This strategic direction, or mission statement, is important in establishing what a company will do and the things that the company won’t do. In this video tutorial, accounting professor Kay Stice analyzes good and bad examples of mission statements. He explains that a good mission statement is specific and clear in order to identify what types of activities a company will focus on.
- An important aspect of running a company is a general agreement among the ownership team and the top managers about the company's strategic direction. This strategic direction or mission statement is important in establishing both those things that the company will do and those things that the company won't do. For example, history is riddled with companies and other organizations that have experienced difficulties as their efforts have become unfocused. They are like a little child splashing around in a pond trying to catch all of the fish and ending up catching none of the fish.
Now here's the mission statement of McDonald's. Our brand mission is to be our customers' favorite place and way to eat. Now in my opinion this is a great mission statement. This McDonald's mission statement suggests that McDonald's has decided, at least for now, not to extend it's powerful brand name into a broad array of goods and services. Now McDonald's has a world-wide reputation for consistency and value. So, would people buy McDonald's gasoline? Probably. Would people stay in a McDonald's hotel? I think so.
Would people deposit their money in a McDonald's bank? Possibly. By the mission statement says that for now McDonald's is focused on a certain place and way to eat. The mission statement provides direction. An example of a very precise mission statement is the acquisition criteria of Berkshire Hathaway. These criteria are reprinted each year in Warren Buffet's letter to the Berkshire Hathaway shareholders. As an example of the specific nature of this statement, one of the criteria is that all potential acquisitions be large, with the target company already generating annual before-tax earnings of at least $75 million.
A couple of more items on the list are as follows. We will not engage in unfriendly takeovers. We are interested in simple businesses (if there's lots of technology, we won't understand it). These acquisition criteria make clear what Berkshire Hathaway will and will not consider in terms of buying companies. A mission statement can also involve a much broader vision. For example, the mission statement of Ben & Jerry's which is now owned by Unilever, a Dutch based consumer products company that's also the largest seller of ice cream in the world, includes three dimensions.
Product mission; to make, distribute and sell the finest quality all natural ice cream and promote business practices that respect the Earth and the environment. Economic mission; to operate the Company on a sustainable financial basis of profitable growth, increasing value for our stakeholders and expanding opportunities for development and career growth for our employees. Social mission; to operate the company in a way that actively recognizes the central role that business plays in society.
Now, some hard bitten died in the wool capitalist might disagree with Ben & Jerry's emphasis on the environment, on nurturing labor practices, and on social awareness. Fine. The beauty of a good mission statement is that it tells potential investors what fundamental principles will be used by management in making corporate decisions. If an investor disagrees with these fundamental principles then she or he can easily decide to invest in a different company. In summary, a good mission statement is specific and clear enough to identify what types of activities a company will focus on as well as what things a company will not do.
In this course, accounting professors Jim and Kay Stice explain what KPIs your business should consider in a balanced scorecard, from financial goals to employee and customer satisfaction. They describe how to craft a clear mission statement that complements your KPIs, and how to tie performance to incentives. Plus, get a look at KPIs in action, as Jim and Kay break down a case study examining a trucking company's balanced scorecard.
- The importance of KPIs and measuring performance
- Financial goals and measure
- Customer needs and satisfaction
- Employee growth
- Creating an effective mission statement
- Linking measurements and rewards
- Examining a KPI case study