Purpose has never been more important, and we’re led to believe that this is vital to the financial health and wellbeing both of organizations and of us as individuals.  Research from Rice University suggests that may not always be entirely true.

The study suggests that mission statements don’t actually boost financial performance, even though they’re usually a major part of the strategic planning process.  The researchers conducted a review of past research and found no link between the mission statement and the financial performance of the business.

“Mission statements are ineffective because they simply reinforce top executives’ salient beliefs, making them more inward-focused and detracting strategy from important customer needs,” the authors say. “For many companies, formulating a mission statement is a closed-door process facilitated by a consultant, but with no test of its internal or external validity among its customers, who are the primary source of cash flow.”

Testing the mission

The researchers analyzed how eight specific customer needs were referenced in the mission statements of 50 American energy suppliers.  The analysis reveals clear inconsistencies between the factors most valued by customers and those emphasized in the company’s mission statements.

For instance, a third of mission statements emphasized the importance of product and service quality, but just 15% of customers thought it was as important.  Similar mismatches appeared on the importance of pricing and billing.  By contrast, customers regarded service and support as hugely important, yet this barely merited a mention in company mission statements.

The authors argue that for companies to do a better job of linking strategic planning with financial performance, it’s vital that they move past meaningless tools, such as mission statements, and try and do a better job of understanding the things that really matter to customers.

“A strategy based on analytics using statistical analysis, machine-learning algorithms and randomized experiments to establish the true association between what executives emphasize and what customers need has a much higher chance of success,” the authors conclude. “These techniques are used in basic corporate functions such as product development and testing, and strategy planning should have to stand the same test of rigor.”