Yesterday in a session on designing effective organization, this statement brought me out of my long lost sleep. It was further added that firms are in business for making profits and vision and mission statements are just lofty ideals.
What if this statement were true?
My acquaintance with vision and mission goes back to 1995 when I joined
Crompton Greaves, and the
learnings are relevant even today. The vision provided the overall objective of where the company wanted to be, the mission provided the framework and broad guideline while quality policy dictated how the vision and mission will be followed by the organization. These three became the guiding principles on which the whole quality system (including business processes) was designed.
An article by
Glassman explains the significance of vision/mission statement and also captures where firms can go wrong.
The vision and mission statements help a firm articulate its sense of purpose, its direction and to an extent keep the firm from wandering into non-core areas.
The experts for ages have been advising that firms need to identify their core and align their business to that core. Diversification is good but not without a core. A Reliance can be successful in Petrochemicals and in retail too, but the two groups are separate organizations with their individual cores. Mixing petrochemical business with retail may not be so successful (of course there are synergies for example, Reliance could combine the fuel stations and its retail store in the same premises - but that is different).
While the top level statements help provide a framework, in the moment of truth, it is laid down procedures, policies and culture which define employee's behavior. In the example from
Glassman's article, John was guided by mission, alright. To me he appeared to be violating a defined policy. The policy probably was not in sync with the mission statement and that caused the heart burn.
Another point of the article which I would like to analyse is - mission statement may restrict
firm's growth opportunities. I agree a very narrowly defined purpose would lead firm to not pursue opportunities outside its core business area. But then,
Bajaj auto could define itself to be a scooter company and die, or, it could change its vision to be a two wheeler company (which in fact it did in the face of competition) and still face loss of market share, or it could define its business to manufacture low cost personal transport equipment. In post mid 90's, it would appear that finance should not be
Bajaj's business, but prior to that, offering loans for two wheelers was an excellent strategy to stimulate demand for its automobile products.
Now coming to the point of profit
centricity of firm, I think that at least for "For Profit" organizations that is their
Raison d'
etre and is therefore not required to be captured in vision and mission statements. Also, it is important to understand that while no loss making business would survive, profit is not what motivated
Ratan Tata to develop
Indica and
Nano. He wanted to make profits by selling
Indica and
Nano not the other way round. There were significant challenges when
Indica was developed and even more when
Nano was. And the challenges were not just
Singur!
To conclude, the vision and mission statements are not just marketing devices. They are important tools for:
- defining and communicating a firm's business objectives.
- formulating policies
- managing culture change to align the firm with ever changing business environment
