A mission statement is a written document identifying the businesses’ primary reason for existence. It should convey the core values and the principles of the company. It should be reviewed with staff frequently to remind everyone of the chief goals of the company.
When asked about preparing a mission statement I tell clients to focus on the three primary reasons you are business. First and the most important is profitability. You want to reassure those that have a financial risk in the company that you are striving to earn a profit to reward them for that risk. Secondly, tell everyone that this is a long term project and that the employees are instrumental in the overall success. In exchange for this success, an employee will feel desired and have financial security to provide for their families. The final goal relates to the customer. The consumer needs to know that you are looking out for them and this is a team relationship. You need the customer and you want to provide them with what they desire.
Naturally you can’t start out stating you want a profit, therefore, in the mission statement satisfy the customer first. Then shift the focus to the employee and finally finish up with a brief assurance statement to the shareholders that all of this is done with a goal of maintaining a profit.
Below I’ll cover each of these goals and before I start, I want the reader to read a really great mission statement that to me is a home run.
Example of a Top Notch Mission Statement
WE WILL BUILD GOOD SHIPS. AT A PROFIT IF WE CAN. AT A LOSS IF WE MUST. BUT ALWAYS GOOD SHIPS.
This is the mission statement from the Newport News Shipbuilding a subsidiary of Huntington Ingalls Shipbuilding. Located in Newport News, VA the company started building ships back in the late 1800’s. They endured financial hardship during the Second World War and build the nation’s aircraft carriers today. Notice how they successfully convey to all the parties the reality of the situation.
For the sailor (customer) that sails on the ship with a concern about sinking – WE WILL BUILD GOOD SHIPS. For the investor – AT A PROFIT IF WE CAN. For the employee – AT A LOSS IF WE MUST. For all concerned – BUT ALWAYS GOOD SHIPS.
Simple straight forward and succinct is this mission statement.
Mission Statement – Focus on the Customer
In my example above notice how the shipyard focused on the customer first? Many of our Fortune 500 Companies start out their missions statements with a connection to their customers. Here is one from Johnson and Johnson the maker of medical products for both the medical professional and the family:
Now here is the interesting part of this statement. Their Credo was written by Robert Wood Johnson one of the early Chief Executive Officers and a member of the founding family. It was written in 1943! Yes, you read that right – 1943. It is still applicable today.
What is interesting is that the customer goes beyond just you and me. Mr. Johnson includes those that provide supplies and distribute their product too. This is unheard of in modern business. Mr. Johnson wanted everyone to know that this is a team effort focused on ‘high quality’.
To prove how core this value is at Johnson and Johnson the company absorbed a several million dollar profit loss associated with the Tylenol scare of 1982. A malicious act where someone laced Tylenol with cyanide in several containers in the Chicago area perpetrated this scare. All toll, seven people died. Johnson and Johnson responded by immediately removing all Tylenol from store shelves throughout the United States. In addition, they successfully used the media to convey their trust relationship with the customer and developed a tamper proof box and container still used to this day. The consumer realized that Johnson and Johnson was adamant about their duty to the customer and allegiance to the product was fully restored within a few years.
What is really interesting about J&J’s mission statement is that they go beyond the customer and include their employees.
Mission Statement – Align the Company with the Employees
The first statement in the employee paragraph gets right to the point. ‘We are responsible to our employees, ….’
Furthermore, notice in the same sentence that employees don’t work for J&J; they work ‘with’ J&J.
In business there are three primary goals for all companies. One of those goals is to provide an environment of security to an employee that they have a job for life. Johnson and Johnson goes beyond just the mission statement but includes it in their policy manuals, training and even in their management style. The employee is an essential component of their product and service.
Reassure the Owners of Conducting Business for a Profit
The last paragraph in Johnson and Johnson’s mission statement covers the owner. Yep, they indicate a responsibility to them but the last statement is ‘…. stockholders should realize a fair return.’ Not an outrageous return or a loss but a ‘Fair’ return. Now I know this means something different to everyone, but the key is the word ‘Fair’. The Board of Directors sets this out from year to year and the company is always trying to stay anew of not only new drugs but technology too. The paragraph indicates that is important to build new facilities and invest in new ideas and products.
Summary – Mission Statement
A mission statement isn’t written in two hours, it is developed over a long period of time. A really good one will take several years. Pen a basic and succinct one to use temporarily and expand upon it as a function of management meetings. Over time it will develop into a credo just like the one used at Johnson & Johnson.
In the interim, remember the customer comes first, then your employees and finally the investors. Act on Knowledge.
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There are four key principles used with value investing. Each is required. They are:
- Risk Reduction – Buy only high quality stocks;
- Intrinsic Value – The underlying assets and operations are of good quality and performance;
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- Patience – Allow time to work for the investor.
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