet customer needs better than all alternatives.' (Rockwell International)
Public Image
is not only good policy, it is good business.' (Standard Federal Bank)
0 Dominant product firms: 'Signet has always believed that supporting efforts to improve the quality of life in the communities where we operate is a duty of good corporate citizenship. We are proud of the volunteer work and financial support provided by Signet and its employees. Since the founding of our Corporation, we have been a leader in many worthwhile developments in these communities.' (Signet Banking Corporation)
0 Related diversified firms: 'Our passion for quality is anchored by the principle of r e s p e c t . . . Respect for clients means continually making an extraordinary effort to understand and be responsive to their financial services n e e d s - - a n effort which distinguishes us from our competition, earns strong client recognition and ensures a loyal and growing client base.' (Homefed Corporation)
El Unrelated diversified firms: 'The Rockwell Credo makes explicit our commitment to responsible corporate citizenship. This commitment is more than an abstract principle. It is demonstrated every day-by Rockwell people determined to deal honestly and fairly with customers, suppliers and each other; by our expanding support of education; and by our involvement in a wide range of other activities directed to improving the quality of life in the communities where we live and work.' (Rockwell International)
The public image mission element addresses the qualities which are attributed to the firm by customers, suppliers, creditors and other external entities. Inclusion of a firm's desired public image in its mission provides outsiders with a statement of the firm's future intentions to remain true to those qualities the public has come to associate with the firm. It was expected that all firms w o u l d express their desired public image in their mission statements and that this expression w o u l d not differ with regard to the level of diversification. As s h o w n in Table 1, this prediction was supported. No significant difference in the rate of inclusion of the public image element was observed for the different levels of diversification. The following samples demonstrate the firms' desire to be seen as responsible corporate citizens:
Although all firms were equally likely to include this element, concern for public image was included less frequently than many of the other mission elements. Only 24% of the 141 firms in this study included this element in their mission statements while 87% of Pearce and David's 23 firms expressed their desired public image. The smaller percentage of firms including public image in this study may be due to differences in environmental stresses encountered by the firms at the time the samples were collected for this study and the Pearce and David study. During times w h e n corporate legitimacy and responsibility is challenged by outsiders, firms may be compelled to include more public image verbiage to reemphasize or stress the firm's beneficial aspects.
E3 Single-product firms: 'The long-term success of
The concern for employees mission element recognizes the employees of the firm as valuable assets instrumental to the achievement of organizational goals. This recognition appears to be equally important to all firms whether they are single-product or diversified firms. This prediction was not supported by the results. Firms that followed an unrelated diversification strategy were more likely to include a discussion of the importance of employees than single-
any financial institution depends u p o n the underlying strength and vitality of its market areas. The Bank must reinvest in the communities it serves to ensure the potential for growth and profits. We strive to reinvest the deposits raised in each community to meet the residential housing and family financial needs of that community. At Standard Federal, we believe that c o m m u n i t y reinvestment Developing a Mission for a Diversified Company
Concern for Employees
product firms. As s h o w n in Table 1, only 5% of the single-product firms included a discussion of employees while almost 28% of the unrelated diversification firms discussed the importance of employees to firm goal attainment. The inclusion percentages appear to be the reverse of what one w o u l d expect although unrelated diversification firms might view concern for employees as a potential rallying point for unifying their diverse interests. By emphasizing a commitment to value the employees and their contributions to the firm, the unrelated diversification firm may be trying to motivate and inspire employees to achieve corporate goals. Concern for employees is demonstrated in these examples:
Q Single-product firm: 'It takes 55,000 dedicated employees to make the organization successful. From courtesy clerk to senior management, our employees are the best in the industry. They are dedicated, hardworking and friendly; and they k n o w h o w to run a successful retail food-drug company. Our people are the key to a promising, exciting future.' (Albertson's)
Q Dominant product firm: 'When we (UJB Financial Corp.) try to analyse our success of the past few years, one thing consistently stands out. Our people. They have distinguished us from our competitors, and they will continue to as we move toward the next century....There have been times w h e n the term "good banker" was a contradiction in terms. To be part of the UJB team, y o u must be good in many ways. Not just as a banker, but as a responsive and involved member of the community.'
Q Related diversified firm: 'Anheuser-Busch Companies' commitment to quality is reflected not only in its products, but also in its people. The c o m p a n y recognizes the importance of h u m a n resources in the continued growth and success of its business operations and is dedicated to providing its employees with financially rewarding work and with continuing opportunities for personal development.'
Q Unrelated diversified firm: 'It's hard to measure loyalty and enthusiasm, yet our employees are motivated to give their very best. We count on their contributions for our progress. Resolve to Win: Our 22,800 associates share our commitment to being the best in the industry. Fleming has assembled a strong retail-minded management team and group of associates dedicated to providing superior service to our retailers and value to our shareholders .... As a service organization, our success depends u p o n the combined capability and contribution of all employees.' (Fleming Companies)
It should be noted that the above examples were carefully selected to demonstrate firms including a concern for employees in their mission statements. Some firms only mentioned employees in passing or focused on what the firm was doing to improve the skills and capabilities of the employees rather than recognizing their importance to attainment of goals.
Writing an Effective Mission Statement The process of creating an effective mission statement involves the identification of the distinctive competencies of the firm, the identification of important external factors and constituencies which are expected to impact the firm and the identification of organizational goals and aspirations. In many firms, the mission creation process is conducted by a management team, thus promoting valuable dialogue and consensus building among team members. Finally, the process involves the selection of appropriate content and verbiage to effectively communicate the firm's strategic vision. Great care should be taken in applying the examples in the previous sections to the creation of mission statements for actual firms. It was not the intent of the author to imply that a magic check-list of elements exists for firms at each level of diversification. If the mission statement is to be effective in providing strategic direction for the firm, it must address the unique aspects of a firm's strategic context rather than follow a 'generic' mission statement format. Pearce and David 24 recognized this need in their original article, but unfortunately their work has often been misinterpreted as providing a blueprint for creating the 'ideal' mission statement. The examples do show that diversified firms do not share Campbell's concerns regarding the creation of a mission statement w h e n the level of diversity is high. 25 Mission statements serve an important purpose in defining the strategic direction for the firm regardless of the level of diversification. Although statistically significant differences were observed in the composition of mission statements at different levels of diversification in this sample, the mission statement excerpts demonstrate the w a y in which firms effectively communicated their strategic positions v i s a vis each of the nine mission statement components contained in the strategic management literature. Researchers may be correct that it is difficult to construct a single mission statement for the highly diversified company. Multi-business firms may be more effective in providing a strategic focus through a mission statement hierarchy as discussed earlier. Motorola's annual report for 1989 (shown as Figure 1) demonstrates a hierarchical approach to Long Range Planning Vol. 29
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The Communications Sector designs and manufactures twoway radios, pagers and other forms of electronic communications systems for agriculture, commercial, construction, education, state, local and federal government and health care markets, as well as for industrial, mining, petroleum, radio common carrier, telephone and transportation companies and utilities.
The Communications Sector
The Semiconductor Products Sector designs and produces a broad line of discrete semiconductors and integrated circuits, including microprocessors, microcomputers and memories, to serve the advanced systems needs of the computer, consumer, automotive, industrial, federal governmental/military and telcommunications markets.
The Semiconductor Products Sector
The General Systems Sector designs and manufactures computer-based cellular radiotelephone systems, mobile and portable radiotelephones, microcomputer boards, and information processing and handling equipment, such as multi-user microcomputer systems.
The General Systems Sector
The New Enterprises organization manages...
New Enterprises
The Automotive and Industrial Electronics Group serves...
The Automotive and Industrial Electronics Group
The Information Systems Group combines the capabilities of...
The Information Systems Group
The Government Electronics Group specializes in.,.
The Government Electronics Group
• A key mission statement that will drive much of our future growth can be simply stated: 'We will build on our semiconductor technology and market position to be the world's premier provider of products, systems and services for communication, computing and control for people and machines on the move.'
• Our semiconductor capability is the foundation of all our other business. A strong merchant semiconductor position is vital to driving the technology, cost and quality. We will grow faster than the market in each of our key semiconductor businesses. In our equipment business, we will strive to grow faster than the components business so as to achieve a business mix that is less subject to the swings of the semiconductor industry. In international markets, our business will grow to about 50% of total revenues, compared with 40% today.
• In each of our chosen arenas of the electronics industry, we will grow rapidly by providing our worldwide customers what they want, when they want it, with Six Sigma quality and best-in-class cycle time, as we strive to achieve our fundamental corporate objective of Total Customer Satisfaction, and to achieve our stated goals of increased global market share; best-in-class people, products, marketing, manufacturing, technology and service; and superior financial results.
Motorola's corporate charcter is shaped by certain fundamental beliefs in personal integrity and the dignity of the individual. This creates a climate in which a dedicated workforce respects the needs of suppliers and customers alike. At Motorola, we build on our beliefs and thrive on change, creativity and innovation. It is an environment that encourages all our people to develop their own dreams. We know how the world should be for our customers, and this enables us to express our business vision as follows:
communicating the firm's sense of direction at the corporate level and for each strategic business unit. Motorola successfully communicates the purpose of the company's portfolio of b u s i n e s s e s - - 'to be the world's provider of products, systems, and services for communication, computing and control for people and machines on the move'. 2~ The desired scope or diversity of the portfolio is defined by the elaboration of the various business units and their relationship to the core semiconductor products sector. Technology via the semiconductor serves to unify the firm's business units. The balance b e t w e e n the firm's different businesses is indicated by the paragraph stating that Motorola's semiconductor capability serves as the foundation for the other business units. The statement also provides growth objectives for key business units w h i c h communicate the priority that will be placed on each of these units. Each business unit is then defined primarily by the products and customers served by the unit. In Motorola's case, a product and customer orientation at the business unit level may be sufficient to communicate the strategic direction of each unit, especially since the corporate sections of the statement effectively communicate a sense of the firm's geographic domain (worldwide, with 50% of total revenues in international markets), core technologies (semiconductor capability), c o m p a n y philosophy (personal integrity and respect for the dignity of the individual), self image (high quality, customer oriented), public image (respectful of employees, cus-
tomers and suppliers), and concern for survival, growth and profitability (growing faster than the market and providing superior financial results). Multi-business firms may find it useful to follow Motorola's example, communicating shared values in a corporate mission statement while focusing on products and customers at the business unit level. This approach serves to unify the various business units around a common value system, thus clearly indicating an overall sense of purpose to both internal and external stakeholders while also communicating the relative importance and emphasis of each of the business units. Missions written in this manner will provide a strong starting point for the establishment of effective organizational priorities, strategies and plans that ultimately will contribute to superior organizational performance as depicted in Figure 2. An effective mission statement may impact organizational performance by providing a focused and supportive organizational environment that leads decision makers to craft superior strategies, thus positioning the firm advantageously relative to competitors and external threats and opportunities. By effectively communicating organizational goals and philosophy to employees in an inspirational way, the mission statement may also improve the firm's ability to implement strategic plans. Perhaps most importantly, the process of creating an effective mission statement can provide managers with an opportunity to resolve internal con-
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Statistical Analysis. No statistical difference was observed in the size of the firms classified in each of the four diversification levels. Analysis of variance of firm size as measured by sales for 1988, 1989, 1990 or the number of employees indicated that any differences observed in the later analysis was not due to differences in the firm size but due to the level of diversification. A series of one-way analyses of variances were run to determine if significant differences existed in the inclusion of each of the mission elements by level of diversification. Significant differences (at the.05 level or better) between the four levels of diversification Coding Methodology. Classification of the nature of were found for the customer, technology and selfdiversification (either related or unrelated) was image mission elements. The concern for employees accomplished using the method outlined in Rumelt. 27 mission element was marginally significant (p <.10 The related ratio, or the proportion of each firm's level). No significant difference was observed in the revenue coming from its largest group of related busi- other five mission elements. nesses, was calculated using the line-of-business data When significant differences in the inclusion of the reported in 10-K filings. Firms with related ratios of mission elements by level of diversification were 70% or greater were considered related diver- indicated in the one-way analysis of variance, the sification firms. Firms with related ratios of less than Scheffe multiple comparison test was run to pinpoint 70% were classified as unrelated diversifications. the differences between groups. flicts about the future direction of the organization, reaching a consensus that results in organizational progress in the desired direction. Firms that work to resolve interorganizational differences to create an effective mission statement and subsequently conduct their business in accordance with the beliefs and philosophies outlined in the statement should ultimately benefit through improved organizational performance.
Research Methodology
References 1. P.F. Drucker, Management: Tasks, Responsibilities and Practices, Harper & Rowe, New York (1973). 2. R.D. Ireland and M.A. Hitt, Mission Statements: Importance, challenge and recommendations for development, Business Horizons, May-June, 34-42 (1992). 3. M.E. Porter, From competitive advantage to corporate strategy, Harvard Business Review, May-June, 43-59 (1987). 4. J.A. Pearce, II, The company mission as a strategic goal, Sloan Management Review, 23 (3), 15-24 (1982). 5. F.G. Boseman and A.V. Phatak, Strategic Management, John Wiley & Sons, New York (1989). 6. D.F. Abell, Defining the Business: The Starting Point of Strategic Planning, Prentice-Hall, Englewood Cliffs, NJ (1980). 7. J.H. Want, Corporate mission, Management Review75 (8), 45-50 (1986). 8. P. Kotler, Marketing Management, Prentice-Hall, Englewood Cliffs, NJ (1984). 9. See Pearce (1982), op. cit. 10. F.R. David, How companies define their mission, Long Range Planning22 (1), 90-97 (1989). 11. A. Campbell, Does your organisation need a mission? Leadership and Organization Development Journal 16 (3), 3-9 (1989). 12. M. Klemm, S. Sanderson and G. Luffman, Mission statements: selling corporate values to employees, Long Range Planning 24 (3), 73-78. The views of Cambell (1989) and Klemm eta/. (1991) may reflect a cultural difference with respect to the descriptive content, purpose, and audience of mission statements as both studies utilized samples of firms operating in the UK. Mission statements have not been as widely utilized in the UKas in the US although this may be changing. 13. C.W.L. Hill and G.R. Jones, Strategic Management: An Integrated Approach, Houghton Mifflin, Boston, MA (1992). 14. P. Wright, C.D. Pringle and M.J. Kroll, Strategic Management: Text and Cases, Allyn and Bacon, Boston, MS (1992). 15. F.R. David, Strategic Management (Fourth edn), Macmillan Publishing, New York (1993). 16. D.S. Cochran and F.R. David, Communications effectiveness of organizational mission statements, Journal of Applied Communication Research 14 (2), 108-118 (1986).
Developing a Mission for a Diversified Company
17. R.P. Rumelt, Strategy, Structure and Economic Performance, Division of Research, Graduate School of Business Administration, Harvard University, Boston (1974). 18. R.J. Morris, Computerized content analysis in management research: a demonstration of advantages and limitations, Journal of Management20 (4), 903-931 (1994). 19. See Pearce (1982), op. cit. 20. See Abell (1980), op. cit. 21. J.A. Pearce, II, Strategic Management: Formulation, Implementation and Control, Richard D. Irwin, Homewood, IL (1991). 22. Ibid. 23. J.A. Pearce, II and F. David, Corporate Mission Statements: The Bottom Line, Academy of Management Executive 1 (2), 109-115 (1987). 24. ibid. 25. See Campbell (1989), op. cit, 26. Motorola, Inc., 1989 Annual Report, Author, Schaumburg, iL (1989). 27. See Rumeit (1974), op. cit.
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