Distilling an organization’s purpose into a few inspiring words can be a harrowing task performed under wide scrutiny. Failure is often very public.
Take, for example, the list of weak missions statements published in Inc. magazine in 2013. The article calls out statements from McDonald’s for having a grammatical error, Barnes & Noble for contradicting itself from one sentence to the next, and Avon for tossing too much into a 249-word mission statement, including six core aspirations and “everything from surpassing competitors to increasing shareholder value to fighting breast cancer.”
More recently, Microsoft CEO Satya Nadella received a lot of public criticism when he introduced a new mission statement for the company. In this case, the scorn was directed less at the statement itself than at how Nadella effused about it.
Clearly, crafting a mission statement is a tricky endeavor. If you’re a senior leader considering this undertaking, you might be tempted to use the absurdist Mission Statement Generator, which mashes together business jargon into a generic mission statement with the click of a mouse. But a range of academic studies has shown that high-quality missions are associated with better performance across a number of measures (see here, here, here, and here).
Yale Insights talked with James Baron, the William S. Beinecke Professor of Management at Yale SOM, about what makes mission statements effective and which organizations actually need them. He said that mission statements should be aspirational. “There’s not a lot of comparative advantage to be gained by simply articulating what business you are in,” Baron explained. “The things that actually seem to be associated with companies getting leverage from their mission statement have to do with articulating some broader purpose, some philosophy, some concept of what the organization views itself as standing for.”
The idea is to present something that is compelling enough to make the company stand out. “To the extent that the mission statement is really going to capture the imagination of stakeholders—employees, customers, perhaps suppliers—it needs to have a stronger values and philosophical basis,” Baron said. He added that mission statements that reference employees, society, and core values tend to be associated with high-performing organizations.
What are the benefits? An organization that effectively articulates its mission may be able to get by with less supervision. If employees understand the ethos of the organization, managers won’t need to weigh in as often about what does and doesn’t fit with the organization. And it can pay off in attracting and keeping the best employees—especially among millennials and women.
However, businesses shouldn’t fake it. “The first question you have to ask is, are you willing and able to be mission driven?” Baron said. “Embracing hollow commitments is worse than not articulating any commitments.”