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Mark Smith, The University of Louisiana at Lafayette
Ronald B. Heady, The University of Louisiana at Lafayette
Paula Phillips Carson, The University of Louisiana at Lafayette
Kerry David Carson, The University of Louisiana at Lafayette
Striving to contribute to the maturation of the mission statement research, this manuscript established three objectives: (1) to provide a comprehensive review of published empirical studies on mission statements, (2) to present initial analytic results demonstrating the relationship between specific mission statement content and organizational longevity, and (3) to argue for the utility of company lifespan as a viable dependent variable in mission statement investigations.
Using the Ashridge Mission Model as a framework to address the second objective, specific mission statement components relating to purpose, strategy, values, and behavior were content-analyzed and correlated with organization longevity. Results indicate that only terms describing social responsibility were significantly related to company lifespan. In support of the third objective, an assessment of de Geus' (1997) "living" company model was reviewed and partially confirmed with regression analysis. Literature on organizational mortality was also discussed to defend the proposed link between mission formation/content and survival.
Although biological metaphors have become commonplace in the organization science literature, Bart (1997), in a Business Horizons article entitled, "Sex, Lies, and Mission Statements," advances the analogy to a vividly descriptive level. He likens mission statements to the "libido" or "sex drive" of a company, inferring that mission statements not only inspire passion and personal pleasure in the firm, but also compel organizationally beneficial activity. While the simile may be novel, the theoretical underpinnings of the comparison are not. One need not look beyond basic business policy textbooks to find the assertion that mission statements, as a strategic planning and management tool, provide the basis for organizational performance and indeed, organizational survival. For example, Miller and Dess (1996) model the relationship between mission statements and the fate of a firm by specifying the intermediate linkages as follows:
A frequently repeated definition of a mission statement is that it is, "a broadly defined but enduring statement of purpose that distinguishes the organization from others of its type and identifies the scope of its operations in product (service) and market terms" (Pearce, 1982, 15). Formulation of such a statement appears to have evolved into a prerequisite of doing business, as a Bain and Company annual survey has consistently reported "mission statements" are the most common management tool out of a collection of over 25 tools, and that over 90% of companies have had a mission statement sometime within the last five years. Recognized as "the starting point for a corporate identity program," mission statements are described as wielding significant influence over organizational performance (Leuthesser & Kohli, 1997, p. 59). As Bart and Tabone (1998) summarize, "in recent years, mission statements have become recognized in modern management theory as one of the cornerstones of an organization. The conclusion of most commentaries on mission statements is that they are an essential factor contributing to an organization's enduring success" (p.54).
Astoundingly, though, mission statements have been the focus of surprisingly few rigorous academic studies. "The fact that there is no reliable and recognized base of research on mission statements is somewhat amazing because the virtues of having a well-articulated mission statement are extolled in almost every current management textbook," conclude Bart and Tabone (1998, p.54). Instead of being empirically confirmed, the nature of the relationship between mission statement presence and content and organizational performance has been assumed to be positive (Calfee, 1993; Piercy & Morgan, 1994). To continue the process of either validating or nullifying this assumption, this manuscript offers an exploratory empirical investigation of the impact of specific mission statement content on organizational longevity and survival.
It has been recognized that such types of research are needed to avoid the potential misdirection of practicing managers. Prior to elaboration of the research objectives, however, it is important to demonstrate that such an investigation has not yet been undertaken through reviewing the extant body of research on mission statements. As can be detected, there is a plethora of literature relating to the topic. However, many inquiries have proceeded based on the assumption that mission statements can be functional organizational tools, an assumption that persists yet remains tenuous.
Empirical and anecdotal studies of mission statements can perhaps be most systematically reviewed through classification based on the stated goals of the research. Using this categorization schema, seven unique streams of mission statement research are identified below.
The basic question emerging in this first stream of research relates to the purpose, objectives, or theoretical benefits of mission statement formulation. Some consensus has been reached regarding the basic assertion that mission statements are designed to fulfill three basic purposes: (a) to inspire and motivate organizational members to higher levels of performance (to provide them with a sense of mission; Campbell, 1993); (b) to guide resource allocation in a consistent manner; and (c) to create a balance among the competing and often conflicting interests of various organizational stakeholders (cf. Campbell & Yeung, 1991). But other potential functions of mission statements include providing a sense of direction, promoting shared values amongst employees, and refocusing an organization during crises. The intended audience of a mission statement is also the subject of debate, with some claiming it to be primarily be an internal tool (Klemm, Sanderson, & Luffman, 1991) and others affirming its value to external evaluators of mission statements, including industry analysts, stockbrokers, and investment managers (Pearce & David, 1987).
There have even been some studies examining the relationship between motivations to develop a mission statement and firm performance and employee behavior. Bart (1997), who refers to factors justifying the development and/or revision of a mission statement as "drivers," reports that mission statements developed to "provide a sense of purpose" tended to be performance-enhancing as well as elicit a positive correlation with mission statement satisfaction. In expanding his research on "drivers," Bart (2000) assessed the impact of mission statement generation (i.e., numbers and types of stakeholders involved) and dissemination (i.e., how the statement is communicated such as through newsletters or plaques) processes on subjective performance. But, as Bart and Tabone (1998) conclude, whatever the rationale or process, the overarching purpose for developing a mission statement is to improve firm performance.
While the majority of published literature on missions tends to extol the benefits of well-articulated and executed statements, there are those studies which argue against the value of a mission statement (i.e., they report that many well-run companies prosper without one and avoid wasting the time necessary to formulate a coherent statement; Coulon-Thomas, 1992, 1993; David, 1989; Klemm, Sanderson, & Luffman, 1991). In fact, Campbell (1997) even poses the question asking whether mission statements can be harmful, as seems to be the case when outside consultants dominate the process (Bart, 2000).
Other investigators approach the topic from a slightly different perspective, emphasizing that the problem with most mission statements is that they are "paper tigers" (Leonard, 2000), suffering from being too vague, having involved too few stakeholders, being too replete with hollow platitudes, and the like (cf. Ireland & Hitt, 1992). Importantly, studies dedicated to elucidating factors that inhibit mission statement formation establish as their objective the removal of these barriers. This is done without regard to an examination of the tangible benefits of mission statement formation. Instead, suppositions appear to be made such as, "developing effective mission statements can contribute to increases in a firm's overall performance" (Ireland & Hitt, 1992, p.42). As indicated previously, such assumptions generally lack substantiation.
Although hypotheses offered surrounding this area of investigation are relatively simple and unambiguous, results generated have certainly been conflicting and inconclusive. First, studies vary in terms of the estimated number of firms possessing mission statements. Reports range from about half of the companies in some samples to over 90% in others (cf. Schriefer, 1998). More conflicting, however, are conclusions reached regarding the impact of mission statement presence on a firm's financial performance. David (1989) did not find any correlation between performance and mission statement presence. Neither did Klemm, et al. (1991) and Coats, David, Longden, Stacey and Emmanuel (1991). Alternatively, Campbell and colleagues (1989, 1991, 1993) reported a positive relationship between mission statement presence and firm performance, as did Medley (1992), and Wilson (1992) who claimed that the presence of a mission statement can result in a 50% increase in organizational effectiveness. Throughout studies in this category, a variety of financial performance indicators, such as ROI, ROA, and profit have been employed as dependent variables. However, no previous study has examined organizational longevity as a dependent variable. Nor has any study attempted to correlate specific mission statement content with any form of performance outcomes.
Ashridge Strategic Management Center's founding director, Andrew Campbell, has spent much of his professional career studying mission statements. In fact, Campbell's framework of four important mission statement dimensions has come to be known as the Ashridge Mission Model (cf. Campbell, 1992). His four components, which include purpose, strategy, values, and behavioral standards, are defined in the first column of Table 1. The latter two dimensions, which incorporate "metaphysical" concepts, are intended to describe the organization's culture (Stevens, 1994). While the Ashridge Mission Model is adopted as the organizing framework for this manuscript, many authors have elaborated and fleshed-out his basic categories.
Pearce and David (1987), for example, identified eight key elements to be included in mission statements. Two years later, David (1989) identified nine key components: customers, products/services, location, technology, concern for survival, philosophy, self-concept, concern for public image, and concern for employees. He also noted that production firms address technology more often than do service firms. Bart (1997) expands the list to 20 components (by adding such items as specific financial objectives and concern for survival), but later reports his research has yielded a count of 40 different items or elements that are often included in mission statements (Bart, 1998). Want (1986 ), Pearce (1982), and Cochrane, David and Gibson (1985) have all elaborated on mission statement content.
There is indeed a great deal of inconsistency within the literature on mission statement content, even between publications by the same author. For example, Bart (1998) identifies the specification of financial goals as being a component of a "good" mission statement, while Bart and Baetz (1998) report that inclusion of financial objectives in a mission statement is correlated with poorer financial performance and should resultantly be avoided. Ackoff (1986) argues that a first criterion of an acceptable mission statement should be the capacity to be challenged. Certainly, given the variety of models offered in the management literature surrounding desirable mission statement content, challenge seems inevitable.
As a subfield of this area of research is a plethora of literature which assesses the degree to which certain stakeholders are or should be mentioned in mission statements (cf. Martens, Matthyssens, Bogaert, & Vandenbempt, 1996). For example, Bart's (1997) listing, which is consistent with many others, concludes customers and employees are mentioned most often, followed by shareholders, society, and competitors. Alternatively, suppliers tend to be included much less frequently (cf. Leuthesser & Kohli, 1997). Finally, there are mission content studies which describe how mission statements topics have evolved over time (e.g., recent mission statements are more likely to include references to suppliers, quality, and customer service than are older statements; O'Gorman & Doran, 1999.)
Although it would be a stretch to claim that the field has established consensus on the essential skeletal components of an effective mission statement, over a decade ago Pearce and David's (1987) ground-breaking study concluded that higher performing firms have comparatively more comprehensive mission statements amongst a sample of Fortune 500 companies. This conclusion was reached following a content analysis (frequency count) identifying whether mission statements included references to such issues as target customers, principle products/services, geographic domain and core technologies. Specific results suggested the most "desired" mission statement components were corporate philosophy and identification of self-concept and public image. However, the study did not concede which philosophies or images were most conducive to high-performance, just that mention of these elements was correlated with superior financial accomplishments.
A similar study was conducted by Bart and Baetz (1998) who reported that the presence of financial goals in a mission statement was negatively correlated with firm performance (as measured by return on sales); statement of organization purpose and specification of values was positively related with performance; and identification of a firm's business strategy made no difference. While this study is significant for its use of financial measures as dependent variables, it offers no insight into which types of values, for instance, might be related to performance. Instead, independent measures were dichotomous, coded as either being present or absent.
A final study is this stream was conducted by Rarick and Vitton (1995), who report high- content mission statement companies have an average return of 26.2% versus those with low content who report an average return of only 13.7%. As a result, they conclude, "although it is difficult to make a definitive causal assumption, it would appear that firms engaged in the type of formal strategic planning process that produces a mission statement are more likely to achieve good financial and bottom-line performance" (p. 12).
A related field of inquiry relates to the length of missions, as high-content statements predictably tend to be longer. In contrast to the general findings of Pearce and David (1987) who support more comprehensive statements, Bart (1998) reports that shorter, simpler missions (30 to 60 words) are more effective than verbose, elaborate ones. At this point in time, this apparent contradiction has yet to be resolved.
Not all research investigating the efficacy of mission statements have used macro-level direct indicators of firm performance as the dependent variable. For example, Bart and Baetz (1998) selected satisfaction with mission statements as the outcome of interest. Others have used firm-level behavioral variables. For example, Germain and Cooper (1990) report mission statements addressing customers as a primary stakeholder are more likely to survey customers and maintain specific indicators of customer service performance. Still others, such as Bart (see Bart, 1998 and Bart, 2000) and his colleagues, have successfully published mission statement research using the respondents' "satisfaction with overall [organization] financial performance" evaluated on a 10-point Likert scale as the measure of "bottom-line financial performance" (Bart, 1998, p.60). In arguing for the superiority of subjective measures over direct assessments of performance, Bart suggests that "arbitrary numerical measures of profitability" (such as net profit) may be contaminated by factors such as "firm size," and that managers can take these contaminants into account when evaluating firm success (Bart, 1998, p. 60-61). Indeed, while the merits of this opinion can be debated, it is important to note that mission statement investigations may be alleged to lag behind other strategy and business policy research in terms of sophistication.
Gibson, Newton, and Cochran's (1990) study of 176 not-for-profit hospitals exemplifies research in this category. They found, for example, greater agreement to the statement, "the mission statement is used as a guide for gaining commitment to organizational values and goals," than to the statement, "the development of a mission statement has been and is an important aspect of our planning." Further, they report that hospitals in environments characterized by "low competition" and those performing less well in terms of occupancy are more likely to agree with the latter statement than are higher-performing hospitals in less competitive environments.
A study conducted by Bart (1997) found that greater satisfaction with the mission statement was correlated with variables assessing the mission's perceived degree of influence over organizational member behavior, and that satisfaction with mission statements was correlated with specific components of statement content (such as the expression of the firm's distinctive competence). Finally, Bart and Baetz (1998) found that satisfaction with mission statements was positively related to firm performance.
Despite the existence of all the studies reviewed, one straightforward question posed over a decade ago remains largely unanswered: "What is the nature of the link between mission statements and organizational performance?" (Pearce & David, 1987, p.113). With regard to specific mission statement components, we have very little evidence upon which to even guess at the answer. As indicated, research examining the relationship has generally been inconclusive, perhaps because investigations have not yet been sufficiently refined. For example, we propose that much insight can be gained by expanding research efforts from looking simply at whether or not mission statements made reference to organizational values to looking at the impact of specific values such as fiscal conservatism or community-mindedness or developmental-orientation.
Another possibility for strengthening the extant literature may be in the reconsideration of performance indicators. As stated previously, some authors have cast doubt on the comparability of cross-organizational financial measures. However, firm longevity is one outcome that is difficult to manipulate or misinterpret, as critics claim to be possible with financial measures. While we are not suggesting a redirection from subjective and firm-level financial measures as dependent variables, we do believe organizational longevity might simultaneously be considered as an important outcome in mission statement research (de Geus, 1997). While authors have suggested an empirical link between mission and survival (Ruef & Scott, 1998), thereby confirming long held beliefs (Drucker, 1973), no evidence exists to support or dispel the notion that mission statements are related to organizational longevity. However, as de Geus (1997) states, "when thinking about what constituted the real measure of corporate success, I took my model from biology, where I think there is general agreement that the two measures of success of any living being are to survive and develop its potential" (p. 42). Longevity is a measure of this success. As such, the focus of the manuscript now shifts to a review of the literature on organizational mortality.
Prior to de Geus' (1997) seminal work on living companies (which will be discussed in the following passages), most organizational survival research focused not on surviving companies but alternatively on dying ones. More specifically, most studies in this stream of research have adopted the prediction of mortality as their objective (cf. Preisendorfer & Voss, 1990). As a relatively new area of interest, the majority of organizational survival studies have been conducted within the last two decades. Even so, some interesting insights are emerging. Taken collectively, studies have largely looked to financial ratios as predictors of failure (Lussier, 1995), but have also concluded that decline is a function of managerial behavior (escalating commitment, strategic paralysis, and organizational inertia); environmental characteristics (demand turbulence and economic decline; Bacot, Hartman, & Lundberg, 1993); strategic competition/population density (Utterback & Suarez, 1993); and industry characteristics (technological conditions; Audretsch, 1995). As can be concluded, predictors of demise receiving the most attention have been external in nature (van Witteloostuijn, 1998), despite the finding that external problems decrease and internal problems increase over the life-cycle of an organization (Dodge & Robbins, 1992). Some basic internal/operational factors have been considered, such as the organization characteristics of firm age (Kelly & Amburgey, 1991) and size (Mata, Portugal, & Guimaraes, 1995). Yet, only one study has been undertaken to empirically demonstrate that firms engaged in strategic planning have a better chance of survival that those that do not (Lussier, 1996).
Research efforts in this vein continue, but Arie de Geus (1997), branded the "Father of Learning Organizations," persuasively argues that our investigations may best be dedicated not toward predicting business failures, but instead toward enhancing the longevity of organizations. Although mission statement research has found that "concern for survival' is not a commonly included component (Bart, 1997), it can reasonably be assumed that most organizations desire to prolong their lifespan.
The discipline's respect for Arie de Geus' work, summarized in a Harvard Business Review article entitled "The Living Company" (which received the 1997 McKinsey Foundation Award for Management Research and the 1997 Edwin G. Booz Prize), is evidenced by the numerous accolades articulated in book reviews published in prestigious academic and practitioner outlets (see Kelly, 1997 in the Academy of Management Executive; Jennings (1998) in The Futurist; Maitai (1997) in Sloan Management Review; Stamps (1997) in Training; and Pospisil (1997) in Industry Week). Indeed, de Geus's book entitled The Living Company: Growth, Learning, and Longevity in Business has been "widely recognized as one of the most important management books of the decade" (Zhu, 1999, p.28). The essence of de Geus' argument is as follows:
First, society must strive to increase the life span of companies. Throughout de Geus' writings, he focuses on the amazingly short life-span of companies, emphasizing that the average life expectancy of a firm is 12 Â½ years, and increases to only 40 or 50 years in large, multinational (Fortune 500) conglomerates (de Geus, 1998). de Geus envisions the tripling of that lifespan, and eventually elongating the life expectancy of business enterprises to their theoretical lifespan of hundreds of years. As justification for this vision, de Geus compares companies to the human species, which has always had a theoretical lifespan of around 100 years. But 30,000 years ago, the average Homo sapiens' life expectancy was 32 years, while today it is more than twice that due to improvements in the human condition.
Second, society must encourage the existence of "living" companies and discourage the existence of "economic" companies. The picture de Geus paints of "economic" companies is harrowing. He describes them as profit-driven bureaucracies, with rigid hierarchies and tight controls, in which human assets are sacrificed for the short-term financial benefit of a small group of managers and shareholders (Chambers, 1997). While Samuel Brittan asserted, "in matters of production and exchange, we will do others more good if we behave as if we are following our self-interest rather than by pursuing more altruistic purposes" (cited in Kay, 1997), and while renowned economist Milton Friedman argues that profit-maximization is the single element critical to firm survival, de Geus takes issue with this perspective.
Importantly, de Geus has some support for his concern regarding the relentless pursuit of profit maximization. In fact, it has been suggested that economic firms pursue profit implacably to the point of self-destruction through escalating commitment to a losing course of action (Yandrick, 1994). The evolutionary biology theory of "spite," which holds that a mammal is spiteful when it engages in actions which harm not only others but also itself (e.g., lowering prices intending to abolish competition but eroding a firm's bottom line), has also been cited as being applicable to business entities (Schaffer, 1989). This possibility had led van Witteloostuijn (1998) to conclude that pure profit-maximizing behavior may come at the expense of organizational survival.
"Living" companies, in contrast to economic ones, are not instruments for wealth creation, but are communities that work to perpetuate themselves as a means for sustaining members of the community, and indeed, society at large. Wealth creation and profit are considered necessary, but not sufficient–not the raison d'Ãªtre (Medcof, 1999). That is, in living companies, organizational profit is likened to human breathing--it is essential for survival but not the purpose of human life (Stone, 1997).
Arie de Geus identifies four distinct characteristics shared by living companies (cf. Jennings, 1998). These include:
De Geus believes that companies die because their managers have focused on the economic activity of producing goods and services and have forgotten that an organization's true nature is that of a community of human beings (Brenneman, Keys, & Fulmer, 1998).
Notably, de Geus is neither the first nor the only theoretician to support the notion of an organization's responsibility to a larger social community. In 1953, the same year Milton Friedman asserted that profit-maximization is the single prerequisite necessary for firm survival and that the social responsibility of business is to maximize its profits, Bowen (1953) focused businesses' attention to societal well-being. This sparked a paradigm shift causing firms to acknowledge "the growing recognition on the part of both businessmen and academics that while profit is usually required for the firm to survive, pursuing profit is not the firm's only responsibility" (Meznar & Nigh, 1993, p.20). Ackerman (1975) similarly argues that firms must be deemed legitimate by organizations to survive. And, Davis (1983) asserts, "society has entrusted business large amount of society's resources to accomplish its mission, and business is expected to manage those resources as a wise trustee for society" (p. 95). Kaku, the former Chairman of Canon, argues the point even more persuasively (1997) by stating, "if corporations run their businesses with the sole aim of gaining more market share or earning more profits, they may well lead the world into economic, environmental, and social ruin" (p. 63). Finally, van Witteloostuijn (1988) concludes, "organizational decline is a serious matter not only for immediate stakeholders but also for societies as a whole" (p.501).
Before de Geus' ideas are internalized and executed, however, some empirical validation of his recommendations (which were derived from case studies) seems necessary. Hence, the study reported in this manuscript aims to obtain the following two research objectives:
Research Objective 1: In the exploratory genre of previous mission statement studies, specific types of purpose, strategy, values, and behavioral standards will be correlated with organizational longevity to assess the degree to which specific mission statement components are related to the life expectancy of companies.
Research Objective 2: A regression analysis will be conducted to attempt prediction of lifespan according to de Geus' theoretical formulation. Specifically, it is proposed that mission statement references to certain ideas (community, fiscal conservatism, learning/developing, and adapting), as well as certain corresponding financial measures (leverage/debt utilization and research & development expenditures) will predict lifespan.
Most of the extant research on mission statements has relied upon written correspondence addressed to companies requesting mission statements, and usually, completion of an accompanying questionnaire. In addition to common method variance bias and non-response problems with this methodology, previous investigators have reported concerns such as the receipt of multiple but different mission statements from a single company. In the present study, these problems were mitigated by using mission statements published in The Mission Statement Book (1995) by Jeffrey Abrahams (Ten Speed Press). This book represents a compilation of over 300 corporate mission statements from "America's top [service and manufacturing] companies" such as FedEx, Avis Rent A Car, General Motors, and Bausch & Lomb. The final sample used in the present study consisted of 162 companies, representing one of the largest mission statement collections ever empirically examined in the management literature. The original number was reduced because the book contained mission statement from some organizations that were not-for-profit, small in size, or not publicly traded. Forehand's (2000) manuscript arguing for the "need for mission statement research that focuses on specific sectors of the market" (p. 270) led to our exclusion of not-for-profit firms. Justification for the exclusion of small businesses from our sample came from O'Gorman and Doran (1999), who suggest small companies use mission statements for different purposes and functions than do larger firms. The publicly-traded criteria was important because corresponding information related to the financial performance of these companies was collected from Compustat.
The mission statements were then content analyzed using SWIFT (Structured Word Identification and Frequency Totals; see Smith, Heady, Hamilton, & Carson, 1996 and Hamilton, Smith, Heady, & Carson, 1997 for a detailed explanation of this content analysis program). SWIFT, unlike many computerized content analysis programs, does more than count just words. The program allows the researcher to group words into subcategories and subcategories into categories (for example, categories may be aligned with the Ashridge Mission Model). To use SWIFT, researchers create a relevant set of key words and phrases with descriptors that form the basis for analyzing the text. Alternatively, SWIFT can develop a schema if a theoretical basis is lacking. Content analysis (Kolbe & Burnett, 1991) has been previously applied to the examination of mission statements (e.g., Kabanoff & Holt (1996) found an increasing use of the term commitment between 1986 and 1990). However, in most cases the analysis was a manual count of frequencies, introducing potential reliability problems that are avoided with SWIFT.
To examine the first research objective, specific mission statement content terms (and their synonyms which can be obtained from the authors) relating to the Ashridge model components were counted using SWIFT and then the frequency of those terms was correlated with company lifespan (computed as the difference between the current year and the year of the company's formation). Table 1 presents the terms and phrases analyzed by SWIFT. See Table 1.
For example, to examine beneficiaries of the company's existence we examined such terms as customers and investors. To examine strategies used by the company to pursue its objectives, we examined such terms as long-term orientation and fiscal conservatism. To examine company values, we examined such terms as civic responsibility and employee well-being. And, to examine the company's behavioral standards, we examined such terms as improvement-orientation and adaptive responses.
To examine the second research objective, we conducted a regression analysis to predict company lifespan based on de Geus' theoretical formulation. Specifically, it was proposed that mission statement references to certain ideas (community, fiscal conservatism, learning/developing, and adapting), as well as certain corresponding financial measures (leverage/debt utilization and research & development expenditures) would predict lifespan if de Geus conceptualization of living companies was to be confirmed.
Before reviewing this table, perhaps it is important to note that only four of these correlations emerged as significant. Inclusion of customers (r=-.12) or employees (r=-.03) in the mission statement, the two stakeholders most likely be addressed, was not related to longevity. In contrast, specifying the business existed to serve the community/society (r = .15) resulted in a significant relationship with company lifespan. Regarding the strategy variables, none of the relationships were significant. This lends further support to the recommendation that specifying financial objectives such as profit does not enhance the desired benefits of mission statements. Values related to longevity included only: (1) the importance of accountability/stewardship (r = .15), and (2) respect for a company's civic or social responsibility (r = .17). Behaviorally, the only content correlated to lifespan was mention that actions were driven by ethical, equitable, or moral principles (r = .13). Interestingly, the correlational results do collectively support de Geus' "living company" orientation toward stewardship, but they do not support his other criteria espoused as characteristics of living companies.
Interestingly, no other mission statement terms were correlated with organizational longevity. There are at least three potential explanations for this anomaly. First, it is possible that the espoused content of mission statements do not reflect the actual emergent strategies of firms. Hence, while a company may pursue environmental adaptation as a survival strategy, it is not included in the mission statement. Second, it may be that the absence of significant correlations relates to the fact that some companies will include items (such as "customer" references) when they excel at meeting/achieving those items, while others deficient at such activities include them to refocus energies toward these items. In essence, these two groups may cancel out the effects of each other. Third, it is possible that other mission statement components not included in the schema are more related to organizational longevity.
Despite the explanation, the de Geus framework does not appear to be broadly or sufficiently supported in the correlational analysis of mission statement components. And, two of the actual direct financial measures he cited as life-prolonging are statistically significant predictors of organizational longevity in the direction opposite of de Geus' theoretical framework. Specifically, level of debt (as reported by Compustat) is positively correlated (r=.31) with longevity while expenditures on research/development as a percentage of sales is negatively correlated (r=-.25). The only remaining significant correlates of organizational lifespan reported in Table 1 were direct COMPUSTAT measures of net income (r=.21) and sales (r=.15).
Regression results for the second research objective are presented in Table 3. The only significant predictors of organizational longevity were type of firm (manufacturing, which was a dummy coded variable based on SIC), leverage, a community orientation in the mission statement, and research/development expenditures (which was negative). The overall R2 for the model was .24. See Table 3.
Looking at the results collectively, then, it can be preliminarily concluded that de Geus criterion of "identity" seems characteristic of living companies, while financial conservatism and tolerance seem completely uncharacteristic. Regarding his criterion of sensitivity, older companies seem no more likely to adapt than younger companies. Beyond an assessment of de Geus, however, the results do seem to validate that mission statement references to an organization's social responsibility are intricately related to company survival. Investigation of the mechanisms through which this finding might be explained would be a fruitful area of future research. Indeed, this research offers a first step in this direction by invalidating the statement that "there are currently no studies that have attempted to relate the specific content of…mission statements with performance" (Bart, 1998, p.66).
The results of this study do interestingly corroborate the findings of Falsey (1989) who reported that companies that expressed a sense of community responsibility in their mission statements performed well over a sustained period of time. And we also confirm that, like companies dating back to the 1920s, corporate credos which include a healthy dose of the "golden rule" invite success (Stamps, 1999). However, many questions remain unanswered, including some that relate to the theorizing of de Geus.
When addressing such questions, it may be useful to recall the limitations of this study. First, despite an attempt to include a representative cross-section of different companies, the compilation of mission studies used may not adequately represent the universe of mission statements in terms of organization type, or statement quality or timeliness. And, statistical power is not maximized based on our sample size, potentially obscuring some significant results.
Bart (1999) concluded, however, that sufficient evidence now existed to "challenge those critics and cynics who liked to pronounce (unjustifiably) that mission statements were not important or that there was no direct link between a mission statement and performance" (p.19). Based on the results of our study, we would caution that claiming such a victory might be premature. Instead, we would concur with Bart's (2000) most recent admission that "performance-based empirical evidence [on the relationship between mission statements and organizational outcomes] is…very thin" (p.45). Indeed, this study is not the first to cast doubt on the relationship or impact of mission statements and outcomes (see David (1989) who examined earnings, ROI, and earning per share; and Klemm et al (1991) who examined profit and turnover). However, persevering in studying the relationship between strategic planning and firm performance are likely to yield considerable benefit, redirecting the mission statement literature which has prematurely become so prescriptive in the absence of sound descriptive studies.
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|Ashridge Mission Model of Components of a Mission Statement||Key Mission Statement Terms Articulating Mission Statement Components||Relationship with de Geus Criteria of Living Companies|
Why does the company exist? What is its reason for being? For whose benefit does the company exist?
How does the company pursue its strategic objectives? Identifies the commercial rationale for the business.
Financial Measures (sales, profit, return)
Dominance of Competition
Research & Development
|Conservatism in Financing|
What does the company believe in? Setting priorities and basic beliefs, aspirations, and philosophical priorities. Establishes the moral rationale for business.
Cost-Consciousness (sensitivity to product/service value and price)
STANDARDS OF BEHAVIOR
How does the company act or behave?
|Concept Identified in Mission Statement
(organized by Ashridge Mission Model Components)
|Correlation with Longevity|
|Behavior–Ethically/ Morally/ Honestly/ Fairly||.13*|
|Other–Number of Employees||.03|
|Other–Return on Assets (ROA)||.08|
|Other–Research and Development / Sales Ratio||-.25**|
* = p < .05
** = p < .0
|Variables in Regression Equation||Regression Coefficient|
|Community-Orientation in Mission Statement||.18**|
|Ratio of Research/Development
Expenditures to Sales
|R2 = .24 (F=12.77, p < .001)|
* = p < .05
** = p < .0
Mark Smith is a Professor of Management at the University of Louisiana at Lafayette. He received his BBA from the University of Houston, his BFA from Sam Houston State, his MBA from Harvard University, and his Ph.D. from University of Washington.
Ronald B. Heady is a Professor of Business Systems, Analysis, and Technology at the University of Louisiana at Lafayette. He received his BS from Kansas University, a MSIA from Purdue University and an MS from Stanford University, and his Ph.D. from Massachusetts Institute of Technology.
Paula Phillips Carson is a Professor of Management at the University of Louisiana at Lafayette. She received her BBA from Loyola University, her MBA from Millsaps College, and her Ph.D. from Louisiana State University.
Kerry David Carson is a Professor of Management at the University of Louisiana at Lafayette. He received his BS from Purdue University, his MSW from Indiana University, and his Ph.D. from Louisiana State University.