Getting started

A mission statement doesn’t need to be long. In fact, the shorter it is, the better. Even so, the task of creating one can seem impossibly daunting — the Mount Everest of business-planning chores, right up there with that vision thing we encounter in Chapter 3. One reason is that a mission statement has to sum up some pretty grand ideas in a few sentences. Another is that writing a mission statement requires business planners to ask themselves some fundamental questions — and come up with solid answers. And don’t forget, your mission statement should closely reflect the values and vision you set for your company.

In other words, a mission statement answers the basic questions first posed long ago by the famed business guru Peter Drucker:

What business are you in? Who is your customer?

When you conscientiously create a mission statement, you’ll find yourself drilling into the core of your business. Take this example: Home construction toolmaker firms like DeWalt or Makita offer drill bit products to the DIYers who finally gets around to fixing that creaking railing on the back deck. They’re the customers, and the business purpose is the manufacture of metal alloy bits for electric drills — right? Nope. What do these weekend warriors really want? A hole! The drill bit itself is merely a means to an end. Perhaps there’s a looming new laser technology out there that might get the hole-creation task done more efficiently. And the real customer might be the person demanding that the fix-it job finally gets done. If you see yourself only as a shaper and twister of metal for those with lots of nasty little cuts and scrapes on their hands and arms, you’ll likely miss potential competitive threats and focus your marketing efforts on the wrong target.

By understanding the business you’re really in and the customer who truly drives the purchase decision, the firm can address its markets and their needs in a way that better informs the realities they face and decisions they make. A good mission statement will capture this.

A little preparation up front can make the process a bit easier. Ask yourself some background questions as you get ready to work on your company’s mission statement. Don’t worry if the answers are fairly general at this point, because you’re only interested in the basics right now. Research your goals and the practices of the competition and then answer these questions:

• Which customers or groups of customers do you plan to serve?
• What products or services do you plan to provide?
• What needs do you want to satisfy?
• How will your company’s products differ from competing offerings?
• What extra value or benefits will customers receive when they choose your company over the competition?

Need some help? You should enlist managers who are familiar with all the aspects of your business, or if you’re a start-up, call in those advisors who’ve been there before. Follow these steps to begin the process:

1. Get together a small group of people whose responsibilities cover all the major functions and activities of the company.

   If you run a small company, include trusted friends, former co-workers, and perhaps even your significant other in this group.

2. Ask the group members to prepare for the meeting by coming up with their own answers to the background questions we list earlier in this section.
3. Review the reasons for having a company mission in the first place, and go over what the mission statement should include.
4. Schedule several informal meetings in which group members can present their own perspectives, brainstorm a bit, and begin to form a consensus.
5. Create, revise, and review the company’s mission statement over as many formal meetings as it takes for everyone to be satisfied with the final product.

A well-crafted mission statement is clear, concise, and easily understood. You should also make it distinctive (from the competition) and up-to-date (given the company’s situation and market dynamics).

One rock in the road you have to watch out for is “mission creep.” This can occur when the decision-makers forget to stick to the script and get overzealous about what the organization is trying to do, or what they think it can do. As a result, they tack on a little something here, work in a new objective there, and before you know it, end up with a dog’s mess of conflicting goals and underfunded initiatives. It’s worth installing practices and procedures in your own organization that allow for a systematic review of your mission and whether (or not) it’s still guiding your direction. As firms grow and rewards get objectified, some folks in the organization will see opportunities for personal benefit in the scramble for access to scarce resources, no matter how distant the supposed opportunity is from the firm’s core. One good opportunity to call out mission creep is at the annual strategic review session (see Chapter 17).

Capturing your business (in 50 words or less)

Your company’s mission statement has to draw a compelling picture of what your business is all about. We often refer to this picture as creating a tangible image of the company. We begin with a first stab at a mission statement:

Our [fill-in your product or service] brings unique value to people, wherever they may be.

Not a bad start. This statement says a little something about geography and a bit about being different. But you’re far from done. To work toward communicating the company’s activities, accomplishments, and capabilities with more clarity and punch, we suggest expanding the statement as follows:

We provide the highest quality [name your product/service] with unmatched value to the global [your product/service] industry, which allows our customers to be leaders in their own fields.

This statement conveys what the company does (provides the highest-quality products or services), who it serves (the relevant global industry), and what sets it apart from its competitors (unmatched value, which allows customers to lead their own fields). This is a far more compelling mission statement than the earlier version.

How do real companies go about capturing their purpose clearly and concisely, in 50 words more or less? The following examples provide useful insights. If you want more, just key in “mission statement” after naming an organization, and chances are your search engine will crank it out pronto. We may not agree with the composition of each of these. But after reading this chapter up to here, dear reader, and drawing on your own knowledge of the statements under the microscope, we’ll leave it up to you to draw your own conclusions. You even might want to give each a grade, say from one to five with five being the best, and then try to explain to yourself why you awarded that score. Give it a go.

• American Red Cross (an international humanitarian organization): The American Red Cross prevents and alleviates human suffering in the face of emergencies by mobilizing the power of volunteers and the generosity of donors.
• Google (leading online search engine firm): Our company mission is to organize the world’s information and make it universally accessible and useful. That’s why Search makes it easy to discover a broad range of information from a wide variety of sources. Some information is purely factual, like the height of the Eiffel Tower. For more complex topics, Search is a tool to explore many angles so you can form your own understanding of the world.
• Haas School of Business, University of California-Berkeley: Our mission is to help extraordinary people achieve great things. At Haas, we live our distinctive culture out loud by embracing our four Defining Leadership Principles: Question the Status Quo, Confidence Without Attitude, Students Always, and Beyond Yourself.
• John Wiley & Sons, Inc. (large international book publisher): Wiley empowers researchers, learners, universities, and corporations to achieve their goals in an ever-changing world.
• Tesla (global manufacturer of electric vehicles): Tesla’s mission is to the accelerate the world’s transition to sustainable energy.
• Walt Disney (diversified entertainment company): The mission of the Walt Disney Co. is to be one of the world’s leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services, and consumer products, we seek to develop the most creative, innovative, and profitable entertainment experiences and related products in the world.

Why bother?

Who needs goals, anyway? You may be the type who plans a trip by filling the SUV with gas, stopping at the ATM for cash, and flipping a coin as you head out of town and reach the first intersection. Ah, life, adventure, the thrill of the unknown! Why waste time trying to decipher a map when you’re just out for the ride? Maybe your approach is fine for a quick getaway break, but for a company, failing to set business goals can lead to more serious consequences — real serious.

If your business opportunities are so obvious and so overwhelming that you don’t need to define a particular course of action to reach your ultimate destination, you’ve won the business planner’s lottery. Be like the first-in folks with Bitcoin: just get out there and scoop the loot as fast as you can. Such opportunities are relatively rare, however. You’re more likely to run into one hazardous crossroad after another in your quest for gold, and a lack of careful planning can be dangerous indeed. Note the following examples:

• Planning blunders have been partly blamed for fiascoes involving certain infamous product introductions, including the Ford Edsel in the 1950s, New Coke in the 1980s, and the Apple Newton PDA in the ’90s.
• Motorola ultimately lost more than $5 billion on Iridium, its ill-planned low Earth orbit mobile telephone satellite system. By 2000 the venture was bankrupt.
• In 2004 Google launched Orkut and in 2011 it introduced Google +. These online services were designed to give this innovative firm entry into the highly lucrative social media platform market. But by 2014 Orkut was gone, and in 2019 Google + was pulled, unable to compete against established incumbents like Facebook, Instagram, and Twitter.

Even the biggest can fail when they don’t do the heavy lifting required in business planning. Moreover, just because a company is successful in one sandbox doesn’t give it a free pass to play in another. Clearly defined goals and objectives can keep you from deviating down those deceptive rabbit holes, no matter how intriguing they may appear at first glance. Watch where you stray as you might stumble instead. Ouch!

Setting business goals and objectives provides an important insurance policy for your business: the opportunity to plan a successful course of action and then keep track of your progress. One way to focus your thinking when it comes to goal definition is to use the “SMART” approach. That is, your goals should be Specific, Measurable, Attainable, Relevant, and Time-bound. This is a nifty little guideline to keep you from running off the track with goal statements that are too broad or so over the top that no one believes in them. Good goal-setting is not simply box-checking by the business planner. It’s providing direction for your future.

Goals versus objectives

After you complete a mission statement, your business goals lay out a basic itinerary for achieving your mission. Goals are broad business results that your company absolutely commits to attaining.

Goals are typically stated in terms of general business intentions. You may define your company’s goals by using phrases such as “becoming the market leader” or “being the low-cost provider of choice.” These aims clearly focus the company’s activities without being so narrowly defined that they stifle creativity or limit flexibility.

In working toward set goals, your company must be willing to come up with the resources — the money and the people — required to attain the intended results. The goals that you set for your company should ultimately dictate your business choices throughout your organization and may take years to achieve. Goals should forge an unbreakable link between your company’s actions and its mission.

Simply setting a general goal for your company isn’t the end of the story; you also need to spend time thinking about how to get there. So, your company must follow up its goal with a series of objectives: operational statements that specify exactly what you must do to reach the goal. You should attach numbers and dates to objectives, which may involve weeks, months, or sometimes even years of effort. Example: We will achieve sales revenue of $10 million by 2024. They help you realize when you reach a given objective.

Objectives never stand alone. They flow directly from your mission and your values and vision (see Chapter 3), and outside the context of their larger goals, they have little meaning. In fact, objectives can be downright confusing.

The goal “Improve employee morale,” for example, is much too general without specific objectives to back it up. And you can misinterpret the objective “Reduce employee grievances by 35 percent over the coming year” if you state it by itself. (One way to achieve this objective is to terminate some employees and terrorize the rest of the workforce.) When you take the goal and objective together, however, their meanings become clear.

Want an easy way to keep the difference between goals and objectives straight? Remember the acronym GOWN: G for goals, O for objectives, W for words, and N for numbers. For goals, we use words — sketching in the broad picture. For objectives, we use numbers — filling in the specific details. For example, your firm might set a goal of becoming “the perceived quality leader” in its space. But to get there, it might want to define an objective of “reducing errors in the shipping department to less than 1 percent during the next six months.” The latter gives specificity to the generic statement of the prior and, as such, provides a concrete guide for action to those charged with getting the job done.

If you already use different definitions for goals and objectives, don’t worry; you’re not going crazy. What we do find crazy is the lack of any standard definition of terms when it comes to business planning in all its areas and topics (some firms out there are still trying to differentiate between vision, values, and mission). The important task is to settle on the definitions that you want to use and stick with them in a consistent manner, communicating these clearly to everyone in the organization. You may even want to add in a glossary at the end of your business plan that specifies the key terms used. That way you prevent any unnecessary confusion within your company.

Efficiency versus effectiveness

Talking about goals and objectives provides us with the perfect opportunity to bring up another pair of business terms that people have bandied back and forth for years: efficiency and effectiveness. The terms were first thrown together in an absolutely captivating business classic, Functions of the Executive, written by Chester Barnard back in 1939 (why are you snoring?). Old Chester was president of the New York Telephone Company, and perhaps he had a bit too much time on his hands (monopolies, you know, can lead to that). But he did come up with one useful notion for working with your company’s goals and objectives: efficiency versus effectiveness.

We all strive to be both efficient and effective in our individual work, of course. Effectiveness is often described as “doing the right thing,” whereas efficiency is described as “doing things right.” President Barnard came up with the idea that you can apply these concepts to a company and its activities.

In this context, effectiveness — doing the right thing — has a great deal to do with choosing the right goals to pursue. For example, consider an imaginary company we’ll call Global Gadgets. Its mission statement may emphasize becoming customer-focused and market-driven in all product areas. If Global Gadgets is to be effective, management must set goals that encourage product designers and engineers to be in touch with their customers first and to be aware of market demands before they start designing and creating new products.

Efficiency — doing things right — is concerned more with how well the company applies resources in pursuit of its goals. To be efficient, Global Gadgets’ employees must have objectives that ensure the company can achieve its goals of becoming customer-focused and market-driven. Among other results, these objectives should lead to a proper allocation of the research budget among design, product development, and market testing. Resources are always scarce, and Global Gadgets can’t afford to squander them.

Successful organizations aren’t just effective or just efficient. The best companies are both efficient and effective on a consistent basis. They achieve both efficiency and effectiveness by taking goal-setting and the development of clear, measurable objectives seriously in the relentless pursuit of the company’s mission. Achieving one without the other is like wearing an attention-getting gorgeous new designer outfit to the company’s annual New Year’s bash while keeping your bathroom slippers on: The shoes might have been an efficiently quick-and-easy way to dress, but … OMG, what?

Creating your business goals

Goals serve as the broad business results that your company commits to achieving. To jump-start the process of setting your company’s goals, follow this useful set of guidelines:

• Determine who to involve in setting your company’s goals. Because goals are the core of your company’s business, the group members should include the people who are responsible for all your major business activities. If you’re going it alone in business, try to develop a core group of advisers who can meet with you periodically to confirm your goals.
• Develop a procedure for monitoring your company’s goals on a routine basis, revising or reworking them as business circumstances change.
• Create individual goals that clarify your company’s business activities without limiting flexibility and creativity.
• Confirm that your company’s goals, taken together, provide an effective blueprint for achieving your broad business intentions.
• Make sure that your company’s stated goals closely comport with your company’s mission and vision statements (see both Chapter 3 and the earlier section “Creating Your Company’s Mission Statement” for more info). If you spot a contradiction, it’s time to revisit one or the other and undertake appropriate action.

Laying out your objectives

Objectives are the statements that fill in the details, specifying exactly how you plan to reach each of your company’s goals. As much as possible, you should tie your objectives to cold, hard numbers: the market share percentage you want to achieve or number of new customers you want to serve, the quantified volume of products you want to sell, or the number of revenue dollars you want to generate.

This set of guidelines provides a useful template when your company starts to develop business objectives:

• Determine who should set business objectives in your company. While overall firm profit objectives might best be reserved for senior management to make, you don’t want these same folks alone determining the optimal level of product quality metrics on the shop floor.
• Develop a system for reviewing and managing business objectives throughout your company.
• Make sure that objectives are achievable and verifiable by including numbers and dates where appropriate.
• Create business objectives that can clearly advance and achieve larger company goals.
• Confirm that your company’s objectives, taken together, result in an efficient use of resources — money and people — in pursuit of broader business intentions.
• Consider using a formal method, such as management by objectives (MBO), to involve everyone in your company in the continuous process of setting, reviewing, and meeting business objectives. (For more on the ins and outs of MBO, see the nearby sidebar “Management by objectives.”)

Matching goals and objectives with your mission

Repetition builds muscle memory for athletes, which is advantageous when decisions must be instantaneous and wrong ones can result in defeat. Accordingly, we might be saying this over and over, but it’s so important that it deserves repeating one more time: Your company’s goals and objectives must be intimately bound to your mission and vision statements.

Too many companies simply forget their broad business intentions when they go about the detailed work of setting goals and tying them to measurable objectives. Managers start with what’s close at hand. They look at employee activities and behavior, and they come up with incentives and rewards that seem to do the right thing at the time, motivating workers toward specific objectives. But these types of goals and objectives tend to be nearsighted and may be totally out of sync with the larger aims of the company. So yet again, don’t let the trees shield the forest in which they reside.

Timing is everything

What’s the proper time frame for you to reach your goals and objectives? How far out should your planning horizon be — one year, three years, maybe five? The answer is … it depends on the pace and dynamics of your industry. We live today in a world of constant change and disruption; definitely, it can be confusing out there, so do your homework before blindly setting a timeframe for goal achievement.

Certain industries seem to remain tortoise-like in their pace, at least at some level of analysis. Small boutique furniture makers in the United States, for example, still operate today much the same as they did 50 years ago, with perhaps the addition of an Internet address. Technological change was minimal at best. Consumer tastes for these products have also changed slowly, and the types of materials used and levels of craftsmanship required have stayed pretty much the same. But while the internal dynamics of furniture making might not have shifted too dramatically, the globalization of markets has utterly and totally disrupted the domestic American industry. Reduced transoceanic shipping costs combined with the communications revolution wrought by the Internet upended the industry, as suppliers from Asia entered the market with look-alike products offered at considerably lower price. High Point, North Carolina, was proudly referred to as “the furniture capital of the world,” but today many of the large, branded firms that operated there no longer exist; next time you’re out shopping for a new sofa or coffee table, try to find something that says “Made in the USA.” In the case of this industry, incumbents might be most comfortable devising a business plan for three years or so at most.

Change, however, is perhaps a daily constant for many other industries. Take traditional “bricks-and-mortar” retailing — that is, a physical store where the customer walks in, wanders the aisles and browses the shelves, and is served by a live salesperson. But then came the advent of online suppliers like Amazon.com. At first they took root slowly (the sorcerer from Seattle first entered into the retail book selling industry way back in 1994). But today almost anyone who sells something in a physical store is subject to disruption. In the past, retailers were judged on four key variables: breadth of available product line; convenience of purchasing; trust (which encompassed perceptions of the firm’s customer service such as returns policy); and price. E-commerce suppliers quickly overtook traditional stores on three of the four, and when they began to build trust through brand recognition, customer-centric policies like no-hassle free return of goods, and ready access to instant chat with a real person, the traditional businesses were doomed. Clearly, you snooze, you lose in this industry today. Perhaps a one-year time frame for planning, which in fact is little more than the annual budgetary exercise, is appropriate for firms in the retail space who have not yet gone digital — and even that might be too long.

When dealing with change, business planners have to maintain a balancing act between moving too quickly and not quickly enough. You have to set business goals and follow them up with verifiable objectives, basing time frames on your comfort level with what you expect to happen down the road. Build in some flexibility so you can revisit your goals and objectives and account for the changes you see; perhaps lease equipment rather than make an outright purchase or hire temps until you get your footings. Stay agile. And stay tuned. We discuss this topic more thoroughly in Chapter 13.