Some years ago, when commencing a client board's annual strategy session, I asked the question 'what business are you in?' It was a disability support organisation but the answers from both board members and executives alike boiled down to 'we are in the housing business.' This organisation, when originally established, had determined that their best strategy to assist their target client group was to provide accommodation with physical modifications appropriate to that group's particular disability.
It turned out that, 40 years on, this organisation was no longer an exclusive supplier of modified housing for its client group and a number of other housing providers were doing a far better job. The organisation's reputation was waning and its future was in doubt. This was a classic example of how the clarity of an organisation's purpose can wane and become confused with a particular strategy.
In this case the organisation's original purpose was to support people to lead active lives as citizens despite their disability. Through their strategic thinking process the board and management of the organisation were able to reconfirm the validity of that purpose and to rethink how best to fulfil that purpose. Their focus subsequently moved away from housing.
This case study is a useful reminder that, regardless of its legal form, every organisation is initially formed for a particular purpose. In a majority of cases that is to achieve something worthwhile for a group of people other than the founders. Usually that means meeting a market or community need or demand. Businesses, even small businesses that are set up primarily to provide employment for their proprietors, are formed to deliver products or services that have value to their customers. Not-for-profit organisations are usually established to achieve some worthwhile social or community benefit. Government-owned organisations are established to deliver 'public goods'.
For organisations to survive they must, by definition, continue to produce something of value. As time goes by, however, there is an increasing risk that those governing and managing an organisation will not be so clear or as focused on that purpose as those that founded the organisation. Sometimes it is perfectly valid for an organisation to diversify or even move completely away from its original purpose. This may reflect no more than its perfectly rational adaptation to changing opportunities, capabilities and circumstances. Frequently we observe, however, that a lack of clarity about organisational purpose, and the consequent lack of 'grounding', results in organisations losing direction and stumbling along from one poor decision to another. Without that clarity of purpose which gives direction it is easy for organisations to become lost. When that happens, as Alice (in Wonderland) was once advised - if you don't know where you are trying to get to, any road will take you there.
For the last 30 to 40 years it has been common to attempt to give direction to organisations through the articulation of high-level 'vision' and 'mission' statements. Dozens of books about strategic planning have stressed the importance of such statements and many boards and management teams have sweated blood over their development. Unfortunately, despite the intent, the time and the effort the resultant statements often fall short of having practical value. As the famous cartoon character, 'Dilbert', created by Scott Adams, once stated, "The average mission statement is a long awkward sentence that demonstrates the group's inability to think clearly." There are, of course, exceptions but vagueness and conceptual problems are often present. Any deficiencies are compounded when these statements have to be interpreted and implemented by people who were not involved in their original formulation.
Perhaps it is time for you and your colleagues to give fresh attention to your organisation's equivalent high-level statements of organisation direction. You will get some sense of whether this is necessary if you ask the following questions:
· Would another company or organisation's name fit over this just as well as ours? Too many mission and vision statements end up as generic announcements that could apply to any number of other organisations even in quite different types of business. The critical issue here is 'does this distinguish our organisation from others?' If not, it is probable that, when you need it, this statement is so generic that it is not going to provide any useful direction to your organisation.
· Does the statement help us in making difficult decisions? Even though these are very high-level statements - arguably the highest level policy statement in the organisation - they must still have practical application. They must give direction. The true test of their effectiveness in this regard is whether or not they provide an adequate steer when the organisation comes to a fork in the road. Does it help narrow down and ultimately select between difficult choices?
· Is this statement a muddle of 'ends' and 'means'? One of the biggest problems with mission statements is that their authors often try to embody both what the organisation is trying to achieve and its preferred way of working. The latter often dominates which has the effect of directing the leadership team's attention downwards and inwards. There is an associated risk that the statement will reflect little more than the current executive team's preferences and capabilities. An organisation's highest level direction statement should be upward and outward looking, focusing attention on its operating environment and what impact it can make on its chosen domain. Ultimately the statement should be about the organisation's reason for being. As the example in the opening paragraphs underlines, a preferred strategy can quickly become out of date, or worse, unduly dominant. As US corporate governance theorist John Carver and his collaborator Caroline Oliver have said: "Ends distinguish purpose from path, results from process, and where one is going from how one is going to get there." Ends and means should be kept conceptually separate and sequential. Defining an organisations ends must come first.
· Do we refer to this statement often? Unless both board members and senior executives, alike, make reasonably frequent references to this statement or its general sentiments when considering important issues it is, to put it bluntly, irrelevant - 'a waste of space'. Not every organisation can easily reach this level of clarity but an aspirational model was provided by the successful 1995 America's Cup challenger. When established the challenger organisation had a simple purpose - to win international yachting's Holy Grail, the America's Cup, for New Zealand. That purpose was able to be operationalised so that every idea, decision and action could be assessed against a simple mantra: 'Will this make the boat go faster?'
· Does this statement describe a purpose that is meaningful and realistically achievable? The extent of wishful thinking in many organisations' high-level strategic statements simply renders them meaningless. Consequently, they do not add to the quality of corporate decision-making. Nor do they assist in motivating and aligning people and decisions throughout the organisation. Such statements are viewed (often quite cynically) for what they really are - meaningless rhetorical flourishes that might as well have been dreamed up by the PR department.
Experience over many years in assisting boards in their strategic thinking processes has led my colleagues and me to a very clear conclusion: for a board to be truly effective in its direction giving role it must concentrate on the articulation (and ongoing application) of a purpose statement rather than the type of vision or mission statements referred to above. A purpose statement specifies succinctly why a company or other type of organisation exists.
Put simply, an organisation exists to provide certain benefits (or to meet certain needs) for a particular set of recipients (consumers, customers, clients, beneficiaries, patients, etc). The highest level strategic statement in your organisation should contain that type of content. The purpose of this article has been to stimulate your thinking about whether your organisation has, and can readily articulate, such a statement. If it can't, a good way to start to develop such a statement - and the powerful dialogue any organisation needs around purpose - can be stimulated by the following simple question: if this organisation did not already exist why would we create it? Try it at your next board meeting.
Corporate Boards that Create Value
by John Carver and Caroline Oliver