EFFECTS OF VISION AND MISSION STATEMENT ON FIRMS’ SURVIVAL
C HAPTER TWO
REVIEW OF LITERATURE
Introduction
Vision is defined as a mental image of a possible, realistic, credible and attractive future (Bennis & Nanus, 1986; Leavitt, 1986). It provides a road map and motivates people to act and interact to achieve this ideal. (Tichy & Devanna, 1990; Collins & Porras,1994; Quigley,1993; Parikh,1994).
In a special issue on 'vision', Business Today (1996) put forth the definition of a vision as follows:
"An inspirational picture that can be created, offering clarity among confusion, hope amidst despair, and unity of purpose amongst diversity of personal causes."
An analysis of the above definitions shows the following commonalties-
,/ Most authors consider vision as an image of the future
,/ Vision provides guidelines for the realizing the image.
Further, since it is perceived to be an image, the realization of a vision depends on the people comprising the organization. The power of the vision lies in that it motivates the people subscribing to it to strive for its implementation and thereby fulfill their dream. The vision provides the direction for action.
Conceptual Framework
Mission and vision statements: conceptual and definitional issues:
Many different organizations use different vocabularies to communicate strategy, some do so blatantly in an effort to portray uniqueness whilst others according to Sufi and Lyons (2003) confuse them unknowingly. There is no doubt in the strategic management literature about the distinctiveness of mission and vision statements. This notwithstanding it is not uncommon for organizations to capture their mission and vision statements in a single statement (see Sufi and Lyons, 2003) for that of Hilton hotels.
Mission statements are widely believed to be antecedents to any strategy formulation effort (Thompson and Strickland 1992; Wheelen and Hunger, 1998; Lyles et al. 1993). More fundamentally, mission statements are supposed to capture the overriding purpose of an organization in line with the values and expectations of stakeholders and should typically answer the questions: “what business are we in?” (Johnson et al., 2008); and “what is our business for?” (Drucker, 1973). In furtherance of these arguments, mission statements are said to do a good job in capturing corporate level strategy in terms of scope, boundaries and value creation (Johnson, 2008; David; 1993). Mission statements have been reported as a broad overarching framework around which other strategic concerns like vision, strategic intent and capabilities, goals, objectives, core values, behavioural standards, business models etc evolve (Campbell and Tawadey, 1992; Lynch, 2000).
The literature is inundated with those scholars who believe that before writing a mission statement, leaders in the organization must have an idea of what is in store for the future and thus the vision is the foundation for the mission statement. The vision provides a strategic direction, which is the springboard for the mission and related goals. Whilst this element of discourse exists, there is overwhelming consensus about the future orientation of a vision statement as opposed to that of a mission statement. Logically no organization wants to remain static; it is not uncommon to come across what is often referred to as a ‘dream’ that a founder of an organization has. A vision is meant to evoke powerful and compelling mental images of the desired future states of their organizations. ‘Dreaming’ and aspirations about tomorrow is a defining tenet of entrepreneurial organizations as well as those organizations whose strategy formulation process could be described as entrepreneurial according to Mintzberg and Waters (1985). Vision statements are supposed to be challenging and ambitious yet workable enough to evoke employees’ ingenuity as far as its realization is concerned. Core values are enduring principles, ideologies and world views that the founding fathers of organization hold in high esteem; these are sometimes referred to ‘organizational vision’ (Sufi and Lyons, 2003). The enduring nature of these core values according to Sufi and Lyons (2003) must provide the toast for a vision for that matter. Authors such as Hussey (1998) and Mintzberg and Quinn (1996) explained that the vision statement should include core values or core ideologies that distinguish one organization from another.
Mission and vision statements: the debate about their relevance:
Do mission and vision statements matter? Piercy and Morgan (1994) and Simpson (1994) are amongst the many who questioned the usefulness and benefits of mission statements. A careful look at the literature however presents an interesting dichotomy of arguments. There are those strategists who question the need at all for mission and vision statements on one hand and those who believe creating one is good, but using it is even better. Sharing a thought in these arguments, Mullane (2002) explained that it is not the contents of the mission statements that stirs debate, rather it is the process used to prepare the document and how the finished document is employed in the organization that comes to question. Most often than not mission and vision statements are thought of as a creation of senior management largely reflecting a mandatory formal process which product is either an obscured document that only is mentioned in annual reports or tacked up as a wall hanging that almost immediately gets forgotten about. Goett (1997) was one of the authors who critiqued the pro-mission and vision statement arguments based on these observations. Calfree (1993) observed that mission and vision statements developed this way are better communicated to Wall Street rather than those within the organization as they tend to reflect messages about growth and profitability. One of the main objections of those from the anti- mission and vision school of thought is that too many of these statements sound generic and are not actionable (see Goett, 1997; Simpson 1994). It has also been argued that people often mistake vision statements for mission statements (Sufi and Lyons, 2003); creating more confusion than clarity.
The body of literature and research supporting the relevance of mission and vision statements to organizations however far outweighs the opposing view. Probably there is a considerable attempt by academics and practitioners to legitimize a tradition long established. This crusade has triggered in its wake empirical studies of all forms to make a case for the need and relevance of mission and vision statements. A study by Rigby (1994) rated mission statements second of all used tools particularly because they believe it is a useful ingredient in organizational integration which gets everyone focused on objectives and working together to pull in the same direction. Numerous studies have also delineated this ‘rally-around the flag’ type of contribution that mission and vision statements do (Klemm et al., 1991; Coulson-Thomas, 1992; Raynor, 1988).
There seems to be an overwhelming consensus that mission and vision statements are communication tools for both internal and external stakeholders. They portray organizational image and uniqueness. Lynch (2000) made a strong case for mission and vision statements as tools for communicating organizations uniqueness in terms of ownership, resources or environmental circumstances. The managers of Hilton hotels believe their mission statement contains elements that distinguish it from other businesses (Sufi and Lyons, 2003). According to Germain and Cooper (1990) these statements communicate public image of the firm to important stakeholders and groups in the firm’s task environment. Internally mission and vision statements are believed to communicate desirable attitudes, work ethic, cultures, and values that employees can operationalise in their choice of actions and inactions. Karami
(2001) suggested that a mission statement focused on customer values can lead to creation of a customer service culture and increased levels of customer satisfaction.
According to Bartkus et al. (2004) the primary role of a mission statement is to communicate the strategic direction of the organization to stakeholders in order to guide strategic planning. In study of USA, Japanese and European businesses motivation and inspiration of employees strongly featured as the second most important objective for mission statements (Bartkus et al. 2004). Mission statements are deemed relevant to the extent that they deliver high levels of motivation and inspiration to employees. Some authors like Bartkus (2004) have studied and have attempted to establish independent outcomes- satisfaction, behaviours, motivation, commitment, performance, and inspiration etc. as impacts that mission and vision statements might have on employees (see also Mullane, 2002) and Forbes and Seena, 2006). The vast majority however have modeled a set of dependent relationships that should ultimately lead to improved performance.
Bart et al. (2001) found that mission statements could positively affect employee behaviour which had a direct effect on firm financial performance and this could only happen when internal policies/programs are derived from the statement. Hussey (1998) explained the ‘interdependent theory’ and posited that objectives are derived from vision, linked to the measurement of corporate progress, and cascaded down to personal performance. Majetka et al. (1993) suggested that mission statements could induce desirable behaviours if it is first clearly communicated and reinforced through the reward system. Another dependent relationship they stated was the need for the mission statement to be shared among employees before it could be effective as a behavioural guide. In the views of Peters and Waterman (1982), shared ideology is a source of motivation for employees primarily, which then drives behaviour. In an attempt to establish a relationship between mission statement and firm performance in terms of financial outcomes Bart et al. (2001) developed a model based on the relationships among various mission constructs.
Lastly, a stream of mission and vision statement research has linked the development of mission and vision statements to the foundations of survival and growth of any business (Analui and Karami, 2002; Falsey, 1989; Smith and Fleck 1987; Churchill and Lewis, 1983, Levitt, 1960).
Mission and vision statements: a review of its components:
The length and content of mission and vision statements may vary; some broad others narrow. Fundamentally vision statements include and capture a myriad of stakeholder values and expectations; more importantly how the organization creates value for its stakeholders (Johnson et al., 2008). According to Mullane (2002) a typical mission statement identifies key stakeholders and states the organisation’s commitment to meet these stakeholders’ needs. He went on to suggest the concept of ‘measurables’ as key to the practical application of the mission: These ‘measurables’ are hybrid of goals and objectives. He observed in a study of the casket making subsidiary of a diverse US corporation that these corporate ‘measurables’ were used to create the company mission statement. Forbes and Seena (2006) has categorised
the components into broad strategic imperatives of financial objectives, geographic scope, distinctive competence. Various practitioners and academics seem to converge on some common themes that a typical and effective mission statement includes or should include:
Common mission themes
Theme Advocates
Overriding purpose of the organization (Johnson et al., 2008; Sufi and Lyons 2003; Want, 1986; Karami, 2001; Rarick and Vitton,
1995)
Basic beliefs, philosophies, tenets, principles, values, aspirations of the organization (Fred 1996; Campbell and Tawadey, 1992;
Pearce, 1982; Want, 1986; Ackoff, 1996;
Raynor, 1998; Baetz and Bart, 1996)
Defining organization’s customers (Abell, 1980; Pearce, 1982; Fred 1996;
Campbell and Tawadey, 1992)
Organization’s scope and boundaries in terms of products, markets and geography (Johnson 2008; McGinins 1981; Pearce, 1982;
Campbell and Tawadey, 1992; Fred,1996; David 1993; Baetz and Bart, 1996)
Organization’s commitment to financial and
economic objectives (Pearce, 1982; Want, 1986; Fred, 1996, Baetz
and Bart, 1996)
Organization’s commitment to long term
survival and growth (Campbell and Tawadey, 1992; Fred, 1996;
O‟Gorman and Doran,1999)
Organization’s identity, distinctive capabilities and basis for competitive advantage (Johnson et al. 2008; Lynch, 2000; Pearce, 1982;
McGinnis, 1981; Ackoff, 1986, Want, 1986; Baetz and Bart, 1996)
How the organization aims to create value for stakeholders including shareholders, employees, customers etc (Johnson et al.,2008; Abell, 1980; Ackoff, 1986, McGinnis, 1981; Campbell and Tawadey, 1992; Baetz and Bart, 1996 O‟Gorman and
Doran,1999)
The literature on the components of a mission statement is clear and unambiguous about the most frequent attributes used universally. However, Sufi and Lyons (2003), in a study that included some of the largest global hospitality enterprises introduced an industry context - appreciating the peculiarities of different industries. Sufi and Lyons (2003), for instance, suggested that managers in the hospitality industry must keep the components of the mission statements simple because of these peculiarities- much of the industry is composed of small units, even if large firms own them; being an international industry, mission statements must translate into many languages and cultures; also the level of franchising requires a simple, widely understood and shared mission.
Anatomy of Vision
Many authors (Bennis & Nanus,1980; Campbell et al,1990) in this area hardly differentiate between 'vision' and 'mission' and use these terms are interchangeably. A deeper understanding of these concepts is necessitated for better conceptualization of the related process, therefore, it is imperative to distinguish between the two. Vision refers to a future state, better than what now exists (Bennis and Nanus, 1986). Vision is an ever-evolving concept. Mission deals with here and now to give the vision a practical outlook to be achieved. Since vision deals with the future state of events it is a iong term aspect, whereas mission concentrates more on the short term aspect. Vision asks the question – “where do we want to be?” Mission asks the question - “what are we today?” (Quigley, 1990; Campbell, et ai., 1990). Vision to be converted into reality has to go through the path of getting converted into mission, goals, strategy, objectives and then finally into individual tasks.
According to Tichy and Devanna (1986) vision comprises two elements namely:
Roadmap- A conceptual framework or paradigm for understanding the organization's purpose and
Emotional appeal - The motivational pull which the people can recognize. Collins and Porras (1994) divide the content of vision into two major components
(i) Core ideology and
(ii) The envisioned future.
Core ideology is defined as the enduring character of the organization It is the consistent identity that the 'visionary' organizations have that transcends product or market life cycles, technological breakthroughs, management fads and individual leaders.
For example, the core ideology, which has guided Hewlett Packard for over 50 years, includes :
• A deep respect for the individual,
• A dedication to affordable quality and reliability,
• A commitment to community responsibility and
• A view that the company exists to make technical contributions for the advancement and welfare of humanity.
HP calls this Core ideology the 'HP Way'.
Envisioned future is the place in the future that the organization wants to be in. On one hand, it refers to something visible, vivid and real while on the other hand, it involves a time yet unrealized - with its dreams, hopes and aspirations. To an extent, this corroborates the concept of 'strategic intent' (Hamel and Prahalad, 1989) that an organization or its leader puts forth.
Canon's 'Beat Xerox' was a strategic intent or envisioned future that helped the organization gain a foothold in the world copier market.
Vision's claim to fame
All the definitions, illustrations and examples notwithstanding, a skepticism still lingers in the minds of some that 'vision' is a management fad or just another jargon or another 'quickie for success' in addition to the already crowded management theory jungle. These questions are best answered by exploring the reasons why the concept gained recognition. Bryman (1992) puts forth the trends in leadership giving a temporal classification to the same. This is shown in the table below:
Period Approach Core Theme
Till late 1940s Trait approach Leadership ability is innate
Late 1940s to late 1960s Style approach Leadership ability is to do with how a leader behaves
Late 1960s to early 1980s Contingency approach It all depends; effective leadership is effected by the situation
Since early 1980s New leadership approach (charismatic leadership) Leaders need vision
Prior to 1980s there were three approaches to study leadership - 'trait', 'style' and 'contingency' approaches and it is clear that the concept of vision caught on from the early 1980s. It is because the concept of transformational leadership started gaining ground in the early 1980s. Studies by Bennis and Nanus (1985), Peters and Waterman (1982) and Tichy and Devanna (1990) emphasize that vision is the central concept of transformational leadership. Bennis and Nanus (1985) carried out a detailed study of ninety prominent and successful leaders. Various interventions such as training or direction marking symbolism can be created for the organization to accept the vision and its attendant values. Organization structure would also have to be in line with the new direction. The example given is that of an entrepreneurial, market led vision introduced in a bureaucracy, constantly experimenting to examine the effects of possible changes, drawing comparisons with other organizations, monitoring environmental change and encouraging training programs. It would never work.
Tichy and Devanna (1986) view a Transformational Leader, as one who
1) Recognizes the need for revitalization
2) Creates a new vision
3) Institutionalizes the change.
To recognize the need for change, the leader scans the environment and initiates processes to overcome resistance in the organization at three levels technical, political and cultural.
To find and create a vision, which is in some way better than the old one, is a challenge for a transformational leader. The true test of leadership is in acting as a steward of the change process and getting people excited about the possibilities that exist in the new vision.
To turn the vision into reality and to institutionalize, apart from changing the attitudes of the people, the leader must also bring about this change in the structure and roles in the organization. As explicit in the above studies, vision is the central precept to the leadership concepts since the early eighties. Then on, the interest in vision as a spearhead of change has been gaining ground.
Implementation Is the Key
But vision formulation per se doesn't hold any ground. It is the implementation of vision which, if successfully carried out, can transform the organization and make it capable of meeting the competitive challenges. However for the transformation to come about, change in the organizational mind-set is imperative. To bring about this change leaders must deal at the symbolic and practical levels at the same time (Kanter, 1983). This makes the implementation more difficult.
The literature on implementation generally does not enlighten about the factors that make the implementation successful. However, authors have given prescriptions for the plan of action an organization needs to make for successful implementation of its vision. Such prescriptions vary from practical tips on how to 'walk the talk' to 'strategic partnering for successful implementation of vision'.
Wall, Solum amd Sobol (1994) prescribe
• Team building for cascading the vision,
• Creating empowerment in the organization,
• Building trust in the organization,
• Bringing emotional commitment in the senior managers by reflecting values of the organization
• Managing change through solving three challenges of relocation of authority, clash of ideas and ambiguity.
These prescriptions are more like over-the-counter drugs, which are to be popped in for routine ailments, but provide only interim relief and don't give guarantee in curing the disease. For curing a disease, it is essential to carry out a detailed thorough diagnosis and to have an insightful understanding. There has been considerable speculation about factors that influence the success ·of implementation, but not much effort has been devoted to differentiating the implementation approaches preferred by the top management from those employed with less influence (Daft, 1983 as cited in Nutt, 1998). To implement any kind of strategic decision, managers must face the political and social factors. These factors influence managers' actions
Zand and Sorensen(1975) and the success of these actions depends upon the frameworks that match the implementation approach to the situation. Most contingency frameworks call for managers to use participative approaches when decisions are apt to produce resistance and unilateral approaches when needs are clear and urgency high.
Mintzberg, Raisinghani and Thortet (1976) examined 25 decisions in which implementation was attempted, finding that implementation took place in an authorization stage in which a decision proponent searched for approval. Authorisation unfolded as a form of argumentation that attempted to win over people who could block the decision and those would approve it.
Luthans (1996) investigated the implementation ideas of Likert (1967) finding empirical justification for his categories of exploitative autocratic, benevolent autocratic, participative and democratic management leadership. Benevolent autocrats created a rationale for action in the minds of the key stakeholders. Stakeholders were seen as excellent source of ideas, so groups were used as design teams or sounding boards to create 'political sensitivity'.
Transformational leaders used incentive but also clarified the actions needed to reach new and vaster aspirations and the value of such a reach.
Nutt (1998) carried out a study on 376 cases that describe attempts to implement strategic decisions in a variety of organizations. The study was aimed at identifying the approaches used by managers to implement strategic decisions and their success. In this study, adoption and value were used to measure success. Whether or not a decision was put into use indicated its adoption. Adoption was further delineated into 'sustained' and 'complete' adoption. Sustained adoption was the sum total of all ultimate adoptions subtracting all ultimate rejections, making a measure of downstream use. Complete adoption was the indicator of degree of use as it considered all partial adoptions as failure. The measure of value was sought to be determined by the economic value of the decision. Other objective data of value such as increase in market share, better quality, better service and better turnaround times were converted into their dollar equivalent and a subjective measure of managers' perception of the value of a decision were also considered.
Values
Values are what make people think what ought to be rather than what is. These are the basic underlying motives that lead people to say whether something is 'good', 'bad', 'beautiful' or 'ugly'. These are closely related to the ideals shared by a group (Trompenaars, 1993). According to Schien(1986), values are the backbone of an organization's culture. Says he; "Values are a sense of what ‘ought’ to be, as distinct from what ‘is’. When a group faces a new task, issue or problem, the first solution proposed to deal with it can only have the status of a value because there is not as yet a shared basis for determining what is factual and real. Someone in the group, usually the founder, has convictions about the nature of reality and how to deal with it, and will propose a solution based on those convictions. That individual may regard the proposed solution as a belief or principle based on facts, but the group cannot feel that same degree of conviction until it has collectively shared in successful problem solution. If the solution works, then the group has a shared perception so that every time a similar problem comes forth, the group will refer to the same solution, probably saying that 'we must do this for this increases sales'.
This shared perception becomes a value. Artefacts are mere manifestation of these values.
The value gradually starts a process of cognitive transformation into belief and, ultimately, an assumption. If this transformation process occurs - and it will occur only if the proposed solution continue to work; thus implying that it is in some larger sense "correct" and must reflect an accurate picture of reality; group members will tend to forget that originally they were not sure and that the values were therefore debated and confronted. As the values begin to be taken for granted, they gradually become beliefs and assumptions and drop out of consciousness, just as habits become unconscious and automatic. Thus, if increased advertising consistently results in increased sales, the group begins to believe that the leader is "right" and has an understanding of how the world really works. Therefore, it is values, which form the underlying reason for behaviour of employees in an organization. Not all values undergo such a transformation. First of all, the solution based on a given value may not work reliably. Only those values that are susceptible to physical or social validation and that continue to work reliably in solving the group's problems will become transformed into assumptions. Second, certain value domains, those dealing with aesthetic matters, may not be testable at all.
A group can learn that the holding of certain beliefs and assumptions is necessary as a basis for maintaining the group. Hofstede(1980) studied the IBM culture across 53 global locations He studied 53 countries where IBM units existed and found that the basic difference in the behaviour of employees of the same company differed on the basis of national value systems. The structure revealed by the IBM data consisted of four largely independent dimensions of differences among national value systems. These were labelled as
i) "Power Distance" (Large vs. Small)
ii) "Uncertainty Avoidance" (Strong vs. Weak),
iii) "Individualism" vs. "Collectivism" And
iv) "Masculinity" vs. "Femininity'"
All 53 countries and regions could be scored on all four dimensions; the four together accounted for 49% of the variance in the country mean scores on 32 values and perceptions questions. Differences in values among matched populations of employees of national subsidiaries of a multinational should be a conservative estimate of differences among the national populations at large. It was concluded that values systems are the underlying cause of differences in employee behaviour across the countries. Since values are an integral part of an organization's culture, many a time the two terms are used synonymously.
Values constitute an important part of culture.
Core Periphery
Core
Firm Values
Periphery
Pant & Lachman (1998)