- Email: [email protected]
High tech firms: Does mission matter?
HIGH TECH FIRMS: DOES MISSION MATTER?
CHRISTOPHER K. BART McMaster
University
What role does a mission statement play in the context of high tech organizations? And what is the nature of the relationship between a high tech company’s formal mission statement and performance? Traditionally, the mission statement has been regarded as the essential starting point in designing an effective and successful strategy for virtually any firm. However, the role and impact of mission statements within high tech firms has not received any significant empirical consideration in the literature of the past twenty years. This is somewhat surprising since the importance of high tech firms to an economy’s future growth is well accepted. Moreover, it is almost impossible to pick up a standard text on strategic planning without some mention of the virtues and importance of having a well developed mission statement. At the same time, there is much literature and research which confirms the existence of unique and special organizational arrangements for high tech (as opposed to low tech) companies. Thus, if mission is important to firm success, one would also expect to find significant differences in the content and characteristics of mission statements between high tech and other corporate situations. The current study reports the results of a survey on the use and performance impact of mission statements among a group of high-tech and low-tech companies. The research confirms that there are important and major differences in the content of the mission statements between these two groups. However, for high tech firms, differences in mission statements do not necessarily translate into variations in financial performance. The research also demonstrates that significant differences exist between high and low tech companies in terms of the factors “driving” the mission statements. These drivers, in turn, sometimes bear somewhat significantly on firm performance but, more critically, impact the behavior of organizational members. The research, therefore, confirms an emerging notion that mission statements primarily influence the behavior of firm members and it is the organizational members’ behaviors which, in turn, impact financial performance.
Direct all correspondence to: Christopher K. Bart, Associate Professor of Business Policy, Michael G. DeGroote School of Business, [email protected].
McMaster
University,
Hamilton,
Ontario, Canada, L8S-4M4;
Fax: 90X121-8995;
The Journal of High Technology Management Research, Volume 7, Number 2, pages 209-225 Copyright0 1996 by JAI Press, Inc. All rights of reproduction in any form reserved. ISSN: 1047-8310.
E-mail:
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INTRODUCTION High technology companies are important sources of innovation and growth in almost every economy. Unfortunately, high tech firms continue to fail at alarming rates-despite the plethora of studies identifying those factors contributing to firm success (such as, customer service, organizational efficiency and product quality) and the reasons for failure (Cooper, 1994). Thus, achieving performance success in high tech firms remains somewhat of a hit-and-miss affair. Interestingly, one factor which has received scant attention in studies of high tech firms is their mission statement. This is unusual since a company’s mission statement is seen by many writers as the critical starting point for the effective and successful strategic management of any firm. As a formal company document, the mission statement should resolve, fairly early-on in an organization’s history, some important and fundamental questions, such as: Why do we exist? What are we here for? What are we trying to accomplish? (Obviously, those high tech organizations that do not know the answers to these questions will be in trouble.) Mission statements, therefore, describe an organization’s central “purpose” and essential activities (Byars, 1984, 1987; Campbell, 1989, 1993; Campbell & Yeung, 1991; David, 1993, 1989; Germain & Cooper, 1990; Ireland & Hitt, 1992; Klemm, Sanderson & Luffman, 1991). They are not to be confused with objectives-the latter of which are usually much more quantitative, detailed and dispassionate statements of specific nearterm performance targets. However, despite their generally recognized importance to firm success, the exact nature of the relationship between mission statements and high tech firms is currently unknown.
THEORETICAL
BACKGROUND
High Tech Versus Low Tech Firms In recent years, there has been a growing recognition and acceptance of the important environmental, strategic and organizational differences which exist between high tech and low tech organizations. For example, high tech firms are generally “characterized by strategic, technological and operational uncertainty which affects growth rates, competitive positions and industry boundaries” (Bahrami & Evans, 1987: 52). The intensely competitive environment of high tech firms, in particular, places a premium on achieving a high level of strategic flexibility (Evans, 1991). High tech firms are also seen to be in need of different management approaches than low tech operations (Bart, 199.5; Cooper & Bruno, 1977; Ketteringham & White, 1984; Roberts, 1968; Zeleny, 1986). Hage (1986), for example, has argued that high tech firms should adopt structural forms which are more “organic” in nature than their low tech counterparts. Bahrami and Evans (1987) claim that the appropriate high tech organizational design is called a “stratocracy”-which they define as “rule by the doers.” And Cooper (1985) has shown that there are important differences in the nature of management decisions associated with new products between high tech and low tech companies. Interestingly, there is also a small literature which supports the notion of performance differences between high and low tech organizations. Porter (1980), for instance, has stated that the profits of high tech (emerging) firms tend to be higher than that found in low tech
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(mature) companies. Vesper (1980) has claimed that high tech industries are more supportive of small firm viability than low tech situations. And, in a recent study, Covin, Prescott and Slevin (1990) found some limited support for their hypothesis that “small firms in hightech industries perform better than do small firms in low tech industries” (p. 490). It has been established empirically only recently, however, that a firm’s technological intensity cannot be examined independent of its strategic context; that a firm’s degree of technological intensity needs to be supported by its business strategy; and that the relationship between strategy and technology may be important to firm performance i.e., not any strategy-technology “fit” will do (Covin & Prescott, 1990; Covin, Prescott, & Slevin, 1990; Miller, 1988; Zahra & Covin, 1993). Yet, there is a paucity of empirical studies in this area (Zahra & Covin, 1993). Or as Miller (1988) has aptly stated: Research actually documenting the relationships between technology, strategy and performance has been slower to develop than our sense of the need for such research. Several streams of research exist which link bits of technology to pieces of strategy or performance, but too little effort has been given to integrating such works. The result of this disparity is that while we may feel certain that strategy and performance are strongly tied to technology, we probably feel uncertain as to how various links mesh with one another in some ‘big picture’ sense (p. 239).
Of all the recent contributions to the strategy-technology-performance literature, it is particularly noteworthy that they have tended to focus only on certain dimensions of strategy (or strategic directions), such as: commodity versus specialty products, marketing intensity, cost leadership and product line breadth (Zahra & Covin, 1993); or build versus hold versus harvest versus divest strategies (Covin & Prescott, 1990; Covin, Prescott, & Slevin, 1990). These dimensions emphasize the “competitive posture” and “business focus” aspects of strategy. Strategy, however, is comprised of many dimensions-of which the firm’s “mission” plays a pivotal and seminal role. Yet, surprisingly, it is not clear how (and to what extent) mission statements of high tech firms vary from those of low-tech organizationsalthough previous related research would suggest that they should. High Tech Firms & Mission Statement
Characteristics
Almost every textbook on strategy extols the importance of having a mission statement and exhorts managers to ensure that their organization has one. Managers, therefore, are vitally interested in what a firm’s mission statement should look like. Unfortunately, most of the previous research on mission statements has been devoted only to analysing their contents and characteristics (Campbell, 1989 & 1993; Campbell & Yeung, 1991; Coats et al., 1991; Cochrane & David, 1987; Collins & Porras, 1991; David, 1989; Klemm et al., 1991; McGinnis, 1981; Pearce, 1982; Pearce & David, 1987.) It is only recently that Bart and Baetz (1995) have provided some findings which now suggest how mission statements ought to look-at least generically. They did this by linking selected mission statement characteristics with various firm performance indicators. However, in the case of high tech firms, there still appears to be virtually no guidance or consensus as to what mission statements should or should not include (i.e., quantity and type of goals, stakeholder groups mentioned, business definition, identification of custom-
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em/customer groups, behavior standards, etc.) and how these characteristics might differ from low tech situations. At a minimum, both the prior literature and research would argue that mission statements of high tech firms should look significantly different from those of low tech organizations. One reason is that there is, today, a fairly large body of research which generally supports the notion of linkages between selected strategic variables (e.g., environment, type of firm, firm strategy) and various organizational characteristics and arrangements (Bart, 1986; Bower, 1970; Bums & Stalker, 1961; Chandler, 1962; Duncan, 1976; Galbraith & Kazanjian, 1986; Lawrence & Lorsch, 1967; Newman, 1971; Rumelt, 1974; Thompson, 1965; Thompson & Strickland, 1992; Wrigley, 1970). Another reason, however, is that mission statements are supposed to be concerned with an organization’s central purpose and essential activities. These dimensions should vary significantly between high and low tech companies. In terms of the specific, albeit nascent, strategy-technology literature, Covin and Prescott (1990) found significant differences between high and low tech firms with respect to the following strategic variables: emphasis on product image/differentiation, external resource control, reliance on external financing and dependence on others external to the firm. Similarly, Zahra and Covin (1993) found significantly different clusters among three categories of technology policies (i.e., aggressive, automated/process, new product development) and five strategic “patterns.” Thus, while not in abundance, the empirical evidence in support of a linkage between strategy and technology intensity is fairly consistent and persuasive. When taken in conjunction with the greater body of research on the relationships among environment, strategy and organization (Galbraith & Kazanjian, 1986), it would not be an untenable proposition to expect high tech firms to have mission statements with characteristics different from their low-tech counterparts. The early and exploratory nature of the present research, however, makes it difficult to speculate, in advance, the exact manner in which mission statements are expected to vary between high and low tech companies. Mission Statements
Characteristics
and High Tech Firm Performance
In addition to our concerns regarding the specific content of high tech mission statements, a perhaps even more important issue is whether or not any differences in mission statement content are associated with variations in firm performance. Over the years, there have been several attempts made at linking firm performance with the mere existence of a company’s mission statement-with mixed results. For instance, Klemm et al. (1991) found no significant differences in the performance of firms in terms of employee tumover or profits when comparing firms that had mission statements with those that did not. In contrast, Campbell (1989, 1993) and Campbell and Yeung (1991) reported that the behavior standards specified in the mission statement of British Airways had “dramatically changed the performance of the airline.” Bart and Baetz (1995), however, appear to be the only researchers, thus far, to have shown how selected mission statement characteristics are associated with firm performance. Unfortunately, to date, no such research efforts have been made in the case if high tech organizations. With respect to the fledgling strategy-technology-performance literature, results from the empirical studies conducted so far are also mixed. For example, Covin and Prescott (1990) found that the strategy-technology linkages identified in their sample were not associated with any differences in firm performance. In contrast, Zahra and Covin (1993) found
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certain strategy-technology combinations to be significantly correlated with high firm performance. Both of these studies, however, were concerned with strategic variables other than mission. It thus remains to be seen to what extent the specific content and characteristics of mission statements “make a difference” in terms of high tech firm performance. Mission Statement
Purpose and High Tech Performance
There are many reasons put forward by numerous authors in support of having a mission statement. Two reasons frequently mentioned include: (a) better staff motivation/ management control toward achieving a common organizational purpose (Campbell, 1989, 1993; Collins & Porras, 1991; Daniel, 1992; Germain & Cooper, 1990; Javidan, 1991; Ireland & Hitt, 1992; Klemm et al., 1991; King & Cleland, 1979; El-Namaki, 1992; Wilson, 1992); and (b) guiding the resource allocation process more effectively (Ireland & Hitt 1992; King & Cleland, 1979). And there are, of course, others. However, none of the reasons given for having a mission statement in the first place have been investigated either (a) in the context of high tech versus low tech organizations; or (b) for their impact on performance. For instance, it is currently unknown to what extent using a mission statement for controlling the behavior of firm members is more or less important to firm success than using mission statements as a basis for allocating resources. None of the performance consequences associated with these-and otheraifferent mission statement “drivers” has been measured directly in any previous mission statement studies. GENERAL
RESEARCH
QUESTIONS
Given the importance of both high tech firms (for economic prosperity) and mission statements (for strategic direction), we decided to address the issues and areas of concern listed above directly. Indeed, if academics and consultants are to continue promoting the usefulness of mission statements (and if corporations are to embrace their use), we need more direct evidence in support of their positive association with firm performance. Consequently, a research study was launched to determine the linkage between mission statements and organizational performance in the case of high tech firms. The research was designed to answer several specific questions: l
l
l
l
Are there differences in the content and characteristics of mission statements between high tech and low tech organizations? To what extent do differences in the content and characteristics of mission statements between high tech and low tech firms account for the differences in firm performance? For what purpose(s) is the mission statement used in high tech firms? (i.e., What are the “drivers” of the mission statements in these companies and how do they compare to low tech organizations?) Does the choice of purpose/driver make a difference in terms of high tech firm performance? To what extent do differences in mission statements among high tech companies account for variations in their performance? How the Research Was Conducted
Sample Selection & Size. The current study involved a survey of 75 senior managers (CEO’s and presidents) from some of Canada’s largest industrial and advanced technology
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companies. Unfortunately, both the method of sample selection (judgmental) and the small sample size restrict any claims that might be made about the representativeness of the findings. Nevertheless, the findings from the firms in our sample were expected to reflect some of the practices found within many of Canada’s leading and highly innovative companies. For Operationalizing Mission Statement Content and Characteristics. content and characteristics of mission statements were operationalized by prior literature to determine what others had to say about mission statement this review, it appears that some of the most frequently mentioned included: l
l
l
l
l
l
l
this study, the reviewing the content. From characteristics
Identification of the relevant stakeholders (Bates & Dillard, 1991; Collins & Porras, 1991; Daniel, 1992; Exley, 1988; Freeman, 1984; Ireland & Hitt, 1992; Klemm et al., 1991; Medley, 1992; Oswald et al., 1994; Wilson, 1992); Specifying some general/corporate non-quantitative goals (Coats et al., 1991; Collins & Porras, 1991; Klemm et al., 1991; Want, 1986); Providing a definition of success (Campbell & Yeung, 1991; Ireland & Hitt, 1992; Klemm et al., 1991; Want, 1986); Defining the firm’s product(s)/business (David, 1989; Drucker, 1974; Ireland & Hitt, 1992); Defining the firm’s markets/customers (David, 1989; Drucker, 1974; Ireland & Hitt, 1992); Identifying the firm’s competitive strategy/posture (Campbell & Yeung, 199 1; Drucker, 1974; Ireland & Hitt, 1992); and IdentiJjing important behavior standards (Campbell & Yeung, 1991; Want, 1986).
In terms of the last item, 15 management practices and behaviors were also identified. These practices were recently cited by Deutschman (1994) as important contributors to enhancing performance in high tech companies. They have also been frequently cited in both the academic and practitioner literatures over the years. The behaviors and practices included:
(BP11 Seeking out and delighting difficult customers; (BP3 Striving constantly to build customer loyalty; Promoting the cannibalization of one’s own products within the firm; Using small teams; Organizing work around projects; Willing to make critical technological decisions significantly ahead of the competition; Accepting constant re-organization as a way-of-life; (BP7) Undertaking cooperative ventures with one’s rivals/competitors (i.e. “coopeti(BP8) tion”); Fostering an “egalitarian” culture; (BP9) (BPlO) Striving to sell unique and highly differentiated products/services; the use of electronic communication to aid communication (BP1 1) Promoting throughout the firm; (BP3) (BP4) (BP5) (BP6)
High Tech Firms
(BP12) (BP13) (BP14) (BP15)
215
Sharing key strategic information with all employees; Placing an extraordinary emphasis on recruiting the “right” people; Glorifying, honouring and celebrating the people who create new products; and Helping employees become world-renowned experts in their fields.
To measure performance, we utilized each company’s Measures of Per$ormance. published reported financial results for 1993-specifically: return-on-sales (McDougall et al., 1994; Brush & VanderWerf, 1990), and return-on-assets (David, 1989; Roth & Ricks, 1994). We also utilized selected performance data from 1992 for comparative purposes (i.e., percentage annual change in sales (McDougall et al., 1994; Roth & Ricks, 1994; Brush & VanderWerf, 1990) and percentage annual change in profits. Finally, we asked respondents in our survey to indicate the degree to which their firm’s mission statement influenced employee behavior. While firm performance can be measured according to many different methods (which, in turn, reflect the priorities of the company), we selected our financial measures on the basis that these are the ones to which analysts and managers pay the most attention (Venkatraman, 1989). They are also among the ones most frequently used in academic assessments of performance (e.g., Brush & VanderWerf, 1990). Defining mission statement “drivers. ” Mission statement drivers were defined as those forces motivating the development and use of a firm’s mission statement in the first place. They represent the mission statement’s primary purpose or raison d’etre. In reviewing the mission literature, numerous reasons have been given for having a mission statement. Those cited most frequently were adopted as the basis for operationalizing the mission statement drivers. They included:
(Dl) (D2) (D3) (D4) (D5) (D6) (D7) (D8) (D9) (DlO)
To To To To To To To To To To
create a common purpose for the organization; define the scope of the organization’s activities and operations; allow the CEO to exert control over the organization; create standards of performance for the organization; help individuals identify with their organization, its aims and its purpose; promote shared expectations/culture among organization members; promote the interests of external stakeholders; motivate and/or inspire organizational members; help refocus organizational members during a crisis; and provide a sound basis for the allocation of organizational resources.
A questionnaire was developed which measured (a) the degree to Data Collection. which the mission statement characteristics referred to above were found in the firms’ mission statements; (b) the extent to which the behavior standards listed in the mission statements were actually practised in the sample of firms; and (c) the degree to which the various mission statement drivers formed the primary rationale in developing the mission statement. More specifically, the questionnaire asked managers to indicate, using a three point scale, the degree to which the mission statement characteristics, referred to above, were written into their firm’s formal mission statement (0 = not at all; 1 = somewhat; 2 = clearly specified). The behavioral variables were also measured by asking each manager to indi-
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cate, on a 10 point scale, the extent to which each practice described, in reality, the situation in his/her firm (low = 0; high = 9). In a similar fashion, a ten point scale was used to classify how technologically advanced each firm was (0 = very low technology; 9 = very high technology). A five point scale, however, was used by the managers to specify the degree to which the various mission stutement drivers formed the primary rationale in developing their firm’s mission statement (1 = not a primary rationale/driver in developing the mission; 5 = a primary driver in developing the mission). Data Analysis. The frequency with which each mission statement characteristic was found in the mission statements was tabulated and compared for high and low tech firms using t-tests for independent means. The degree to which differences in performance could be explained by variations in the content of mission statements between high and low tech firms was examined through a series of ANOVAs. We then analyzed the relationship between mission statement drivers and performance using, again, a series of t-tests for independent means. The results of this latter analysis caused us to further investigate the relationship between the content of high tech firm mission statements and their members’ behavior. This, in turn, prompted an investigation into the relationship between the behavior of high tech firm members and high tech firm performance. All of these later analyses were conducted using t-tests for independent means.
THE RESULTS Comparing
Mission Statement Characteristics and Low Tech Companies
Between High Tech
The analysis of differences in mission statement characteristics between high and low tech firms is shown in Table 1. The results indicate that only two of the six characteristics
TABLE 1 Mission Statement Characteristics: High Technology vs. Low Technology Companies High Tech Mission Statement CharacteristicdCompon Number of stakeholders
LoTTech Sign%
ents listed
Mean Score
for Low Tech Companies
Mean Score
for High Tech Companies
IIS
2 2.1
1.9
Definition of success provided
+(O.ool)
0.1
0.7
Definition of the product/business
-(O.OOO)
1.0
0.7
Number of general/corporate quantitative goals listed
IIS
non-
provided
2
Definition of the markets/customers provided
“S
0.9
0.7
Definition of the competitive provided
“S
1.6
1.8
Note:
Allf-tests arc two tailed.
strategy
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studied (i.e., definition of success and definition of the product(s)/business) were significantly different. Specifically, there were significantly more “definitions of success” in the mission statements of high tech firms than low tech firms. Low tech firms, on the other hand, were found to have significantly more mission statements which defined their products and businesses (as opposed to high tech firms). For all of the other characteristics investigated, there were no differences in the mission statements of high and low tech organizations. Comparing
Mission Statement Behavior Standards and Practices in High Tech and Low Tech Companies
Table 2 presents the results from our analysis of behavior standards found within the various mission statements. The findings show that there were significant differences between high tech and low tech companies for eight of the 15 mission statement behavior standards listed. In each instance, the behavior standards were found to occur (as anticipated) significantly more often in the mission statements of high tech firms than in low tech firms. For the remaining seven behavior standards (i.e., cannibalization, project organization, constant re-organization, coopetition, e-mail communication, sharing information, and making employees experts) there were no significant differences noted between high and low tech companies in the frequency with which these behavior standards were mentioned. Mission Statement
Characteristics,
Behavior Standards and Performance
A series of ANOVA analyses were done to determine if there were any differences performance between high and low tech firms which could be explained by differences
Statement
TABLE 2 Behavior Standards
High Technology
vs. Low Technology
Mission
High Tech Behavior Standards and Practices potentially listed in the Mission Statement BP1 Satisfy Customers BP2 Loyalty BP3 Cannibalization BP4 Small Teams BP5 Project Oriented BP6 Tech. Decisions BP7 Reorganize BP8 Coopetition BP9 Egalitarian BP10 Product Uniqueness BP1 1 E-Mail BP12 Share Information BP 13 Recruit Right People BP 14 Glorify Innovators BP15 Become World Experts Note:
All t-tests are two tailed
VS.
Low Tech Signi& +(0.002) +(0.08 I) ns +(0.075) ns +(0.049) ns ns +(0.058) +(0.012) ns “S +(0.076) +(O.OOO) IIS
and Practices: Companies Mean Score for Low Tech Companies
Mean Score for High Tech Companies
1.20 2.10 1.20 1.40 1.70 1.80 1.70 1.30 1.50 1.60 1.30 1.70 1.50 1.10 1.40
1.82 2.54 1.33 1.89 2.03 2.35 1.85 1.38 2.03 2.36 1.48 1.95 2.00 1.72 1.74
in in
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either (a) the characteristics of or (b) the behavior standards listed in the mission statements. The ANOVAs were 2x2 analyses and based on the degree of technological advancement (i.e. high versus low tech) and one of the mission statement characteristics or behavior standards (i.e. the characteristic was either present or not present). An ANOVA analysis was then conducted for each of the four performance measurements (i.e., percentage change in sales; percentage change in profits; return on sales; return on assets). In virtually all of the analyses, no significant differences in performance were observed. And any significant differences found were deemed to be either spurious or inconsistent with other results. As a consequence, neither the various mission statement characteristics nor the firms’ degree of technological advancement could be said to explain any of the differences in any of the performance measurements observed. Comparing
Mission Statement Drivers Between High and Low Tech Companies
A mission statement driver represents the primary rationale/purpose for developing a mission statement in the first place. Table 3 shows the degree to which various mission statement drivers were used in the high tech and low tech organizations in our sample. It also shows that, of the 10 mission statement drivers identified, there were only four in which significant differences between high tech and low tech companies were found to exist (i.e., promote shared expectations; promote the interests of external stakeholders; motivate/inspire employees; and refocus in a crisis). In each of these instances, the mission statement driver was also found to be stronger (or higher scored) for the high tech firms than for the low tech companies.
TABLE 3 Mission Statement Drivers: High Technology versus Low Technology Firms
Mission Statement Drivers {or Purposes/Rationales) To create a common purpose for the organization; To define the scope of the organization’s 03 activities and operations; (D3) To allow the CEO to exert control over the organization ; (D4) To create standards of performance for the organization; (D5) To help organization members individually identify with the organization, its aims and its purpose; (D6) To promote shared expectations/culture among organization members; (D7) To promote the interests of external stakeholders; (D8) To motivate and/or inspire organizational members; (D9) To help refocus organization members during a crisis; (DlO) To provide a sound basis for the allocation of organizational resources.
Mean Score for Low Tech Companies
Mean Score
3.19
3.85
4.07
3.87
3.07
2.53
3.36
3.69
ns
3.14
3.67
+(0.05 1)
3.21
3.85
+(0.019)
2.71
3.59
+(O.Oll)
2.79
3.67
+(0.025)
2.50
3.33
ns
3.14
2.74
High Tech vs. Low Tech Sign8
for High Tech Companies
(Dl)
Note:
All ~-testsare two tailed
High Tech Firms
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Mission Statement Drivers and Performance
in High Tech Companies
Each of the 10 mission statement drivers was analyzed for the high tech firms to determine the nature and the extent of their relationship--if any-with the four performance measures. Table 4 shows the results of this analysis. The findings indicate that there is virtually no relationship between any of the mission statement drivers and high tech firm performance-except in one instance. Specifically, the data show that the area where mission statement drivers were found to have an impact on high tech performance most consistently was in terms of “influencing employee behavior.” In addition, each of the drivers appeared to influence high tech employee behavior in a positive way. In other words, the presence of most of the mission statement drivers was found to be associated with a higher levels of influence on employee behavior than when the driver was absent. Thus, it appears that the primary purpose of mission statement drivers in high tech firms is to influence employee behavior and that their impact on financial measures of performance is very weak. Mission Statement Behavior Standards and Reported Behaviors in High Tech Companies Given the particular influence of the mission statement drivers noted above, we decided to compare the presence of “behavior standards” in the mission statements of high tech firms with the managers’ “reported behaviors” directly. The results are shown in Table 5. This Table demonstrates that for 11 of the 15 behaviour standards listed in the mission statements of high tech firms, there were significantly higher degrees of the actual behaviors reported than when the behavior standards were absent. Reported Behaviors and Performance
in High Tech Firms
As a final analysis, we decided to explore the relationship between the managers’ reported behaviors and high tech firm performance directly. Our expectation was that for those high tech firms that reported practicing “high levels” of the 15 innovation inducing behaviors, they would enjoy higher levels of firm performance than those high tech companies that only practiced the behaviors to a “low level.” The reported manager behavior scores for each high tech company were, therefore, summed to create an aggregate behavior score (minimum aggregate score = 57; maximum aggregate score = 147; “low reported behavior category” = median aggregate score of 100 or less; “high reported behavior category” = aggregate score greater than 100). Company performance (based on our four measurement criteria) was then compared between the two behavior categories using a series of t-tests for independent means. The results of this analysis were as follows: (a) growth in sales: no significant differences between the two aggregate behavior categories; (b) growth in profits: significant difference at 0.078; (c) return on sales: significant difference at 0.044; and (d) return on assets: significant difference at 0.023.
Purpose Driver exists vs no exists Scope Driver exists vs no exists Control Driver exists vs no exists Standard Driver exists vs no exists Identify Driver exists vs no exists Expectation Driver exists vs no exists Interest Driver exists vs no exists Motivate lhiver exists vs no exists Refocus Driver exists vs no exists Allocate Driver exists vs no exists ._ Nora: All f-tests are two-tailed.
Dl D2 D3 D4 D5 D6 D7 D8 D9 D10
Mission Statement Drivers exist vs no exist in creating the Mission -~-
.~
_
ns
0.023 ns ns
ns ns
ns ns ns ns IlS
ns LlS
0.087
ns
ns
-
ns ns ns ns ns ns
ns
ns ns
LtS
.084
tl.S
ILS
0.026
ns
ns
Return on Assets (Significance)
Its
ns
ns
__-.
Return on Sales (Significance)
ns 0.049
Percentage Change in Sales (Significance) IlS
ns ns
Percentage Change in Profits (Signijica rice) .-~.--
TABLE 4 The Impact of Mission Statement Drivers on High Tech Firm Performance
ns 0.073 0.098 0.012 ns 0.044 0.072 0.002 0.034
0.035
Influence on Employee Behavior (Significance)
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TABLE 5 The Impact of Mission Statement on Employee Behavior in High Tech Firms High Tech Firm Behavior Practice Score
Mission Statement Behavior Standard/Practice BP1 BP2 BP3 BP4 BP5 BP6 BP1 BP8 BP9 BP10 BP1 1 BP12 BP13 BP14 BP15
No Mention in High Tech Firm Mission Statement
Some Mention in High Tech Firm Mission Statement
T-test Significance (Two-tail Test)
4.90 8.20 2.29 7.26 5.90 5.00 6.42 2.85 5.44 5.13 6.09 5.69 6.25 5.00 3.97
6.58
0.004 ns 0.000 ns 0.059 0.048
Satisfy Customer Loyally Cannibalize Small Teams Project Orient. Early Tech. Decisions Reorganize Coopetition Egalitarian Uniqueness E-mail Share Info. Recruiting Glorify and Honour Creators World Experts
1.85
6.77 7.26 6.84 6.93 6.50 6.26 6.68 6.76 6.53 6.67 7.31 6.39 6.69
0x0 0.018 0.060 ns 0.069 0.038 0.021 0.000
It should also be noted that, for each significant t-test result, higher performance among high tech firms was associated with higher levels of the reported aggregate behaviors.
DISCUSSION
& CONCLUSIONS
Mission Characteristics
and Firm Technology
The findings from our comparison of high tech and low tech companies are most revealing and instructive. Tables 1 and 2 show that mission statements vary significantly between high and low tech firms in only three ways: definition of success; definition of the firm’s business; and selected behavior standards. It was especially interesting to note that the mission statements of high tech firms listed their “definitions of success” significantly more often than their low tech counterparts. One of the reasons for this may be that because high tech firms place such a premium on innovation, they need to be particularly cognizant of “what it is, exactly, that they are shooting for.” At the same time, it was also interesting to find that the mission statements of high tech firms contained significantly fewer “definitions of (their) business” than the mission statements of low tech firms. This finding is especially significant given the reliance that high tech firms place on innovation. Indeed, much of the historical research on new products (Cooper, 1994) states that one of the “keys to new product success” is a clear definition of the business. But, perhaps this advice applies only with respect to specific new products entering into specific new markets. In the case of high tech firms with multiple products, specifying a definition of the business might be seen as too confining and too restricting in
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terms of the various ways that they might apply their technology. For low tech firms, on the other hand, there is a larger and more stable “core business” from which one could extract some type of business definition. The comparison of behavior standards in the mission statements of high and low tech companies (Table 2), however, showed that there are many specific practices which distinguish the operations of these two types of firms. And it is the firm’s mission statement that is one of the primary documents which captures those important differences. The results obtained in this study, therefore, add further evidence to the notion from the historical literature that a firm’s strategy (of which the mission is an essential component) is not independent of technology and that a firm’s technological intensity is supported by a firm’s mission. Hopefully, our efforts have contributed to a better understanding of the strategy-technology connection. Mission Statements
and Firm Performance
Despite the rhetoric which accompanies most descriptions on mission statements and the reasons for their use, the evidence seems pretty clear cut. The linkage between mission statements and firm performance is neither specific nor direct. Indeed, we could find no significant and/or consistent relationships between any of the contents or characteristics of the mission statements and any of the financial measures of firm performance. In this sense, our results are consistent with the research findings of Covin and Prescott (1990) and Klemm et al. (1991). Our findings, however, also represent additional proof in a growing stream of research which now argues that the primary purpose, use and impact of mission statements is more behavioral and less financial (Bart, 1995; Bart & Baetz, 1995).
Mission Statements
Drivers, Behavior and High Tech Firm Performance
The analysis of the 10 mission statement drivers themselves (i.e. those rationales behind the creation of mission statements) showed that there were, again, important differences between low tech and high tech organizations (Table 3). But, more importantly, the results have helped confirm the findings of earlier research (Bart, 1995)-only now, in the very specific instance of high tech organizations-that the primary impact of mission statements is in their influence on the behavior of organizational members (Tables 4 and 5). And it is those behaviors which, in turn, influence firm performance.
SOME FINAL THOUGHTS And so, now, to answer our initial question: “For high tech firms: Does mission matter?’ The answer appears to be a qualified one. Yes, mission statements are significantly different and unique for high tech firms in important ways. However, they do not appear to have much of a direct impact on firm performance. Where their impact is felt most in high tech firms is in terms of the influence that they wield on the attitudes, values and beliefs of organizational members. The proof of this impact is in its most significant form (i.e., the actual reported behaviors of the employees). And because it is those behaviors which appear to be responsible for producing the results that lead to high performance, we have concluded that, yes, indeed, the mission statements of high tech firms do matter and do
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just not in the ways that we have been used to thinking
about
Future Research This research suggests several possibilities for future empirical investigation. For example, in the present study, no mission statement differences were found between high and low tech firms among a selected number of the behavioral standard variables. Yet, these variables are often assumed to be characteristic of high tech situations. The reasons for this lack of variation needs to be explored in greater depth (perhaps though company interviews) since they question some fundamental assumptions concerning the nature of high tech management. Another project would be to explore the differences in mission statements that might exist between specific high and low tech industries and compare their attributes. Also, given the present study’s limitation of a small sample size, it would be useful to replicate our efforts using a much larger sample. One study, however, that would be particularly fascinating would be to perform a detailed frequency count on the exact words used in a large sample of mission statements. It would be especially important to have the mission statements “computer read” in order to maximize the objectivity and accuracy of the counting process. This project would then allow us to analyse the specific language that appears in mission statements. Given our contention that the primary impact of mission statements is behavioral, the project being proposed here would allow us to determine if “certain types of words work better than others” in terms of inspiring and motivating organizational members. One could also determine the degree to which specific words were associated with one another and whether there were specific clusters of mission statement words. As a final recommendation for future research, the process of formulating a mission statement is one area which has gone virtually unexplored in the literature. Just how are mission statements created? What are the steps? Who is involved-and who should be? How much time do firms spend creating these documents? Is there an optimal time period i.e. can a firm spend too much time? And how is the fit between a firm’s mission statement and its technology established and maintained? Some case studies detailing the mission development process would be particularly useful as well as a larger scale survey project.
REFERENCES Bahrami, H., & Evans, S. (1987, Fall). Stratocracy in high-technology firms. California Management Review, 5 l-66. Bart, C. K. (1986, July-August). Product strategy and formal structure. Strategic Management Journal, 7(4), 293-3 11. Bart, C. K. (1995). The impact of mission statements on firm innovativeness. International Journal of Technology Management. (forthcoming). Bart, C. K., & Baetz, M. C. (1995). Do mission statements mutter? (Working Paper 345). School of Business, McMaster University, Hamilton, Ontario, Canada. Bates, D. L., & Dillard, J. E. (1991, June). Desired future position-A practical tool for planning, Long Range Planning, 24.
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Brush, C. G., & VanderWerf, P. A. (1990). Measuring performance of new ventures. Paper presented at Babson Entrepreneurship Conference, Wellesley, MA. Bums, T., & Stalker, G. M. (1961). The management of innovation. Tavistock, London. Byars, L. L. (1984). Strategic management: Planning and implementation. New York: Harper & Row. Byars, L. L. (1987). Organizational philosophy and mission statements. Planning Review, I5(4), 32-36. Campbell, A. (1989). Does your organization need a mission? Leadership and Organization Development, 3. Campbell, A., & Yeung, S. (1991). Creating a sense of mission. Long Range Planning, 24(4), lO20. Campbell, A. (1993). The power of mission: Aligning strategy and culture. Planning Review, Special Issue. Chandler, A. D. (1962). Strategy and structure: Chapters in the history of the American industrial enterprise. Cambridge, MA: MIT Press. Coats, J., Davis, E., Longden, S., Stacey, R., & Emmanuel, C. (1991, December). Objectives, missions and performance measures in multinationals. European Management Journal, 9(4). Cochrane, D., & David, F. R. (1987). The communication effectiveness of organizational mission statements. Applied Journal of Communication Research. Collins, J. C., & Porras, J. I. (1991, Fall). Organizational vision and visionary organizations. California Management Review. Cooper, R. G. (1985). Overall corporate strategies for new product programs. Industrial Marketing Management, 14, 179-193. Cooper, R. G. (1994). New products: The factors that drive success. International Marketing Review, 11(l), 60-76. Cooper, A. C., & Bruno, A. (1977). Success among high technology firms. Business Horizons, 20(2), 16-22. Covin, J. G., & Prescott, J. E. (1990). Strategies, styles and structures of small product innovative firms in high and low technology industries. Journal of High Technology Management Research, 1(l), 39-56. Covin, J. G., Prescott, J. E., & Slevin, D. P. (1990, September). The effects of technological sophistication on strategic profiles, structure and firm performance. Journal of Management Studies, 27(5), 485-510. Daniel, A. L. (1992). Strategic planning-The role of the chief executive. Long Range Planning, 25. David, F. R. (1993). Strategic management, 4th ed. New York: Macmillan. David, F. R. (1989). How companies define their mission. Long Range Planning, 2(l), 90-97. Deutschman, A. (1994, October). The managing wisdom of high-tech superstars. Fortune, 17, 197206. Drucker, P. (1974). Management: Tasks, responsibilities and practices. New York: Harper & ROW. Duncan, R. (1976). The ambidexterous organization: Designing dual structure for innovation. In R. H. Kilman, L. R. Pondy, & D. P. Slevin (Eds.) The management oforganizational design. vol. 1, p. 176-188. New York: North Holland. El-Namaki, M. S. S. (1992, December). Creating a corporate vision. Long Range Planning, 25. Evans, J. S. (1991). Strategic flexibility for high technology maneuvres: A conceptual framework. Journal of Management Studies, 28(l), 7 l-89). Exley, C. E. (1988, Fall). The masterstroke of managing for stakeholders. Directors & Boards. Freeman, C. (1984). Strategic Management: A stakeholder approach. New York: Pitman. Galbraith, J. R., & Kazanjian, R. K. (1986). Strategy implementation: Structure, systems and process, 2nd ed. St. Paul: MN: West Publishing. Germain, R., & Cooper, M. B. (1990). How a customer mission statement affects company performance. Industrial Marketing Management, 19.
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Hage, J. (1986). Responding to technological and competitive change: Organizational and industry factors. In D. D. Davis & Associates (Eds.) Managing technological irznovation. pp. 44-71. San Francisco: Josey Bass. Ireland, R. D., & Hitt, M. A. (1992, May-June). Mission statements: Importance, challenge and recommendations for development. Business Horizons. Javidan, M. (1991). Leading a high-commitment high-performance organization. Long Range Planning, 24. Ketteringham, J., & White, J. (1984). Making technology work for business. In R. Lamb (Ed.) Competitive strategic management. pp. 498-519). Englewood Cliffs, New Jersey: Prentice Hall. King, W. R., & Cleland, D. I. (1979). Strategicplanning andpolicy. New York: van Nostrand Reinhold. Klemm, M., Sanderson, S., & Luffman, G. (1991). Mission statements: Selling corporate values to employees. Long Range Planning, 24(3), 73-78. Lawrence, P., & Lorsch, J. (1967). Organization & environment: Managing differentiation and integration. Harvard University. McDougall, P. P., Covin J. G., Robinson Jr., R. B., & Herron, L. (1994). The effects of industry growth and strategic breadth on new venture performance and strategy content. Strategic Management Journal, 15,537-554. McGinnis, V. J. (1981, November-December). The mission statement: A key step in strategic planning. Business, 3943, Medley, G. J. (1992, April). WWF UK creates a new mission. Long Range Planning, 25,63-68. Miller, A. (1988). A taxonomy of technological settings, with related strategies and performance levels. Strategic Management Journal, 9, 239-254. Newman, W. H. (1971). Strategy and management structure. Journal of Business Policy, 2(l), 5666. Oswald, S. L., Mossholder, K. W., & Harris, S. G. (1994). Vision salience and strategic involvement: Implications for psychological attachment to organization and job. Strategic Munagement Journal, 15,477489. Pearce, J. A. (1982, Spring). The company mission as a strategic tool. Sloan Management Review, 1S-24. Pearce, J. A., & David, F. R. (1987). Corporate mission statements: The bottom line, Academy of Management Executive, l(2), 109-l 16, Porter, M.(1980). Competitive strategy. New York: Free Press. Roberts, E. (1968). Entrepreneurship and technology. Research Management, 11(4), 249-266. Roth, K., & Ricks, D. A. (1994). Goal configuration in a global industry context. Strategic Management Journal, 15, 103-120. Rumelt, R. P. (1974). Strategy structure and economic performance. Boston: Harvard University. Thompson, V. A. (1965). Bureaucracy and innovation. Administrative Science Quarterly, IO(l), l20. Thompson, A. A., & Strickland, A. J. (1992). Strategic Management: Concept and cases, 6th ed. Illinois: Irwin. Venkatraman, N. (1989). Strategic orientation of business enterprises: The construct, dimensionality and measurement. Management Science, 35(8), 942-962. Vesper, K. H. (1980). New Venture Strategies. Englewood Cliffs, New Jersey: Prentice-Hall. Want, J. H. (1986, August). Corporate mission. Management Review, 4650. Wilson, I. (1992). Realizing the power of strategic vision. Long Range Planning, 25(5), 18-28. Wrigley, L. (1970). Divisional autonomy and diversification. (Unpublished doctoral dissertation.) Harvard University. Zahra, S. A., & Covin, J. G. (1993). Business strategy, technology policy and firm performance. Strategic Management Journal, 14, 541478. Zeleny, M. (1986). High technology management. Human Systems Management, 6, 109-120.
CHRISTOPHER K. BART McMaster
University
What role does a mission statement play in the context of high tech organizations? And what is the nature of the relationship between a high tech company’s formal mission statement and performance? Traditionally, the mission statement has been regarded as the essential starting point in designing an effective and successful strategy for virtually any firm. However, the role and impact of mission statements within high tech firms has not received any significant empirical consideration in the literature of the past twenty years. This is somewhat surprising since the importance of high tech firms to an economy’s future growth is well accepted. Moreover, it is almost impossible to pick up a standard text on strategic planning without some mention of the virtues and importance of having a well developed mission statement. At the same time, there is much literature and research which confirms the existence of unique and special organizational arrangements for high tech (as opposed to low tech) companies. Thus, if mission is important to firm success, one would also expect to find significant differences in the content and characteristics of mission statements between high tech and other corporate situations. The current study reports the results of a survey on the use and performance impact of mission statements among a group of high-tech and low-tech companies. The research confirms that there are important and major differences in the content of the mission statements between these two groups. However, for high tech firms, differences in mission statements do not necessarily translate into variations in financial performance. The research also demonstrates that significant differences exist between high and low tech companies in terms of the factors “driving” the mission statements. These drivers, in turn, sometimes bear somewhat significantly on firm performance but, more critically, impact the behavior of organizational members. The research, therefore, confirms an emerging notion that mission statements primarily influence the behavior of firm members and it is the organizational members’ behaviors which, in turn, impact financial performance.
Direct all correspondence to: Christopher K. Bart, Associate Professor of Business Policy, Michael G. DeGroote School of Business, [email protected].
McMaster
University,
Hamilton,
Ontario, Canada, L8S-4M4;
Fax: 90X121-8995;
The Journal of High Technology Management Research, Volume 7, Number 2, pages 209-225 Copyright0 1996 by JAI Press, Inc. All rights of reproduction in any form reserved. ISSN: 1047-8310.
E-mail:
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INTRODUCTION High technology companies are important sources of innovation and growth in almost every economy. Unfortunately, high tech firms continue to fail at alarming rates-despite the plethora of studies identifying those factors contributing to firm success (such as, customer service, organizational efficiency and product quality) and the reasons for failure (Cooper, 1994). Thus, achieving performance success in high tech firms remains somewhat of a hit-and-miss affair. Interestingly, one factor which has received scant attention in studies of high tech firms is their mission statement. This is unusual since a company’s mission statement is seen by many writers as the critical starting point for the effective and successful strategic management of any firm. As a formal company document, the mission statement should resolve, fairly early-on in an organization’s history, some important and fundamental questions, such as: Why do we exist? What are we here for? What are we trying to accomplish? (Obviously, those high tech organizations that do not know the answers to these questions will be in trouble.) Mission statements, therefore, describe an organization’s central “purpose” and essential activities (Byars, 1984, 1987; Campbell, 1989, 1993; Campbell & Yeung, 1991; David, 1993, 1989; Germain & Cooper, 1990; Ireland & Hitt, 1992; Klemm, Sanderson & Luffman, 1991). They are not to be confused with objectives-the latter of which are usually much more quantitative, detailed and dispassionate statements of specific nearterm performance targets. However, despite their generally recognized importance to firm success, the exact nature of the relationship between mission statements and high tech firms is currently unknown.
THEORETICAL
BACKGROUND
High Tech Versus Low Tech Firms In recent years, there has been a growing recognition and acceptance of the important environmental, strategic and organizational differences which exist between high tech and low tech organizations. For example, high tech firms are generally “characterized by strategic, technological and operational uncertainty which affects growth rates, competitive positions and industry boundaries” (Bahrami & Evans, 1987: 52). The intensely competitive environment of high tech firms, in particular, places a premium on achieving a high level of strategic flexibility (Evans, 1991). High tech firms are also seen to be in need of different management approaches than low tech operations (Bart, 199.5; Cooper & Bruno, 1977; Ketteringham & White, 1984; Roberts, 1968; Zeleny, 1986). Hage (1986), for example, has argued that high tech firms should adopt structural forms which are more “organic” in nature than their low tech counterparts. Bahrami and Evans (1987) claim that the appropriate high tech organizational design is called a “stratocracy”-which they define as “rule by the doers.” And Cooper (1985) has shown that there are important differences in the nature of management decisions associated with new products between high tech and low tech companies. Interestingly, there is also a small literature which supports the notion of performance differences between high and low tech organizations. Porter (1980), for instance, has stated that the profits of high tech (emerging) firms tend to be higher than that found in low tech
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(mature) companies. Vesper (1980) has claimed that high tech industries are more supportive of small firm viability than low tech situations. And, in a recent study, Covin, Prescott and Slevin (1990) found some limited support for their hypothesis that “small firms in hightech industries perform better than do small firms in low tech industries” (p. 490). It has been established empirically only recently, however, that a firm’s technological intensity cannot be examined independent of its strategic context; that a firm’s degree of technological intensity needs to be supported by its business strategy; and that the relationship between strategy and technology may be important to firm performance i.e., not any strategy-technology “fit” will do (Covin & Prescott, 1990; Covin, Prescott, & Slevin, 1990; Miller, 1988; Zahra & Covin, 1993). Yet, there is a paucity of empirical studies in this area (Zahra & Covin, 1993). Or as Miller (1988) has aptly stated: Research actually documenting the relationships between technology, strategy and performance has been slower to develop than our sense of the need for such research. Several streams of research exist which link bits of technology to pieces of strategy or performance, but too little effort has been given to integrating such works. The result of this disparity is that while we may feel certain that strategy and performance are strongly tied to technology, we probably feel uncertain as to how various links mesh with one another in some ‘big picture’ sense (p. 239).
Of all the recent contributions to the strategy-technology-performance literature, it is particularly noteworthy that they have tended to focus only on certain dimensions of strategy (or strategic directions), such as: commodity versus specialty products, marketing intensity, cost leadership and product line breadth (Zahra & Covin, 1993); or build versus hold versus harvest versus divest strategies (Covin & Prescott, 1990; Covin, Prescott, & Slevin, 1990). These dimensions emphasize the “competitive posture” and “business focus” aspects of strategy. Strategy, however, is comprised of many dimensions-of which the firm’s “mission” plays a pivotal and seminal role. Yet, surprisingly, it is not clear how (and to what extent) mission statements of high tech firms vary from those of low-tech organizationsalthough previous related research would suggest that they should. High Tech Firms & Mission Statement
Characteristics
Almost every textbook on strategy extols the importance of having a mission statement and exhorts managers to ensure that their organization has one. Managers, therefore, are vitally interested in what a firm’s mission statement should look like. Unfortunately, most of the previous research on mission statements has been devoted only to analysing their contents and characteristics (Campbell, 1989 & 1993; Campbell & Yeung, 1991; Coats et al., 1991; Cochrane & David, 1987; Collins & Porras, 1991; David, 1989; Klemm et al., 1991; McGinnis, 1981; Pearce, 1982; Pearce & David, 1987.) It is only recently that Bart and Baetz (1995) have provided some findings which now suggest how mission statements ought to look-at least generically. They did this by linking selected mission statement characteristics with various firm performance indicators. However, in the case of high tech firms, there still appears to be virtually no guidance or consensus as to what mission statements should or should not include (i.e., quantity and type of goals, stakeholder groups mentioned, business definition, identification of custom-
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em/customer groups, behavior standards, etc.) and how these characteristics might differ from low tech situations. At a minimum, both the prior literature and research would argue that mission statements of high tech firms should look significantly different from those of low tech organizations. One reason is that there is, today, a fairly large body of research which generally supports the notion of linkages between selected strategic variables (e.g., environment, type of firm, firm strategy) and various organizational characteristics and arrangements (Bart, 1986; Bower, 1970; Bums & Stalker, 1961; Chandler, 1962; Duncan, 1976; Galbraith & Kazanjian, 1986; Lawrence & Lorsch, 1967; Newman, 1971; Rumelt, 1974; Thompson, 1965; Thompson & Strickland, 1992; Wrigley, 1970). Another reason, however, is that mission statements are supposed to be concerned with an organization’s central purpose and essential activities. These dimensions should vary significantly between high and low tech companies. In terms of the specific, albeit nascent, strategy-technology literature, Covin and Prescott (1990) found significant differences between high and low tech firms with respect to the following strategic variables: emphasis on product image/differentiation, external resource control, reliance on external financing and dependence on others external to the firm. Similarly, Zahra and Covin (1993) found significantly different clusters among three categories of technology policies (i.e., aggressive, automated/process, new product development) and five strategic “patterns.” Thus, while not in abundance, the empirical evidence in support of a linkage between strategy and technology intensity is fairly consistent and persuasive. When taken in conjunction with the greater body of research on the relationships among environment, strategy and organization (Galbraith & Kazanjian, 1986), it would not be an untenable proposition to expect high tech firms to have mission statements with characteristics different from their low-tech counterparts. The early and exploratory nature of the present research, however, makes it difficult to speculate, in advance, the exact manner in which mission statements are expected to vary between high and low tech companies. Mission Statements
Characteristics
and High Tech Firm Performance
In addition to our concerns regarding the specific content of high tech mission statements, a perhaps even more important issue is whether or not any differences in mission statement content are associated with variations in firm performance. Over the years, there have been several attempts made at linking firm performance with the mere existence of a company’s mission statement-with mixed results. For instance, Klemm et al. (1991) found no significant differences in the performance of firms in terms of employee tumover or profits when comparing firms that had mission statements with those that did not. In contrast, Campbell (1989, 1993) and Campbell and Yeung (1991) reported that the behavior standards specified in the mission statement of British Airways had “dramatically changed the performance of the airline.” Bart and Baetz (1995), however, appear to be the only researchers, thus far, to have shown how selected mission statement characteristics are associated with firm performance. Unfortunately, to date, no such research efforts have been made in the case if high tech organizations. With respect to the fledgling strategy-technology-performance literature, results from the empirical studies conducted so far are also mixed. For example, Covin and Prescott (1990) found that the strategy-technology linkages identified in their sample were not associated with any differences in firm performance. In contrast, Zahra and Covin (1993) found
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certain strategy-technology combinations to be significantly correlated with high firm performance. Both of these studies, however, were concerned with strategic variables other than mission. It thus remains to be seen to what extent the specific content and characteristics of mission statements “make a difference” in terms of high tech firm performance. Mission Statement
Purpose and High Tech Performance
There are many reasons put forward by numerous authors in support of having a mission statement. Two reasons frequently mentioned include: (a) better staff motivation/ management control toward achieving a common organizational purpose (Campbell, 1989, 1993; Collins & Porras, 1991; Daniel, 1992; Germain & Cooper, 1990; Javidan, 1991; Ireland & Hitt, 1992; Klemm et al., 1991; King & Cleland, 1979; El-Namaki, 1992; Wilson, 1992); and (b) guiding the resource allocation process more effectively (Ireland & Hitt 1992; King & Cleland, 1979). And there are, of course, others. However, none of the reasons given for having a mission statement in the first place have been investigated either (a) in the context of high tech versus low tech organizations; or (b) for their impact on performance. For instance, it is currently unknown to what extent using a mission statement for controlling the behavior of firm members is more or less important to firm success than using mission statements as a basis for allocating resources. None of the performance consequences associated with these-and otheraifferent mission statement “drivers” has been measured directly in any previous mission statement studies. GENERAL
RESEARCH
QUESTIONS
Given the importance of both high tech firms (for economic prosperity) and mission statements (for strategic direction), we decided to address the issues and areas of concern listed above directly. Indeed, if academics and consultants are to continue promoting the usefulness of mission statements (and if corporations are to embrace their use), we need more direct evidence in support of their positive association with firm performance. Consequently, a research study was launched to determine the linkage between mission statements and organizational performance in the case of high tech firms. The research was designed to answer several specific questions: l
l
l
l
Are there differences in the content and characteristics of mission statements between high tech and low tech organizations? To what extent do differences in the content and characteristics of mission statements between high tech and low tech firms account for the differences in firm performance? For what purpose(s) is the mission statement used in high tech firms? (i.e., What are the “drivers” of the mission statements in these companies and how do they compare to low tech organizations?) Does the choice of purpose/driver make a difference in terms of high tech firm performance? To what extent do differences in mission statements among high tech companies account for variations in their performance? How the Research Was Conducted
Sample Selection & Size. The current study involved a survey of 75 senior managers (CEO’s and presidents) from some of Canada’s largest industrial and advanced technology
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companies. Unfortunately, both the method of sample selection (judgmental) and the small sample size restrict any claims that might be made about the representativeness of the findings. Nevertheless, the findings from the firms in our sample were expected to reflect some of the practices found within many of Canada’s leading and highly innovative companies. For Operationalizing Mission Statement Content and Characteristics. content and characteristics of mission statements were operationalized by prior literature to determine what others had to say about mission statement this review, it appears that some of the most frequently mentioned included: l
l
l
l
l
l
l
this study, the reviewing the content. From characteristics
Identification of the relevant stakeholders (Bates & Dillard, 1991; Collins & Porras, 1991; Daniel, 1992; Exley, 1988; Freeman, 1984; Ireland & Hitt, 1992; Klemm et al., 1991; Medley, 1992; Oswald et al., 1994; Wilson, 1992); Specifying some general/corporate non-quantitative goals (Coats et al., 1991; Collins & Porras, 1991; Klemm et al., 1991; Want, 1986); Providing a definition of success (Campbell & Yeung, 1991; Ireland & Hitt, 1992; Klemm et al., 1991; Want, 1986); Defining the firm’s product(s)/business (David, 1989; Drucker, 1974; Ireland & Hitt, 1992); Defining the firm’s markets/customers (David, 1989; Drucker, 1974; Ireland & Hitt, 1992); Identifying the firm’s competitive strategy/posture (Campbell & Yeung, 199 1; Drucker, 1974; Ireland & Hitt, 1992); and IdentiJjing important behavior standards (Campbell & Yeung, 1991; Want, 1986).
In terms of the last item, 15 management practices and behaviors were also identified. These practices were recently cited by Deutschman (1994) as important contributors to enhancing performance in high tech companies. They have also been frequently cited in both the academic and practitioner literatures over the years. The behaviors and practices included:
(BP11 Seeking out and delighting difficult customers; (BP3 Striving constantly to build customer loyalty; Promoting the cannibalization of one’s own products within the firm; Using small teams; Organizing work around projects; Willing to make critical technological decisions significantly ahead of the competition; Accepting constant re-organization as a way-of-life; (BP7) Undertaking cooperative ventures with one’s rivals/competitors (i.e. “coopeti(BP8) tion”); Fostering an “egalitarian” culture; (BP9) (BPlO) Striving to sell unique and highly differentiated products/services; the use of electronic communication to aid communication (BP1 1) Promoting throughout the firm; (BP3) (BP4) (BP5) (BP6)
High Tech Firms
(BP12) (BP13) (BP14) (BP15)
215
Sharing key strategic information with all employees; Placing an extraordinary emphasis on recruiting the “right” people; Glorifying, honouring and celebrating the people who create new products; and Helping employees become world-renowned experts in their fields.
To measure performance, we utilized each company’s Measures of Per$ormance. published reported financial results for 1993-specifically: return-on-sales (McDougall et al., 1994; Brush & VanderWerf, 1990), and return-on-assets (David, 1989; Roth & Ricks, 1994). We also utilized selected performance data from 1992 for comparative purposes (i.e., percentage annual change in sales (McDougall et al., 1994; Roth & Ricks, 1994; Brush & VanderWerf, 1990) and percentage annual change in profits. Finally, we asked respondents in our survey to indicate the degree to which their firm’s mission statement influenced employee behavior. While firm performance can be measured according to many different methods (which, in turn, reflect the priorities of the company), we selected our financial measures on the basis that these are the ones to which analysts and managers pay the most attention (Venkatraman, 1989). They are also among the ones most frequently used in academic assessments of performance (e.g., Brush & VanderWerf, 1990). Defining mission statement “drivers. ” Mission statement drivers were defined as those forces motivating the development and use of a firm’s mission statement in the first place. They represent the mission statement’s primary purpose or raison d’etre. In reviewing the mission literature, numerous reasons have been given for having a mission statement. Those cited most frequently were adopted as the basis for operationalizing the mission statement drivers. They included:
(Dl) (D2) (D3) (D4) (D5) (D6) (D7) (D8) (D9) (DlO)
To To To To To To To To To To
create a common purpose for the organization; define the scope of the organization’s activities and operations; allow the CEO to exert control over the organization; create standards of performance for the organization; help individuals identify with their organization, its aims and its purpose; promote shared expectations/culture among organization members; promote the interests of external stakeholders; motivate and/or inspire organizational members; help refocus organizational members during a crisis; and provide a sound basis for the allocation of organizational resources.
A questionnaire was developed which measured (a) the degree to Data Collection. which the mission statement characteristics referred to above were found in the firms’ mission statements; (b) the extent to which the behavior standards listed in the mission statements were actually practised in the sample of firms; and (c) the degree to which the various mission statement drivers formed the primary rationale in developing the mission statement. More specifically, the questionnaire asked managers to indicate, using a three point scale, the degree to which the mission statement characteristics, referred to above, were written into their firm’s formal mission statement (0 = not at all; 1 = somewhat; 2 = clearly specified). The behavioral variables were also measured by asking each manager to indi-
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cate, on a 10 point scale, the extent to which each practice described, in reality, the situation in his/her firm (low = 0; high = 9). In a similar fashion, a ten point scale was used to classify how technologically advanced each firm was (0 = very low technology; 9 = very high technology). A five point scale, however, was used by the managers to specify the degree to which the various mission stutement drivers formed the primary rationale in developing their firm’s mission statement (1 = not a primary rationale/driver in developing the mission; 5 = a primary driver in developing the mission). Data Analysis. The frequency with which each mission statement characteristic was found in the mission statements was tabulated and compared for high and low tech firms using t-tests for independent means. The degree to which differences in performance could be explained by variations in the content of mission statements between high and low tech firms was examined through a series of ANOVAs. We then analyzed the relationship between mission statement drivers and performance using, again, a series of t-tests for independent means. The results of this latter analysis caused us to further investigate the relationship between the content of high tech firm mission statements and their members’ behavior. This, in turn, prompted an investigation into the relationship between the behavior of high tech firm members and high tech firm performance. All of these later analyses were conducted using t-tests for independent means.
THE RESULTS Comparing
Mission Statement Characteristics and Low Tech Companies
Between High Tech
The analysis of differences in mission statement characteristics between high and low tech firms is shown in Table 1. The results indicate that only two of the six characteristics
TABLE 1 Mission Statement Characteristics: High Technology vs. Low Technology Companies High Tech Mission Statement CharacteristicdCompon Number of stakeholders
LoTTech Sign%
ents listed
Mean Score
for Low Tech Companies
Mean Score
for High Tech Companies
IIS
2 2.1
1.9
Definition of success provided
+(O.ool)
0.1
0.7
Definition of the product/business
-(O.OOO)
1.0
0.7
Number of general/corporate quantitative goals listed
IIS
non-
provided
2
Definition of the markets/customers provided
“S
0.9
0.7
Definition of the competitive provided
“S
1.6
1.8
Note:
Allf-tests arc two tailed.
strategy
211
High Tech Firms
studied (i.e., definition of success and definition of the product(s)/business) were significantly different. Specifically, there were significantly more “definitions of success” in the mission statements of high tech firms than low tech firms. Low tech firms, on the other hand, were found to have significantly more mission statements which defined their products and businesses (as opposed to high tech firms). For all of the other characteristics investigated, there were no differences in the mission statements of high and low tech organizations. Comparing
Mission Statement Behavior Standards and Practices in High Tech and Low Tech Companies
Table 2 presents the results from our analysis of behavior standards found within the various mission statements. The findings show that there were significant differences between high tech and low tech companies for eight of the 15 mission statement behavior standards listed. In each instance, the behavior standards were found to occur (as anticipated) significantly more often in the mission statements of high tech firms than in low tech firms. For the remaining seven behavior standards (i.e., cannibalization, project organization, constant re-organization, coopetition, e-mail communication, sharing information, and making employees experts) there were no significant differences noted between high and low tech companies in the frequency with which these behavior standards were mentioned. Mission Statement
Characteristics,
Behavior Standards and Performance
A series of ANOVA analyses were done to determine if there were any differences performance between high and low tech firms which could be explained by differences
Statement
TABLE 2 Behavior Standards
High Technology
vs. Low Technology
Mission
High Tech Behavior Standards and Practices potentially listed in the Mission Statement BP1 Satisfy Customers BP2 Loyalty BP3 Cannibalization BP4 Small Teams BP5 Project Oriented BP6 Tech. Decisions BP7 Reorganize BP8 Coopetition BP9 Egalitarian BP10 Product Uniqueness BP1 1 E-Mail BP12 Share Information BP 13 Recruit Right People BP 14 Glorify Innovators BP15 Become World Experts Note:
All t-tests are two tailed
VS.
Low Tech Signi& +(0.002) +(0.08 I) ns +(0.075) ns +(0.049) ns ns +(0.058) +(0.012) ns “S +(0.076) +(O.OOO) IIS
and Practices: Companies Mean Score for Low Tech Companies
Mean Score for High Tech Companies
1.20 2.10 1.20 1.40 1.70 1.80 1.70 1.30 1.50 1.60 1.30 1.70 1.50 1.10 1.40
1.82 2.54 1.33 1.89 2.03 2.35 1.85 1.38 2.03 2.36 1.48 1.95 2.00 1.72 1.74
in in
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either (a) the characteristics of or (b) the behavior standards listed in the mission statements. The ANOVAs were 2x2 analyses and based on the degree of technological advancement (i.e. high versus low tech) and one of the mission statement characteristics or behavior standards (i.e. the characteristic was either present or not present). An ANOVA analysis was then conducted for each of the four performance measurements (i.e., percentage change in sales; percentage change in profits; return on sales; return on assets). In virtually all of the analyses, no significant differences in performance were observed. And any significant differences found were deemed to be either spurious or inconsistent with other results. As a consequence, neither the various mission statement characteristics nor the firms’ degree of technological advancement could be said to explain any of the differences in any of the performance measurements observed. Comparing
Mission Statement Drivers Between High and Low Tech Companies
A mission statement driver represents the primary rationale/purpose for developing a mission statement in the first place. Table 3 shows the degree to which various mission statement drivers were used in the high tech and low tech organizations in our sample. It also shows that, of the 10 mission statement drivers identified, there were only four in which significant differences between high tech and low tech companies were found to exist (i.e., promote shared expectations; promote the interests of external stakeholders; motivate/inspire employees; and refocus in a crisis). In each of these instances, the mission statement driver was also found to be stronger (or higher scored) for the high tech firms than for the low tech companies.
TABLE 3 Mission Statement Drivers: High Technology versus Low Technology Firms
Mission Statement Drivers {or Purposes/Rationales) To create a common purpose for the organization; To define the scope of the organization’s 03 activities and operations; (D3) To allow the CEO to exert control over the organization ; (D4) To create standards of performance for the organization; (D5) To help organization members individually identify with the organization, its aims and its purpose; (D6) To promote shared expectations/culture among organization members; (D7) To promote the interests of external stakeholders; (D8) To motivate and/or inspire organizational members; (D9) To help refocus organization members during a crisis; (DlO) To provide a sound basis for the allocation of organizational resources.
Mean Score for Low Tech Companies
Mean Score
3.19
3.85
4.07
3.87
3.07
2.53
3.36
3.69
ns
3.14
3.67
+(0.05 1)
3.21
3.85
+(0.019)
2.71
3.59
+(O.Oll)
2.79
3.67
+(0.025)
2.50
3.33
ns
3.14
2.74
High Tech vs. Low Tech Sign8
for High Tech Companies
(Dl)
Note:
All ~-testsare two tailed
High Tech Firms
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Mission Statement Drivers and Performance
in High Tech Companies
Each of the 10 mission statement drivers was analyzed for the high tech firms to determine the nature and the extent of their relationship--if any-with the four performance measures. Table 4 shows the results of this analysis. The findings indicate that there is virtually no relationship between any of the mission statement drivers and high tech firm performance-except in one instance. Specifically, the data show that the area where mission statement drivers were found to have an impact on high tech performance most consistently was in terms of “influencing employee behavior.” In addition, each of the drivers appeared to influence high tech employee behavior in a positive way. In other words, the presence of most of the mission statement drivers was found to be associated with a higher levels of influence on employee behavior than when the driver was absent. Thus, it appears that the primary purpose of mission statement drivers in high tech firms is to influence employee behavior and that their impact on financial measures of performance is very weak. Mission Statement Behavior Standards and Reported Behaviors in High Tech Companies Given the particular influence of the mission statement drivers noted above, we decided to compare the presence of “behavior standards” in the mission statements of high tech firms with the managers’ “reported behaviors” directly. The results are shown in Table 5. This Table demonstrates that for 11 of the 15 behaviour standards listed in the mission statements of high tech firms, there were significantly higher degrees of the actual behaviors reported than when the behavior standards were absent. Reported Behaviors and Performance
in High Tech Firms
As a final analysis, we decided to explore the relationship between the managers’ reported behaviors and high tech firm performance directly. Our expectation was that for those high tech firms that reported practicing “high levels” of the 15 innovation inducing behaviors, they would enjoy higher levels of firm performance than those high tech companies that only practiced the behaviors to a “low level.” The reported manager behavior scores for each high tech company were, therefore, summed to create an aggregate behavior score (minimum aggregate score = 57; maximum aggregate score = 147; “low reported behavior category” = median aggregate score of 100 or less; “high reported behavior category” = aggregate score greater than 100). Company performance (based on our four measurement criteria) was then compared between the two behavior categories using a series of t-tests for independent means. The results of this analysis were as follows: (a) growth in sales: no significant differences between the two aggregate behavior categories; (b) growth in profits: significant difference at 0.078; (c) return on sales: significant difference at 0.044; and (d) return on assets: significant difference at 0.023.
Purpose Driver exists vs no exists Scope Driver exists vs no exists Control Driver exists vs no exists Standard Driver exists vs no exists Identify Driver exists vs no exists Expectation Driver exists vs no exists Interest Driver exists vs no exists Motivate lhiver exists vs no exists Refocus Driver exists vs no exists Allocate Driver exists vs no exists ._ Nora: All f-tests are two-tailed.
Dl D2 D3 D4 D5 D6 D7 D8 D9 D10
Mission Statement Drivers exist vs no exist in creating the Mission -~-
.~
_
ns
0.023 ns ns
ns ns
ns ns ns ns IlS
ns LlS
0.087
ns
ns
-
ns ns ns ns ns ns
ns
ns ns
LtS
.084
tl.S
ILS
0.026
ns
ns
Return on Assets (Significance)
Its
ns
ns
__-.
Return on Sales (Significance)
ns 0.049
Percentage Change in Sales (Significance) IlS
ns ns
Percentage Change in Profits (Signijica rice) .-~.--
TABLE 4 The Impact of Mission Statement Drivers on High Tech Firm Performance
ns 0.073 0.098 0.012 ns 0.044 0.072 0.002 0.034
0.035
Influence on Employee Behavior (Significance)
221
High Tech Firms
TABLE 5 The Impact of Mission Statement on Employee Behavior in High Tech Firms High Tech Firm Behavior Practice Score
Mission Statement Behavior Standard/Practice BP1 BP2 BP3 BP4 BP5 BP6 BP1 BP8 BP9 BP10 BP1 1 BP12 BP13 BP14 BP15
No Mention in High Tech Firm Mission Statement
Some Mention in High Tech Firm Mission Statement
T-test Significance (Two-tail Test)
4.90 8.20 2.29 7.26 5.90 5.00 6.42 2.85 5.44 5.13 6.09 5.69 6.25 5.00 3.97
6.58
0.004 ns 0.000 ns 0.059 0.048
Satisfy Customer Loyally Cannibalize Small Teams Project Orient. Early Tech. Decisions Reorganize Coopetition Egalitarian Uniqueness E-mail Share Info. Recruiting Glorify and Honour Creators World Experts
1.85
6.77 7.26 6.84 6.93 6.50 6.26 6.68 6.76 6.53 6.67 7.31 6.39 6.69
0x0 0.018 0.060 ns 0.069 0.038 0.021 0.000
It should also be noted that, for each significant t-test result, higher performance among high tech firms was associated with higher levels of the reported aggregate behaviors.
DISCUSSION
& CONCLUSIONS
Mission Characteristics
and Firm Technology
The findings from our comparison of high tech and low tech companies are most revealing and instructive. Tables 1 and 2 show that mission statements vary significantly between high and low tech firms in only three ways: definition of success; definition of the firm’s business; and selected behavior standards. It was especially interesting to note that the mission statements of high tech firms listed their “definitions of success” significantly more often than their low tech counterparts. One of the reasons for this may be that because high tech firms place such a premium on innovation, they need to be particularly cognizant of “what it is, exactly, that they are shooting for.” At the same time, it was also interesting to find that the mission statements of high tech firms contained significantly fewer “definitions of (their) business” than the mission statements of low tech firms. This finding is especially significant given the reliance that high tech firms place on innovation. Indeed, much of the historical research on new products (Cooper, 1994) states that one of the “keys to new product success” is a clear definition of the business. But, perhaps this advice applies only with respect to specific new products entering into specific new markets. In the case of high tech firms with multiple products, specifying a definition of the business might be seen as too confining and too restricting in
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terms of the various ways that they might apply their technology. For low tech firms, on the other hand, there is a larger and more stable “core business” from which one could extract some type of business definition. The comparison of behavior standards in the mission statements of high and low tech companies (Table 2), however, showed that there are many specific practices which distinguish the operations of these two types of firms. And it is the firm’s mission statement that is one of the primary documents which captures those important differences. The results obtained in this study, therefore, add further evidence to the notion from the historical literature that a firm’s strategy (of which the mission is an essential component) is not independent of technology and that a firm’s technological intensity is supported by a firm’s mission. Hopefully, our efforts have contributed to a better understanding of the strategy-technology connection. Mission Statements
and Firm Performance
Despite the rhetoric which accompanies most descriptions on mission statements and the reasons for their use, the evidence seems pretty clear cut. The linkage between mission statements and firm performance is neither specific nor direct. Indeed, we could find no significant and/or consistent relationships between any of the contents or characteristics of the mission statements and any of the financial measures of firm performance. In this sense, our results are consistent with the research findings of Covin and Prescott (1990) and Klemm et al. (1991). Our findings, however, also represent additional proof in a growing stream of research which now argues that the primary purpose, use and impact of mission statements is more behavioral and less financial (Bart, 1995; Bart & Baetz, 1995).
Mission Statements
Drivers, Behavior and High Tech Firm Performance
The analysis of the 10 mission statement drivers themselves (i.e. those rationales behind the creation of mission statements) showed that there were, again, important differences between low tech and high tech organizations (Table 3). But, more importantly, the results have helped confirm the findings of earlier research (Bart, 1995)-only now, in the very specific instance of high tech organizations-that the primary impact of mission statements is in their influence on the behavior of organizational members (Tables 4 and 5). And it is those behaviors which, in turn, influence firm performance.
SOME FINAL THOUGHTS And so, now, to answer our initial question: “For high tech firms: Does mission matter?’ The answer appears to be a qualified one. Yes, mission statements are significantly different and unique for high tech firms in important ways. However, they do not appear to have much of a direct impact on firm performance. Where their impact is felt most in high tech firms is in terms of the influence that they wield on the attitudes, values and beliefs of organizational members. The proof of this impact is in its most significant form (i.e., the actual reported behaviors of the employees). And because it is those behaviors which appear to be responsible for producing the results that lead to high performance, we have concluded that, yes, indeed, the mission statements of high tech firms do matter and do
High Tech Firms
make a difference-but them!
223
just not in the ways that we have been used to thinking
about
Future Research This research suggests several possibilities for future empirical investigation. For example, in the present study, no mission statement differences were found between high and low tech firms among a selected number of the behavioral standard variables. Yet, these variables are often assumed to be characteristic of high tech situations. The reasons for this lack of variation needs to be explored in greater depth (perhaps though company interviews) since they question some fundamental assumptions concerning the nature of high tech management. Another project would be to explore the differences in mission statements that might exist between specific high and low tech industries and compare their attributes. Also, given the present study’s limitation of a small sample size, it would be useful to replicate our efforts using a much larger sample. One study, however, that would be particularly fascinating would be to perform a detailed frequency count on the exact words used in a large sample of mission statements. It would be especially important to have the mission statements “computer read” in order to maximize the objectivity and accuracy of the counting process. This project would then allow us to analyse the specific language that appears in mission statements. Given our contention that the primary impact of mission statements is behavioral, the project being proposed here would allow us to determine if “certain types of words work better than others” in terms of inspiring and motivating organizational members. One could also determine the degree to which specific words were associated with one another and whether there were specific clusters of mission statement words. As a final recommendation for future research, the process of formulating a mission statement is one area which has gone virtually unexplored in the literature. Just how are mission statements created? What are the steps? Who is involved-and who should be? How much time do firms spend creating these documents? Is there an optimal time period i.e. can a firm spend too much time? And how is the fit between a firm’s mission statement and its technology established and maintained? Some case studies detailing the mission development process would be particularly useful as well as a larger scale survey project.
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