The Strategic Planning Process: The Link between Mission Statement and Organizational Performance

ABSTRACT The strategic planning process requires development of a mission statement for the organization. The mission statement incorporates the organization's purpose and vision for the future. A 9-item mission statement evaluation scale was developed to measure the completeness and quality of an organization's mission statement. Further, the link between the completeness and quality of an organization's mission statement and the organization's financial performance was investigated. Results indicate a significant, positive relationship between the completeness and quality of the mission statement and the organization's financial performance. Strategic managers can expect that the result of improving their organization's mission statement will be improved financial performance. INTRODUCTION Senior capstone courses in Business Policy or Strategic Management are required in virtually every undergraduate (and graduate) business program. Strategic management texts used in these courses tout mission statements that articulate a firm's mission as critical elements of a company's overall strategic management process. They are championed as important mechanisms to provide crucial information to internal and external stakeholders about the purpose and direction of the organization. Instructions are provided in ways to properly develop, craft, and write mission statements. Distinctions are regularly made between "quality" mission statements versus those that lack "quality. " However, despite this focus, little if anything is discussed concerning the impact mission statements have on performance outcomes. This study is designed to investigate whether the quality and completeness of a firm's mission statement has a positive influence on various organizational performance outcomes. REVIEW OF THE LITERATURE Strategic management texts include a process of strategic management that incorporates mission as one of the vital tasks in the strategic planning process (Thompson & Strickland, 2001; Hill & Jones, 2000; Wheelen & Hunger, 2000). In addition, mission statements are presented as important tools for communicating the mission to internal and external stakeholders. A number of definitions of mission statements exist. Bart and Tabone ( 1998), Rigby ( 1998), and Drohan ( 1999) all provide definitions that essentially say that mission statements should reflect an organizations purpose and the means by which that purpose will be accomplished. Pearce ( 1982) states that the mission statement should include the ultimate aims of the firm thus providing unity of direction for managers, shared expectations by employees, and a projection to customers of what the firm provides and represents. Calfee (1993) says that mission statements answer the questions of what business the firm is in, what its objectives are, and how the company will win. This will ensure that all managers understand their role in executing the mission. Research studies attempting to link mission statements to organizational performance have been conducted. Pearce and David (1987) compared mission statements of higher financial performing Fortune 500 firms to those of lower financial performing companies. Higher performing organizations "prepared written statements for public distribution giving special attention to their corporate philosophy on the firm's 1. basic beliefs, values, aspirations, and priorities, 2. desired public image, and 3. self-concept, including competitive strengths. " Mission statements are often customer-focused. Germain and Cooper ( 1990) found that firms that have customer service missions are more likely to seek input from customers and are also more likely to develop and maintain customer service measures. Also, customer service activities by the company are more likely to be monitored by firms with customer service mission statements. Forehand (2000) studied firms within the healthcare industry and concluded that, within this particular industry, "solid mission statements can improve the performance of mangers, employees, and the healthcare organization. …