Don’t underestimate the power of words in making your business work! Your mission statement can be one of the most powerful tools to market your business and keep your employees (and yourself) focused and motivated.
This is what David J Collis and Michael Rukstad said about mission statements in the Harvard Business Review of April 2008: “The value of rhetoric should not be underestimated. A 35 word statement can have a substantial impact on a company’s success. Words do lead to action. Spending time to develop the few words that truly capture your strategy and that will energize and empower your people will raise the long-term financial performance of your organization.”
Unfortunately there are mission statements and then there are mission statements. The majority of them are appallingly bad. We’ve all heard the smug declarations that “This company’s mission is maximising shareholder value.” Uggghhh!
Of course companies must maximise shareholder value, but it is meaningless as a mission statement, unless of course you are an investment company! It’s about as informative as saying “good morning” when you meet someone.
Surely what we as clients and your employees are interested in is “how?” And the “how” shouldn’t sound like a legal document, covering all bases. Coming to think of it, the expression “maximising shareholder value” is pompous. Why not simply: “We want to make money for our shareholders?”
Short, sweet, effective
Here is a (thankfully!) short version of the ‘maximising stakeholder variety of mission statements’: “The Company’s primary objective is to maximize long-term stockholder value, while adhering to the laws of the jurisdictions in which it operates and at all times observing the highest ethical standards.” Would you have guessed that ‘they’, Dean Foods Corporation, were a food and beverage company?
Compare those statements with Fortune 500 Company ADM whose business is agricultural products: “To unlock the potential of nature to improve the quality of life.” Short, sweet, effective! Please, remember, you needn’t say it all in your mission statement.
There are other elements of your corporate profile, such as your slogan or strapline, your values and your vision statement that will tell the whole story. Keep every single element of your profile, such as the mission statement, focused and crisp.
The problem with all these “maximising shareholder value” mission statements is that they don’t sit well with clients. To the client it sounds too much like “we will fleece you to the last Rand.” Or: “Look at our smiling shareholders, how happy they are after we have squeezed the last drop of blood from you!”
The mission statement is your opportunity to explain to clients why your business exists at all. And no matter how important it is to make money for your shareholders, that is not the reason why your enterprise exists. Your enterprise exists because it addresses a need in the world out there.
Meeting clients halfway
Real people of flesh and blood need groceries. That’s why SPAR, Checkers and Pick n Pay exist. An enterprise’s reason for being is in the needs of their clients. Only by fulfilling clients’ needs efficiently and to their satisfaction can you make money for yourself and your shareholders. See?
So this is where you begin to craft your mission statement, by asking: “What needs do my enterprise fulfil?” What is our reason for being? If I had to close my doors tomorrow, who else in the wide world out there would miss us and why?
Would anyone except employees and shareholders burst into tears if we had to cease to exist tomorrow? Your mission statement must tell your clients how you are going to help them.
The beauty of it is that your employees will also know what they are supposed to be doing and why they are doing it!
The perfect mission statement
In my consultancy I always use Winston Churchill’s statement to the British people after a disastrous start to World War II, as the ultimate mission statement:
“You ask, what is our policy? I will say: It is to wage war, by sea and land and air, with all our might and with all the strength that God can give us; to wage war against a monstrous tyranny never surpassed in the long and lamentable catalogue of human crime. That is our policy.”
Well, no doubt hey? No room for misunderstanding, everybody knows what’s to be done. You are in for a helluva fight; don’t even think of raising the white flag.
Now, not all of us live in such exciting times and with such a historical mission to accomplish. Most of our businesses won’t be defined by fighting for a cause. Don’t expect your corporate cleaning services business to have such an exciting, heroic tone to it. But you can be just as explicit, clear and convincing.
The following is a thankfully short, but inappropriate mission statement: Our goal is to be the leader in every market we serve, to the benefit of our customers and our shareholders.” The Dover Corporation is an equipment manufacturer.
What they have here is not a mission statement, but a strategic goal, to be the leader in every market. As a company you have more than enough room for telling all and sundry what your strategy is, but in the mission statement you must tell everybody what need in the real world out there you are addressing.
Let’s compare it to the mission statement I have helped to create for corporate cleanings services company, Libera: “Our mission is to create hygienic, aesthetic, productive environments that comply with all regulations.”
This tells us that our premises will be both germ free and pleasing to the eye so that we can get your work done with a smile. Also, you won’t be surprised by the health inspectors, because all the paperwork will be in order.
You can imagine the presentation to a prospective client ticking these boxes one by one. You can imagine when walking the CEO through the premises pointing out why this spot is hygienically clean, not only appearing to be clean; pointing the finger to how esthetically pleasing that corner over there is, once a horrible eyesore.
Then indicating how productivity is enhanced in this clean and pleasing environment. Then, finally quickly running through the list of regulatory requirements and putting the CEO at ease that all has been taken care of. You can also imagine the supervisor doing inspection with the cleaners and asking:
“Here are the results of the tests, this is not hygienic. Look there, do you think the people who work here will want to face that every day? How are they going to work here, if we leave it like that?”
The mission statement must keep you and your employees focused on the reason why you are being paid by your clients. Good to remind shareholders too, where and how the money comes from. The mission statement must focus the clients’ attention on the reason why their cares have been relieved and why they can sit back, happy and content.
So, what’s my mission for my consulting business? “I help you to differentiate yourself from the opposition.” This is the main purpose of strategy and branding. Need I say more? Follow my advice, get a mission statement that reminds your clients how lucky they are to have you help them and you will be different from the herd in both in marketing and management!
Alan Knott-Craig Answers Your Questions On Money And Partners
From starting the right business, to managing business partners and finding your magic number, there is a secret to happiness.
If I get rich will I be happy? — JC Lately
Does money equal happiness? Mostly, yes. Research in the US shows that your happiness is proportionate to your earnings up until you earn $80 000 per annum. Thereafter, incremental income gains have a negligible effect on your happiness.
In other words: More money will make you happy as long as you’re poor. Once you break out of poverty and enter a comfortable middle-class existence, more money will not make you happier.
These are the top three for old folks:
- I wish I’d spent more time with family.
- I wish I’d taken more risks.
- I wish I’d travelled more.
Therein lies the secret to happiness. Spend time with your family. Take risks. Travel.
But first, make money. Don’t do any of the above until you’re making enough money not be stressed about money.
What is the magic number? — Mushti
The magic number is the amount of money you need to not worry about money ever again. If you don’t need toys like Ferraris, yachts and jets, the magic number is R130 million. Here’s the math: R130 million will earn R9,1 million in interest annually (assuming 7% interest). After tax that is R5,46 million.
Assuming you need 50% to maintain a good lifestyle, that leaves approximately R2,7 million for reinvestment, which is enough to keep your capital amount in touch with inflation for 50 years. The balance of R2,7 million (after tax) is for your living costs. In South Africa, R2,7 million will afford you a lifestyle that allows you to send your kids to a great school and university, to travel overseas a couple of times a year, and to live in a comfortable house.
Over time your living costs (and inflation) will eat into your capital amount. After 50 years you should be down to nil, assuming you earn zero other income in that time.
In 50 years, you will probably be dead. If you’re not dead, your kids will be able to support you (because they love you and they have a great university education).
I am the sole director of a company (the others still have full-time jobs and don’t want to be conflicted) and there is pro-rata shareholding based on our initial shareholder loans. However, I am putting in most of the hard work, together with one of the other actuaries. How best do I manage the director/shareholder dynamic? I obviously want to make as much progress as possible but there are times when I need the input from the others (and their responses aren’t always as quick as I would like). — Mike
If you have any perception of unfairness regarding effort/risk vs reward, deal with it NOW! You can’t do so later. The best approach is honesty. Call your partners together. Explain your thinking. Perhaps argue for 25% ‘sweat equity’ for yourself. Everyone dilutes accordingly. Ideally cut a deal whereby you have an option to pay back all their loans, plus interest, within six months, and you get 100% of equity (unless they quit their jobs and join full-time).
Equity dissent must be resolved long before the business makes money, otherwise it will never be resolved.
What do you think of WiFi in taxis?— Ntembeko
It’s a good idea, but not original. Before embarking on a start-up, you should survey the landscape for competitors. Just because there are none doesn’t mean no one has tried your idea.
It just means that everyone that tried has failed. You need to be 100% sure that you have some ‘edge’ that makes you different from everyone who came before you (and failed). Otherwise you will fail. What is your advantage that is different to everyone who came before?
Read ‘Be A Hero’ today
What You Need To Know About The Lean Start-up Model
The Lean Start-up philosophy was developed by Eric Ries, a Silicon Valley-based entrepreneur who also sat on venture capital advisory boards. He published The Lean Startup in 2011, igniting a movement around a new way of doing business.
The model follows key precepts that include:
Taking untested products to market
The fact that too many start-ups begin with an idea for a product that they think people want, spending months (or even years) perfecting that product without ever testing it in the market with prospective customers.
When they fail to reach broad uptake from customers, it’s often because they never spoke to prospective customers and determined whether or not the product was interesting. The earlier you can determine customer feedback, the quicker you can adjust your model to suit market needs.
The ‘build-measure-learn’ feedback loop is a core component of lean start-up methodology
The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. Once the MVP is established, a start-up can work on tuning the engine. This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect.
Utilising an investigative development method called the ‘Five Whys’
This involves asking simple questions to study and solve problems across the business journey. When this process of measuring and learning is done correctly, it will be clear that a company is either moving the drivers of the business model or not. If not, it is a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy and engine of growth.
Lean isn’t only about spending less money
It’s also not only about failing fast and as cheaply as possible. It’s about putting a process in place, and following a methodology around product development that allows the business to course correct.
Progress in manufacturing is measured by the production of high quality goods
The unit of progress for lean start-ups is validated learning. This is a rigorous method for demonstrating progress when an entrepreneur is embedded in the soil of extreme uncertainty. Once entrepreneurs embrace validated learning, the development process can shrink substantially. When you focus on figuring the right thing to build — the thing customers want and will pay for, rather than an idea you think is good — you need not spend months waiting for a product beta launch to change the company’s direction. Instead, entrepreneurs can adapt their plans incrementally, inch by inch, minute by minute.
Start-Up Law: I’m A Start-up Founder. Can I Pay Employees With Shares?
Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.
Every early stage start-up company battles with restricted cash flow and not being able to pay market related salaries to their employees. Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.
Can I pay salaries with shares?
South African labour laws require that employees be paid certain minimum wages, and “remuneration”, as defined within the Basic Conditions of Employment Amendment Act, either means in ‘money or in kind’. ’In kind’ does not include shares or participation in share incentive schemes, as determined by the Minister of Labour. As such, there is no room for start-ups to completely substitute paying salaries with shares or share options. However, there is no restriction in topping up below market related salaries with equity via an employee share ownership plan (‘ESOP‘).
Employee Share Ownership Plans
There are a variety of ways in which employees can be incentivised, and it will always be important for the start-up founders to consider what goal they wish to achieve by incentivising their employees.
ESOPs can be structured in several ways, for example: employees may be offered direct shareholding in the company, options for the acquisition of shares in the future; or alternatively, a phantom / notional share scheme can be set up.
ESOPs permit employees to share in the company’s success without requiring a start-up business to spend precious cash. In fact, ESOPs can contribute capital to a company where employees need to pay an exercise price for their share options or shares.
The primary disadvantage of ESOPs is the possible dilution of the Founder’s equity. For employees, the main disadvantage of an ESOP compared to cash bonuses or bigger salaries, is the lack of liquidity. If the company does not grow bigger and its shares does not become more valuable, the shares may ultimately prove to be worthless.
Some key features to consider when setting up an ESOP are:
- ELIGIBILITY – who will be allowed to participate? Full time employees? Part-time employees? Advisors?
- POOL SIZE – what percentage of shares will be allocated to incentivise employees?
- RESTRICTIONS – will employees be able to sell their shares immediately?
- VESTING – will there be a minimum period that service employees will have to serve with the start-up to receive the economic benefit of his or her shares?
Employee share ownership plans are great corporate structuring mechanisms for attracting and retaining employees, as well as fostering an understanding of the company ethos and encouraging loyalty and productivity. It is essential when implementing an ESOP that all the tax implications are considered and that the correct structure and legal documentation are in place.
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