How to Define the Mission and Objectives of a Business

This article is an excerpt from the Shortform book guide to "The Essential Drucker" by Peter Drucker. Shortform has the world's best summaries and analyses of books you should be reading.

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Who defines the mission and objectives of a business? Is making a profit the most important part of business?

According to The Essential Drucker by Peter Drucker, management is directly responsible for whether the organization’s efforts produce its desired results. Managers do this by articulating an enterprise’s mission and spelling out its objectives.

Let’s look at how managers create and carry out a company’s mission.

Defining the Mission and Objectives

Though management is usually discussed in business terms, its practices are central to any organization, and managers’ first duty is to spell out the mission and objectives of a business. That mission will determine every aspect of how the business functions internally and how it interacts with the external world. We’ll describe Drucker’s views on how an organization’s mission should be defined, why managers must communicate it clearly to employees, how a business relates its mission to the market, and the concrete goals management has to set to put the organization’s mission into action.

Drucker says that even in the business world, turning a profit is never the overriding mission. Rather, making money is merely the yardstick by which a business can measure its success. The mission of an organization is based on the results it hopes to achieve outside itself. For a law firm, that mission might be to successfully litigate on behalf of its clients. For a public library, the mission might be to grow readership in its local community. For a toothpaste company, the mission might be to help people take better care of their teeth.

(Shortform note: A business without a clear mission can easily lose its way, as the computer giant Microsoft did in the early 2000s. In Hit Refresh, Microsoft CEO Satya Nadella explains that clearly framing Microsoft’s mission proved a key component in reinvigorating the company and giving it a sense of direction. However, Nadella’s phrasing of the mission—“to empower every person and every organization on the planet”—was vague compared to former CEO Bill Gates’s version—“a computer on every desk in every home.” Gates’s mission was more in line with Drucker’s advice because it defined a measurable, if ambitious, goal.)

Drucker writes that defining the mission of an organization is vital because at some point every person within it is going to make decisions that affect the whole enterprise, from the organization’s founder to the person who cleans the floors. Therefore, everyone has to have the same understanding of the group’s shared purpose, who the organization’s customers are, and by what external measures its success can be judged. When management can clearly articulate that purpose, it guides decision-making at all levels of the business and sets the direction for future innovation.

(Shortform note: While an organizational purpose may be necessary, as Drucker suggests, it might not be sufficient to guide decision-making. In Built to Last, Jim Collins and Jerry I. Porras expand on Drucker’s concept of a shared business purpose to a broader conception of an organization’s core philosophy, which includes both the company’s purpose and its guiding values, such as customer focus or care for the environment. These values should be clearly stated and limited in number to prevent them from losing their power.)

The “How and Why” of Business

To determine a business’s underlying mission, managers must put themselves in the shoes of their customers. Drucker takes this idea a step further and says that the most basic function of a business is to look at the market and create its own customers. Most attempts at marketing get this backwards—they start with a product or service and look for a market that will want it. To build a successful business or nonprofit, you look at the market, find a need or want that hasn’t yet been met, and design your organization’s mission to do so.

(Shortform note: A prime example of a “customer creator” in the Drucker style was Apple’s Steve Jobs. In Walter Isaacson’s biography of Jobs, he writes that what made Jobs such an influential pioneer was his ability to intuit the future and get a jumpstart on innovations such as a graphics-based computer interface before his customers ever asked for such a thing. Likewise, an example from the nonprofit sector is Iris Wedeking, founder of Camp Kesem. Though she originally planned to support children suffering from cancer, Wedeking realized there were no support services for children whose parents were dealing with cancer. Having identified that unserved market, Wedeking pivoted her focus, as Drucker would suggest.)

Once you establish the company’s mission, the next step is to establish concrete goals and objectives. Drucker lists specific areas in which any organization needs to set objectives, including how to meet its resource requirements, how to maintain productivity, how to grow its customer base, and how to stay ahead in terms of innovation. Drucker divides resource and productivity objectives into three sub-categories that every organization must focus on—sources of capital to keep the business running, physical resources required for production, and most importantly human resources without which an organization is dead in the water.

(Shortform note: Goals are defined as the large-scale outcomes an organization aspires to, while objectives comprise the short-term outcomes that serve as milestones on the path to your goals. In Measure What Matters, venture capitalist John Doerr adds to Drucker’s breakdown of organizational objectives by pairing them with key results that represent crucial steps to achieving them. Key results can be quantitative or qualitative, and Doerr argues that each objective needs both if you’re ever to achieve your overarching goals.)

How to Define the Mission and Objectives of a Business