Imagine you're a potential hire for an up-and-coming company. You're deciding whether to take the job, and as you sit in the executive lounge, you pick up a brochure that has the company's mission statement. It reads:
Respect, integrity, communication and excellence.
Though all four words are largely positive, is this even a statement? Would you feel like you knew what your purpose was coming into work every day for this company?
The importance of mission statements
I'll get back to that company's mission statement in a second, but first, let's focus on why mission statements are so important.
Lots of people think investing is all about numbers. In one respect, that's true; being able to decipher what a company's cash flow statement actually means is crucial to understanding how a business is doing.
But on another level, the softer side of research -- where subjective measures outweigh quantifiable ones -- should be just as important. Fool co-founder Tom Gardner has said that to succeed in investing:
You have to look at different factors. You start having to look at what's the culture of that organization like? Do employees stay there? Is it a great place to work? Is the turnover of employees at that organization lower than at other comparable companies in their industry?
Often overlooked as meaningless, a solid mission statement can be the difference between a mediocre and a truly great business. To be effective, a mission statement needs two key traits: specificity and simplicity. Those two can be hard to piece together.
How to totally screw up a mission statement
Though it doesn't publicly publish a mission statement today, Sony once had a mission "to experience the joy of advancing and applying technology for the benefit of the public."
This is neither specific nor simple to understand. Anyone could "experience" this joy by buying an Apple (Nasdaq: AAPL ) iPad or Mac and using it to some positive end. In fact, that's largely what's happened, and it might help explain why Sony's stock is down more than 80% since the start of 2001, while Apple's has surged more than 7,700%.
Sony isn't alone in this space. Volvo states: "We use our expertise to create transport-related products and services of superior quality, safety and environmental care for demanding customers in selected segments." Though this is certainly specific, it's not simple by any means.
And the company whose mission statement started this article? That would be Enron -- no need to expand any further.
What you should be looking for
To give you an idea of what a quality mission statement looks like, I've cobbled together six of my favorites. Notice how they are both simple and specific. My bet is you'd be able to correctly identify most of these companies based on their statements alone.
- "To inspire and nurture the human spirit -- one person, one cup and one neighborhood at a time."
- "To build a place where people can come to find and discover anything they might want to buy online."
- "To offer the best audio entertainment."
- "To give people the power to share and make the world more open and connected."
- "To bring the best personal computing experience to students, educators, creative professionals and consumers around the world through … innovative hardware, software and Internet offerings."
- "To organize the world's information and make it universally accessible and useful."
Though the stocks of some of these companies may have wavered over time, the underlying businesses are sound, and employees understand what their mission is on a daily basis.
Look at how revenue has grown over the past five years for all of these companies -- with the exception of Facebook, which just went public.
5-Year Cumulative Revenue Growth
Our mission statement at The Motley Fool was recently reworked. It is now: To help the world invest. Better.
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