Chapter 2: Leading Strategically
Chapter 2: Leading Strategically
2.1 Leading Strategically
2.2 Vision, Mission, and Goals
2.3 Assessing Organizational Performance
2.4 The CEO as Celebrity
2.5 Entrepreneurial Orientation
2.6 Conclusion
2.1 Leading Strategically
Learning
Objectives
After reading this chapter, you should be able to understand and articulate answers to the following questions:
1. What are vision, mission, and goals, and why are they important to organizations?
2. How should executives analyze the performance of their organizations?
3. In what ways can having a celebrity CEO and a strong entrepreneurial orientation help or harm an organization?
Questions Are Brewing at Starbucks
Starbucks’s global empire includes this store in Seoul, South
Korea.
Wikimedia Commons – public domain.
March 30, 2011, marked the fortieth anniversary of Starbucks first store opening for business in Seattle, Washington. From its humble beginnings, Starbucks grew to become the largest coffeehouse company in the world while stressing the importance of both financial and social goals. As it created thousands of stores across dozens of countries, the company navigated many interesting periods. The last few years were a particularly fascinating era.
In early 2007, Starbucks appeared to be very successful, and its stock was worth more than $35 per share. By 2008, however, the economy was slowing, competition in the coffee business was heating up, and Starbucks’s performance had become disappointing. In a stunning reversal of fortune, the firm’s stock was worth less than $10 per share by the end of the year. Anxious stockholders wondered whether Starbucks’s decline would continue or whether the once high-flying company would return to its winning ways.
Riding to the rescue was Howard Schultz, the charismatic and visionary founder of Starbucks who had stepped down as chief executive officer eight years earlier. Schultz again took the helm and worked to turn the company around by emphasizing its mission statement: “to inspire and nurture the human spirit—one person, one cup and one neighborhood at a time (Starbucks).” About a thousand underperforming stores were shut down permanently. Thousands of other stores closed for a few hours so that baristas could be retrained to make inspiring drinks. Food offerings were revamped to ensure that coffee—not breakfast sandwiches—were the primary aroma that tantalized customers within Starbucks’s outlets.
By the time Starbucks’s fortieth anniversary arrived, Schultz had led his company to regain excellence, and its stock price was back above $35 per share. In March 2011, Schultz summarized the situation by noting that “over the last three years, we’ve completely transformed the company, and the health of Starbucks is quite good. But I don’t think this is a time to celebrate or run some victory lap. We’ve got a lot of work to do (Starbucks, 2011).” Indeed, important questions loomed. Could performance improve further? How long would Schultz remain with the company? Could Schultz’s eventual successor maintain Schultz’s entrepreneurial approach as well as keep Starbucks focused on its mission?
References
Starbucks, Our Starbucks mission statement. Retrieved from http://www.starbucks.com/about-us/company-
information/mission-statement. Accessed March 31, 2011.
Starbucks, Onward: How Starbucks fought for its life without losing its soul by Howard Schultz]. 2011, March
28. NPR Books. Retrieved from http://www.npr.org/2011/03/28/134738487/starbucks-ceo-can-you-get-big-and-
stay-small.
2.1 Leading Strategically 32
2.2 Vision, Mission, and Goals
Learning Objectives
1. Define vision and mission and distinguish between them.
2. Know what the acronym SMART represents.
3. Be able to write a SMART goal.
The Importance of Vision
“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it
to completion.”
–Jack Welch, former CEO of General Electric
Many skills and abilities separate effective strategic leaders like Howard Schultz from poor strategic leaders. One
of them is the ability to inspire employees to work hard to improve their organization’s performance. Effective
strategic leaders are able to convince employees to embrace lofty ambitions and move the organization forward.
In contrast, poor strategic leaders struggle to rally their people and channel their collective energy in a positive
direction.
As the quote from Jack Welch suggests, a vision is one key tool available to executives to inspire the people
in an organization (Table 2.1 “The Big Picture: Organizational Vision”). An organization’s vision describes what
the organization hopes to become in the future. Well-constructed visions clearly articulate an organization’s
aspirations. Avon’s vision is “to be the company that best understands and satisfies the product, service, and
self-fulfillment needs of women—globally.” This brief but powerful statement emphasizes several aims that
are important to Avon, including excellence in customer service, empowering women, and the intent to be a
worldwide player. Like all good visions, Avon sets a high standard for employees to work collectively toward.
Perhaps no vision captures high standards better than that of aluminum maker Alcoa. This firm’s very ambitious
vision is “to be the best company in the world—in the eyes of our customers, shareholders, communities and
people.” By making clear their aspirations, Alcoa’s executives hope to inspire employees to act in ways that help
the firm become the best in the world.
The results of a survey of one thousand five hundred executives illustrate how the need to create an inspiring
vision creates a tremendous challenge for executives. When asked to identify the most important characteristics
of effective strategic leaders, 98 percent of the executives listed “a strong sense of vision” first. Meanwhile, 90
percent of the executives expressed serious doubts about their own ability to create a vision (Quigley, 1994).
Not surprisingly, many organizations do not have formal visions. Many organizations that do have visions find
that employees do not embrace and pursue the visions. Having a well-formulated vision employees embrace can
therefore give an organization an edge over its rivals.
Table 2.1 The Big Picture: Organizational Vision
An organization’s vision describes what the organization hopes to become in the future. Visions highlight the
values and aspirations that lay at the heart of the organization. Although visions statements have the potential to
inspire employees, customers, and other stakeholders, vision statements are relatively rare and good visions are
even rarer. Some of the visions being pursued by businesses today are offered below.
Company Vision
Alcoa To be the best company in the world–in the eyes of our customers, shareholders, communities and people.
Avon To be the company that best understands and satisfies the product, service and self-fulfillment needs women–globally.
Chevron To be the global energy company most admired for its people, partnership and performance.
Google To develop a perfect search engine.
Kraft Foods Helping people around the world eat and live better.
Proctor and Gamble
Be, and be recognized as, the best consumer products and services company in the world.
Mission Statements
In working to turnaround Starbucks, Howard Schultz sought to renew Starbucks’s commitment to its mission
statement: “to inspire and nurture the human spirit—one person, one cup and one neighborhood at a time.” A
mission such as Starbucks’s states the reasons for an organization’s existence. Well-written mission statements
effectively capture an organization’s identity and provide answers to the fundamental question “Who are we?”
While a vision looks to the future, a mission captures the key elements of the organization’s past and present
(Table 2.2 “Missions”).
Table 2.2 Missions
While a vision describes what an organization desires to become in the future, an organization’s mission is
grounded in the past and present. A mission outlines the reasons for the organization’s existence and explains
what role it plays in society. A well-written mission statement captures the organization’s identity and helps to
answer the fundamental question of “Who are we?” As a practical matter, a mission statement explains to key
stakeholders why they should support the organization. The following examples illustrate the connections between
organizations and the needs of their key stakeholders.
2.2 Vision, Mission, and Goals 34
Company Mission Statement
Harley Davidson
We ride with our customers and apply this deep connection in every market we serve to create superior value for all of our stakeholders.
Internal Revenue Service
Provide America’s taxpayers top-quality srevice by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.
Starbucks To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
The Estée Lauder Company
Bringing the best to everyone we touch and being the best in everything we do.
Limited Brands
Limited Brands is committed to building a family of the world’s best fashion brands offering captivating customer experiences that drive long-term loyalty and deliver sustained growth for our shareholders.
Fender Musical Instruments
We will exceed the expectations of music enthusiasts worldwide and create a community for individual expression by focusing on our people, products, and business excellence.
Organizations need support from their key stakeholders, such as employees, owners, suppliers, and customers, if
they are to prosper. A mission statement should explain to stakeholders why they should support the organization
by making clear what important role or purpose the organization plays in society. Google’s mission, for example,
is “to organize the world’s information and make it universally accessible and useful.” Google pursued this
mission in its early days by developing a very popular Internet search engine. The firm continues to serve its
mission through various strategic actions, including offering its Internet browser Google Chrome to the online
community, providing free e-mail via its Gmail service, and making books available online for browsing.
35 Mastering Strategic Management
Many consider Abraham Lincoln to have been one of the greatest strategic leaders in modern history.
Wikimedia Commons – public domain.
One of Abraham Lincoln’s best-known statements is that “a house divided against itself cannot stand.” This
provides a helpful way of thinking about the relationship between vision and mission. Executives ask for trouble
if their organization’s vision and mission are divided by emphasizing different domains. Some universities have
fallen into this trap. Many large public universities were established in the late 1800s with missions that centered
on educating citizens. As the twentieth century unfolded, however, creating scientific knowledge through research
became increasingly important to these universities. Many university presidents responded by creating visions
centered on building the scientific prestige of their schools. This created a dilemma for professors: Should they
2.2 Vision, Mission, and Goals 36
devote most of their time and energy to teaching students (as the mission required) or on their research studies
(as ambitious presidents demanded via their visions)? Some universities continue to struggle with this trade-off
today and remain houses divided against themselves. In sum, an organization is more effective to the extent that
