MGMT project

Essential summary

Purpose is the reason for the organization and its overall goals. Vision statement is the organization’s statement of its desired future

state or ideal. Mission is the organization’s statement of its overriding pur-

pose, such as the value it creates for its stakeholders and other responsibilities.

Values are the organization’s statement of its expected collective norms and behaviours and will include its overall core business meth- odologies and management philosophies.

Purpose2

It is essential for organizations to have a common purpose. There is no sen- sible strategic management without purpose. This is important if everybody in an organization is to work effectively together. Senior managers spend considerable time clarifying and making purpose meaningful. This is done not only to inspire the organization but also to help employees in an orga- nization to develop their priorities and roles and to understand the priorities and roles of others they work with.

Purpose is the primary and basic reason for an organization’s existence, and it is founded on belief. An organization must believe that it serves a use- ful purpose, and this requires some sort of belief system to make sense of what an organization does since in everyday work much has to go unques- tioned. There are three dimensions to how organizations manage themselves as a collective entity – vision, mission, and values. Each offers a differ- ent role in strategic management for clarifying organizational purpose (see Figure 2.1).

C o p y r i g h t 2 0 2 0 . R o u t l e d g e .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

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12 Purpose

Vision is a desired future state or ideal for an organization; this requires an organization to make a substantial strategic change. Mission is a statement of an organization’s present aims and core activities; these guide an orga- nization’s control of its core business areas and continuous improvement for creating customer value. Visionary change and the strategy to achieve it bring change to existing working. Values, the expected collective norms and behaviour of everybody, have a mediating role in terms of how values influence the management of vision and mission together.

Vision statements Visions are drawn up in document form as a statement of intent. They are typically short and memorably ambitious but not overblown. A vision will provide the basic rationale for change to ensure that the reasons and the broad implications for action are obvious. Its inspirational qualities should excite and motivate enough to encourage people to stretch possibilities and rethink their work. But it also needs to seem realistic – so senior manag- ers need to walk a narrow line between distant ambition and the possibili- ties of getting there carefully. The development of a vision needs to take into account an organization’s situation with regard to both the external and

Figure 2.1 The three dimensions of organizational purpose

Vision

Values

Mission

Strategy

Business Model

Important to continuous improvement and the

control of core business areas for creating value

Important to making a substantial

strategic change

Important to the core business methodologies

and management philosophies

A desired future state or ideal for an organization

The expected collective norms and behaviour of

everybody in an organization

A statement of an organization’s present

aims and core activities

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Purpose 13

internal environments; this may involve an envisioning process involving the participation of an organization’s important stakeholders.

A particular kind of vision statement is a simple ‘big idea’ – something very different that will change an organization. This can be used as a mem- orable catchphrase to be easily communicated as a slogan to spur people on to make exceptional efforts. A word of warning is necessary: vision statements should be meaningful statements useful to guide activities in a desired direction and should not be reduced to superficial slogans. It is also essential to understand that they have a different role from that of mission statements.

Mission statements A mission statement explains why an organization exists. It explains the scope of what an organization does and typically will have a rationale to explain how it adds stakeholder value. The style and the form of statements vary considerably in practice since organizations use them in different ways. For example, a statement can be used for public relations to influence impor- tant publics or for marketing to indicate a distinctiveness that stands out against competitors. Care is necessary to ensure that an organization is able to live up to its claims. The statement may claim excellence and quality, but if it fails to deliver these, the organization’s reputation will suffer. Platitudes like ‘we make your life better’ can leave both customers and employees feeling cynical.

The importance of stakeholders to mission is important. Stakeholders are individuals and groups who benefit directly by receiving value from what an organization does and provides. This includes, of course, shareholders and other groups who invest in an organization. They may also include employees, suppliers, and facilitators, such as partners and more broadly society and government. Peter Drucker, widely acknowledged as the father of modern management, in an oft-quoted piece from his classic The Practice of Management (1955), puts the customer first:

If we want to know what a business is we have to start with its purpose. And its purpose must lie outside of the business itself. In fact, it must lie in society since a business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer.

But a ‘customer’ can be hard to define for some organizations. In the case of public service organizations, political purpose is important – as well service users and citizens. A major question is about how the wider com- munity can be treated as a customer and how a commercial firm can create

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14 Purpose

significant shared value for society. Corporate social responsibility (CSR) is based on a view that large corporations should fulfil a world citizen role. CSR involves the joint pursuit of profit, good citizenship, and setting a good example by achieving high standards of business morality, especially in relation to practices in the developing world and the environment (Bhat- tacharya, Sen, and Korschun, 2011).

Values statements A values statement documents the expected collective norms and standards of behaviour for an organization’s managers and workforce. It may also be expressed in terms of a set of principles setting out the way that managers and other employees should do and conduct their work. Note that values are different from stakeholder value: values are the standards by which people work, while value is an outcome produced by that work. Values statements should be designed to sustain social capital by emphasizing trust, fairness, support, and honesty – those values upon which most working relationships depend.

In strategic management, values statements have become more important with the rise in growth and power of global organizations. An important rea- son is a greater requirement to integrate corporate-wide management phi- losophies and business methodologies across global workforces that differ widely in terms of national cultures. Large organizations have to harmonize cross-functional activity with functional ones, and this needs a general con- text in which individuals can work consistently in relation to each other to develop and sustain organization-wide values.

An organization’s general context for working must be stable over a long period. Jim Collins (2001), in his important book Good to Great, argues that the best companies sustain their position by preserving their core values and purpose, while their strategy and operating practices continuously adapt to change. It does not matter what these core values are so much that to be successful companies must have them – it is more important that senior managers are aware of them, can build them explicitly into the organization, and preserve them over time.

An organization’s core values constitute its basic strategic understanding, and Collins emphasizes the importance of a culture of self-disciplined peo- ple who adhere to a consistent system within which they have the freedom and responsibility to take action. This discipline is felt as much intuitively as it is consciously. It should be communicated through a common organi- zational culture which is shared by key managers and employees.

Edgar Schein (1985), in his influential book Organizational Culture and Leadership, explains organizational culture as the shared basic assumptions

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Purpose 15

and beliefs learned from experience. These operate unconsciously and deter- mine the taken-for-granted perceptions everybody in an organization has of his or her environment. Assumptions and beliefs are forged over time as people learn from dealing with an organization’s problems, which become embedded in behaviour that repeatedly proves itself over time. Organiza- tional culture is pervasive and powerful in its influence, so senior managers should be aware and manage its effects for strategic management – or else they are likely to find that culture will manage them.

An established culture is typically organization-specific and because of this it may have given the organization unique ways of working and stra- tegic resources which underpin its competitive advantage. Thus, a new top management should be careful if it wishes to change an organizational cul- ture. It may be more practical to work with a culture than to seek to change it; certainly, with culture it is necessary to build any required changes gradu- ally over time.

References Bhattacharya, C. B., Sen, S., & Korschun, D. (2011), Leveraging Corporate Social

Responsibility: The Stakeholder Route to Business and Social Value, Cambridge: Cambridge University Press.

Collins, J. (2001), Good to Great: Why Some Companies Make the Leap . . . and Others Don’t, London: HarperCollins.

Drucker, P. F. (1955), The Practice of Management, London: Heinemann Butter- worth.

Schein, E. H. (1985), Organizational Culture and Leadership, London: Jossey-Bass.

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