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How to Write Mission Statements That Keep You Out of Court

| Tuesday April 13th, 2010 | 0 Comments

Mission statements can be painful exercises for entrepreneurs that have yet to truly define their business–or for people who just hate writing. But they are an important part of your planning, and writing a meaningful one can be a cathartic step in business development. Besides, getting it wrong can land you in court.

Infuse mission statements with meaning

Mission statements, at minimum, are statements of purpose: what is your company going to do? At maximum, they are statements of aspiration: what does your company want to do? In “How to Write a Mission Statement That Doesn’t Suck”, Fast Company’s Dan Heath advocates infusing mission statements with meaning by being specific through concrete wording, and by adding at least one clause regarding the founders’ beliefs the motivated the business in the first place. Triple bottom line businesses have an advantage here; social purpose is part of the business plan, and so it should be easy to state.

Don’t let your mission statement be a liability

After you’ve written something, hone it. It’s important to get a mission statement right, especially by the time you go public because by that point, the mission statement has likely made it into founding legal documents. Once it is part of founding documents, mission statements can become a liability. Limiting mission statements’ litigation potential depends on what type of business you have.

For-profit: vague is good. Overly broad mission statements are forgiving in the context of for-profit business, where their vagueness offers a litigation shield of ambiguity. Shareholders can theoretically sue based on specific mission statements – is the Board of Directors violating the corporate charter they advertise? In this way, it’s helpful for corporate mission statements to be somewhat unspecific, but still meaningful. (“Don’t be evil.” > feel good, but makes no specific promises)

Non-profit: specific is good. In the public sector, overly broad statements are the liability; caselaw indicates that the IRS will expect to see a concrete demonstration of all activities named in a nonprofit’s mission statement if audited. If a nonprofit’s mission is to “educate veterans all across America”, the IRS will require the nonprofit to prove education of veterans nationally, not only in Georgia, or wherever the operations are. So nonprofits: be realistic! Only name what you can demonstrate that you do.

Social enterprise: specific is good. Social enterprises also benefit from specific statements. 3p businesses should incorporate social objectives into their mission statement and their founding charter. US law favors the idea that altruism is outside of   sound “business judgement”, though organizations such as BCorp and others have worked for legislative changes to circumvent this precedent (there are also cases, less observed, that support stakeholder theory). Social enterprises may, to some extent, protect themselves if their altruistic business practices are incorporated into core founding documents; they will have a defense (investors should have known before buying) if shareholders sue when they discover later that XYZ corp gives all their profits to horse charities (or whatever). This is the reason shareholders pushed for Intel’s amendment; they want to be able to hold management accountable.

Adopt a living mission statement

Like the US Constitution, the best mission statements are specific in defining a value proposition, and are “living” in the same sense the US. Constitution is – constantly amended to reflect changing circumstances. Entrepreneurs should refresh their mission statement at least every five years and ideally more frequently, changing it to reflect the dynamism of the company.


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