Elasticity of the Airline Industry Essay Example

statements (Jauch and Glueck 1988, Johnson and Scholes 1999, De Wit and Meyer 1994, Barrow et al. 2001), but little discussion, still less empirical evidence, of how mission statements are used, by whom and their impact on performance.

Research since 2000 has attempted to remedy the deficiency in the mission statement literature and to establish a link between mission statements and performance. Bart and Baetz's (1998) in-depth study showed that the presence of mission statements was not automatically associated with superior company performance. Where internal performance and resource allocation measures were aligned with the mission there was a significant and positive correlation between mission and performance.

Main:

Two thirds of responding organisations with more than 5000 employees had a mission statement compared with only 40% of smaller companies (klemm and redfearn 2004)

The majority (80.7%) of the people involved in compiling mission statements in UK companies were of director grade and above. Non- management employees account for only 4.8% of the personnel involved, with shareholders accounting for only 1% (Table 2). These results confirm the findings of Klemm et al. (1991) and Rigby (1998) that compiling the mission statement in a plc is a top-down process, generally the preserve of the most senior managers.

One reason that mission statements are so popular even though there is no direct evidence that they do any good is that there is no direct evidence that they do any good. In other words, companies adopt them because no one can prove that they don't work. So what if you can't prove that mission statements have any direct effect on the bottom line--it's hard to prove that anything a company does has a direct effect

on the bottom line. Even operating performance can be only tenuously linked to financial performance, in the opinion of many experts.

Mike Lovdal is vice president of Mercer Management Consulting Inc., which has surveyed hundreds of companies in this area. "A mission statement is one of 100 factors that count," he concludes. "It's like trying to correlate sunspots with the bottom line." Mission statements thus are like rabbit's feet and other lucky charms: Carrying one probably won't do any good, but what can it hurt? because they do work--for a while. Angela Baron and Mike Walters noted in their study for Institute of Personnel and Development IPD that while mission statements can help companies change employee behavior in the short run, the improving effect that mission statements seem to have on employees usually has less to do with the mission statements than with the strenuous propaganda campaigns usually mounted on their behalf.

Changing attitudes takes more time. Alas, old habits linger longer than most execs these days. The boss moves on, convinced that mission statements do more than they actually do, while back on his old watch everyone gradually slips back into the old ways. . . . because they seem to work. Executives often resort to what Lovdal calls proxy correlations to prove the efficacy of mission statements. A lot of the firms that end up on Fortune's most-admired list, or dominate their markets, or collect the most money for the United Way, have cracker-jack mission statements.

A company that is good at drafting mission statements is usually good at everything else too. The firm's success explains the mission statement--not the other way around. A lot of

companies at the bottom of such lists have cracker-jack mission statements too. You may as well try to predict a firm's success by the color of the carpet in the executive suites or the make of the CEO's limo. . . . because they work at things that can be measured. The IPD roam found that most of the companies it looked at measured the success of their mission statement not in terms of the effect it had on the firm's performance but in terms of its effect on employees.

This can be measured by how many of its people remembered it (for example) or whether and to what extent they understood and identified with it. Says Roberts, "It is sometimes easier to draw a link between mission statements and people's comprehension of what kinds of behaviors are required" than it is to draw a link between behavior and company success. This proxy correlation is perhaps more familiar from another realm: People by the millions can love your commercials, for example, and never buy your product.

Why do they create mission statements / the purpose?

Some consensus has been reached regarding the basic assertion that mission statements are designed to fulfill three basic purposes:

• to inspire and motivate organizational members to higher levels of performance (to provide them with a sense of mission; Campbell, 1993);
• to guide resource allocation in a consistent manner;
• 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).

The results in Table 3 show that most senior managers perceive the main internal purpose of a mission statement as being to supply direction (27% of the respondents) followed by its use during strategic planning (24%). This finding supports Olins's (1990) assertion that one of the roles of the mission statement is to aid in maintaining strategic direction, which can be interpreted as reminding employees about what they are supposed to be doing on a daily basis.

Analysis of references to stakeholder group (customers, employees, City analysts, financial institutions and suppliers) showed that customers are the most frequently mentioned stakeholders in the mission statements (Table 5). One interpretation is that mission statements are of value in telling these other stakeholders that the customers are very important.

Conclusion:

Clearly there is no strong evidence either way on the link between company mission statements and performance. Perhaps a more fruitful line of enquiry is to examine the effect of mission statement on strategic decisions. The development of statements of missions and objectives are now embedded in the management process. Therefore it is timely to investigate whether, and in what ways, the company missions are referred to in the day-to-day process of managerial decision making at all levels.

One reason that mission statements are so popular even though there is no direct evidence that they do any good is that there is no direct

evidence that they do any good. In other words, companies adopt them . . . because no one can prove that they don't work. So what if you can't prove that mission statements have any direct effect on the bottom line--it's hard to prove that anything a company does has a direct effect on the bottom line. Even operating performance can be only tenuously linked to financial performance, in the opinion of many experts.

Mike Lovdal is vice president of Mercer Management Consulting Inc., which has surveyed hundreds of companies in this area. "A mission statement is one of 100 factors that count," he concludes. "It's like trying to correlate sunspots with the bottom line." Mission statements thus are like rabbit's feet and other lucky charms: Carrying one probably won't do any good, but what can it hurt? . . . because they do work--for a while. Angela Baron and Mike Walters noted in their study for IPD that while mission statements can help companies change employee behavior in the short run, the improving effect that mission statements seem to have on employees usually has less to do with the mission statements than with the strenuous propaganda campaigns usually mounted on their behalf.

Changing attitudes takes more time. Alas, old habits linger longer than most execs these days. The boss moves on, convinced that mission statements do more than they actually do, while back on his old watch everyone gradually slips back into the old ways. . . . because they seem to work. Executives often resort to what Lovdal calls proxy correlations to prove the efficacy of mission statements. A lot of the firms that end up

on Fortune's most-admired list, or dominate their markets, or collect the most money for the United Way, have cracker-jack mission statements.

A company that is good at drafting mission statements is usually good at everything else too. The firm's success explains the mission statement--not the other way around. A lot of companies at the bottom of such lists have cracker-jack mission statements too. You may as well try to predict a firm's success by the color of the carpet in the executive suites or the make of the CEO's limo. . . because they work at things that can be measured.

The IPD roam found that most of the companies it looked at measured the success of their mission statement not in terms of the effect it had on the firm's performance but in terms of its effect on employees. This can be measured by how many of its people remembered it (for example) or whether and to what extent they understood and identified with it. Says Roberts, "It is sometimes easier to draw a link between mission statements and people's comprehension of what kinds of behaviors are required" than it is to draw a link between behavior and company success.

This proxy correlation is perhaps more familiar from another realm: People by the millions can love your commercials, for example, and never buy your product.

References:

1. Bart, C. K. (1998). Mission matters. CPA Journal, 68(6), 56-57.
2. Bart, C. K. (1997). Sex, lies, and mission statements. Business Horizons, 40(6), 9-18.
3. Bart, C. K. (1997). Industrial firms and the power of mission. Industrial Marketing Management, 26(4), 371-383.
4. Campbell, A.(91993). The power of mission: Aligning strategy and culture. Planning Review Special
   

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