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Elasticity of the Airline Industry

Essay by   •  November 17, 2010  •  Research Paper  •  2,202 Words (9 Pages)  •  1,644 Views

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INTRODUCTION

In 1973 Peter Drucker wrote that "mission and philosophy is the key starting point in business" and claimed that the lack of thought and attention given to them as the cause of many frustrations and failures in business.

Subsequently Pearce (1982), David (1989), Campbell and Tawadey (1990) and others developed a body of knowledge on mission statements as a strategic tool essential for good management practice.

The Ashridge model:

MAINTAINING A CORPORATE FOCUS

mission statement is a powerful instrument which can significantly influence the actions of an organisation

Campbell and Tawadey (1990) put the mission statement into

the context of a mission model, entitled "The Ashridge

Mission Model", which comprises four elements:

*Purpose describes why the organisation exists

*Strategy focuses on how the purpose might be achieved

*Values are what the organisation cherishes and believes in

*Behaviour standards are the policies and patterns existing

within the organisation which guide and colour how it operates

*key issues are whether such elements have been addressed and

whether the organisation's stance is clearly understood by

all employees

* Strong links between the four elements will result in a

strong mission

During the 1990s attitudes to company mission statements were generally positive with more companies using them and academics and consultants engaged in defining and evaluating them. Most of this was within the context of strategic management since mission and vision form a "framework within which strategising takes place" (Eden and Ackerman 1998) leading to the mission as a statement of strategic intent.

Leading management authors advised that corporate headquarters draw up business plans which include broad statements of mission and strategy (Kotler 1991, Kay 1993, Lynch 2000, Thompson 2001). There were numerous definitions and categorisations of mission statements (Jauch and Glueck 1988, Johnson and Scholes 1999, De Wit and Meyer 1994, Barrow et al. 2001), but little discussion, still less empirical evidence, of how mission statements are used, by whom and their impact on performance.

Research since 2000 has attempted to remedy the deficiency in the mission statement literature and to establish a link between mission statements and performance. Bart and Baetz's (1998) in-depth study showed that the presence of mission statements was not automatically associated with superior company performance. Where internal performance and resource allocation measures were aligned with the mission there was a significant and positive correlation between mission and performance.

Main:

Two thirds of responding organisations with more than 5000 employees had a mission statement compared with only 40% of smaller companies (klemm and redfearn 2004)

The majority (80.7%) of the people involved in compiling mission statements in UK companies were of director grade and above. Non- management employees account for only 4.8% of the personnel involved, with shareholders accounting for only 1% (Table 2). These results confirm the findings of Klemm et al. (1991) and Rigby (1998) that compiling the mission statement in a plc is a top-down process, generally the preserve of the most senior managers.

One reason that mission statements are so popular even though there is no direct evidence that they do any good is that there is no direct evidence that they do any good. In other words, companies adopt them . . .

. . . because no one can prove that they don't work. So what if you can't prove that mission statements have any direct effect on the bottom line--it's hard to prove that anything a company does has a direct effect on the bottom line. Even operating performance can be only tenuously linked to financial performance, in the opinion of many experts.

Mike Lovdal is vice president of Mercer Management Consulting Inc., which has surveyed hundreds of companies in this area. "A mission statement is one of 100 factors that count," he concludes. "It's like trying to correlate sunspots with the bottom line." Mission statements thus are like rabbit's feet and other lucky charms: Carrying one probably won't do any good, but what can it hurt?

. . . because they do work--for a while. Angela Baron and Mike Walters noted in their study for Institute of Personnel and Development IPD that while mission statements can help companies change employee behavior in the short run, the improving effect that mission statements seem to have on employees usually has less to do with the mission statements than with the strenuous propaganda campaigns usually mounted on their behalf.

Changing attitudes takes more time. Alas, old habits linger longer than most execs these days. The boss moves on, convinced that mission statements do more than they actually do, while back on his old watch everyone gradually slips back into the old ways.

. . . because they seem to work. Executives often resort to what Lovdal calls proxy correlations to prove the efficacy of mission statements. A lot of the firms that end up on Fortune's most-admired list, or dominate their markets, or collect the most money for the United Way, have cracker-jack mission statements.

A company that is good at drafting mission statements is usually good at everything else too. The firm's success explains the mission statement--not the other way around. A lot of companies at the bottom of such lists have cracker-jack mission statements too. You may as well try to predict a firm's success by the color of the carpet in the executive suites or the make of the CEO's limo.

. . . because they work at things that can be measured. The IPD roam found that most of the companies it looked at measured the success of their mission statement not in terms of the

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