We have all heard of the “Big Bang” theory of the universe and the general diversity of opinion as to its accuracy as an explanation of how the universe started.  When we seek the “Big Bang” theory of the corporation in order to identify where the corporation “starts” we tend to observe much more agreement.

In the corporate context, most observers of and participants in business would agree that the raison d’etre of corporations (i.e. where a corporation’s efforts “start” and from where it gets its legitimacy) is identified within its mission statement. And it is from this mission statement that organisations develop an enabling vision and extract from it a set of enabling objectives and strategies that will deliver this vision and fulfil its mission.

Unfortunately this process is flawed since in most organisations the process of developing its mission is undertaken entirely by management. And it is management who, without the necessary metrics to define their owners’ objectives, make subjective assessments as to those objectives (albeit well-meaning), and incorporate them into the organisation’s strategies and plans. In other words, managers decide what it is that their organisation will do and what their organisation will deliver.

Since shareholder objectives vary significantly, management’s subjective assessments are therefore often wrong, inexact or inappropriate. The corporation’s mission then, is a statement of organisational deliverables that, because it has been subjectively derived, often diminishes the probability for owner satisfaction from the company that the owners collectively posses.

A key element of most organisations where management defines the mission statement, is that management sets the performance criteria against which it will itself be measured. These criteria may not be the criteria needed to drive toward owner objectives and owner satisfaction.

Since management is “merely” human and thus exhibits natural human traits and tendencies, the measures used to assess itself are frequently those that are less challenging, less confronting, are less risk-taking or threatening than they might be if they were set in a manner focussed exclusively on shareholder best-interest.

The question therefore is whether an organisation’s mission statement is the fundamental reason why an organisation exists. Strictly speaking, the mission statement does provide the rationale for an organisation’s existence and context to its operational and investment strategies.

However, the issue for those organisations where management subjectively develops the mission statement, is that as long as a mission statement fails to address the satisfaction of owner objectives in tangible, quantifiable and measurable ways, then the mission statement is not the definer of a corporation’s purpose. The mission statement will provide the necessary direction for the corporation as long as it is not a statement of subjective or uninformed management, but is an accurate representation of the outcomes desired by owners.

Mission Statements that speak of “quality”, “best practice”, sustained competitive advantage” and similar motherhood statements without convincingly demonstrating that such philosophies contribute to the enhancement of shareholder satisfaction threaten the use of shareholder funds toward projects that add little to the owners of those funds.

The only way to bridge this chasm between management perception and owner objectives is to quantify owner objectives in a way that enables the organisation to determine what it needs to deliver over time. Once quantified, a mission statement for an organisation needs to be “no more” than a statement of quantified owner objectives since the organisation “merely” exists to satisfy those objectives.