An empirical analysis of Web-based corporate mission statements

An empirical analysis of Web-based corporate mission statements

Charles A. Rarick

ABSTRACT

Using the Business Week Global 1000, the largest U. S. firms were selected for inclusion this study. The statistical universe of this study consisted of the largest 424 American companies, based on market valuation. Researchers examined the websites of all 424 companies to determine whether the firms chose to display their mission statements, or similar type statements (vision, credo, values) on the Internet.

Any mission statement or similar statement found on the firm’s website was printed and a content analysis was performed on the documents, using the Pierce and David mission statement content recommendations. The researchers also investigated relationships based on firm size and profitability.

INTRODUCTION

The study was conceived to be an update and expansion of a previously published study by Rarick and Vitton conducted in 1995 which determined mission statement content and its relationship to profitability. Recognizing that corporate environments have drastically changed since that time, the question arose as to how these changes are reflected in today’s corporate mission statements. This study aimed to clarify these issues.

REVIEW OF LITERATURE

The history of research devoted to understanding the role of mission statements in the organizational strategic environment is long and varied. Some of the more influential researchers on the subject include John A. Pearce II who wrote an article entitled “The Company Mission as a Strategic Tool” which was published in Sloan Management in the spring 1982. In the article Pearce asserts that a company’s mission statement can be a valuable tool for strategic management. He provides a framework for developing a meaning company mission statement that can aid in addressing various conflicting demands a firm faces in both its internal and external environment. This work is generally accepted as the basis for later research on the subject of mission statements.

In 1986 Jerome H. Want wrote “Corporate Mission: The Intangible Contributor to Performance” in which he asserts that management needs to develop a mission statement because it helps employees recognize the firm’s identity and future course, forges employee commitment through the establishment of commonly accepted values, and supports cohesion in operations and productivity. He also states that the CEO should serve as the standard bearer for the corporate mission.

In their article “Corporate Mission Statements: The Bottom Line” John A. Pearce II and Fred David (1987) focused on the nature and role of mission statements in organizational processes by surveying Fortune 500 companies as to the existence of a mission statement. They developed a framework of eight key components that have formed the basis for research into mission statements ever since. The components are:

1. The identification of target customers and markets.

2. The identification of principal products/services.

3. The specification of geographic domain.

4. The identification of core technology.

5. The expression of commitment to survival, growth, and profitability.

6. The specification of key elements in the company philosophy.

7. The identification of the company self-concept.

8. The identification of the firm’s desired public image.

This seminal study was followed by flurry of studies examining mission statements in various environments. Among these was Fred David’s (1989) investigation of mission statements of large manufacturing and service firms collected from the Business Week 1000 firms. Results from this study revealed nine key components: customers, products/services, location, technology, concern for survival, philosophy, self-concept, concern for public image, and concern for employees. Concern for employees was the additional component identified in this study.

In 1992 R. Duane Ireland and Michael A. Hitt wrote their article “Mission Statements: Importance, Challenge, and Recommendations for Development” in which they assert that mission statements are important for all types of organizations because they provide guidance for strategic and day-to-day operational decisions. They describe the firm’s fundamental, unique purpose. Ireland and Hitt also speak about factors that tend to inhibit the development of mission statements in organizations; such as, the number and diversity of stakeholders, the work required in developing such statements, belief that mission statements may reveal competitive information, and the historical formality of the strategic planning process.

Laura Nash and Andrew Campbell (1993) in their survey of U.S., Japanese, and European seek answers to questions such as “What is a mission?” What is the difference between a mission and a sense of mission?” and “How can leaders define clear missions and how do they share them with employees to create a sense of mission?” They explain the value of having a sense of mission and a leader who is able to create a sense of mission.

In 1995 Charles A. Rarick and John Vitton published the results of their survey of Business Week 1000 companies in their article titled “Mission statements make cents.” They found that having a mission statement does increase a firm’s ROE. Firms with mission statements had ROEs of 16.1% versus those without who had ROEs of 9.7%. They found common mission elements to be: 1. concern for public image, 2. concern for quality, 3. commitment to survival, growth, and profitability, and 4. differentiation from competition.

In 1996 Mark C. Baetz and Christopher K. Bart published the findings of their research on the 500 largest industrial firms in Canada. The study sought to identify practitioner’s thinking about the role of mission statements and the process for creating such a statement. They reported mission statements to be a recent, more fashionable development in firms and analyzed them without preconceived categories. They did, however, develop categories based on the responses which essentially followed those developed by earlier researchers. They also reported reasons for why (a strategic and operational motivational tool) and why not (too much effort, uncertain value, waste of time, too difficult to formulate) mission statements are/are not implemented.

Declaring a well crafted mission statement to be a key component of an effective strategic planning process, Romuald Stone (1996) published his article “Mission statements revisited” in which attempts to explain why mission statements are important, what mission statements are, and provide guidance on how to develop a mission statement.

Andrew Campbell (1997) speaks of mission statements as an expression of a company’s purpose and ambition, a guide to behavior, a celebratory symbol of a company’s culture. He also states that “A good mission statement, however, does not necessarily add value. In fact it may do serious harm.” They may cause emotional resistance in employees if the values and behavior standards are different from their own. Senior management must model the expressed behavior in order for it to have credence.

Lance Leuthesser (1997) examined (63 of 393) annual reports selected from the Business Week 1000 list with mission statements for their content. They found stakeholders classified into four categories: customers, shareholders, employees, and suppliers and mission statements messages fitting into four categories: benefits, values, self-image, and focus. They found customers and shareholders addressed by benefits to them and employees were addressed through values statements.

In 1997 article “Sex, Lies, and Mission Statements” Christopher Bart examines why mission statements are not getting the credit they deserve or the results managers and experts have expected. Bart asserts that the power of mission statements lies in their ability to inspire and motivate organizational members to exceptional performance and their ability to guide the resource allocation process. That is, they provide a sense of purpose; they insure that the interests of key stakeholders are not ignored; they sharpen a firm’s focus; they enable better control over employees; and, they promote shared values and behavioral standards. Bart sought answers as to the efficacy of these assertions from senior managers from 88 leading North American corporations. Their responses indicate that there appears to be much misrepresentation in published mission statements. Managers spoke of the impossibility of achieving published goals, of mission ambiguity, of dissatisfaction with the mission, of pursuit of the wrong mission, of dissatisfaction with the process by which the mission statements were developed, of little actual influence over behavior, and of limited and highly selective involvement in the process of mission development. Constituency groups mentioned in mission statements were: customers, employees, shareholders, society, and suppliers. Of the respondents, only 35 percent reported using mission statements to inspire and motivate their troops, and only 15 percent claimed that improved resource allocation was a consideration in their mission’s development. Many managers in the survey believed their mission’s influence over organizational members to be fairly limited. It is clear that “the impact and commitment mission statements can deliver in daily organizational life come only when they are of high quality and are pervasive throughout the firm.”

In 1998 Bart in “Mission matters” reiterates the importance of a good mission statement in energizing stakeholders to a common purpose, and he offers this prescriptive: be unique, be inspirational, make personal values the cornerstone and bedrock of the mission, and focus on the basics.

Bart (1998) in “The relationship between mission statements and firm performance: An exploratory study” asserts from his sampling of 136 Canadian organizations that there is little empirical evidence to support the notion that mission statements are essential for superior organizational performance results.

Also in 1998 James R. Lucas in “Anatomy of a vision statement” elaborates on the need for a vision, the illusion of vision, and the visioning process.

In 1999 David Stamps in “Best mission statement” analyzes organizational mission statements dating back to the 1920 and components of some of the best ones.

A 2000 article by Bartkus, Glassman, and McAfee titled “Mission statements: Are they smoke and mirrors?” examine what a mission statement is, outline presumed benefits of mission statements, and analyze what’s wrong with mission statements. They believe that for most employees and stockholders mission statements are simply redundant, the boundaries set by the mission may be so narrows as to threaten the firm’s ability to adapt to change, given the brevity and general nature of most mission statements, it is hard to imagine how they would be of much use in helping employees make decisions. They also state that one of the generally accepted purposes of a mission statement “to inspire and motivate employees” is undercut by current attitudes favoring job mobility and the trends toward downsizing and the use of contingent workers, many employees see themselves as short-term hires with little desire to understand the big picture.

Aimee Forehand in her 2000 article “Mission and organizational performance in the healthcare industry” examines key elements of the organizational mission statement and its significance in relation to firm performance. Forehand outlines the eight performance-enhancing drivers of mission statements previously identified by Bart and Tabone (1998). They are:

1. to provide a sense of purpose

2. to increase CEO control

3. to define behavior standards

4. to enable employees to identify with their organization

5. to give greater recognition to the interests of external stakeholders

6. to inspire and motivate employees

7. to refocus the organization during a crisis

8. to improve the resource allocation process.

Based on the studies of Bart and Tabone (1998) and Bart and Baetz (1998), Forehand proposes an integrated analytic framework to assess healthcare mission statements to aid management in the healthcare industry.

In their 2001 study “A model of the impact of mission statements on firm performance” Bart, Bontis, Taggar tested their previously developed mission statement model on 83 large Canadian and U.S. organizations. They found that “commitment to the mission” and the “degree to which an organization aligns its internal structure, policies and procedures with its mission” were both positively associated with “employee behavior, with the latter having the most direct relationship with financial performance.

In 2001 Christopher Bart turned to investigate the extent to which the internet is used as a medium of conveyance for organizational missions. His article titled “Exploring the application of mission statements on the World Wide Web” discusses his survey of web sites of 100 Fortune 500 companies to determine whether they posted a mission statement (45 did have a mission posted), what types of organizations posted most frequently (educational institutions, for profit corporations, and not-for-profit associations were the most frequent posters of mission), and why they posted, or not. For the five respondents to the “why post” inquiry (all from for profit firms), reasons generally centered around spreading the mission as widely as possible to provide information to their stakeholders and to reinforce company values.

In 2002 Christie H. Amato reported her research on examining the relationship between a company’s commitment to quality of life goals (as reflected in the corporate mission statement) and the firm size, profitability, and industry in which the firm operates. She found a positive correlation between ROE and workforce well being. Financial services firms often include societal goals in their missions statements, whereas ecological and safety goals are frequently mentioned in mining, metals and construction organizations.

Omran, Atrill, and Pointon (2002) in their study of 32 shareholder-oriented companies and 48 stakeholder-oriented companies found that mission orientation did not affect performance, whether in terms of stock returns or excess returns.

Sufi and Lyons (2003) in their study of the mission statements of 30 top hospitality enterprises found that while there was a statistically significant correlation between the mission statements and the annual turnover (sales), there was no significant correlation with the net profit margin or the return on equity.

In 2003 Forest R David and Fred R David, in their article “It’s time to redraft your mission statement” report on another internet-based research project, where 95 mission statements were collected from the computer, food, and banking industries. They state that “the mission statements from all 3 industries were incredibly deficient.” They found mission statements to be either too short (phrase or sentence) or too long (2 pages). They reported banks to have the least comprehensive mission statements among the three industry groups sampled in the study. David and David offer the previously identified (by Pearce and David) nine components as the measures for their research in this study. They found that “Results from our preliminary study suggest that, when it comes to company mission statements, there is a great deal of room for improvement. The sample firms in our study generally did not include needed components in their mission statements.”

In the 2003 article “Mission Statements: Is it Time to Shelve Them?” by Jatinder Sidhu results of an empirical investigation into the dynamic multi-media domain in The Netherlands are reported. Statement content as well as process were taken into account when studying the impact of mission statements. The findings of the research indicate that mission statements can lead to superior performance.

Another web-based study of mission statements by Bartkus, Glassman, and McAfee (2004) titled “A Comparison of the Quality of European, Japanese and U.S. Mission Statements: A Content Analysis” found that few firms included all stakeholder groups, most firms included about half of the recommended components, and most statements did not meet all of the recommended objectives. These researchers employed ten characteristics of mission statements which were similar to the previously developed components by Pearce and David. Both U.S. and European firms mentioned, on average, only two stakeholders in their mission statements. For Japan, the average was 1.3. The results of the study indicate that the statements fall short of meeting the quality criteria suggested in the academic literature.

In the 2004 article “Web-based mission statements in Slovenian enterprises” Roberto Biloslavo analyses mission statements of 50 top Slovenian enterprises which were published on the companies’ web sites. His research indicates some significant differences between Slovenian mission statements and those of other European and American companies. He believes these differences to be culturally, institutionally, and historically based. He believes that despite globalization and regionalization, convergence of various contents or roles of the mission statement is questionable. Instead a blending of individual elements among different cultural and economic systems should be considered as a factor when analyzing mission statement components.

Charles Toftoy and Joydeep Chatterjee (2004) in “Mission Statements and The Small Business” report findings from research conducted by the Council for the Advancement of Small Business at the George Mason University. The findings suggest that the “lackadaisical approach towards business planning has resulted in dismal failures for many young and enthusiastic entrepreneurs.” They suggest that writing a mission statement is the first strategic decision a small business needs to take.

Scott Beagrie (2005) in “How to … develop a corporate mission” gives guidance on what a mission is, why it is important, where to start, drafting a mission, and ensuring that it is powerful.

Andrea Kilpatrick (2005) in “The power of vision” speaks to two unique challenges faced by non-profit organizations in creating a vision. First, there is the challenge of making focused decisions. This is difficult because nonprofits are driven by a mission, which can be defined in various ways by each stakeholder. Second is the funding process that sustains the organization which may not be conducive to the typical three-to-five year vision statement process. As a result, many nonprofit leaders compromise by broadening the scope of their vision.

Smith, Heady, Carson, and Carson wrote about their research in a study titled “Do Missions Accomplish their Mission? An Exploratory Analysis of Mission Statement Content and Organizational Longevity.” (unpublished study retrieved 8/1/2005 from http://www.huizenga.nova.edu/jame/Missions.htm) Their comprehensive analysis of past research on mission statements is organized by the following scheme. They categorize mission statement research based on:

1. Motivations for development of a mission statement

2. Arguments against and reasons for not developing mission statements

3. Comparison of performance of firms with mission statements versus those without mission statements

4. Content of mission statements

5. Comparison of performance with firms with “high-content” mission statements versus those with “low-content” mission statements

6. Behavioral and subjective measures of performance

7. Subjective attitudes toward mission statements

It is evident from the discussion of important literature in the area of research on mission statements, that there exist widely divergent views on whether mission statements are effective or not. The divergence of opinions can be largely attributed to different research questions and design, akin to having several blind persons approach and touch an elephant on one part of its anatomy. That is, the person feeling an elephant’s ear will have a different description of what an elephant looks like than one who touches the tail or a leg. Nevertheless, it is useful to look at mission statement construction, application, and results from various viewpoints to form a more complete understanding of the phenomenon. Clearly there has been an evolution of thought and procedure over time.

METHODOLOGY

Using the 2004 Business Week Global 1000, a list of the world’s largest companies, the largest firms in the United States were selected. The statistical universe of this study consisted of the largest 423 American companies, based on market valuation. Researchers made a search of the websites of all 423 firms, looking to see if the firms chose to display their mission statements, or similar type statements (vision statement, credo, values statement) on the Internet.

Any mission statement or similar statement found on the firm’s website was printed and a content analysis was performed on the documents, using the Pierce and David mission statement content recommendations. Because the Business Week Global 1000 ranks firms on the basis of market value and provides information on return on equity (ROE), the researchers also were able to investigate any relationships based on firm size and profitability.

FINDINGS

The initial assessment of company websites revealed that many firms (57%) have mission statements and choose to put them on their websites. The results indicate that company size does not seem to be related to the likelihood of finding a firm’s mission statement on its website. When comparing the top ten percent of firms with the bottom ten percent of firms based on market value, the percentages are identical. Fifth-two percent of top ten firms have mission statements on their websites, and 52% of the bottom firms also have mission statements on the Web. A small difference can be seen between the top and bottom twenty percent of firms. In the top twenty percent of firms 61% have mission statements available on their websites, while in the bottom twenty percent of firms we find 56% having statements on-line (Figure 1).

An analysis of return on equity shows some association with mission statement presence on the Web. Overall, firms with mission statements on their websites had an average ROE of 18.5% while firms without a mission statement on the Web had a ROE of 18.2%. More differences were seen between the top half of firms. The top half of firms with mission statements had an average ROE of 22.3% while the top half of firms without a mission statement had an average return of only 16%. The top quarter of firms with mission statements had a ROE of 24% and the top quarter without statements had a return of only 15.2%. This association, however, did not carry through with the bottom half and bottom quarter of the firms. More detailed information can be seen in Figure 2 concerning mission statement presence, firm size and return on equity.

Significant differences did show up among companies across industry groups. Some industries were more likely to have a mission statement on their website, such as materials where 88% of the firms published their mission statements on-line. Financial services were the least likely to have a mission statement on-line, with only 38% of the firms choosing to publish a mission statement on their websites. Detailed information on the presence of mission statements by industrial classification can be seen in Figure 3.

An interesting observation from the Web search concerns the terms used to describe a firm’s mission. While many organizations specifically use the term “mission statement” or “mission” when describing their organizational purpose, a number of other terms are commonly used including “values,” “vision,” “credo,” “philosophy.” Of the 244 companies that display some type of mission statement on their websites, 51 refer to the statement as a mission statement. A number of firms combine the terms to include “mission and vision,” “mission and values,” or “vision and values.” A breakdown of the terms used to describe the organization’s purpose and their frequency can be seen in Figure 4.

A content analysis of the statements revealed some differences among the various terms used to describe the organization’s purpose. Using the Pierce and David content model, mission statements came the closest to adhering to the recommendation; however, even with “pure” mission statements, many of the items were not often found in the statements. In over half of the mission statements no mention was made to target market, geographic market, technology, firm philosophy, public image, or the importance of employees. Vision statements and values statements often differed in their content, with some areas being frequently mentioned in one statement and seldom mentioned in the other. Wide variation appears to exist in statement content, and many of the traditional items suggested for inclusion are not frequently found. The results of the content analysis can be seen in Figure 5 with the percentages of items included in each type of statement.

SUMMARY AND CONCLUSIONS

Of the companies surveyed, 58% have mission statements and put them on their websites. There was some association between ROE and mission statement presence on the Web. The top half of firms with mission statements had an ROE of 22.3% while the top half without mission statements had an average return of 16%. This association did not, however, hold true for the bottom half of firms.

Some industries, notably materials and healthcare, were more likely to have mission statements online; whereas others, such as financial services, were not likely to have mission statements. The most common terminology used to describe a company’s focus was values, mission, and vision. Analysis of the mission statements of the largest U. S. corporations also has revealed several other important recent developments.

The Pearce and David model does not seem to reflect the current state of mission statements. Mission statements of contemporary corporations vary not only by name but by content as well. Many mission statements now include different concerns, such as diversity, innovation, and teamwork. Future research into the area of mission statement content should consider including the new components in their analysis to better reflect current mission statement language. Mission statements are now often placed on firm websites and may now be developed to influence that external audience.

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Charles A. Rarick, Barry University

Inge Nickerson, Barry University

Figure 1: Mission Statements on the Web

Total U.S. Companies in Business Week Global 1000 423

With Mission Statements on the Web 244 58%

Without Mission Statements on the Web 179 42%

Top Ten Percent of Companies with MS on Web 22 52%

Bottom Ten Percent without MS on Web 22 52%

Top Twenty Percent of Companies with MS on Web 52 61%

Bottom Twenty Percent of Companies with MS on 48 56%

Web

Figure 2: Mission Statements and ROE

Return on Equity (ROE)

With MS on Web 18.5%

Without MS on Web 8.2%

Top Half with MS on Web 22.3%

Top Half without MS on Web 16.0%

Bottom Half with MS on Web 15.8%

Bottom Half without MS on Web 19.0%

Top Quarter with MS on Web 24.0%

Top Quarter without MS on Web 15.2%

Bottom Quarter with MS on Web 14.0%

Bottom Quarter without MS on Web 22.0%

Figure 3: Mission Statement Presence by Industry

Financial Services

With MS on Web 38%

Without MS on Web 62%

Health Care

With MS on Web 80%

Without MS on Web 20%

Energy

With MS on Web 64%

Without MS on Web 36%

Utilities

With MS on Web 56%

Without MS on Web 44%

Consumer Staples

With MS on Web 69%

Without MS on Web 31%

Industrials

With MS on Web 62%

Without MS on Web 38%

Materials

With MS on Web 88%

Without MS on Web 12%

Information Technology

With MS on Web 62%

Without MS on Web 38%

Consumer Discretionary

With MS on Web 49%

Without MS on Web 51%

Telecommunication Services

With MS on Web 63%

Without MS on Web 37%

Figure 4: Organizational Purpose Statements

Mission 51

Mission and Vision 26

Mission and Values 53

Mission Vision Values 24

Vision 11

Values 19

Vision and Values 10

Other 50

Figure 5: Organizational Purpose Statements Content

(Percentages by Statement Type)

Pierce & David All Mission Values Vision

Content Item Statements

Customers (target 15% 40% 2% 14%

market)

Products/Services 55% 96% 18% 88%

Geographic 17% 13% 14% 46%

Market

Technology 20% 24% 16% 25%

Survival/Growth/ 50% 51% 56% 58%

Profitability

Philosophy 60% 47% 100% 38%

Public Image 48% 47% 66% 54%

Employees 63% 47% 98% 42%

Distinctive 51% 60% 59% 46%

Competence

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